Financial Crime World

Taiwan Banks Face Stricter Regulations Amid Global Financial Reforms

As part of efforts to enhance financial stability and consumer protection, Taiwan’s banking regulator has introduced new regulations for banks operating in the country. The moves come amid global reforms aimed at strengthening the resilience of the financial sector.

Strengthening Risk Management

According to the Financial Supervisory Commission (FSC), banks in Taiwan must establish internal control systems and have sufficient personnel to ensure effective risk management. Failure to do so could result in administrative fines ranging from NT$2 million to NT$50 million.

Enhanced Capital Requirements

The FSC has also tightened capital requirements for banks, aligning with international standards set by the Basel III framework. The minimum paid-in capital required to establish a commercial bank in Taiwan is now NT$10 billion, while foreign banks operating in the country must allocate a minimum operating capital of NT$250 million.

Stricter Liquidity and Leverage Ratios

Banks are also subject to stricter liquidity and leverage ratios, aimed at preventing excessive risk-taking and ensuring they can withstand financial shocks. The FSC has designated six domestic systemically important banks (D-SIBs) in Taiwan, which will be subject to additional capital requirements and stress tests.

Financial Consumer Protection Act

In addition, the Financial Consumer Protection Act (FCPA) requires banks to conduct thorough know-your-customer processes and assess the suitability of financial products for different types of customers. Banks must also provide comprehensive product information and refrain from offering products that are not aligned with customers’ risk tolerance levels.

Alternative Dispute Resolution Mechanism

To address customer complaints, Taiwan has established a Financial Ombudsman Institution (FOI), which provides an alternative dispute resolution mechanism for handling disputes between financial consumers and institutions.

Key Takeaways

  • Banks in Taiwan must establish internal control systems and have sufficient personnel to ensure effective risk management.
  • The minimum paid-in capital required to establish a commercial bank in Taiwan is NT$10 billion.
  • Foreign banks operating in Taiwan must allocate a minimum operating capital of NT$250 million.
  • The FSC has designated six D-SIBs in Taiwan, which will be subject to additional capital requirements and stress tests.
  • Banks are subject to stricter liquidity and leverage ratios to prevent excessive risk-taking.
  • The FCPA requires banks to conduct thorough know-your-customer processes and assess the suitability of financial products for different types of customers.
  • The Financial Ombudsman Institution provides an alternative dispute resolution mechanism for handling disputes between financial consumers and institutions.