| 2005.03.03 |
Regulations Governing Approvals of Banks to Engage in Financial Activities Between the Taiwan Area and the Mainland Area
[Chinese]
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Regulations Governing Approvals of Banks to Engage in Financial Activities Between the Taiwan Area and the Mainland Area
Full 14 articles amended and promulgated per 3 March 2005 Order No. Jin-Kuan-Yin-(I)-0940004013 of the Financial Supervisory Commission, Executive Yuan, for enforcement from the date of issuance.
Article 1.
These Regulations are adopted pursuant to Article 36, Paragraph 3, of the Act Governing Relations Between the Peoples of the Taiwan Area and the Mainland Area, (the “Act”).
Article 2.
Overseas branches and offshore banking units of banks in the Taiwan area ("Taiwan Banks"), banks approved by the Central Bank of China to handle foreign exchange business ("Designated FX Banks") and the Chunghwa Post Company, Ltd ("Post Company ") may, after obtaining approval by the Competent Authority, engage in financial activities with the Mainland area branches of foreign banks, Mainland area financial institutions ("Mainland Banks") and the overseas branches thereof, Mainland area legal entities, groups, institutions and the overseas branches thereof, and natural persons.
Article 3.
The Competent Authority, as referred to in these Regulations, is the Financial Supervisory Commission, Executive Yuan.
Article 4.
"Financial Activities Engaged in by Taiwan Banks" in accordance with these Regulations shall include:
1. Accepting deposits;
2. Outward and inward remittances;
3. Export-related foreign exchange business including export bill negotiation, export bill collections, export factoring, and advice of letters of credit and bonding business;
4. Import-related foreign exchange business including issuance of letters of credit, acceptance of drafts, import foreign exchange settlements, and import bill collections;
5. Acting as a collecting and paying agent; and
6. Credit extension business;
7. Interbank transactions related to business specified in the preceding six subparagraphs.
8. Other activities approved by the Competent Authority.
When making credit extensions and purchasing receivables under subparagraphs 6 and 7 of the preceding paragraph, the following requirements shall be complied with:
1. Customers shall be limited to those approved under Article 35, Paragraph 1, of the Act (hereinafter, “Taiwan businesses in the Mainland Area”);
2. A thorough check shall be conducted of the credit status, and repayment ability of the borrower in order to protect the bank's interests;
3. No R.O.C. shares, real estate and other NT Dollar denominated assets shall be used as collateral.
The aggregate amount of credit that the overseas branches and OBUs of a Taiwan Bank extend in the business in paragraph 1, subparagraph 6, plus the aggregate amount of credit they extend to juristic persons in third regions in which the credit line or funds are transferred for use by any Taiwan business in the Mainland Area may not exceed 30 percent of the combined net assets of the Taiwan Bank's overseas branches and OBUs after the closing of the books in the previous fiscal year; any unsecured credit thereamong may not exceed ten 10 percent. However, short-term trade financing and international syndicated loan amounts are excluded from these calculations.
Article 5.
Designated FX Banks and the Post Company shall, when conducting financial business with the approval of the Competent Authority under the provisions of these Regulations, comply with the Central Bank of China's rules related to the conduct of foreign exchange business by Designated FX Banks; the scope of such financial business shall be as follows:
1. Foreign currency deposit business.
2. Outward remittance and inward remittance business.
3. Foreign exchange business related to export.
4. Foreign exchange business related to import.
5. Inter-bank transactions related to business specified in the preceding four subparagraphs.
6. Other business approved by the Competent Authority.
The scope of outward remittance and inward remittance business under subparagraph 2 of the preceding paragraph is as follows:
1. Outward remittance business:
(1) remittances for recipient’s personal use or gifts to friends and relatives;
(2) back-to-back outward remittances by firms handling "shipment from Mainland, negotiation in Taiwan," transaction, provided that the outward remittance amount shall not exceed the amount of the bills negotiation;
(3) remittances of payments for goods imported from the Mainland or of refunds of payments for goods exported to the Mainland;
(4) remittance of office expenses for representative offices of those institutions established in the Mainland with the approval of the Competent Authority;
(5) remittances of inheritance, insurance death benefits, pensions, military retirement pay to military service persons and the interests thereof legally inherited by, or due to, people in the Mainland;
(6) repayment of principal and payment of interest by a Taiwan firm on a loan from its subsidiary in the Mainland;
(7) remittances of living expenses of veterans residing in the Mainland;
(8) remittances of expenses for visiting the Mainland to engage in artistic and educational activities, participate in international meetings, conduct business negotiations, or attend commercial exhibitions;
(9) remittances for the payments for publications, films, video programs, or broadcasts and TV programs in the Mainland;
(10) remittances for shared telecommunications fees;
(11) remittances for direct trade between Taiwan and the Mainland as approved by the competent authority responsible for the supervision of the business at issue;
(12) outward re-remittance of dividends and earnings repatriated by overseas and Mainland subsidiaries of companies approved by the competent authority responsible for the supervision of the business at issue to invest overseas and in the Mainland, provided that the amount of outward re-remittance may not exceed the amount repatriated;
(13) remittances related to tourism and travel to the Mainland;
(14) remittances of individual income earned in the Taiwan area or unused funds by citizens of the Mainland area and individuals who have not obtained a resident certificate, Alien Resident Certificate, or other applicable resident certificate for the Taiwan area, provided that the amount of each remittance transaction may not exceed One Hundred Thousand US Dollars (US$100,000).
