Newsletter
The FSC stipulated the "Negative-Listing Rules for Offshore Banking Unit of a Bank Conducting Financial Related Foreign Exchange Business"
In the past, the Financial Supervisory Commission (FSC) regulated the foreign exchange business conducted by the Offshore Banking Unit ("OBU") per its letter, Ref. No Jin-Guan-Yin-Wu-Zi-0940023077 dated 25 August 2005, stipulating the "Negative-Listing Rules for Offshore Banking Unit Conducting Financial Related Foreign Exchange Business" ("2005 Rules"). However, the FSC issued a letter, Ref. No Jin-Guan-Yin-Wai-Zi-10200293011, on 27 December 2013, abolishing the 2005 Rules and stipulating the "Negative-Listing Rules for Offshore Banking Unit of a Bank Conducting Financial Related Foreign Exchange Business" ("Negative-Listing Rules").
The main differences between the Negative-Listing Rules and the 2005 Rules are as follows:
1. The letter issued by the FSC was replaced by a self-check list
According to the 2005 Rules, a bank shall apply these rules only after it has met the conditions provided under the said rules and after the FSC has issued a letter accordingly with a copy to notify the Central Bank of the Republic of China (Taiwan) (CBC). After that, if the bank fails to meet the requirements, the FSC shall also issue a letter and notify the CBC of suspension of applying the 2005 Rules to such bank. Nevertheless, according to the Negative-Listing Rules, the OBU of the bank which meets certain financial and business conditions may directly conduct banking related foreign exchange business which is not provided under subparagraph 1 to subparagraph 10 of Article 4 of the Offshore Banking Act and is not in connection with New Taiwan Dollar with individuals, juristic persons and government agencies outside the territory of the R.O.C. and financial institutions within or outside the territory of the R.O.C., but it shall file a notice together with a business plan, a statement that it is in compliance with the relevant regulatory requirements and a completed self-check list attached to the Negative-Listing Rules with the regulator and notify the CBC of the same within 15 days after the commencement of such foreign exchange business.
2. Amendments to the applicable conditions
A bank meeting the following conditions may apply the Negative-Listing Rules:
(1) Its non-performing loan ratio at the end of each of the preceding six months has not exceeded 1% (the 2005 Rules required the ratio to be below 2.5 %).
(2) Its non-performing loan coverage ratio has exceeded 150% in the previous month (the 2005 Rules required the ratio to be above 40%).
(3) Its self-owned capital to risk-based asset ratio in the most recent quarter has exceeded the statutory minimum ratio plus 1% (the statutory minimum ratios in 2014 are as follows: the total capital adequacy ratio is 8%; the tier 1 capital ratio is 5.5%; the tier 1 common capital ratio is 4.0%, while the 2005 Rules required the ratio to be 10%).
(4) Within the last year the regulatory authorities have not found it responsible for any major non-compliance or imposed administrative penalties on it totaling NT$1 million or more; however, if it has taken concrete steps to rectify the violation causing the major non-compliance or administrative penalties and the competent authority has recognized such rectification, the aforementioned restriction shall not apply (same as under the 2005 Rules).
For a Taiwan branch of a foreign bank, calculation for items (1), (2) and (4) above shall be limited to the Taiwan branch itself; for item (3) above, the calculation shall be based on the self-owned capital to risk-based asset ratio of its head office for the most recent quarter as certified by a certified public accountant (same as under the 2005 Rules).
3. Contents of the business plan
With respect to the contents of the business plan to be submitted by the bank, it was newly added in the Negative-Listing Rules that the bank shall explain the qualifications, experiences and suitability of the personnel managing and handling such business.