Taiwan Development Sees 3rd Day of Panic Withdrawals
Taipei, May 16 (Bloomberg) -- Hundreds of panicked customers jammed branches of Taiwan Development & Trust Corp. for a third day, on fears the state-controlled mid-sized trust firm would collapse.
Local media estimated about NT$3.4 billion ($110 million) has been withdrawn since the Commercial Times reported on Friday that the company faced a NT$500 million shortage in operating funds that day. The run is expected to continue on Wednesday, as Taiwan Development has said it can only process a limited number of withdrawals and asked many depositors to return tomorrow.
``I can't go on like this,'' an unidentified woman said in tears on local Eastern Television. ``I can't keep skipping my work to wait here.''
Confidence in the Taiwanese financial industry has been shaken in recent weeks, with Chung Shing Bank having been taken over by the government in late April. On Saturday, authorities ordered the seizure of Taiwan Development in a move likely to underscore concerns about the health of the island's financial system.
The crisis is a challenge for Shea Jia-dong, who will take up the post of finance minister on Saturday. The Commercial Times today quoted Shea as saying that Taiwan needs to study whether there's sufficient ``discipline'' in the banking industry, which he described as over-banked, not profitable enough, and beset by non-performing loans.
``Taiwan's banking industry needs an overhaul and a tighter monitoring mechanism to end the recurrence of bank failures and runs,'' said Lin Tsui-pin, manager of Core Pacific Securities Corp.'s NT$500 million Financial Fund.
No Systemic Threat
While there's been no talk of a systemic threat to the banking system, the Taiwan dollar slumped to a two-month low following the run on Taiwan Development. The Taiwan dollar weakened to NT$30.782 against the U.S. dollar in Taipei, compared with NT$30.767 yesterday.
The panic is continuing even though the finance ministry on Saturday ordered its Central Deposit Insurance Corp. to seize control of the firm for six months to offer assurance to depositors and supervise the bank.
The central bank also provided NT$4 billion in cash yesterday to help the company to meet withdrawals.
Yet government measures may have been somewhat undermined by the behavior of its own staff -- the first wave of panic withdrawals Friday was at Taiwan Development's Nan-hai branch, located on the same block as the finance ministry and the central bank. Finance staff and other government workers were the main people queuing up, said Kao Chien-wen, Taiwan Development's Vice Chairman.
State-Controlled
Taiwan started to privatize Taiwan Development when it listed the company 17 months ago, though the firm is still managed by government-appointed bankers. The government also controls nearly half of Taiwan Development through a string of state-controlled companies including Bank of Taiwan, Land Bank of Taiwan, Taiwan Cooperative Bank, Hua Nan Commercial Bank, Chang Hwa Commercial Bank, and Taiwan Sugar Corp.
The finance ministry itself holds 2.6 percent of the company and last October appointed Liu Chin-piao, former director of the ministry's National Property Bureau, as the bank's chairman.
The company's largest private investor, Era Communications Co., holds 5 percent in the company and is represented by Vice Chairman Kao. Era Communications is one of the largest media companies in Taiwan, operating the popular T.V.B.S. cable television station.
In the first three months of 2000, Taiwan Development posted a net loss of NT$192 million or NT$0.64 per share. It shares have fallen 84 percent in the past 12 months compared to a 15 percent rise in the benchmark index. The shares fell by their daily trading limit, dropping 6.4 percent to NT$5.90.
May/16/2000 5:31 |
