NEW TYPES OF SECURITIES OPEN TO BANK INVESTMENT

09/01/2004

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To allow commercial banks greater flexibility in their application of funds, and to enable them to achieve better returns, on 2 July 2004 the Fi-nancial Supervisory Commission announced revised rules for the types of security open to investment by commercial banks, and the per-mitted amounts of such investments. Commer-cial banks may now additionally invest in pri-vately placed securities, and in stocks listed on the Emerging Stocks board of the GreTai Secu-rities Market (GTSM). This is expected to assist enterprises in raising funds, and to stimulate domestic financial markets. The main points of the amendments are as follows:

Commercial banks may now invest in bonds issued by international or regional financial organizations.

Commercial banks may now invest in shares listed on the Emerging Stocks board of the GTSM. But the issuer of such shares must achieve a certain credit rating by a credit rat-ing institution recognized by the regulatory authority.

Commercial banks may now invest in pri-vately placed securities. But the issuer of such securities must achieve a certain credit rating by a credit rating institution recognized by the regulatory authority.

Commercial banks are explicitly prohibited from investing in OTC-traded securities that are listed by the GTSM as subject to pre-paid settlement, or traded as managed stocks.

A commercial bank that is an originator (settlor), a trustee, or the corporate shareholder in a special-purpose company (SPC) under the Financial Asset Securitization Act or the Real Estate Securitization Act, may not invest in the following types of beneficiary certificates or asset-backed securities:

1.A commercial bank that is an originator (settlor) may not invest in beneficiary cer-tificates or asset-backed securities issued on the basis of its own financial assets, real estate, or real-estate-related rights.

2.A commercial bank that is a trustee may not invest in beneficiary certificates that it issues.

3.A commercial bank that is the corporate shareholder in an SPC may not invest in asset-backed securities issued by its SPC.