7 Nov 2009 San Francisco bank with interests in Asia collapses

[Watchman]

Major San Francisco bank with interests in Asia collapses

Singapore News.Net
Saturday 7th November, 2009

United Commercial Bank, San Francisco, which has 63 branches in the U.S., along with extensive locations in Hong Kong and China, was closed Friday by the California Department of Financial Institutions.

The state authority appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.

United Commercial was one of five banks seized by regulators on Friday, and one of 120 seized this year. It was by far the biggest bank closed Friday. The closure will cost the FDIC fund around $1.4 billion.

To protect the depositors of United Commercial Bank, the FDIC has entered into a purchase and assumption agreement with East West Bank, of Pasadena, California, to assume all of the deposits of United Commercial Bank. This agreement included all U.S. branches of United Commercial Bank, the Hong Kong branch of United Commercial Bank, and the subsidiary of United Commercial Bank headquartered in Shanghai, China, United Commercial Bank (UCB-China).

The 63 U.S. branches of United Commercial Bank will reopen during their normal business hours Saturday as branches of East West Bank. All locations in Hong Kong and China will reopen on Monday, according to normal business hours. In addition, UCB-China, the Shanghai, China, subsidiary of United Commercial Bank, which was also part of Friday’s transaction, will continue its regular banking operations without interruption with the full support of its parent company, East West Bank, whose qualification, according to an FDIC statement, has already passed the preliminary review by the China Banking Regulatory Commission.

Depositors of United Commercial Bank will automatically become depositors of East West Bank. Domestic deposits will continue to be insured by the FDIC, and the Hong Kong deposits will continue to be covered by the Hong Kong Deposit Protection Scheme and the full deposit guarantee currently in force in Hong Kong. The FDIC says it is in close cooperation with the Chinese banking regulatory authority regarding regular operations of UCB-China.

Customers are advised they should continue to use their existing branch until they receive notice from East West Bank that it has completed systems changes to allow other East West Bank branches to process their accounts as well.

Over the weekend, depositors of United Commercial Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual, the FDIC said.

As of October 23, 2009, United Commercial Bank had total assets of $11.2 billion and total deposits of approximately $7.5 billion. East West Bank paid the FDIC a premium of 1.1 percent for the right to assume all of the deposits of United Commercial Bank. In addition to assuming all of the deposits of the failed bank, East West Bank agreed to purchase approximately $10.2 billion in assets of the failed bank.

The FDIC and East West Bank entered into a loss-share transaction on approximately $7.7 billion of United Commercial Bank's assets. East West Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-share arrangement is projected to maximize returns on the assets covered by keeping them in the private sector.

U.S. customers who have questions about Friday's transaction can call the FDIC toll-free at 1-800-238-8209.