Banking Bureau, Financial Supervisory Commission, R.O.C.: Laws and Regulations Retrieving System of the Banking Bureau

1. To maintain the financial soundness of financial institutions, any exchange-listed or OTC-listed financial institution that implements a share repurchase pursuant to Article 28-2 of the Securities and Exchange Act and the Regulations Governing Share Repurchasing by Exchange-Listed and OTC Companies shall comply with these Directions.
2. When a listed or OTC financial institution implements a share repurchase, its financial condition, including its capital adequacy ratio, shall meet the following conditions:
(1) Financial Holding Companies and Their Subsidiaries:
1. The capital adequacy ratio of a banking subsidiary shall be 10.5% or higher, its Tier 1 capital ratio shall be 8.5% or higher, and its common equity Tier 1 ratio shall be 7% or higher (based on the capital adequacy ratio reviewed by a certified public accountant (CPA) for the most recent fiscal half-year).
2. The capital adequacy ratio of a bills finance subsidiary shall be 10.5% or higher, and its Tier 1 capital adequacy ratio shall be 8.5% or higher (based on the capital adequacy ratio reviewed by a CPA for the most recent fiscal half-year).
3. The capital adequacy ratio of a securities subsidiary shall be 200% or higher (based on the monthly report; provided that if the capital adequacy ratio calculated from the most recent financial report audited by a CPA is lower, the lower ratio shall apply).
4. Insurance Subsidiaries:
(1) The capital adequacy ratio is not less than 125% of the statutory requirement as prescribed in Article 143-4, Paragraph 2, Subparagraph 1 of the Insurance Act (hereinafter referred to as the "statutory level"). However, this shall not apply if there is concrete evidence demonstrating sound capital and approval has been obtained from the competent authority.
(2) Its net worth ratio shall not be less than 3% (based on the capital adequacy ratio and net worth ratio reviewed by a CPA for the most recent fiscal year).
5. Depending on the purpose of the share repurchase, the group capital adequacy ratio of a financial holding company shall meet the following standards, respectively (based on the group capital adequacy ratio reviewed by a CPA for the most recent fiscal half-year):
(1) Where the purpose is to transfer shares to employees or for equity conversion: The group capital adequacy ratio, after deducting the amount of the current share repurchase application, shall be 105% or higher.
(2) Where the purpose is to cancel shares: The group capital adequacy ratio, after deducting the amount of the current share repurchase application, shall be 120% or higher.
6. No subsidiary of the financial holding company has been ordered by the competent authority to increase capital where the capital raising has not yet been completed.
(2) Banks:
1. The capital adequacy ratio, after deducting the amount of the current share repurchase application, shall be 10.5% or higher, the Tier 1 capital ratio shall be 8.5% or higher, and the common equity Tier 1 ratio shall be 7% or higher (based on the capital adequacy ratio reviewed by a CPA for the most recent fiscal half-year).
2. In the most recent financial examination or review by the competent authority, there is no insufficiency in provisions for bad debts (including reserves for guarantee liabilities), no misreporting of non-performing loans, and no insufficiency in provisions for losses on non-credit assets, or such situations existed but have been rectified.
3. The non-performing loan ratio reported in the most recent self-declaration does not exceed 1.5%, and the bad debt coverage ratio is 100% or higher.
(3) Bills Finance Companies:
1. The capital adequacy ratio, after deducting the amount of the current share repurchase application, shall be 10.5% or higher, and the Tier 1 capital adequacy ratio shall be 8.5% or higher (based on the capital adequacy ratio reviewed by a CPA for the most recent fiscal half-year).
2. The non-performing credit ratio reported in the most recent self-declaration does not exceed 1.5%, and in the most recent financial examination or review by the competent authority, there is no insufficiency in provisions for bad debts (including reserves for guarantee liabilities), no misreporting of non-performing credit, and no insufficiency in provisions for losses on non-credit assets, or such situations existed but have been rectified.
(4) Insurance Companies:
1. The capital adequacy ratio after deducting the dollar amount for the presently filed share repurchase is not less than 125% of the statutory level. However, this shall not apply if there is concrete evidence demonstrating sound capital and approval has been obtained from the competent authority.
2. Its net worth ratio shall not be less than 3% (based on the capital adequacy ratio and net worth ratio reviewed by a CPA for the most recent fiscal year).
