This country-specific Q&A provides an overview of Banking & Finance laws and regulations applicable in Taiwan.
What are the national authorities for banking regulation, supervision and resolution in your jurisdiction?
The national authorities for banking regulation, supervision and resolution in Taiwan are Financial Supervisory Commission (FSC), the Central Bank of the Republic of China (Taiwan) and the Central Deposit Insurance Corporation (CDIC).
 The Financial Supervisory Commission (FSC) is an independent primary regulatory authority governing the financial services industry in
Taiwan, which determines financial policy, drafts regulations and rules with regard to the financial industry, conducts financial examinations and supervises financial institutions. The Banking Bureau regulates banking and bill finance, and the Examination Bureau is in charge of financial inspection and audits of financial institutions regulated by the FSC.
 The Central Bank regulates monetary and credit policies. It also manages official foreign exchange reserves, issues currency, adjusts reserve ratios and inspects banks.
 The Central Deposit Insurance Corporation (CDIC) is delegated under the Deposit Insurance Act to handle deposit insurance-related matters, to manage deposit insurance risk and to deal with failing and failed insured institutions.
Which type of activities trigger the requirement of a banking licence?
There are businesses that a bank can conduct: (1)accepting checking deposit; (2)accepting various kinds of other deposits; (3)managing trust funds under mandate; (4)issuing bank debentures; (5)extending loans, discounting bills and notes; (6)investing in securities; (7)investing in productive enterprises; (8)investing in residential construction and construction for business purposes; (9)handling domestic and foreign remittances; (10)accepting commercial drafts; (11)issuing Letters of Credit; (12)guaranteeing domestic and foreign transactions; (13)acting as collecting and paying agent; (14)underwriting and trading in securities for its own account or for customers; (15)managing issuance of bonds and debentures and to provide advisory services with respect thereto; (16)acting as attestor for the issuance of stocks, bonds and debentures, managing various kinds of property under mandate; (17)conducting businesses related to investment and trusts regarding securities, buying and selling gold bars/coins and/or silver bars/coins and foreign currencies; (18)conducting warehousing, custody and agency businesses in relation to the businesses itemized above; (19)other relevant businesses which may be authorized by the Central Competent Authority.
Does your regulatory regime know different licenses for different banking services?
Yes. Taiwanese banks are classified as three types: (I)commercial banks (II)banks for a special business purpose (III)investment and trust companies. The main businesses of commercial banks are taking deposit and making loans. The banks for a special business purpose offer specialized credit for particular industries. The investment and trust companies accept, operate, manage and employs trust funds and manage trust properties for trustee or, as an investment broker, invest funds relating to capital markets for specific purposes.
Does a banking license automatically permit certain other activities, e.g., broker dealer activities, payment services, issuance of e-money?
No. If the financial institutions want to undertake the business like the activities such as broker dealer activities, payment services, issuance of e-money, they should apply for the approval from the FSC.
Is there a “sandbox” or “license light” for specific activities?
Yes, Taiwan has legislated the Financial Technology Development and Innovative Experimentation Act in 2018. It provides applicants space with less restrictions and functions like a sandbox. After the review of an innovative experimentation application, the FSC may grant applicants exemption from regulations, orders, or administrative rules during the experimentation period. The scope of innovative experimentation is not limited, but it has to meet some standards like innovation, efficiency, potential risk evaluation, participants protection, and permission from FSC.
Are there specific restrictions with respect to the issuance or custody of crypto currencies, such as a regulatory or voluntary moratorium?
Yes, the FSC has issued the regulations of Security Token Offering (STO), and confirmed the security token as approved security. It applies to the Securities and Exchange Law. If the amount of offering is no less than NT$30 million, then it’s exempted from the duty of registration.
What is the general application process for bank licenses and what is the average timing?
According to Article 8 of Standards Governing the Establishment of Commercial Banks, the founders shall attach three copies of related documentation within the deadline requested by the competent authority and apply to the competent authority for the establishment permit. After the establishment is approved, the founders shall fully pay up the amount of shares subscribed within two months and attach three copies of the related documents and submit to the competent authority for approval to publicly solicit the share subscription. Then after incorporation registration, the bank shall apply to the competent authority for the business license by attaching related documents within three months.
Is mere cross-border activity permissible? If yes, what are the requirements?
What legal entities can operate as banks? What legal forms are generally used to operate as banks?
According to the Banking Act, a bank is a juristic person. The legal form shall be a company lim-ited by shares unless it has been established with special approval obtained prior to the amend-ment and enforcement of the Banking Act or otherwise provided by law.
What are the organizational requirements for banks, including with respect to corporate governance?
