Banking Regulations in Taiwan

Taiwan has implemented various banking regulations to enhance the stability of its financial system. These regulations aim to ensure that banks maintain sufficient liquidity, adhere to strict capital requirements, and protect customers from potential risks.

Liquidity Coverage Ratio (LCR)

Introduced in 2015, the LCR framework requires banks to maintain a minimum liquidity coverage ratio of 100%. This ratio ensures that banks have sufficient liquid assets to meet their short-term obligations.

Implementation: The LCR framework was implemented to enhance banks’ ability to recover from potential liquidity crises.
Requirements: Banks must maintain an LCR of at least 100% to ensure they can meet their short-term obligations.

Leverage Ratio

The leverage ratio, introduced in 2013, aligns with the Basel III framework. It is calculated by dividing net Common Equity Tier 1 by total risk amount and requires a minimum of 3%.

Implementation: The leverage ratio aims to ensure that banks maintain a strong capital base.
Requirements: Banks must maintain a leverage ratio of at least 3% to ensure they have sufficient capital.

Total Loss-Absorbing Capacity (TLAC)

The Financial Supervisory Commission (FSC) made amendments to capital accrual regulations, which will be implemented from 2024. These amendments aim to enhance the capital quality and risk-taking capacity of banks.

Implementation: The TLAC framework aims to strengthen bank capital and improve their ability to absorb losses.
Requirements: Banks must meet the new TLAC requirements to ensure they have sufficient capital to absorb potential losses.

Domestic Systemically Important Banks (D-SIBs)

Six banks in Taiwan have been designated as D-SIBs, subject to stricter capital standards. These standards include additional statutory capital requirements and internal management capital requirements.

Implementation: The designation of D-SIBs aims to ensure that systemically important banks maintain a strong capital base.
Requirements: D-SIBs must meet stricter capital requirements to ensure they can absorb potential losses.

Customer Protection

Taiwanese banks are required to conduct thorough know-your-customer (KYC) processes, assess the suitability of financial products for different types of customers, and provide comprehensive product information to customers.

Implementation: The customer protection regulations aim to ensure that banks treat their customers fairly.
Requirements: Banks must meet the customer protection requirements to ensure they are treating their customers fairly.

Alternative Dispute Resolution

The Financial Ombudsman Institution (FOI) was established to provide a reliable alternative dispute resolution mechanism for handling disputes between financial consumers and institutions.

Implementation: The FOI aims to provide a fair and effective way of resolving disputes.
Requirements: The FOI provides a free service to help resolve disputes between financial consumers and institutions.