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Pledging by a Financial Holding Company of Stock of a Subsidiary as Security for Credit Does Not Fall Within the Meaning of "Secured Credit" Defined in Article 12 of the Banking Act
(23 September 2004)
Order Ref. Jin-Kuan-Yin-(VI)-0936000531 of the Financial Supervisory Commission, Executive Yuan
1.Credit extended by a bank to a financial holding company with stock of a subsidiary of the financial holding company pledged as collateral does not fall within the definition of "secured credit" in Article 12 of the Banking Act, because such pledge of collateral is merely a facility used by the bank to establish its creditor's right and has no substantive security effect; such a loan falls within the definition of "unsecured credit" in Article 13 of the Banking Act.
2.When extending credit to a financial holding company that is an interested party, a bank shall satisfy the requirements set out in Article 33 of the Banking Act. Where, prior to the promulgation of this Order, stock of a financial holding company's subsidiary has already been pledged as collateral, that credit case may continue until expiration of the loan period stipulated in the original agreement, with the requirement that attention be paid to risk controls.
In the event of any discrepancy between this English translation and the original Chinese text, the original text will take precedence. |