Data Source:Laws and Regulations Retrieving System of the Banking Bureau

Regulations Governing Issuance of Bank Debentures By Banks

Article 1
These Regulations are adopted in accordance with Articles 72-1 and 90 of the Banking Act (the "Act").
Article 2
The term "Bank Debentures" as used in these Regulations shall mean general Bank Debentures, subordinated Bank Debentures, convertible Bank Debentures, exchangeable Bank Debentures and other Bank Debentures approved by the competent authority, in each case, issued by a bank in accordance with regulations issued pursuant to the Law for the purposes of raising funds for medium and long term credit extensions, after reporting to, and obtaining the approval of, the competent authority, and having a tenor of not less than two (2) years.
Article 3
In order to issue Bank Debentures a bank must first apply to the competent authority by submitting an application (report) form and the items and documents listed therein.
An application to issue general Bank Debentures, subordinated Bank Debentures, or other Bank Debentures that do not involve shareholding rights made in accordance with the preceding paragraph shall be deemed approved if the competent authority does not object thereto within twelve (12) business days from the date of receipt of such application form (as attached).
If a bank's application to issue Bank Debentures is incomplete or otherwise does not include all of the required information, but the bank remedies such deficiencies within the time period specified by the competent authority, the application shall be deemed approved if the competent authority does not object thereto within twelve (12) business days from the date of receipt of such missing information.
A bank applying (or filing a report) under paragraph 1 hereof to issue convertible Bank Debentures, exchangeable Bank Debentures, or other Bank Debentures that involve shareholding rights shall comply with the provisions of the Regulations Governing the Offering and Issuance of Securities by Securities Issuers or the Regulations Governing the Offering and Issuance of Overseas Securities by Issuers, in addition to the provisions of these Regulations.
A bank that wishes to issue equity-based Bank Debentures by means of private placement shall comply with relevant provisions of the Securities & Exchange Act and file with the competent authority information on the terms of private placement as well as qualification requirements for buyers seven (7) business days prior to the issue date.
A bank that wishes to issue foreign currency denominated Bank Debentures shall obtain approval from the competent authority as well as comply with relevant Central Bank of China regulations.
Article 4
Unless it is otherwise provided in Paragraph 2 hereof, a bank may not apply to issue Bank Debentures if any of the following circumstances exist:
1. Provisions for bad loans are insufficient;
2. The bank sustained cumulative loss by taking into account
unamortized loss from the disposal of non-performing loans in the fiscal year preceding the year in which the application is made;
3. The bank's ratio of overdue loans for the quarter past three months
preceding the application exceeds five (5) percent; or
4. During the year preceding the application, there occurred an
irregularity involving an amount in excess of One Hundred Million New Taiwan Dollars (NT$100,000,000).
A bank having any of the situations as provided in subparagraph 2, 3, or 4 of the preceding paragraph may, subject to the approval of the competent authority, issue Bank Debentures with minimum par value of NT$10 million for the purposes of improving its constitution, capital adequacy or financial health.
Article 5
The competent authority may reject a bank's application to issue Bank Debentures if any of the following circumstances exist:
1. The bank's application to issue Bank Debentures is incomplete or
otherwise does not include all of the required information and the bank fails to remedy such deficiencies within the time period specified by the competent authority;
2. Any of the situations described in the first paragraph of Article 4,
above, exist; or
3. The bank has failed to fully implement a previous issuance plan with
no reasonable explanation having been provided for such failure.
Article 6
The issue amount of Bank Debentures plus the amount of outstanding previously issued Financing Bonds shall not exceed two (2) times the bank's net worth as of the end of the preceding fiscal year; provided, that, subject to compliance with other requirements for the issuance of Bank Debentures by industrial banks, the above issue amount limit shall not apply to industrial banks.
For a bank to issue Bank Debentures, either the bank or the Bank Debentures shall have been rated by a credit rating agency sanctioned by the competent authority, unless the bank has reasonable explanation for not having such a credit rating with the approval of the competent authority.
