Rumour triggers race to withdraw savings from two banks

Thursday, September 25, 2008
Issue 477, Page 1 & 3
Word count: 1223
Published in: Macau Daily Times

By Poyi (Natalie) Leung

The rumour which had Luso International Bank going bankrupt within two days was intensified yesterday after several of its branches shut their doors after being affected by the typhoon, prompting thousands of concerned customers to race to withdraw their savings from their accounts.

The rumour was circulated on the Internet and via SMS on Tuesday claiming Luso International Banking Ltd (LIB) “has financial difficulties and owns Lehman Brothers bonds and it will soon be taken over by the Monetary Authority of Macao (AMCM)”.

Although senior executive of the group had already clarified the matter as reported in Macao Daily News yesterday, hundreds of customers formed a long queue at LIB’s head office and branches within hours after opening at noon.

At the same time, branches of Banco Weng Hang were also packed with people wishing to withdraw their money yesterday afternoon.

The AMCM, Macau Banks Association, Luso International Banking as well as Banco Weng Hang held separate press conferences yesterday to deny the rumour and emphasise the banking system’s financial stability.

Mr Leong, a gaming instructor who was among the LIB concerned customers at the head office in Avenida Dr Mario Soares, told the Macau Daily Times he had faith in the banking industry of Macau, but admitted that the rumour did prompt him to go cancel his investment account one day earlier than originally planned.

Having opened an account last month for buying stocks but never using it since, Mr Leong said the recent fluctuation in the stock market held him up from investment and he’d wanted to cancel the account at LIB.

“As the rumour is so hot I decided to come to the bank sooner. It’s always better to keep cash in hand,” he added.

However, he also said that Macau’s banking system was “trustworthy” and even though LIB had purchased Lehman Brothers bonds they would not take up a significant amount of the bank’s assets that could possibly make it declare itself bankrupt.

“Like the example of AIA many people rushed to terminate their policies at once but soon afterwards they went back for reinstatement,” the LIB customer said.

Despite the concerns some LIB customers had, the MDTimes saw people visit the head office yesterday to make deposits totalling millions of dollars as well as open new saving accounts.

On the other hand, AMCM chairman Teng Lin Seng said at the press conference that the rumour was “insubstantial”, adding Macau’s banking system has a total asset base worth 387 billion patacas as of July 2008, a figure higher than the total deposits of 267 billion patacas of the 28 local banks.

Mr Teng also said that each local bank was required to maintain at least 30 percent of its deposits as the current assets and thus an “inordinate occurrence of withdrawals” within a short period of time would pose no challenges to the banks’ liquidity conditions.

In addition, the value of Lehman Brothers products purchased by certain local banks was no more than 200 million patacas, the AMCM chairman said, and thus the impact Lehman Brothers’ bankruptcy could bring to Macau was “minimal”.

Apart from Seng Heng Bank which has holdings of Lehman Brothers bonds, Mr Teng refused to disclose what other banks possessed products of Lehman Brothers or American International Group (AIG) as he said he did not want to “arouse panic” in the community.

Meanwhile, Luso International Bank and Banco Weng Hang affirmed that they do not own any products of Lehman Brothers, Merrill Lynch or AIG.

For individual customers who have invested in Lehman Brothers bonds through local banks, Mr Teng said the AMCM had urged the industry to keep constant communication with their agents about the progress of Lehman’s post bankruptcy procedures and also to announce updates to the public regularly.

Due to the serious flooding from Typhoon Hagupit in Macau, LIB’s Fai Chi Kei and Ilha Verde branches as well as Banco Weng Hang’s northern district and Inner Harbour branches were forced to close yesterday whilst other branches opened at a later time at noon.

The AMCM chairman said those affected branches would restore their normal business hours today.

Having assured the public that Macau’s banking system remained stable and healthy, Mr Teng urged them to “stay calm and not to be affected by the fabrication”.

Deputy general manager of Luso International Banking, Liu Kam Chi, said in a joint press conference with the Macau Banks Association that LIB “never had any financial problems” and had always been running business “conservatively”.

“LIB has liquidity at about five billion patacas, the loan to deposit ratio is 52 percent while the bad and doubtful debts ratio is below 0.5 percent,” Mr Liu said, “thus customers should not be worried but have confidence in us.”

Acting president of the Macau Banks Association, Cheang Chi San, also told the press Luso International Banking was a “very healthy bank which could afford risks”, and the group had “a solid business background with sufficient capital.”

Banco Weng Hang, a fully owned subsidiary of Hong Kong’s Wing Heng Bank Ltd, said they did not rule out the possibility of “malicious fabrication” and might report to police following Luso International Banking and Bank of East Asia in Hong Kong.

Judiciary Police said they have already begun investigation on the “insubstantial speech suspected of being spread intentionally by SMS.”

Director and general manager of Banco Weng Hang, Lee Tak Lim, said they were “amazed” that the rumour had spread “so fast” within just a few hours.

Only at 3pm yesterday Mr Lee said their branches began to register “exceptional amounts of customers” who were eager to withdraw their savings.

As of June 30, 2008, Banco Weng Hang has total assets valued at about 20 billion patacas including liquidity of five billion patacas which is above its total deposits of 16 billion patacas, assistant general manager Kelvin Lou said.

According to the statement Wing Hang Bank Group in Hong Kong announced yesterday, Banco Weng Hang is financially “sound and stable” and the group will “fully support the business and daily operation of the subsidiary to the fullest extent”.

“Wing Hang Bank Group also states that Banco Weng Hang does not hold any bond issued by Lehman Brothers, or extend any loan or facility to the following US financial institutions, namely Lehman Brothers and AIG,” the statement said.

“Besides, The Bank of New York Mellon, one of the shareholders of the Group, is one of the leading custodian banks in the world.  The assets entrusted in the Bank by its customers are not direct assets of the Bank itself. Its role has been to serve as a trustee for certain Lehman Brothers bond offerings. It has no outstanding loans to Lehman Brothers,” the company announcement continued.

Apart from being rated at “A2” by Moody’s Investors Service, Mr Lee said their parent company’s total assets exceeded HK$140 billion with an average liquidity ratio of 45.1 percent and capital adequacy ratio reaching 16.1 percent “which was well above the Base II requirement”.

The Banco Weng Hang chief said the number of customers requesting money withdrawals including fixed deposits yesterday accounted for a “small percentage” of their total customer base of over 100,000.

Both Luso International Bank and Banco Weng Hang extended their business hours yesterday in order to attend to all waiting customers and complete their requests.

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