Taiwan FSC Proposes Rules Changes for Foreign Bank Branches

Source: Regulation Asia Editors, Regulation Asia 2020-07-08

The FSC proposes to allow loan loss provisions and reserves to be used in calculating net worth, accumulated losses and total deposits, which have a bearing on lending capacity.

Taiwan’s FSC (Financial Supervisory Commission) has proposed amendments to its regulations governing foreign bank branches and representative offices, aimed at expanding their capacity to support the domestic economy.

Currently, loan loss provisions and operational reserves in excess of expected losses can be included in local banks’ Tier 2 capital.

The FSC has proposed to allow 50% of loan loss provision and reserves set aside by foreign bank branches (against liability on guarantees) to be:

1、included in foreign bank branches’ net worth, subject to a review of the 50% ratio every three years (Note: the amount of credit a foreign bank branch can extend is capped at between 20 times net worth for retail and 40 times net worth for non-retail)

2、factored into determinations on whether foreign bank branches have accumulated losses (Note: accumulated losses can limit the credit a foreign bank branch can extend to an individual and their related entities)

3、used as the basis of calculation of total deposits of the foreign bank branches, not including short-term loans from the head office (Note: a foreign bank branch can only extend local currency loans up to 50% of total local currency deposits)

“The proposed amendments to the Regulation aim to expand the business capacity of foreign bank branches and to support such branches to extend credits, engage in investments, and spur real economic developments in Taiwan,” the FSC said.

The proposed amendments will be published in the Executive Yuan Gazette. A 60-day comment period will be allowed from the date of public announcement.

FSC

Taiwan FSC Proposes Rules Changes for Foreign Bank Branches

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