3. The ratios for various fund utilization comply with Articles 146 through 146-6 of the Insurance Act and other relevant laws and regulations.
(5) Securities Firms: The capital adequacy ratio, after deducting the amount of the current share repurchase application, shall be 200% or higher (based on the monthly report; provided that if the capital adequacy ratio calculated from the most recent financial report audited by a CPA is lower, the lower ratio shall apply).
3. If a financial institution fails to meet the capital adequacy ratio and net worth ratio standards prescribed in the preceding point, it shall be deemed to have met the standards if its capital adequacy ratio and net worth ratio, based on the most recent self-assessment reviewed by a CPA, meet the prescribed ratios after deducting the amount of the current share repurchase application, except where a financial holding company conducts a share repurchase for the purpose of canceling shares.
Where a financial institution buys back its shares pursuant to the preceding paragraph, if the capital adequacy ratio and net worth ratio reviewed based on the financial data audited and certified by a CPA do not meet the ratios prescribed in the preceding point after deducting the amount of the current share repurchase application, the financial institution shall not conduct any further share repurchase pursuant to the preceding paragraph within one year from the date of the buyback.
4. The financial statements of the financial institution mentioned in the preceding point shall meet the following conditions:
(1) The financial statements for the most recent fiscal year and half-year must be audited or reviewed by a CPA with an unqualified opinion issued. However, this shall not apply to an interim financial report where a CPA issues a qualified opinion solely because the investments accounted for under the equity method and the share of profit or loss of associates and joint ventures accounted for under the equity method were calculated based on the financial reports of the investee companies that have not been audited or reviewed by a CPA.
(2) The financial institution must be financially sound for both the most recent fiscal year and half-year, with no losses or accumulated deficits, and there must be no other facts indicating that the financial statements may present a false profit but actual loss. However, securities firms may be exempted from the restriction of having no losses in the most recent fiscal year and half-year.
(3) If a bank or a bills finance company has sold non-performing loans and amortized the deferred recognized losses over several years, the total amount of such deferred unrecognized losses shall be fully deducted when calculating the maximum limit of the amount allowable for share repurchases under Article 28-2 of the Securities and Exchange Act.
5. When a financial institution files an application to repurchase its own shares in accordance with the "Regulations Governing Share Repurchase by Exchange-Listed and OTC-Listed Companies," the person in charge of the company shall additionally issue a statement declaring the following matters, and such statement shall be transmitted to the Market Observation Post System (MOPS) along with the filing documents:
(1) The financial conditions of the company comply with the provisions of Points 2 through 4.
(2) If the share repurchase is conducted for the purpose of transferring shares to employees, the company will execute it faithfully in accordance with the principle of good faith.
6. Where a financial institution buys back its shares for the purpose of transferring shares to employees or for equity conversion, it shall report the detailed execution progress and concrete measures of the transfer plan to the respective bureaus of the competent authority every half-year, and the transfer must be completed within five years after the buyback. If the transfer is not completed upon the expiration of the period, necessitating the cancellation of capital, the Financial Supervisory Commission (hereinafter referred to as the "FSC") will take the following measures, except where employees or investors voluntarily waive their subscription rights or equity conversion due to market price factors:
(1) Require the financial institution to make up for the cancelled capital through a cash capital increase within six months after the cancellation of shares. Before the capital is fully made up, the FSC may withhold its approval for the institution's applications for new types of business and share repurchases.
(2) After the capital is made up pursuant to the preceding item, if the financial institution intends to buy back its shares again, its capital adequacy ratio and net worth ratio, after deducting the current buyback application, must meet the following standards before it may buy back its shares again:
1. Financial holding companies must reach 126% or higher (and their subsidiaries must also meet the respective standards for each industry sector below).
2. Banks must reach 12.5% or higher, Tier 1 capital ratio must reach 10.5% or higher, and common equity Tier 1 ratio must reach 9% or higher.
3. Bills finance companies must reach 12.5% or higher, and Tier 1 capital adequacy ratio must reach 10.5% or higher.
4. Insurance Companies:
(1) The capital adequacy ratio is not less than 150% of the statutory level. However, this shall not apply if there is concrete evidence demonstrating sound capital and approval has been obtained from the competent authority.
(2) The net worth ratio shall not be less than 3.6%.
5. Securities firms must reach 240% or higher.
(3) Publicly disclose the name of the financial institution and the aforementioned restrictive measures taken against it by the FSC.