| Article 1 | These Regulations are enacted in accordance with Article 51 of the Financial Holding Company Act; Paragraph 1, Article 45-1 of the Banking Act of the Republic of China (hereinafter called Banking Act); Paragraph 1, Article 21 of the Credit Cooperatives Act of the Republic of China (hereinafter called Credit Cooperatives Act); Article 43 of the Act Governing Bills Finance Business; Paragraph 3, Article 42 of the Trust Enterprise Act. |
| Article 2 | The "banking business" referred to in these Regulations includes banks, credit cooperatives, bills houses and trust enterprises.
Financial institutions other than banking business that concurrently conduct bills finance business and trust business shall establish and implement internal control and internal audit systems in accordance with these Regulations, unless otherwise provided by other applicable laws and regulations. |
| Article 3 | The subsidiaries of a financial holding company referred to in these Regulations shall be determined in accordance with Article 4 of the Financial Holding Company Act; the subsidiaries of a banking business shall be determined in accordance with Paragraph 3 of Article 5 of the Regulations Governing Establishment of Internal Control Systems by Public Companies. |
| Article 4 | Financial holding companies and the banking business shall establish internal control and internal audit systems and ensure the on-going and effective operation of the system to promote the sound business operation of financial holding companies (including their subsidiary companies) and the banking business.
Financial holding companies and the banking business shall organize overall operation strategies, risk management policies and guidelines, draft operation plans, risk management procedure and execution guidelines.
Financial holding companies shall supervise their subsidiaries in implementing the matters prescribed in the preceding paragraph. |
| Article 5 | The fundamental purpose of internal control is to promote the sound operation of financial holding companies and banks. It shall be jointly complied with by the boards of directors, management, and all employees to reasonably ensure that the following objectives are achieved:
1. Effectiveness and efficiency of operations;
2. Reliability, timeliness, transparency and compliance of reporting; and
3. Compliance with applicable rules and regulations.
The objective of effectiveness and efficiency of operations referred to in subparagraph 1 of the preceding paragraph includes objectives such as profits, performance, and safeguarding asset security.
The "reporting" referred to in Subparagraph 2, Paragraph 1 includes internal and external financial reporting and non-financial reporting of a financial holding company and a banking business. The objective of external financial reporting includes ensuring that financial reports presented to external users are prepared in accordance with the generally accepted accounting principles and that all transactions are properly approved. |
| Article 6 | The internal control system of a financial holding company or banking business shall be approved by the board of directors. If any director expresses a dissenting opinion or reservation, such opinion and the reasons therefore shall be recorded in the minutes of the board meeting and submitted, together with the internal control system approved by the board of directors, to each supervisor (or the board of supervisors) or the audit committee. The same procedure shall apply in the case of any amendment thereto. |
| Article 7 | The board of directors of a financial holding company or banking business shall be aware of the operational risks faced by the company or business, supervise its operating results and bear the ultimate responsibility for ensuring the establishment and maintenance of an appropriate and effective internal control system. |
| Article 8 | The general manager of a financial holding company or a banking business shall supervise all departments (for the financial holding company, including its subsidiaries) to carefully assess and review the status of the operation of its internal control system. The Statement on Internal Control System (as attached) shall be jointly issued by the Chairperson, the general manager, and the Chief Auditor, and submitted to the board of directors for approval. The content of the Statement on Internal Control System shall be disclosed on the website of the financial holding company or banking business, and publicly announced and filed on the website designated by the competent authority, within three months after the end of each fiscal year.
The internal control system statement under the preceding paragraph shall be duly published in the annual report, stock issue prospectuses, and other prospectuses.
The provisions of Paragraph 1 shall not apply to a banking business that has been taken over by the competent authority. |