Taiwan’s Banking Industry Under Scrutiny: Regulations Tightened Amid Global Competitiveness

A Shift Towards International Standards

TAIPEI, TAIWAN - As Taiwan continues to rank high on global competitiveness reports, its banking sector is undergoing significant changes to align with international standards. The Financial Supervisory Commission (FSC), the country’s competent authority for the financial services industry, has been at the forefront of implementing reforms aimed at strengthening the sector.

A High-Wealth Economy

Taiwan boasts one of the highest levels of wealth in Asia, according to the International Institute for Management Development’s World Competitiveness Booklet 2023. With a population of 23.42 million and a net financial assets per capita of €141,600, the country has a strong foundation for its banking sector.

Regulations Aimed at Enhancing Stability

The FSC has been working to maintain this momentum by introducing regulations aimed at enhancing the sector’s stability. In 2019, the FSC amended the Regulations Governing the Capital Adequacy and Capital Category of Banks to align with the standards set by the Basel Committee on Banking Supervision.

Domestic Systemically Important Banks (D-SIBs)

Six major domestic banks have been categorized as D-SIBs due to their size, interconnectedness, substitutability, and complexity. These D-SIBs - including CTBC Bank Co, Ltd, Cathay United Bank, Taipei Fubon Commercial Bank Co, Ltd, Mega International Commercial Bank, Taiwan Cooperative Bank, and First Commercial Bank - are now subject to higher capital standards.

Internet-Only Banks and Digital Banking Licenses

The FSC has granted approvals to LINE, Next Bank, and Rakuten Bank to set up internet-only banks, while also issuing digital banking licenses to the same. This marks a significant shift towards increased competition in the Taiwanese banking sector, with new players expected to shake things up in the coming years.

The Role of the Central Bank

The Central Bank of the Republic of China (Taiwan) (CBC), which regulates monetary and credit policies, has also been playing a key role in shaping the sector’s future. With 38 domestic banks and 28 local branches of foreign banks operating in Taiwan, the country’s banking landscape is set to become even more dynamic.

The Future of Taiwan’s Banking Industry

As Taiwan continues to navigate the complexities of global finance, its banking industry is poised for significant growth and transformation. With the FSC at the helm, the sector is expected to remain a vital component of the country’s economy, driving innovation and stability in equal measure.