TAIPEI (Reuters) - Taiwan’s financial watchdog will not approve Sinopac Financial Holdings’ (2890.TW) $340 million sale of its U.S. unit to Cathay General Bancorp (CATY.O) unless Sinopac submits the necessary paperwork, a source with the regulator said.
Some board members at Taiwan’s Sinopac are hesitant to sign off on the deal, feeling “seller’s remorse” as the price tag now looks too low, three separate sources with direct knowledge of the matter said.
It has been a year since the deal was announced and the foot dragging comes ahead of a June 20 deadline imposed by the U.S. Federal Reserve, which approved the deal in March, although Cathay General, a Los Angeles-based bank, can request an extension.
A collapse of the deal could also taint the reputation of Sinopac and Taiwanese banks in the U.S. market, coming in the wake of $180 million in U.S. fines for Taiwan’s Mega Financial Holding (2886.TW) for violations of rules including lax attention to risk exposure in Panama.
“We have asked Sinopac to provide additional paperwork. If they don’t do that, they automatically forfeit the deal,” said an official at Taiwan’s Financial Supervisory Commission.
Sinopac needs to explain the full terms of the agreement in a satisfactory way, said the official, declining to elaborate.
The official and other sources declined to be identified as they were not authorised to speak to the media on matter.
A spokesman for Sinopac said the company would submit the additional paperwork “soon” and hopes that the deal will close.
The FSC suspended a review of the acquisition application, according to a Sinopac statement earlier this month, which did not provide further details.
Cathay General did not reply to requests for comment via email.
Nasdaq-listed Cathay General has complained to Sinopac for not trying hard enough to get clearance from Taiwan regulators, said the three sources with direct knowledge of the matter.
One of the sources said that the price had looked good to Sinopac last year amid uncertainties about Britain’s decision to leave the European Union and the U.S. presidential election.
“But now things have changed. The U.S. and global economies are showing strong momentum,” the source said.
Reporting by Faith Hung; Editing by Jacqueline Wong and Edwina Gibbs