Identifier
Created
Classification
Origin
07TAIPEI1324
2007-06-12 07:33:00
UNCLASSIFIED
American Institute Taiwan, Taipei
Cable title:
Taiwan Auctions 2nd Insolvent Bank in 2007
how-toVZCZCXRO2220 RR RUEHGH DE RUEHIN #1324/01 1630733 ZNR UUUUU ZZH R 120733Z JUN 07 FM AIT TAIPEI TO RUEHC/SECSTATE WASHDC 5606 RUEATRS/DEPT OF TREASURY WASHDC INFO RUCPDOC/USDOC WASHDC RUEHBK/AMEMBASSY BANGKOK 3722 RUEHBJ/AMEMBASSY BEIJING 6902 RUEHUL/AMEMBASSY SEOUL 8714 RUEHGP/AMEMBASSY SINGAPORE 6924 RUEHKO/AMEMBASSY TOKYO 8851 RUEHML/AMEMBASSY MANILA 0078 RUEHJA/AMEMBASSY JAKARTA 4087 RUEHKL/AMEMBASSY KUALA LUMPUR 3757 RUEHHI/AMEMBASSY HANOI 3328 RUEHBY/AMEMBASSY CANBERRA 4531 RUEHWL/AMEMBASSY WELLINGTON 1804 RUEHHK/AMCONSUL HONG KONG 8160 RUEHGH/AMCONSUL SHANGHAI 1153 RUEHGZ/AMCONSUL GUANGZHOU 0328
UNCLAS SECTION 01 OF 02 TAIPEI 001324
SIPDIS
SIPDIS
STATE PLEASE PASS USTR
STATE FOR EAP/RSP/TC, EAP/EP
USTR FOR ALTBACH and Stratford
USDOC FOR 3132/USFCS/OIO/EAP/WZARIT
TREASURY FOR OASIA/LMOGHTADER
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF
GOVERNORS, AND SAN FRANCISCO FRB/TERESA CURRAN AND NY FRB MARIA
BOLIS
E.O. 12958: N/A
TAGS: EINV EFIN ECON PINR TW
SUBJECT: Taiwan Auctions 2nd Insolvent Bank in 2007
REF: TAIPEI 1270
SUMMARY
-------
UNCLAS SECTION 01 OF 02 TAIPEI 001324
SIPDIS
SIPDIS
STATE PLEASE PASS USTR
STATE FOR EAP/RSP/TC, EAP/EP
USTR FOR ALTBACH and Stratford
USDOC FOR 3132/USFCS/OIO/EAP/WZARIT
TREASURY FOR OASIA/LMOGHTADER
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF
GOVERNORS, AND SAN FRANCISCO FRB/TERESA CURRAN AND NY FRB MARIA
BOLIS
E.O. 12958: N/A
TAGS: EINV EFIN ECON PINR TW
SUBJECT: Taiwan Auctions 2nd Insolvent Bank in 2007
REF: TAIPEI 1270
SUMMARY
--------------
1. In early June Taiwan financial regulators successfully auctioned
off the Taitung Business Bank (TBB). ABN AMRO Bank became the first
foreign bank to win bidding for a problem bank and will become third
largest foreign bank in Taiwan after it takes over TBB. TBB was the
second insolvent bank auctioned within ten days, largely depleting
Taiwan's RTC funds. Another five problem banks still need
resolution. END SUMMARY.
Two Banks Auctioned in Ten Days
--------------
2. The Taiwan Central Deposit Insurance Corporation (CDIC)
auctioned TBB to ABN AMRO on June 8. ChinaTrust Commercial Bank
(CCB) won an auction for Enterprise Bank of Hualien (EBH) (reftel)
at the end of May. EBH, TBB, and Chinese Bank were three insolvent
banks placed in receivership in early January 2007. The CDIC will
auction Chinese Bank in July or August.
Cost and Compensation
--------------
3. The bidding for TBB (as with EBH) was for the compensation
wanted to cover the insolvent bank's liability gap (i.e., the excess
of debts over assets). ABN AMRO Bank wanted to take over TBB's 32
bank branches and assume TBB's liability gap of NT$10 billion
(US$303 million) for CDIC compensation of NT$6.9 billion (US$209
million). Thus, ABN AMRO Bank will pay about NT$97 million for each
branch, slightly less than the NT$116 million (US$3.5 million) paid
by CCB for acquisition of EBH branches.
