Chairman of Chinatrust Commercial Bank resigns

LOSSES & LAWSUITS

Koo will be replaced by vice-chairman Charles Lo, who is a veteran of the bank's consumer lending business, Chinatrust said in a statement. It added that Koo's resignation, which was approved by the board of directors on July 21, was prompted by penalties levied by the Financial Supervisory Commission (FSC) a day earlier for which Koo had accepted responsibility.

The FSC alleged that Chinatrust Financial Holding had acquired an additional stake in Mega Financial Holding through its banking unit's Hong Kong branch, which bought $390 million of 30-year structured notes from a foreign securities firm in Hong Kong during October to December 2005.

In the statement released on July 20, the FSC said it would levy a fine of NTD$10 million ($304,377) on Chinatrust, and also impose a ban on its Hong Kong branch from dealing in derivatives for a year. In addition, the FSC would reduce the limit for Chinatrust's shareholding in Mega to 5-6.1% from 5-10%, and it would also demand that Chinatrust seek reimbursement from the third party involved in the structured note transaction.

It also ruled that Chinatrust must consider whether Koo was still fit to serve as the bank's chairman, a regulatory statement that sealed the fate of Koo.