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DIRECTIONS
From : Ministry of Finance
Date : September 23, 2003
Ref. No. : Tai-Tsai-Rong-(5)-0925000440
Content : The requirements for applications by banks to engage in underwriting and proprietary trading of bonds is as follows:
1. A Bank wishing to apply for an approval to engage in underwriting and proprietary trading of bonds must submit a business plan and approval of its board of directors to the MOF .
2. The business plan must contain the following:
(1) Description of business;
(2) Operating procedures;
(3) Internal control system (including firewalls for personnel, price sensitive information, physical access and documents);
(4) The actual method of risk management to be used; and
(5) Staffing and evaluation of equipment.
3. A bank which receives MOF's approval to engage in such business must then apply for licenses in accordance with the "Standards Governing the Establishment of Securities Firms". After the bank receives the forgoing license, it shall submit a copy of such license and apply to MOF for amendment of its banking license.
4. The allocated capital of a bank engaging in this business must meet the requirements set out in the "Standards Governing the Establishment of Securities Firms" and comply with Article 28, Paragraph 1, of the Banking Act and Article 5 of "Guidelines for the Scope of Business and Risk Management of Trust or Securities Business as Conducted by Banks".
5. A bank engaging in this business shall combine its position in bonds with maturity over one year arising from underwriting and proprietary trading with the total amount of its invested securities and:
(1) Domestic banks: the position held by a domestic bank shall be subject to the investment cap set out in the MOF's "Limitations on Types and Amounts of the Securities in which a Commercial Bank May Invest" so as to comply with Article 74-1 of the Banking Law.
(2) Taiwan branches of foreign banks: The foreign bank's Taiwan branches investing in bonds must submit approval documents (from its board of directors or its authorized unit/person) indicating the approved investment type, approved total investment amount and approved investment cap for bonds issued by the same issuer for MOF approval. Once a foreign bank's Taiwan branch receives such approval, it shall be governed, mutatis mutandis, by Article 74-1 of the Banking Law.
The foregoing investment position shall be subject to such investment caps as may be set by MOF.
6. A bank engaging in this business shall comply with the following:
(1) The head and personnel of the bank's dealing room shall not concurrently serve in the securities department.
(2) The discussion of price-sensitive information between personnel of the securities department shall be strictly controlled and such information shall not be revealed until it becomes public information.
(3) There should be access control and personnel who do not belong to the securities department may not enter the securities department without authorization; and
(4) The relevant trading and internal documents of the securities department must be kept in a locked safe deposit box.
7. A foreign bank's Taiwan branch may not apply for underwriting and proprietary trading of bonds if any of the following situations exists:
(1) The branches' allowance for possible losses are not sufficient;
(2) The branches had accumulated losses for the preceding fiscal year;
(3) The branches' NPL ratio is higher than 5% for the preceding quarter; or
(4) The branch has been sanctioned twice during the preceding fiscal year because of violations of the Banking Act or other relevant rules. |