Taiwan Banks Eye Expansion in Macao and Hong Kong: New Regulations and Compliance Requirements

The Taiwan Financial Supervisory Commission (FSC) has introduced new regulations for Taiwan banks planning to establish branches or subsidiaries in Macao and Hong Kong. Here’s a comprehensive breakdown of the key points:

New Regulations for Taiwan Banks in SARs

1. The new regulations apply to both branches and subsidiaries (representative offices and branch offices, as well as companies in which a Taiwan bank owns 50% or more of the issued shares or paid-in capital).
2. They are based on Article 32 of the Act Governing Relations between the People’s Republic of China and Taiwan (ROC).

Eligibility Criteria

Eligible Taiwan banks hoping to expand their presence in Hong Kong and Macao can apply to the Ministry of Finance with the following qualifications:

• Compliance with local and international finance laws and a strong financial standing.
• Qualified personnel, including those with expertise in international finance and excellent foreign language capabilities.
• An International Banking Department with at least two years of experience (or one year for representative offices).

Application Procedure

Before submitting their applications, Taiwan banks must prepare the following documents for the Ministry of Finance:

• Application form
• Feasibility study
• Business plan
• Internal control and auditing systems
• Performance evaluation methodology

Government Approval and Compliance

After evaluation, the Ministry of Finance may deny permission if it believes the expansion could hinder sound business management or if the bank cannot meet the government policy requirements. Approved banks must submit additional documents, such as local financial regulatory authority approval, business items operated, date of establishment, and responsibilities.

Branch/Subsidiary Operations

Regulations apply to Taiwan bank subsidiaries if they establish branches or subsidiaries in the SARs. Branches or subsidiaries conducting business in compliance with local laws but not Taiwanese area financial laws should submit reports for approval.

Personnel and Mergers/Acquisitions

• Taiwan banks planning to dispatch personnel to collect business information before setting up branches must first receive Ministry of Finance approval.
• Mergers or acquisitions of banks or companies located in both Macao and Hong Kong require approval beforehand.

Pre-Existing Permissions and Effectiveness

Existing Taiwan banks with prior permissions to operate in Macao and Hong Kong still need to comply with the new regulations. The regulations take effect once the Act enters into force, although provisions within the Act may allow for a case-by-case implementation.