| 2007.09.13 |
Financial Supervisory Commission Passed Amendment to “Standards for Application of Establishment of a Financial Holding Company”
[Chinese]
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Financial Supervisory Commission Passed Amendment to “Standards for Application of Establishment of a Financial Holding Company”
The Financial supervisory Commission, Executive Yuan passed the amendment to the “Standards for Application of Establishment of a Financial Holding Company” on September 13, 2007; it amended relevant review standards, and the number of the standards amounted to six points. The key points of the amendment are as follows:
(I) Capital Adequacy:
The group capital adequacy ratio of the financial holding company shall reach one hundred percent (100%) or up; the capital adequacy ratio of a bank subsidiary of the financial holding company shall reach ten percent (10%) or up and the Tier 1 capital adequacy ratio six percent (6%) or up; a securities subsidiary of the financial holding company two hundred percent (200%) or up; and an insurance subsidiary of the same company three hundred percent (300%) or up.
(II) Scope of Inter-businesses
A financial holding company shall conduct businesses going across two (2) or more sectors of the industries, being banking, securities or insurance.
(III) Paid-in Capital and Asset Size:
The minimum paid-in capital is to be sixty billion New Taiwan Dollars (NT$ 60,000,000,000) and the minimum total amount of the asset is to be seven hundred and fifty billion New Taiwan Dollars (NT$ 750,000,000,000).
(IV) Legal Compliance:
A financial institution which decides to convert itself into a financial holding company does not have any of the following circumstances within the most recent three (3) years, or has any of the following circumstances within the said period but it has rectified (the circumstance) and such rectification is sanctioned by the competent authority:
1. The financial institution violated laws related to finance and its entire businesses or a part or more parts of its main businesses were suspended upon the order of the competent authority.
2. A single institution violated laws and regulations related to finance and has been imposed with administrative punishments for more than three (3) times.
3. The financial institution violated laws and regulations related to finance and has been imposed with an administrative punishment; in the same way, the amount of the single fine imposed on the financial institution reached the amount that was two (2) times the minimum amount of fine provided by the provision on punishment, while the imposition of the fine was based on the said provision.
4. Other major events that will impair sound operations of the businesses (of the financial holding company that is decided to be established in the future).
(V) When an applicant applies for the establishment of a financial holding company, he/she/it shall provide the content of a business plan, a financial plan and an investment plan of the financial holding company decided to be established in the future. The content not only includes items which are originally regulated, but the following items shall also be added:
1. Explanation of the ratio of the total amount of non-financial enterprises’ equity investments held by the financial conglomerate decided to be established in the future to the total amount of capital, and of future plans.
2. With respect to the organization, tactics, procedures and an information system of risk management, provide a clarification of methods of establishing a flawless group risk management mechanism and a suitable mechanism that allows requests relevant to reinforcing risk management to be executed effectively,
3. Explanation of a concrete plan as regards strengthening the application of group resources, increasing operational efficiency, creating values, and achieving competitiveness and general effects of operation, and a group’s sound operation.
(VI) Requirements to be considered for determination of the impact on the level of competition in the financial market and the furtherance of public interests:
1. Corporate Governance (including details on the establishment of independent directors and the pledged share ratio of substantial shareholders):
(1) Details as regards the establishment of independent directors: When an entity which, with an application of establishment of a financial holding company, is to be a financial holding company has initial public offerings, it shall establish independent directors according to the “Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies” and the number of independent directors shall conform to Article 14-2 of the “Securities and Exchange Act.” In the same way, it shall formulate standards of ethical conducts by referring to the “Examples as Reference for Formulation of Standards of Ethical Conducts by Listed Companies and Over-the-counter Companies.”
(2) Pledged Share Ratio of Substantial Shareholders (Directors and Supervisors): If the average pledged share ratio of the directors, supervisors and the first ten substantial shareholders of a financial institution which plans to apply for the establishment of a financial holding company reaches fifty percent (50%) or up, the financial institution shall not be allowed to establish a financial holding company.
2. Social Responsibilities: Differentiate concrete evidence of the following items for consideration: prevention of financial crimes, disclosure of information, fair competition, labour-capital relationship and staff welfare, rights and benefits of consumers, participation in charity activities, and assistance in financial stability.
3. Details on handling loans for small and medium businesses are taken as one of the reference indices: The ratio of the remaining amount of the loans granted to small and medium businesses to the total amount of loans granted is more than twenty percent (20%); the remaining amount of the loans granted to small and medium businesses is bigger than the average of the remaining amount of the loans granted to small and medium businesses by the entire domestic banks; or comparing to the average of the remaining amount of the loans granted to small and medium businesses for the preceding three (3) years and until the end of the preceding third year, the remaining amount of the loans granted to small and medium businesses represents five percent (5%) or up increase. This rule however does not apply to a bank subsidiary of the financial holding company which is a professional bank or to an entity which has no bank subsidiaries.
The FSC indicated that standards relevant to application for new establishment of a financial holding company was preliminarily announced for seven days starting from September 4, 2007; during the period of the preliminary announcement, the only suggestion received by the FSC from outsiders was to reduce paid-in capital to fifty billion New Taiwan Dollars (NT$ 50,000,000,000). After the FSC considered that the standard of paid-in capital preliminarily announced was referred to the medium scale of the lowest paid-in capital of the existing financial holding company, it hoped that existing financial holding companies which had not met the standard drafted future business development plans, and planned future self-development or drew up a plan of cooperation with another financial holding company as regards methods of increasing scale and general effects of business operation. Therefore, it resolved to maintain the minimum paid-in capital, sixty billion New Taiwan Dollars (NT$ 60,000,000,000), as preliminarily announced.
The FSC also indicated that it would re-promulgate relevant orders (including “The Directions Governing Application Documents and Review Criteria for the approval of Financial Holding Company ” and provisions relevant to the minimum paid-in capital of financial holding company), and repeal Order Tai-Tsai-Rong-(1)-Zi-0911000464 dated July 2, 2002 and Order Tai-Tsai-Rong-(1)-Zi-0901000116 dated October 19, 2001.
Last updated on September 13, 2007