The FSC has issued the regulation about corporate governance in banking in 2004, it requires banks to establish the system of internal control, compliance, and audit such as the supervision of executives from the board of directors. In shareholders protection, it suggests the chairman calls shareholders’ meeting in person and strengthen the transparency between the board of directors and shareholders by disclosing information technologically, encouraging shareholders’ involvement and better communications.
Do any restrictions on remuneration policies apply?
Yes, according to Article 14-6 of Securities and Exchange Act, a company whose stock is listed on the stock exchange or traded over-the-counter shall establish a remuneration committee. The remunerations include the salary, stock options, and any other substantive incentive measures for directors, supervisors, and managerial officers. The FSC also issued the administrative regulation to specify principles that the committee should follow. For instance, the performance assessment and remuneration shall refer to the typical pay levels adopted by peer companies and consider the individual performance, the company’s business performance, and future risk exposure.
 The administrative regulation the FSC issued in 2015 was the Regulations Governing the Appointment and Exercise of Powers by the Remneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter in 2015.
Has your jurisdiction implemented the Basel III framework with respect to regulatory capital? Are there any major deviations, e.g., with respect to certain categories of banks?
Yes, the FSC has issued the Regulations Governing the Capital Adequacy and Capital Category of Banks in 2012 and implemented the Basel III framework. It includes the amendment of the composition of Regulatory Capital and the requirement of Minimum Capital Adequacy Ratio.
Citibank Taiwan and Cathay United Bank got the highest capital adequacy ratio. It’s between 15.9% to 16.93%. The Bank of Panhsin and COTA Bank got the lowest capital adequacy ratio which is only between 8.87% to 9.39%.
Are there any requirements with respect to the leverage ratio?
Yes, according to the Article 4 of the Regulations Governing the Capital Adequacy and Capital Category of Banks, the bank shall calculate its stand-alone leverage ratio. The minimum requirement of leverage ratio is no less than 3% and it shall be carried out in accordance with the calculation methods.
What liquidity requirements apply? Has your jurisdiction implemented the Basel III liquidity requirements, including regarding LCR and NSFR?
Yes, besides the Required Liquid Reserves and the Directions for Auditing Liquidity of Financial Institutions, the FSC referred to BCBS’s Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools, and issued the Standards Implementing the Liquidity Coverage Ratio of Banks in 2014. The calculation of NSFR is implemented in 2018.
Do banks have to publish their financial statements? Is there interim reporting and, if so, in which intervals?
Yes, each bank shall prepare and submit its annual report and business report, financial statements, determination as to distribution of profits or make up of losses and other items designated by the FSC at the end of each business year. Besides publishing its financial statements in a daily newspaper in the place where such bank is located or in such other manner as may be designated by the FSC, a bank shall also post one copy thereof in a conspicuous place in each of its business premises for public review.
If the bank is also a publicly listing company, the bank shall also prepare and submit its quarter report and financial statements of the first, second, and third quarters of each fiscal year.
Does consolidated supervision of a bank exist in your jurisdiction? If so, what are the consequences?
No. Referring to the supervision and practice in the USA, the framework of consolidated supervision was expected to achieve two objectives: (1) enhancing resiliency of a firm to lower the probability of its failure or inability to serve as a financial intermediary; (2) reducing the impact on the financial system and the broader economy in the event of a firm’s failure or material weakness.
What reporting and/or approval requirements apply to the acquisition of shareholdings in, or control of, banks?
According to the Banking Act, shareholders shall report in two conditions: (1) The same person or same concerned party who singly, jointly or collectively acquires more than five percent (5%) of a Bank’s outstanding voting shares shall report such fact to the FSC within ten (10) days from the day of acquisition; the preceding provision applies to each cumulative increase or decrease in the shares of the same person or same concerned party by more than one percent (1%) thereafter. (2) The same person or same concerned party who intends to singly, jointly or collectively acquire more than ten percent (10%), twenty-five percent (25%) or fifty percent (50%) of a Bank’s outstanding voting shares shall apply for prior approval of the Competent Authority. The FSC shall also prescribe the regulations of qualifications, required documentation, shares to be acquired, purpose of acquisition, sources of funding, and other matters to be complied with.
Does your regulatory regime impose conditions for eligible owners of banks (e.g., with respect to major participations)?
Yes, the qualifications and requirements for the responsible persons of the bank include restrictions on concurrent posts thereof, prohibition on conflicts of interest and other matters to be complied with shall be prescribed by the Competent Authority, FSC. The specific conditions of responsible person include good moral character, and without any conflict of interests or any violation of the respective internal controls of the institutions.
 The FSC issued the Regulations Governing Qualification Requirements and Concurrent Serving Restrictions and Matters for Compliance by the Responsible Persons of Banks.
Are there specific restrictions on foreign shareholdings in banks?
No, but if the proportion of foreign shareholdings is beyond certain range which is regulated in the Banking Act, then it still has to report such fact to the FSC.