(15) Other remittances approved by the competent authority responsible for the supervision of the business at issue in consultation with the Mainland Affairs Council of the Executive Yuan. However individual transactions of amounts less than NT$500,000 shall not be subject to these restrictions.
2. Inward remittances: Designated FX Banks may handle all inward remittances from the Mainland except for inward remittances for the purposes of direct investment, securities investment or other items which are not permitted by laws or regulations.
Article 6.
If a Taiwan Bank, Designated FX Bank, or the Post Company intends to engage in financial business pursuant to these Regulations, its head office shall submit the following to apply for approval from the Competent Authority:
1. The name and address of the head office and the responsible person;
2. A business plan (including the business items applied for, business development projections, and the measures for dispute handling, taking security interests and risk control).
3. A CPA audited financial report of the head office for the most recent fiscal year and a calculation of the capital adequacy ratio for the most recent fiscal half year; and
4. A description of the amount and the ratio of non-performing loans and non-accrual loans and the amounts and ratios of all loss reserves set aside for the most recent fiscal period.
The Competent Authority shall consult with the Central Bank of China before approving an application referred to in paragraph 1. If there are indications that the applied for activities are likely to adversely affect sound management of business or fail to meet the requirements for overall financial supervision, the Competent Authority may reject the application. If an application has been approved, the Competent Authority may revoke the approval [for the same reasons].
Article 7.
The currencies used for activities referred to in Article 4, Paragraph 1, and Article 5 shall be limited to currencies other than New Taiwan Dollars and Renminbi.
Article 8.
An overseas branch or offshore banking unit of a Taiwan Bank, a Designated FX Bank or the Post Company which has been permitted to engage in activities under these Regulations shall submit business reports to its head office periodically, and the head office shall transfer such reports to the Competent Authority and the Central Bank of China for recordation.
Article 9.
For the necessity of maintaining the stability of the domestic financial market, the Competent Authority may, after report to and approval from the Executive Yuan, restrict or prohibit financial activities of banks engaging in activities under these Regulations.
Article 10.
A Taiwan Bank which meets the following requirements may apply for approval to establish a representative office in the Mainland:
1. The Taiwan bank is in compliance with the law, is soundly managed and has not been punished for a serious violation of relevant regulations within the last three (3) years;
2. The assets and net worth of the Taiwan Bank ranked among the top 10 domestic banks in the fiscal year prior to submitting an application;
3. The Taiwan Bank's capital adequacy ratio was 8% or more for the most recent fiscal half year;
4. The employees of the Taiwan Bank have international financial knowledge and experience; and
5. The Taiwan Bank has established branches in countries or areas outside Taiwan.
The Competent Authority may, taking into consideration the actual needs for banking services of Taiwan businesses in the Mainland Area and the locations of Taiwan banks in the Mainland Area, approve a bank to set up its representative office in certain areas in the Mainland Area and, in such cases, the provisions of subparagraph 2 of the preceding paragraph shall not apply.
If an overseas subsidiary bank of a Taiwan area financial holding company or bank meets the requirements set out in subparagraphs 1 and 3 of the preceding paragraph, the financial holding company or bank may apply for approval for its overseas subsidiary to establish a representative office in the Mainland.
Article 11.
A Taiwan Bank which meets the requirements in paragraphs 1 or 2 of the preceding Article shall fill in the application documents and submit them together with the following documents [to apply for approval]:
1. A feasibility study;
2. Minutes of the board of directors meeting;
3. Its financial reports for the most recent three (3) years;
4. A schedule calculating its capital adequacy ratio for the most recent fiscal half year; and
5. Such other documents as may be required by the Competent Authority.
A Taiwan financial holding company or bank which meets the requirements in Item 3 of the preceding article shall fill in the application documents and submit them together with the following documents [to apply for approval]:
1. A feasibility study; and
2. A schedule calculating the ratio of equity capital to risk-based assets of the overseas subsidiary bank for the most recent fiscal half-year.
3. Such other documents as may be required by the Competent Authority.
The Competent Authority may deny approval of an application referred to in the preceding article if there are indications that approval of the application is likely to adversely affect sound management of business or fail to meet the requirements for overall supervision or financial policies. If an application has been approved, the Competent Authority may revoke the approval [for the same reasons]. Prior to approving applications under paragraphs 1 and 2 of the preceding article, the Competent Authority shall consult the Central Bank of China.
Article 12.
A representative offices established by a Taiwan Bank in the Mainland area may engage in the following activities:
1. Researching the relevant business situation regarding finance;
2. Collecting relevant information regarding finance; and
3. Other liaison activities.
Article 13.
A Taiwan Bank which has been approved by the competent financial authority in the Mainland area to set up a representative office in the Mainland area, shall, prior to establishing the office submit the following to the Competent Authority:
1. The approval letter from the competent financial authority in the Mainland area;
2. The expected establishment date and the address of the representative office; and
3. Evidence of the representative's education and working experience.
If the representative office of a Taiwan Bank is to be dissolved, the Taiwan Bank shall obtain the approval from the Competent Authority in advance.
If the representative or the address of the representative office is changed, the Taiwan Bank shall report same to the Competent Authority.
Article 14.
These regulations shall enter into force from the date of promulgation.