Banking Regulation Law in Taiwan: A Comprehensive Guide
The Banking Regulation Law in Taiwan is designed to govern banking practices and ensure stability and security in the financial system. The following articles outline key regulations and guidelines for banks operating in Taiwan.
Article 33-5: Calculation of Investments
- This article clarifies how to calculate the percentage of investments by a bank in an entity’s paid-in capital.
- It includes investments made by the bank’s subsidiaries, third parties acting for the bank, or the bank’s subsidiaries.
Regulation of Incentives and Interest Rates
Article 34: Prohibition on Offering Additional Incentives
- Banks are prohibited from offering additional incentives, such as allowances, gifts, or payments, to attract deposits.
- However, Trust Funds where dividends can be declared according to their trust agreements are exempt.
Article 34-1: Reasonable Interest Rates
- Banks should set reasonable interest rates based on market rates, funding costs, operating costs, expected credit losses, and the customer’s contribution.
Conflict of Interest and Bank Official Restrictions
Article 35: Prohibition on Accepting Commissions or Unwarranted Benefits
- Bank staff members are not allowed to accept commissions, rebates, or other unwarranted benefits from depositors, borrowers, or customers.
Article 35-1: Restriction on Holding Positions in Other Banks
- Bank officials are restricted from holding positions in other banks unless it is as a director or supervisor due to an investment relationship and only with the approval of the Central Competent Authority.
Article 35-2: Qualifications, Concurrent Posts, Conflicts of Interest, and Violations
- This article outlines guidelines for qualifications, restrictions on concurrent posts, conflicts of interest, and procedures for handling violations by bank officials.
Loan Extensions and Asset-Liability Ratios
Article 36: Restriction on Extending Unsecured Loans or Guarantees
- The Central Competent Authority can restrict banks from extending unsecured loans or guarantees after consultation with the Central Bank of China.
- They may also set standards for asset-liability ratios and restrict profit distribution if these ratios are not met.
Valuation of Pledged Items or Mortgaged Properties
Article 37: Accurate Determination of Value
- Banks should accurately determine the value of pledged items or mortgaged properties based on current prices, depreciation rates, and saleability.
Medium- to Long-Term Loans
Article 38: Maximum Term for Residential and Business Loans
- Banks can extend medium- to long-term loans for residential buildings or business purposes, with a maximum term not exceeding thirty years.
Article 39: Medium-Term Loans for Durable Consumer Goods Purchases
- Banks can offer medium-term loans to individuals for durable consumer goods purchases or discount notes issued by buyers endorsed by sellers/distributors.
Repayment in Installments
Article 40: Procedure for Repayment in Installments
- The procedure for repayment in installments used in medium- or long-term loans applies to these types of loans.
- The Central Bank of China may regulate their terms and duration as necessary.
Interest Rates and Reserves
Article 41: Posting Interest Rates
- Banks must post their interest rates based on an annual rate at their place of business.
Article 42: Reserves for Different Types of Deposits and Liabilities
- Banks are required to maintain reserves for different types of deposits and liabilities according to rates set by the Central Bank of China.
Liquidity Requirements
Article 43: Minimum Ratio Between Current Assets and Various Liabilities
- To ensure a bank maintains adequate liquidity, the Central Bank of China may prescribe a minimum ratio between current assets and various liabilities after consulting with the Central Competent Authority.