 Paragraph 2 and 3 of the article 25 of Banking Act of the ROC:
(II) The same person or same concerned party who singly, jointly or collectively acquires more than five percent (5%) of a Bank’s outstanding voting shares shall report such fact to the Competent Authority within ten (10) days from the day of acquisition; the preceding provision applies to each cumulative increase or decrease in the shares of the same person or same concerned party by more than one percent (1%) thereafter.
(III) The same person or same concerned party who intends to singly, jointly or collectively acquire more than ten percent (10%), twenty-five percent (25%) or fifty percent (50%) of a Bank’s outstanding voting shares shall apply for prior approval of the Competent Authority.
Is there a special regime for domestic and/or globally systemically important banks?
Yes, according to the Regulations Governing the Capital Adequacy and Capital Category of Banks, in order to enhance the Total Loss-absorbing Capacity, the domestic systemically important banks (D-SIBs) can use Tier 1 Capital to achieve the FSC’s requirement of setting aside 2% capital buffer additionally and the buffer period is four years.
What are the sanctions the regulator(s) can order in the case of a violation of banking regulations?
Depending on the situation, the FSC can take any of actions in addition to ordering correction or improvement by the bank within a specified period of time. The actions include: (1) revoke resolutions of statutory meetings; (2) suspend part of the bank’s business; (3) restrict investments; (4) order or prohibit the bank from disposal or transfer of specific assets; (5) order the bank to close a branch or department within a prescribed period; (6) order the bank to discharge managers or staff members or suspend them from performance of their duties for a specified period of time; (7) discharge directors and supervisors or suspend them from performance of their duties for a specified period of time; (8) order the bank to set aside a certain amount of monetary reserve; (9) other necessary measures.
What is the resolution regime for banks?
According to Article 62 of the Banking Act, the FSC assign officials to take receivership over the Bank, order such a Bank to suspend and wind up business, or take other necessary measures. If deemed necessary, the Competent Authority may notify relevant authorities or institutions to prohibit the Bank’s responsible person from transferring, delivering or creating other rights in his/her properties, and/or request the immigration agency to prohibit the responsible person from departing the country.
How are client’s assets and cash deposits protected?
Taiwan has adopted deposit insurance policy to protect the rights and interests of depositors, maintain credit order, and promote the sound development of the financial industry. Deposit-taking financial institutions pay the insurance premium for the Central Deposit Insurance Corporation (CDIC). If the insured institution has been ordered to close by the competent authority, CDIC will compensate each individual depositor for deposit up to the maximum coverage limit- NT$3 million, thereby protecting the depositors’ rights and interests and maintaining financial stability.
Does your jurisdiction know a bail-in tool in bank resolution and which liabilities are covered?
Is there a requirement for banks to hold gone concern capital (“TLAC”)?
Tier 2 Capital is considered to be gone concern capital. Regarding the requirement of holding gone concern capital, the Regulations Governing the Capital Adequacy and Capital Category of Banks required the Capital Adequacy Ratio of banks at least to be 10.5%. The FSC also announced the timeframe and directions of new capital requirements for capital instruments for investments by banks in financial related enterprises and TLAC debt instruments in 2019.
 The Capital Adequacy Ratio is calculated by dividing a bank’s capital by its risk-weighted assets, and the capital is composed of Tier 1 Capital and Tier 2 Capital.
In your view, what are the recent trends in bank regulation in your jurisdiction?
Virtual banks (internet-only banks) would be the most popular topic in financial markets of Taiwan recently. The FSC has announced amendments to two decrees relating to virtual banks establishment: Standards Governing the Establishment of Commercial Banks and Regulations Governing Investments in Other Enterprises by Commercial Banks. Originally, the FSC announced that it planned to approve two licenses for virtual bank, but it turned out that three applicants have received the approval. The feature of virtual banks is that they do not have any physical infrastructure and process all the business online. Therefore, it creates the benefit of lower fees, higher interest and diversity of service, but it still faces challenges of information security to deal with.
 The three banks, with the approval of the FSC, are Rakuten Bank, Line Bank and Next Bank.
What do you believe to be the biggest threat to the success of the financial sector in your jurisdiction?
The cyber-attacks should be the most serious problem for the financial sector due to the prosperity of Fintech. Many services like virtual banks, open banking and cloud computing are linked to data protection and information security. Thus, the FSC has established the Financial Information Sharing and Analysis Center (F-ISAC) to assist banks, insurers, and securities finance enterprises to build networks of information security protection. The F-ISAC will collaborate with the financial industry to realize cyber security information sharing, early warning and emergency response. A cyber security united defense and collaboration network will be formed by information exchange from the financial industry, including banks, securities and futures firms, and insurance companies, with the aim of reinforcing cyber security in the financial market.