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Laws and Regulations Database of the Central Bank of the Republic of China-Article Content

Title: Regulations Governing Foreign Exchange Business of Banking Enterprises Inactive Regulations Open new window for Chinese

Announced Date:July 23, 2003

Date:


Chapter 3 Management of Foreign Exchange Business

The exchange rates used for foreign exchange transactions between a banking enterprise and a customer may be solely determined by the banking enterprise.

The exchange rate for a single non-cash foreign exchange transaction with a customer for an amount of less than ten thousand United States dollars ( US$10,000) shall be posted at the banking enterprises' business premises before 9:30 AM on each business day. The bid/ask spread shall be reported to the Bank for record. Any change to the spread shall also be reported.

When submitting reports and forms prescribed in these Regulations, banking enterprises shall attach relevant supporting documents and appendices.

The Department of Foreign Exchange of the Bank may request banking enterprises to fill out additional reports and forms if necessary.

The formats, contents, and completion instructions of the reports and forms prescribed in the previous two paragraphs shall conform to the "Directions Governing Banking Enterprises in Conducting Foreign Exchange Business" separately provided by the Bank, as well as other relevant regulations.

Where an authorized bank operates foreign exchange derivatives business involving the New Taiwan dollar exchange rate, the following rules shall apply:

1.Delivery foreign exchange forward business "between the New Taiwan dollar and foreign currency" (1)Actual for demand foreign exchange receipts or disbursements, but one receipt or disbursement of foreign exchange may not be used in multiple contracts. (2)Entering into contracts or processing settlements with clients, either transaction documents supporting actual for demand foreign exchange receipts or disbursements, or a written approval from the competent authorities shall be verified. (3)Maturity: determined according to actual for demand foreign exchange receipts or disbursements. (4)The price of a rollover transaction shall be based on the current market exchange rate rather than the rate of the original contracts.

2.Foreign exchange swaps business "between the New Taiwan dollar and foreign currency" (1)In swaps transactions, when entering into spot foreign exchange settlement or a forward sale (forward purchase) of foreign exchange, the authorized bank shall enter into a foreign exchange forward contract with the same amount in the opposite direction at the same time. (2)Counterparties: Domestic legal entities: no documents required. Foreign legal entities and natural persons: documents of approval issued by the competent authorities shall be verified. (3)In the settlement of swaps transactions, the Declaration Statement shall be filled out pursuant to the "Regulations Governing the Declaration for Foreign Exchange Receipts and Disbursements or Transactions" (hereinafter referred to as the Regulations for Declaration). Column 4 of the Declaration Statement "Nature of Foreign Exchange Receipts and Disbursements or Transactions" shall be filled out according to the nature of the actual transaction, and also noted as "foreign exchange swaps transaction'. In addition, the "remittance classification and code number" provided by the Department of Foreign Exchange of the Bank shall be indicated on the foreign exchange memo, and included in the daily foreign exchange transaction report along with the Declaration Statement. (4)The swap transaction amount need not be included in the foreign exchange settlement and remittance aggregate amount as specified in subparagraph 3, Paragraph 1, Article 4 of the Regulations for Declaration. (5)The prices of rollover transactions shall be based on the current market exchange rates rather than the rates of the original contracts.

3.Non-Delivery New Taiwan dollar foreign exchange forward business (NDF): (1)Counterparties are limited to domestic authorized banks and the overseas branches or head offices of authorized banks. (2)The format, content, and accounting treatment of contracts shall be segregated from those of delivery foreign exchange forward (DF) business. (3)Contracts under this item may not be rolled over or terminated before maturity. (4)Net cash settlement shall be applied uniformly upon maturity. (5)Transactions do not allow margin trade. (6)Without the approval of the Bank, contracts may not be structured to combine with other foreign exchange derivatives products, New Taiwan dollar deposits, foreign currency deposits, or other products. (7)For non-delivery New Taiwan dollar foreign exchange forward transactions of United States dollars 5 million or above, the Department of Foreign Exchange of the Bank shall be notified immediately by telephone.

4.New Taiwan dollar exchange rate option business: (1)Counterparties are limited to domestic and foreign legal entities. (2)Both net amount settlement and gross amount settlement upon maturity are allowed, but the settlement method shall be specified in the contracts. (3)The currency used for option premium and settlement if the option is exercised may be either in the denominated foreign currency or New Taiwan dollar, but shall be specified in the contract. (4)Only "plain vanilla" options may be transacted. Without the approval of the Bank, contracts may not be structured to combine with options or other foreign exchange derivatives products, New Taiwan dollar deposits, foreign currency deposits, or other products.

