Financial Crime World

Taiwan Introduces Stricter Regulations for Foreign Banks’ Branches

In an effort to strengthen oversight and ensure stability in the financial sector, Taiwan’s authorities have introduced new regulations governing foreign banks’ branches operating in the country.

New Requirements for Credit Extensions

According to Article 15 of the Banking Law, foreign bank branches must establish clear terms and conditions for credit extensions, including:

  • Interest rates
  • Security requirements
  • Repayment schedules

These terms will be applicable mutatis mutandis to borrowers in the same category, meaning those receiving credits from the branch for similar purposes and with similar accounting entries.

Minimum Eligible Assets Requirement

Article 16 requires foreign bank branches to maintain a minimum level of eligible assets, including:

  • Government bonds
  • Mortgage loans
  • Investments in real estate

The ratio of NTD deposits to outstanding NTD loans must also meet certain thresholds, with a minimum ratio of 50% for branches accepting deposits from individuals.

Stricter Lending Limits

The regulations impose stricter limits on lending activities. For branches that accept deposits from individuals:

  • The outstanding balance of credit extensions other than loans cannot exceed 15 times the branch’s net worth after the accounting books were closed at the end of the previous fiscal year.
  • Outstanding loans cannot be more than 20 times the branch’s net worth.

Industry Expert Response

The new regulations have been welcomed by industry experts as a necessary step to enhance stability and transparency in Taiwan’s financial sector. “These measures will help to reduce risk and ensure that foreign banks’ branches operate with integrity,” said an accountant specializing in banking regulations. “We are seeing a trend towards increased oversight and regulation globally, and Taiwan is taking proactive steps to keep pace.”

Effective Date

The new regulations come into effect immediately, with foreign bank branches required to comply by the end of the current fiscal year.