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I. To maintain the financial soundness of financial institutions, it is hereby required that an exchange-listed or OTC-listed financial institution repurchasing its own shares pursuant to Article 28-2 of the Securities and Exchange Act and the “Regulations Governing Share Repurchase by Listed and OTC Companies” shall comply with these Directions. |
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II. The capital adequacy ratio and other financial conditions of an exchange-listed or OTC-listed financial institution repurchasing its own shares shall meet the following requirements:
(I) For financial holding companies and its subsidiary companies:
1. The banking subsidiary’s total capital adequacy ratio is not less than 10.5%, the Tier 1 capital ratio is not less than 8.5%, and the common equity tier 1 ratio is not less than 7%. (based on the capital adequacy ratio for the most recent fiscal half-year examined by a certified public accountant).
2. The bills finance subsidiary’s total capital adequacy ratio is not less than 10.5%, and the Tier 1 capital ratio is not less than 8.5%. (based on the capital adequacy ratio for the most recent fiscal half-year examined by a certified public accountant).
3. The securities subsidiary’s capital adequacy ratio is not less than 200% (based on the monthly accounting summary or the capital adequacy ratio calculated based on the financial report for the most recent period certified by a certified public accountant, whichever is lower).
4. The insurance subsidiary’s capital adequacy ratio is not less than 250% and the and the net worth ratio is not less than 3% (based on the capital adequacy ratio and net worth ratio for the most recent fiscal year examined by a certified public accountant).
5. The financial holding company’s group capital adequacy ratio shall meet the following capital adequacy ratio for the most recent fiscal half-year examined by a certified public accountant):
(1) For the purpose of transferring shares to employees and/or equity conversion: The group capital adequacy ratio after deducting the dollar amount for the presently filed share repurchase is not less than 105%.
(2) For the purpose of share cancellation: The group capital adequacy ratio after deducting the dollar amount for the presently filed share repurchase is not less than 120%.
6. The subsidiary of the financial holding company has completed the capital funding in the event of capital increase order by the competent authorities.
(II) For banks:
1. The total capital adequacy ratio after deducting the dollar amount for the presently filed share repurchase is not less than 10.5%, the Tier-1 capital ratio is not less than 8.5%, and the common equity tier 1 ratio is not less than 7% (based on the capital adequacy ratio for the most recent fiscal half-year examined by a certified public accountant).
2. The most recent financial examination or been audited by the competent authority and had no following situation: insufficient loan loss reserves (including the guaranty responsibility reserves), unfaithful report of overdue loans, insufficient loss reserves for non-credit assets, and others or the conditions mentioned above have been improved.
3. The non-performing loan (NPL) ratio as most recently filed by the bank itself is below 1.5%, and the coverage ratio of allowance for bad debts is not less than 100%.
(III)For bills finance companies:
1.The total capital adequacy ratio after deducting the dollar amount for the presently filed share repurchase is not less than 10.5%, and the Tier 1capital ratio is not less than 8.5% (basedonthe capital adequacy ratio for the most recent fiscal half-year examined by a certified public accountant).
2.The non-performing loan (NPL) ratio as most recently filed by the billsfinance company itself is below 1.5% andthe most recent financial examination or been audited by the competent authority and had nofollowing situation: insufficient loan loss reserves (including the guaranty responsibility reserves), unfaithful report of overdue loans, insufficient loss reserves for non-credit assets, and others or the conditions mentioned above have been improved.
(IV) For insurance companies: The capital adequacy ratio after deducting the dollar amount for the presently filed share repurchase is not less than 250% and the net worth ratio is not less than 3% (based on the capital adequacy ratio and net worth ratio for the most recent fiscal year examined by a certified public accountant), and all funds are utilized at a ratio in compliance with Articles 146 to 146-6 of the Insurance Act and other applicable laws and regulations.
