Fitch cuts some Taiwanese banks

Fitch Ratings said it downgraded the support ratings assigned to selected smaller banks and bills finance companies in Taiwan to reflect the reduced likelihood of full and timely support from the government for financial institutions that are not deemed "too big to fail," by the government.

Fitch also said it raised Bank SinoPac's support rating one notch to recognize its increased systemic importance and therefore, its increased probability of receiving government support after its merger with International Bank of Taipei in November 2006.

Fitch said it affirmed all the other ratings of the affected financial institutions, including:

Bank SinoPac's long-term issuer default rating at BBB+ with stable outlook, short-term foreign-currency at F2, national long-term at AA-(twn), national short-term at F1+(twn), individual rating at B/C, support rating upgraded to 3 from 4,

Bank of Overseas Chinese's individual rating at E, support rating downgraded to 5 from 4,

Cosmos Bank's individual rating at E, support rating downgraded to 5 from 4,

Industrial Bank of Taiwan's individual rating at C/D, support rating downgraded to 5 from 4,

Ta Chong Bank's individual rating at D/E, support rating downgraded to 5 from 4,

Union Bank of Taiwan's individual rating at D, support downgraded to 5 from 4,

Dah Chung Bills Finance Corp.'s long-term issuer default rating at BBB- with stable outlook, national long-term A(twn), short-term foreign-currency rating at F3, national short-term rating at F1(twn), individual rating at C, support rating downgraded to 5 from 4,

Grand Bills Finance Corp.'s long-term issuer default rating at BBB- with stable outlook, national long-term at A(twn), short-term foreign currency rating at F3, national short-term rating at F1(twn), individual rating at C/D, support rating downgraded to 5 from 4,

Ta Ching Bills Finance Corp.'s long-term issuer default rating at BB+ with stable outlook, national long-term at A-(twn), short-term foreign-currency at B, national short-term rating at F2(twn), individual rating at C/D, support rating downgraded to 5 from 4,

Union Bills Finance Corp.'s long-term issuer default rating at BB- with stable outlook, national long-term at BBB(twn), short-term foreign-currency at B, national short-term at F3(twn), individual rating at D, support rating downgraded to 5 from 4.

The recent partial default by Great Chinese Bills in January 2007 highlights that the Taiwanese government is gradually withdrawing its full support to smaller financial institutions and is introducing an element of market discipline by imposing costs on institutional creditors and depositors - especially other financial institutions - while ensuring that retail depositors are paid in full, Fitch said.

Although Fitch does not expect full and timely government support to be extended to the smaller financial institutions, the agency said it still believes that support to large, systemically important ones remains strong, given their importance to Taiwan's economy.

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