5.Cross currency swaps business "between the New Taiwan dollar and foreign currency": (1)Counterparties are limited to domestic and foreign legal entities. (2)For cross currency swaps involving the exchange of principal both at inception and maturity, domestic legal entities are not required to submit transaction documents. Both the principal and interest need not be included in the remittance aggregate amount as specified in Subparagraph 3, Paragraph 1, Article 4 of the Regulations for Declaration. (3)For other types of cross currency swaps, the bank shall request its customer to submit documents evidencing actual demand at the time of transaction, the transaction amount shall be included in the remittance aggregate amount as specified in Subparagraph 3, Paragraph 1, Article 4 of the Regulations for Declaration. However, if the foreign exchange receipts and disbursements or transactions are for the export or import of goods, providing services, or other uses approved by the competent authorities, they need not be included in the remittance aggregate amount. (4)In the settlement of cross currency swaps transactions, the Declaration Statement shall be filled out pursuant to the Regulations for Declaration. Column 4 of the Declaration Statement "Nature of Foreign Exchange Receipts and Disbursements or Transactions" shall be filled out according to the nature of the actual transaction, and also noted as "cross currency swaps transaction". In addition, the "remittance classification and code number" provided by the Department of Foreign Exchange of the Bank shall be shown on the foreign exchange memo, and included in the daily foreign exchange transaction report along with the Declaration Statement. (5)The exchange of principal or interest in each term in the future is deemed as a foreign exchange forward contract, and shall be reported on the daily foreign exchange forward transaction report when entering into contract.

Authorized banks shall comply with the following regulations when engaging in foreign exchange derivatives business not involving the New Taiwan dollar exchange rate:

1.Foreign currency margin trading business: (1)May not be conducted with foreign currency loans, and the bank shall set a separate line of credit for each customer. (2)Without the approval of the Bank, authorized banks may neither provide full discretionary account management nor "joint account" in conducting the business. Regulations governing full discretionary account management shall be separately provided by the Bank. (3)Certificates of deposit or other collateral not under the name of the customer may not be pledged to the authorized bank as collateral for foreign currency margin trading.

2.Foreign exchange derivatives business involving stock prices or stock indices: (1)The "underlying products" shall mean foreign currencydenominated, foreign market related stock prices, stock beneficiary certificates, or stock indices. (2)The underlying products shall not include any stock indices, stock prices, or stock beneficiary certificates listed on any stock exchange in Taiwan or Mainland China.

3.Forward and swaps business between foreign currencies: The prices of rollover transactions shall be based on the current market exchange rates rather than the rates of the original contracts.

4.Cross currency swaps business between foreign currencies: When providing this service, after settlement, the appropriate " remittance classification and code number" shall be indicated on other transaction certificates and included in the foreign exchange transaction daily report.

5.Structured products business linked to deposits: (1)When providing "structured deposits" linked to foreign exchange derivatives products with principal protection, or "structured products" linked to foreign exchange derivatives products without principal protection, the underlying targets are limited to foreign exchange derivatives products already approved by the Bank. (2)The business shall be conducted in compliance with the respective restrictions or regulations governing each type of businesses that have been structured into this business.

6.Structured business linked to loans: (1)For "structured loans" linked to foreign currency loans, the underlying targets are limited to foreign exchange derivatives products already approved by the Bank. (2)The business shall be conducted in compliance with provisions of the " Directions Governing Banking Enterprises for Operating Foreign Exchange Business", as well as the respective restrictions or regulations governing each type of businesses that have been structured into this business.

For a new foreign exchange derivatives business that has not yet been approved, an authorized bank shall apply for approval pursuant to the procedures set forth in Article 13; the relevant guidelines concerning the business shall be specified in the letter of approval issued by the Bank. The Bank may authorize the "Taipei Foreign Exchange Market Development Foundation" (" the Foundation") to coordinate with "R.O.C. Bankers Association" ("BA") to formulate guidelines for contract signing, transaction and settlement methods, the contents of risk disclosure statements, accounting principles, formats of financial statements and reports, information disclosure methods, methods for dispute resolution, procedure for reporting incompliance to the Bank and other related matters. Such guidelines will become effective after the Bank's approval. The same procedure shall be followed for any amendments.