For the issue and sale of Bank Debenture, a bank shall inform the investors the following:
1. Credit rating: The credit rating of the bank or the Bank Debenture;
2. Investment risk: Including the fact that Bank Debenture is non-deposits and not insured by the Central Deposit Insurance Corporation;
3. Major terms and conditions: Including whether the Bank Debenture is cancelable, callable or redeemable and conditions thereto;
4. In the case of subordinated bank debenture, the priority of claim
and the legal effect of subordination; and
5. Other material issuing terms and conditions.
For the offering and issuance of Bank Debentures, a bank shall follow the provisions of the Criteria Governing Information to be Published in the Financial Industry Prospectus for Offering and Issuance of Securities.
If a bank commissions an underwriter to issue its Bank Debentures, the bank shall enter an agreement with said underwriter requiring said underwriter to perform the obligation of disclosure as provided in the preceding paragraph.
Article 7
Bank Debentures shall be bearer debentures; provided, that convertible Bank Debentures, exchangeable Bank Debentures, other Bank Debentures that involve shareholding rights and, if the purchaser or holder so requests, other Bank Debentures may be converted to registered debentures.
Banks may issue Bank Debentures in dematerialized form. Bank debentures issued in dematerialized form shall be registered debentures.
Except for Bank Debentures issued pursuant to the provisions in the second paragraph of Article 4 herein, the minimum par value of Bank Debentures issued by a bank shall be NT$100,000.
Article 8
Bank Debentures may be freely transferred and provided as security; provided, that the transfer or provision as security of registered Bank Debentures shall require recordation with the issuing bank or other authorized agent organization.
The statute of limitations on Bank Debentures and the loss, theft or destruction thereof shall be handled in accordance with the relevant provisions of R.O.C Civil Code or other regulations governing the issuance thereof.
Article 9
When calculating and paying interest on Bank Debentures, a bank shall withhold income tax in accordance with the Income Tax Act.
Article 10
A bank shall issue Bank Debentures within one (1) year from the date on which an application becomes effective; failure to do so shall result in the invalidation of such effectiveness. However, for Bank Debentures requiring application for approval or effective registration under the Regulations Governing the Offering and Issuance of Securities by Securities Issuers or Regulations Governing the Offering and Issuance of Overseas Securities by Issuers, the provisions thereof shall be complied with.
Article 11
In accordance with the provisions of Article 4, paragraph 2, of the Trust Act regarding title transfer and trust registration of Bank Debentures, Bank Debentures originally in bearer form shall be changed to registered form, and the following provisions shall be complied with:
1. The settlor and trustee shall fill out the title transfer application
and affix their signatures or seals to the reverse side of the Bank Debentures; when Bank Debentures in the custody of a centralized securities depository enterprise are property under a trust and the provisions of subparagraph 6 herein have been complied with, if the trustee withdraws them from the centralized securities depository enterprise, documentation of withdrawal from the depository enterprise shall be submitted, and the trustee shall affix their signature or seal on the application for title transfer and on the back of the Bank Debentures in the space designated for the assignee.
2. Annex the trust contract or will and relevant evidentiary documents from the tax authorities; after the bank has checked and confirmed their accuracy, record the words "Trust Assets" and the date in the Register, and on the reverse side of the Bank Debentures.
3. When the trustee is changed, name amendment shall be carried out, and
documents relevant to the reason for the change submitted.
4. When a trust agreement stipulates the settlor as a beneficiary of the
trust interest in whole or in part, if during the duration of the trust
relationship the beneficiary is changed to a person other than the settler, relevant evidentiary documentation from the tax authorities shall be submitted.
5. When a trust relationship is dissolved and trust assets revert
to the settlor in accordance with the law, sufficient evidentiary documentation shall be submitted to verify the extinguishment of the trust relationship; after the bank has checked and confirmed their accuracy, trust registration cancellation shall be carried out; when trust assets revert to a person other than the settlor, relevant evidentiary documentation from the tax authorities shall be submitted; after the bank has checked and confirmed their accuracy, trust cancellation registration shall be carried out, recording the date and affixing the seal stating "Trust Reversion Record" in the registration book and on the reverse side of the Bank Debenture.
6. When Bank Debentures in the custody of a centralized securities
depository enterprise are property under a trust, the indication of the trust relationship and matters to be recorded shall be governed by the Regulations Governing Book-Entry Operations for Centrally Deposited Securities.
Article 12
These Regulations shall be effective from the date of promulgation.
Article 3 of the amendments to these Regulations shall be effective from 1 January 2005.