PDA

View Full Version : Taiwan authorities renew call for calm after taking over failing bank (Update 2)



EJ
01-08-07, 12:59 PM
Taiwan authorities renew call for calm after taking over failing bank (Update 2) (http://news.yahoo.com/s/afp/20070108/bs_afp/taiwanbanking_070108085749)
January 8, 2007 (AFP)

Taiwan authorities renewed a call for calm among depositors after the government took over a bank faced with a run on funds and insisted there was no risk to the financial system as a whole.

"The government guarantees that the rights and benefits of all of the bank's depositors will be fully protected in a timely and appropriate manner after the government takeover. There is no need for depositors to worry," Finance Minister Ho Chih-chin told reporters.

The government took over The Chinese Bank on Saturday following panic runs all over the island after two financially-stricken units of the Rebar group announced Friday they had filed bankruptcy reorganisation applications with the Taipei District Court.

"I have faith in Taiwan's financial system which is sound enough to take on the bank's difficulties. It is unlikely for Taiwan to suffer a systematic financial crisis," Ho said.

AntiSpin: Interesting because just last Friday I was getting lectured by a bank regulator in the UK that our warnings to readers about risks in the banking sector are unwarranted and alarmist: "The era of bank failures and bank runs in is over."

Taiwan is known for its corrupt banks, and this bank failure appears to be a result of corruption. China is also known for less than de-lux banking practices, and that fact makes this event more interesting. There have been a number of warnings recently about risks in the Chinese banking system, that the government press makes no effort to hide (http://www.chinadaily.com.cn/china/2006-06/30/content_629813.htm). If a bank were to fail in China, likely the Chinese government will not be asking citizens to stop withdrawing money as in Taiwan. Presumably under similar circumstances they will tell bank customers to stop withdrawing money. Or else. Then again, maybe no one will know about it until well after the fact.

Whether China's banks are more or less corrupt than Taiwan's is a matter of debate. The relationship between the level of corruption in the public sector that regulates banking and a nation's banking system itself is strong. In the public sector in Asia, Transparency International (http://www.international.ucla.edu/article.asp?parentid=5299) rates Taiwan just below Japan but well above China and South Korea in corruption perception.

<table border="0" width="100%"><tbody><tr><td width="12%">Rank</td> <td width="40%">Nation</td> <td width="30%">Score
(higher means perceived to be less corrupt)</td> <td width="18%">No. of surveys used</td></tr> <tr> <td>5</td> <td>Singapore</td> <td>9.4</td> <td>
12
</td></tr> <tr> <td>14 (tie)</td> <td>Hong Kong</td> <td>8.0</td> <td>
11
</td></tr> <tr> <td>21 (tie)</td> <td>Japan</td> <td>7.0</td> <td>
13
</td></tr> <tr> <td>30 (tie)</td> <td>Taiwan</td> <td>5.7</td> <td>
13
</td></tr> <tr> <td>37 (tie)</td> <td>Malaysia</td> <td>5.2</td> <td>
13
</td></tr> <tr> <td>50 (tie)</td> <td>South Korea</td> <td>4.3</td> <td>
12
</td></tr> <tr> <td>66 (tie)</td> <td>China</td> <td>3.4</td> <td>
13
</td></tr></tbody></table>
We'll soon find out if this bank failure is an isolated event in Taiwan or has more broad implications in Asia.

akrowne
01-08-07, 06:07 PM
I suspect what varies is not actually corruption, but how notable corruption is (i.e. how often it ends up in the press when it happens).

In the US, corruption beyond anyone's wildest dreams has been institutionalized Thus, it isn't newsworthy at all, and the perception of legitimacy is much greater.
When no one is concerned about credibility, it is actually a universal problem, and I suspect the peril is much greater due to the lack of competition in this arena.

Ishmael
01-09-07, 09:52 AM
Aaron:

Your comment about corruption being every where is right on target. Since corruption is every where it is hard to point out something is wrong versus something else. You start losing your anchors to compare it to so it hard to point out corruption.

akrowne
01-10-07, 12:41 AM
Thanks.

I remember when I visited Hong Kong being a little shocked. Everyone said it was very corrupt, and indeed corruption was in the papers. But walking around, it seemed like most folks were happy and quite affluent. I suspect there was more money to go around because the system is actually more equitable than what we're used to here in the US.

Hong Kong's executive payout ratio is something like a tenth of the US's.

Pervilis Spurius
01-10-07, 08:29 AM
Thanks.

But walking around, it seemed like most folks were happy and quite affluent. I suspect there was more money to go around because the system is actually more equitable than what we're used to here in the US.

Hong Kong's executive payout ratio is something like a tenth of the US's.


I believe this is partly due to the HK tax structure which favors dividends, incentivizing management to hold large portions of their wealth in company stock. This is turn rewards all shareholders. This is obviously not the case in the U.S.

Ishmael
01-10-07, 09:53 AM
When I lived in Australia in the early 80"s, I was working for Arthur Andersen and was shocked how poor the regulation of public companys was and how poor the accounting standards and auditing was. There was a Canadian there and after I was there about a month he came up to me and told me he had forgotten how bad things were until I got there. I always thought that the rest of the world would rise to the level of the US in corporate goverance but instead the US fell to the level of third worlds. Interestingly, a few years before Arthur Andersen fell it was led by its first nonAmerican. He came from Europe and was incharge of one of Andersen's biggest audit failures up to that time -- Delorean. The firm did not do its usual practice at that time of terminating the partner after all of the litigation was completed. Why, he was considered a great marketer even though he was terrible at the firm's base business.

In summary the combination of marketing (or putting the right spin or con job on something) combined with corruption (which was covered up by marketing, spin, con job or whatever you want to call it) has prevaded the US everywhere.

With that said, don't fool yourself. Anyone investing in third world and staying invested there will lose their shirt. Look at Venezuela. Early on in my career I was very involved in oil and gas businesses in Argentina. I never saw any gringo get any money out of there. A few years ago I saw a friend of mine's business lose $150 million through theft and then there was all the corruption at Royal Ahold. Argentina just recently defaulted on its debt and the economy rebounded.

That will happen through out the third world when the world economy goes into recession.

Boys and girls, hold onto your hats and make sure your seat belts are fastened. It is going to be a bumpy ride.