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Taiwan is delaying approval of CTBC Financial Holding Co.’s planned ¥52 billion purchase of Japan’s Tokyo Star Bank Ltd. after finding internal-control breaches at CTBC’s banking unit.

Taiwan Financial Supervisory Commission’s Jean Chiu, a spokeswoman for the FSC’s banking bureau, said Tuesday that its consideration of the deal has been put on hold along with all investments by CTBC Bank Co. “until corrected measures are taken and recognized by us.”

CTBC Bank Co., a unit of Taiwan’s fourth-largest publicly traded financial company by market value, was fined 10 million New Taiwan dollars ($330,000) and restricted from setting up overseas units until the situation is rectified, an FSC statement said. Failed internal protocols allowed bank managers to hide control of a Shanghai-based company from board members.

The penalties may delay a planned $1.4 billion expansion by the Taipei-based lender and its parent. CTBC Financial in October announced proposed purchases of Taiwan Life Insurance Co. and Tokyo Star Bank as it seeks to diversify outside its crowded home market.

CTBC Financial said the bank will make improvements in accordance with the FSC’s conclusions, it said Tuesday in a filing to the Taiwan Stock Exchange. It may take one to three months for the suspension to be lifted, because the lender needs to end its contract with the Shanghai company and change internal rules, according to the FSC’s Chiu.

CTBC has agreed to buy Tokyo Star from holders including Lone Star Funds, Shinsei Bank Ltd. and Credit Agricole SA. A deal will be the first takeover of a Japanese commercial bank by a foreign lender.

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