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

Amendment and Promulgation of “Regulations Governing The Establishment Criteria and Administration of The Industrial Bank”

The Financial Supervisory Commission (hereafter called “the FSC”) passed the bill of amendment of provisions of “Regulations Governing The Establishment Criteria and Administration of The Industrial Bank” on November 22, 2007; it will promulgate and enforce it within the next few days.
The FSC indicated it was necessary to further discuss and amend management regulations related to industrial banks to coordinate with the change of the financial environment and facilitate the development of the banks. Pursuant to the objectives of the establishment of industrial banks, investing in securities is one of the important businesses of an industrial bank. The amendment and the promulgation of “Regulations Governing The Establishment Criteria and Administration of The Industrial Bank” by the Commission this time, therefore, are to increase the quota of investment in securities by an industrial bank, so as to balance risks incurred in the course of businesses of the bank.

Seven (7) articles are amended this time and the key amendment is as follows:
(1) In order to cope with the enforcement of the New Basel Capital Accord, the method of calculating the ratio between equity capital and risk assets of an industrial bank is amended. The capital measurement of the amount in the investment of real estates of the bank shall follow the example of the capital measurement of the amount in the investment of real estates of a commercial bank and the amount shall not be deducted from the equity capital of the industrial bank. (Article 8 is amended.)
(2) In order to avoid an industrial bank from utilizing businesses under its control to invest in manufactory businesses with the aim of circumventing related restrictions, the regulation that the balance of direct investment and the shareholding ratio of any manufactory businesses engaged by industrial bank and a company controlled by an industrial bank shall be calculated together is therefore added to the Regulations. Furthermore, since the balance of direct investment of any manufactory businesses engaged by a venture capital company wholly owned by the industrial bank has been incorporated into the quota related to the foresaid calculation, risks incurred in the course of related businesses should be able to be controlled. Therefore, the FSC stipulates that the balance of direct investment of the wholly owned venture capital company engaged by the industrial bank shall exceed 5% of the bank's net worth as of the end of the preceding fiscal year. (Article 9 is amended.)
(3) With the aim of coordinating with the development of the financial market, the provision which provides that an industrial bank shall invest in bonds issued by international or regional financial organizations, collective trust funds issued by trusts, and private beneficiary certificates, private warrant certificates and private warrants is added to the Regulations. (Article 10 is amended.)
(4) The regulation that an industrial bank shall invest in exchange-traded funds issued by the company where the responsible person of the bank positions as a director, supervisor or manager is provided. (Article 11 is amended.)
(5) The FSC stipulates that an industrial bank shall not invest in beneficiary securities or asset-backed securities issued on the basis of the financial assets, the real estates and the rights related to real estates of the bank’s affiliated enterprises. Nevertheless, after the consideration of the practice of securitization, the Commission enacts that the first regulation in this paragraph shall not apply to an industrial bank which holds the foresaid beneficiary securities or asset-backed securities due to the demand of the purpose of credit enhancement and the necessity of securitization plan, after the approval of the FSC. In spite of what have been mentioned, the first regulation in this paragraph also shall not apply to the case that the bank’s affiliated enterprises and other originators participate in securitization plans jointly and the amount of the assets brought into the asset pool by the affiliated enterprises shall not exceed 20% of the asset pool. (Article 12 is amended.)
(6) After considering the characteristics of an industrial bank, the FSC relaxes the quota of investment in securities which have no share quality, to balance risks incurred in the course of businesses engaged by an industrial bank. (Article 13 is amended.)
(7) The FSC stipulates the procedure that in the case that an industrial bank merges with other financial institutions pursuant to the Financial Institutions Merger Act and extinguished, then its surviving institution or newly incorporated apply to amend its registration to be an industrial bank, with the aim of benefiting the bank to proceed in the merger. (Article 30 is amended.)