(V) For securities firms: The capital adequacy ratio after deducting of the dollar amount for the presently filed share repurchase is not less than 200% (based on the monthly accounting summary or the capital adequacy ratio calculated based on the financial report for the most recent period certified by a certified public accountant, whichever is lower). |
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III. Where a financial institution does not meet the requirements for capital adequacy ratio and net worth ratio set forth in the preceding Point, the financial institution is still deemed meeting the criteria, provided its latest self-settled capital adequacy ratio and net worth ratio that has been examined by a certified public accountant after deducting the dollar amount for the presently filed share repurchase reaches the level prescribed in the preceding Point, except in the case of a financial holding company that repurchases its own shares for the purposes of share cancellation.
A financial institution that has repurchased its own shares pursuant to the preceding paragraph, but its capital adequacy ratio and net worth ratio calculated based on the financial report certified by a certified public accountant after deducting the dollar amount for the presently filed share repurchase does not reach the level prescribed in the preceding Point, the financial institution is barred from undertaking share repurchase pursuant to the preceding paragraph in one year from the date of repurchase. |
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IV. The financial statements of a financial institution in the preceding Point must meet the following requirements:
(I) The financial reports must have been audited in a lawful and transparent manner by a certified public accountant, and must have been issued an audit report with an unqualified opinion for both the most recent fiscal year and the most recent fiscal half-year. However, this shall not apply with respect to an interim financial report for which the CPA has issued a qualified opinion because equity-method investment and the share of the profit or loss of associates and joint ventures accounted for using the equity method was calculated based on financial reports of the invested company that were not audited or reviewed by a certified public accountant
(II) The financial reports of the most recent fiscal and half-fiscal year show that the financial institution is financially sound, and has neither any deficit nor accumulated deficit, and there is no other factual evidence indicating any likelihood of false profit presentation in the financial statements. However, securities firms are not subject to restrictions on the deficits in the financial reports of the most recent fiscal and half-fiscal year.
(III) If a bank or bills finance company sells non-performing loans and defers recognition of the losses on an annual amortization basis, it shall deduct the full amount of any such deferred and unrecognized losses when calculating the maximum share repurchase amount permitted under Article 28-2 of the Securities and Exchange Act, |
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V. When filing to repurchase its own shares in accordance with the Regulations Governing Share Repurchase by Listed and OTC Companies, a financial institutional shall through its responsible person additionally issue an undertaking stating the following matters, and a copy of the undertaking shall, together with a copy of the filing document and the share transfer rules, be submitted to the competent authority for the relevant industry:
(I) Its financial status complies with the regulatory provisions set out in Point 2 to 4; and
(II) If the repurchase is carried out for the purpose of transferring shares to employees, it will implement accordingly and in good faith. |
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VI. Where a financial institution repurchases its own shares for the purposes of transferring shares to employees or otherwise for purposes of equity conversion, it shall submit a report for every half-fiscal year to the competent authority for the relevant industry, giving detailed information on the progress of its implementation of the share transfer scheme and the concrete measures adopted, and shall complete the share transfer within five years after the repurchase. If by the end of that period the share transfer is not completed, necessitating cancellation of capital, except in the situation where an employee or investor elects to waive the right to share subscription or equity conversion by reason of market price, the Financial Supervisory Commission (FSC) will adopt any of the following measures:
(I) Require the financial institution to, within six (6) months following share cancellation, carry out cash capital increase to make up the cancelled capital; before that capital is fully made up, the FSC may reject any application filed by the financial institution for a new business or for share repurchase;
(II) If the financial institution intends to repurchase its own shares after its capital has been fully made up as stated above, its capital adequacy ratio and net worth ratio after deducting the dollar amount for the presently filed share repurchase shall meet the following requirements before the financial institution may carry out such share repurchase:
1. Not less than 126% if it is a financial holding company (with all subsidiaries shall meet the following capital adequacy requirement for its type of business.).
2. Not less than 12.5% if it is a bank. The Tier 1 capital ratio is not less than 10.5% and the common equity tier 1 ratio is not less than 9%.
3. Not less than 12.5% if it is a bills finance company. The Tier 1 capital ratio is not less than 10.5%.
4. Not less than 300% if it is an insurance company. The net worth ratio is not less than 3.6%.
5. Not less than 240% if it is a securities firm.
(III) Publish the name of the financial institution and any of the above restrictions that the FSC has imposed thereupon. |