Magazine article American Banker

Probe of Hong Kong Bank Begins as Government Takes Control; Four Arrested in Connection with Collapse of Overseas Trust

Magazine article American Banker

Probe of Hong Kong Bank Begins as Government Takes Control; Four Arrested in Connection with Collapse of Overseas Trust

Article excerpt

HONG KONG -- The Hong Kong government took control of the collapsed Overseas Trust Bank Ltd. on Friday night and is reopening it today. Police have launched a criminal investigation into the affairs of the bank, which is owned by Singapore citizen Chang Ming-thien and members of his family.

There have been rumors that Britain's National Westminster Bank might consider taking over the company, but these reports are mainly based on analysts' speculations that the match would suit NatWest in its quest for an Asian foothold.

"Anyone who wants to buy Overseas Trust Bank at this juncture needs his head examined," Sir John Bremridge, Hong Kong financial secretary, said at a press conference on Friday.

Sir John said the bank's difficulties "went beyond imprudent management or misfortune. There are serious matters that warrant investigation by the commercial crimes bureau."

So far, Hong Kong police have arrested two Malaysians and two Chinese in connection with the failure. One of the Malaysians, an executive of the bank, was seized at Hong Kong's Kai Tak Airport while carrying over $125,000 in cash and securities.

Many millions of dollars are reportedly missing, but at this point no one knows exactly how much was taken or where the funds are. Hong Kong has no bank deposit insurance, and the bank's failure, the second major bank collapse in two years, will likely spur debate on this issue.

Sir John declared the bank insolvent and ordered its 44 branch offices here closed. With deposits of $1.26 billion and 100,000 depositors, Overseas Trust Bank is among the largest independently owned banks here. Trading in its shares has been halted until further notice.

Overseas Trust Bank's most recent annual report, for 1983, stated that management had transferred $25 million to "to inner services," of which a portion " has been utilized against provision for doubtful loans and advances. …

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