The Financial Supervisory Commission yesterday ordered Ho Shou-chuan (何壽川) off SinoPac Financial Holding Co’s (永豐金控) board of directors, effectively removing him from the chairmanship of the embattled company.

Ho, who also heads the papermaking conglomerate YFY Inc (永豐餘控股), had violated corporate governance rules in a series of dealings between units of his NT$1.7 trillion (US$56 billion) business empire, the commission said.

He also extended sizable loans with inadequate collateral to parties led by his relatives, it added.

As violations were found across SinoPac Financial’s flagship banking unit, as well as its leasing subsidiaries and overseas business units, they could not be viewed as isolated incidents, it said.

“Leveraging his influence, Ho’s personal actions have exposed SinoPac Financial to tremendous risk, rendering him unfit to lead a financial holding company,” commission Chairman Lee Ruey-tsang (李瑞倉) told a news conference in Taipei.

“The company put too many eggs in one basket and lacked diversification,” Lee said.

Ho’s orders distorted the objective of SinoPac Financial’s governance into skirting regulations, while the company’s internal controls failed to prevent the violations, Lee said.

Following the commission’s actions, Ho is barred from holding any key position at a financial institution for the next five years, according to the regulations.

The commission also ordered SinoPac Financial president and board member Yu Kuo-chih (游國治) removed from those posts for six months.

The company’s violations include loans to Taipei-based Tingsing Trading Co (鼎興貿易), a dentistry supplier, which were approved using fraudulent financial information, exposing SinoPac Financial and other lenders to about NT$4.5 billion in bad debts, as well as a series of undercollateralized loans to Sun Power Development and Construction Co (三寶建設).

SinoPac Financial’s appointment of board director Paul Chiu (邱正雄) as acting chairman during an emergency board meeting on Saturday came under scrutiny after Ho was placed under custody and denied bail by Taipei prosecutors on Sunday.

The firm has said that another special board meeting would be held this week to name Chen president of SinoPac Financial,

However, critics said that most of the violations now being investigated occurred during Chiu’s term as director of Bank SinoPac’s (永豐銀行) board, and questioned whether he should also be held responsible.

The commission respects the outcome of SinoPac Financial’s internal control protocols, Lee said.

“We hope that the company can begin making progress in the right direction, like a broken bone that mends and becomes stronger,” he said.

The commission also penalized the company’s Hong Kong-based brokerage subsidiary, SinoPac Securities (Asia) Ltd (永豐金證券亞洲), for extending excessive credit to its clients without adequate collateral and for funneling Chinese funds to purchase shares in Taiwanese companies.

It fined the brokerage NT$600,000 and imposed limits on its business for three months, as well as a one-month suspension on its president.