The Financial Supervisory Commission (FSC) yesterday fined Cathay United Bank (國泰世華銀行) NT$2 million (US$68,622) and banned the lender from setting up new automatic teller machines (ATMs) as the bank’s ATM service malfunctioned several times recently, significantly affecting clients, the commission said.
The commission also raised the risk factor for Cathay United Bank in light of the recent incidents.
The bank must increase its capital by at least NT$750 million to keep its BIS capital adequacy ratio unchanged at 16.25 percent, Banking Bureau Chief Secretary Phil Tong (童政彰) told a news conference.
The bank could issue new shares or bonds to perform the cash injection, Tong added.
The bank, which operates 5,070 ATMs and ranks second among local banks in terms of the number of ATMs, had applied to the commission to set up 246 new machines this year, but the expansion would be suspended until the bank improves its ATM system, Tong said.
Only some ATMs proposed to be installed in remote areas would be allowed to be set up, he added.
Cathay United Bank’s ATMs have malfunctioned four times over the past six months, affecting 32,452 clients in the first two incidents in October last year, 2,015 in February and 732 people last month, the commission said.
The malfunctions occurred while the bank was updating its database, causing clients not to be able to transfer, withdraw or deposit money, Tong said.
Although the bank said that it had hired a contractor to update its database and was negotiating compensation with the company, it demonstrated poor internal control when dealing with the malfunctions, Tong said.
The bank did not properly evaluate whether a stress test was intense enough, nor did it set up an emergency plan for its call center, Tong said, adding that the bank did not notify the regulator quickly enough.
Among the fines levied on financial institutions for malfunctions in their information systems, Cathay United Bank’s fine was the second-highest after the NT$5 million fine on Citibank Taiwan Ltd (花旗台灣) in 2019, commission data showed.
However, Cathay United Bank was the first bank that was required to increase capital due to a malfunction, the commission said.
Previously, E.Sun Commercial Bank (玉山銀行) was asked to inject cash after its personnel stole money from clients, it said.
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