An authorized bank shall act in accordance with relevant regulations and the above guidelines when conducting the foreign exchange derivatives business.

For foreign currency deposits business, an authorized bank shall follow international business practice in determining and posting its own minimum deposit interest rates. The applicable interest rates for maturities not posted shall be negotiated between the authorized bank and its customer with reference to other posted rates with similar maturities. Interest rates that are subject to negotiation shall be announced publicly.

The announcement in the preceding paragraph shall be displayed in the business hall, and also posted on a publicly accessible website or disclosed to the general public through other means.

An authorized bank may purchase or sell foreign exchange on the foreign exchange market or with the Bank, and may also hold long or short positions within the limits set by itself.

An authorized bank participating in the inter-bank foreign exchange market shall comply with the rules formulated by the Foundation after coordination with BA, and with reference to international customs and had reported to the Bank.

An authorized bank shall set its total position limits for transactions between the New Taiwan dollar and foreign currency, which shall be submitted along with its board resolution (the Taiwan branches of foreign banks shall submit documentation of approval issued by their head offices) to the Department of Foreign Exchange of the Bank.

The combined position of non-delivery New Taiwan dollar forward contracts and New Taiwan dollar exchange rate options may not exceed one-third of the afore-mentioned total position limit.

Authorized banks shall fill out "Foreign Exchange Position Daily Reports" for all foreign exchange transactions involving the New Taiwan dollar on a daily basis, and submit the reports to the Department of Foreign Exchange of the Bank on the following business day. Foreign exchange positions recorded on internal books of authorized banks shall be identical to those submitted to the Foreign Exchange Department.

Authorized banks shall report the estimated foreign exchange positions for the day to the Department of Foreign Exchange of the Bank by telephone at the end of each business day.

Authorized banks, when engaging in large spot or forward transactions with clients over the counter, shall use the "Large Spot, Forward, and Cross Currency Swap (CCS) Transactions Information Online Transmitting System" under the "Online Civil Outward/ Inward Remittances Declaration Yearly Aggregate Settlement Amount Query System" to transmit relevant data to the Department of Foreign Exchange of the Bank pursuant to the following regulations:

1.Data on foreign exchange purchase or sale of United States dollars 1 million or above or its equivalent in other foreign currencies by a company or firm (excluding transactions from the export or import of goods processed with documentary bills), or of United States dollars 500,000 or above or its equivalent in other foreign currencies by an individual or an association shall be transmitted immediately on contract day.

2.Data on forward contracts transactions, and cross currency swap (CCS) transactions involving the conversion of New Taiwan dollars against foreign curriencies for United States dollars 1 million or above or its equivalent in other foreign currencies shall be transmitted before 12:00 noon on the business day following the contract.

3.Relevant transmitting operations shall be processed in accordance with the "Manual for the Online Data Transmitting System on Large Spot, Forward, and Cross Currency Swap (CCS) transactions" prescribed by the Department of Foreign Exchange of the Bank.

Authorized banks, when engaging in large spot or forward transactions involving the conversion of the New Taiwan dollars through their internet bank network, shall first pass the Bank's requirments of the "Internet Bank's Large Spot and Forward Transactions Information of Internet Bank Online Transmitting System"; they shall use the "Large Spot and Forward Transactions Information Online Reporting and Transmitting System", which is linked under the "Outward/Inward Remittances yearly Aggregate Settlement Amount Online Query System", to transmit relevant data to the Department of Foreign Exchange of the Bank pursuant to the following regulations:

1.After verifying the relevent transaction documents, data on foreign exchange purchase or sale of United States dollars 1 million or above or its equivalent in other foreign currencies by a company or firm (excluding transactions from the export or import of goods processed with documentary bills), or of United States dollars 500,000 or above or its equivalent in other foreign currencies by an individual or an association, shall be transmitted immediately on the contracting day.

2.After verifying the relevent transaction documents, data on forward contracts transactions involving the conversion of New Taiwan dollars against foreign currencies for 1 million or above or its equivalent in other foreign currencies shall be transmitted immediately on the contract day.

The relevant timetable for the authorized banks to transmit reports to the Department of Foreign Exchange of the Bank:

1.Daily Report: Before 12:00 noon of the following business day.

2.Monthly Report: Within ten (10) days after the end of each month.

The scope of the daily report and monthly report described in the preceding Paragraph shall be separately regulated by the Bank.

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