Foreign Banks Increase Market Share
--------------
4. ABN AMRO Bank will take over TBB within 100 days. The takeover
will increase the number of its branches from five to 36, behind
only Standard Chartered Bank's 86 branches and Citibank's 65
branches. Standard Chartered Bank acquired Hsinchu International
Bank late last year, and Citibank acquired Bank of Overseas Chinese
in March 2007. The three mergers will increase the number of
foreign banks' banking offices from 96 to 230, and their combined
market share (in terms of banking offices) will increase from less
than 3% to over 8%.
Depleting RTC Funds
--------------
5. The CDIC will pay NT$11.4 billion (US$345 million) to compensate
CCB and ABN AMRO Bank for taking over EBH and TBB. The
reimbursement will reduce Taiwan's RTC funds to NT$28.6 billion
(US$867 million),insufficient to address the five remaining problem
banks, according to the Banking Bureau (BB). The five problem banks
include a bank and a trust company placed in receivership in early
2007 and three banks under BB surveillance.
COMMENT
--------------
6. Due to insufficient RTC funding, Taiwan will need to rely on
other methods to resolve problem banks. It will likely continue to
maintain strict branching restrictions to encourage good banks to
acquire bad banks for expansion.
TAIPEI 00001324 002 OF 002
YOUNG
SIPDIS
SIPDIS
STATE PLEASE PASS USTR
STATE FOR EAP/RSP/TC, EAP/EP
USTR FOR ALTBACH and Stratford
USDOC FOR 3132/USFCS/OIO/EAP/WZARIT
TREASURY FOR OASIA/LMOGHTADER
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF
GOVERNORS, AND SAN FRANCISCO FRB/TERESA CURRAN AND NY FRB MARIA
BOLIS
E.O. 12958: N/A
TAGS: EINV EFIN ECON PINR TW
SUBJECT: Taiwan Auctions 2nd Insolvent Bank in 2007
REF: TAIPEI 1270
SUMMARY
--------------
1. In early June Taiwan financial regulators successfully auctioned
off the Taitung Business Bank (TBB). ABN AMRO Bank became the first
foreign bank to win bidding for a problem bank and will become third
largest foreign bank in Taiwan after it takes over TBB. TBB was the
second insolvent bank auctioned within ten days, largely depleting
Taiwan's RTC funds. Another five problem banks still need
resolution. END SUMMARY.
Two Banks Auctioned in Ten Days
--------------
2. The Taiwan Central Deposit Insurance Corporation (CDIC)
auctioned TBB to ABN AMRO on June 8. ChinaTrust Commercial Bank
(CCB) won an auction for Enterprise Bank of Hualien (EBH) (reftel)
at the end of May. EBH, TBB, and Chinese Bank were three insolvent
banks placed in receivership in early January 2007. The CDIC will
auction Chinese Bank in July or August.
Cost and Compensation
--------------
3. The bidding for TBB (as with EBH) was for the compensation
wanted to cover the insolvent bank's liability gap (i.e., the excess
of debts over assets). ABN AMRO Bank wanted to take over TBB's 32
bank branches and assume TBB's liability gap of NT$10 billion
(US$303 million) for CDIC compensation of NT$6.9 billion (US$209
million). Thus, ABN AMRO Bank will pay about NT$97 million for each
branch, slightly less than the NT$116 million (US$3.5 million) paid
by CCB for acquisition of EBH branches.
Foreign Banks Increase Market Share
--------------
4. ABN AMRO Bank will take over TBB within 100 days. The takeover
will increase the number of its branches from five to 36, behind
only Standard Chartered Bank's 86 branches and Citibank's 65
branches. Standard Chartered Bank acquired Hsinchu International
Bank late last year, and Citibank acquired Bank of Overseas Chinese
in March 2007. The three mergers will increase the number of
foreign banks' banking offices from 96 to 230, and their combined
market share (in terms of banking offices) will increase from less
than 3% to over 8%.
Depleting RTC Funds
--------------
5. The CDIC will pay NT$11.4 billion (US$345 million) to compensate
CCB and ABN AMRO Bank for taking over EBH and TBB. The
reimbursement will reduce Taiwan's RTC funds to NT$28.6 billion
(US$867 million),insufficient to address the five remaining problem
banks, according to the Banking Bureau (BB). The five problem banks
include a bank and a trust company placed in receivership in early
2007 and three banks under BB surveillance.
COMMENT
--------------
6. Due to insufficient RTC funding, Taiwan will need to rely on
other methods to resolve problem banks. It will likely continue to
maintain strict branching restrictions to encourage good banks to
acquire bad banks for expansion.
TAIPEI 00001324 002 OF 002
YOUNG