To create a level playing field for local subsidiary banks and local branches of foreign financial institutions and Taiwan domestic banks, to increase capital utilization efficiency, reduce financing cost and allow more flexibility in offering financial services to corporate clients, the Financial Supervisory Commission (FSC) announced the amendments to the Eligible Assets Maintenance Requirements for a Local Subsidiary Bank of a Foreign Financial Institution on January 31, 2019. Main points of said amendments are as follows:
1.Amendment of the Ratio of Total Net Asset Amount of Local Subsidiary Bank and Local Branch together:
(1)Before the amendment, the daily average balance of the total net asset amount (i.e., the amount of asset minus the amount of liability for each transaction) of the subsidiary bank, combined with the amount of branches within Taiwan of the foreign financial institution in each month shall not exceed 50% of the local subsidiary bank's net worth, and the daily total net asset amount shall not exceed 100% of the local subsidiary bank's net worth, as of the end of the preceding fiscal year.
(2)After the amendment, the average balance of the total net asset amount is calculated quarterly, and the quarterly beforaverage balance shall not exceed 50% of the subsidiary bank's net worth as of the preceding fiscal year. This allows the subsidiary bank greater flexibility in managing its capital.
2.Allow Qualified Local Subsidiary Bank to Manage the Ratio of Total Net Asset Amount to Net Worth:
Before the amendment, a local subsidiary bank meeting the requirements may apply to FSC for raising the aforesaid ratio, which shall not exceed 250%; after the amendment, such qualified subsidiary bank is allowed to set and manage said ratio, provided it shall execute its self-managed ratio and large risk exposure management policy after the same are approved by the board of directors.
To avoid the impacts of dramatic changes in domestic and foreign economies or financial markets on the stability of domestic financial market, the competent authority is authorized to, in a timely manner, review and approve the aforesaid ratio managed by the qualified subsidiary banks.