Laws and Regulations Database of the Central Bank of the Republic of China(Taiwan)

Banking enterprises engaging in the foreign exchange business shall first verify the identity or primary registration data of the customer, and ensure that supporting documents comply with the regulations.

When a banking enterprise engages in the foreign exchange business, the operation of customer due diligence, record keeping, and reporting of cash transactions and suspicious transactions on money laundering or terrorist financing shall comply with the Money Laundering Control Act and other applicable regulations; the reporting on the property, or property interests and location of the property or property interests of designated individuals, legal persons or entities shall comply with the Terrorism Financing Prevention Act and other applicable regulations.

An authorized bank may, within the scope of foreign exchange business approved by the Bank, accept the designation of the offshore banking unit (OBU) of the same bank to handle its OBU business in accordance with the Offshore Banking Act, the Offshore Banking Act Enforcement Rules, and other relevant provisions.

When an authorized bank engages in foreign exchange derivatives business involving NTD exchange rate, the following rules shall apply:

1.NTD deliverable foreign exchange forward (DF) business

(1)Based on genuine needs for foreign exchange receipts or disbursements, and the same need shall not be involved in multiple contracts.

(2)When entering into contracts or processing settlements with clients, either the transaction documents supporting genuine needs for foreign exchange receipts or disbursements, or a written approval from the competent authorities shall be verified.

(3)Term: determined according to practical needs for foreign exchange receipts or disbursements.

(4)When the contract is rolled over, the price shall be set based on the current market exchange rate rather than the rate of the original contract.

2.NTD foreign currency swap business (FX SWAP)

(1)FX swap is a simultaneous purchase and sale of identical amounts of one currency for another with two different value dates.

(2)Counterparties and documents: No documents are required for domestic legal entities; for foreign legal entities and natural persons, documents of approval issued by the competent authorities shall be verified.

(3)In the settlement of foreign exchange swap, the banking enterprise shall confirm whether the customer has filled out a Declaration Statement in accordance with the Regulations for Declaration and whether the customer has entered information under the "Nature of Foreign Exchange Receipts and Disbursements or Transactions" of the Declaration Statement according to the nature of the actual transaction, and also notes it as a "foreign exchange swap ". 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 transaction report along with the Declaration Statement.

(4)The swap transaction amount need not be included in the annual aggregate settlement amount as specified in Subparagraph 3, Paragraph 1, Article 4 of the Regulations for Declaration.

(5)When the contract is rolled over, the price shall be set based on the current market exchange rates rather than the rates of the original contracts.

3.NTD non-deliverable foreign exchange forward business (NDF):

(1)Counterparties are limited to other domestic authorized banks and each authorized bank’s overseas branches, head office (parent bank) and branches of head office (parent bank).

(2)The format, content, and accounting of contracts shall be segregated from those of delivery forward (DF) business.

(3)Contracts under this item shall not be rolled over or terminated before maturity.

(4)Net cash settlement shall be applied uniformly upon maturity.

(5)Margin trading is not allowed for NDF transactions.

(6)Without the approval of the Bank, contracts shall not be structured to combine with other derivatives products, NTD or foreign currency principals, or other businesses and products.

(7)For NTD non-deliverable forwards of US$5 million or above, the Department of Foreign Exchange of the Bank shall be notified immediately by telephone.

4.NTD exchange rate option business:

(1)Counterparties are limited to domestic and foreign legal entities.

(2)An option may be settled by net settlement or gross settlement, but the settlement method shall be specified in the contract.

(3)The currency used for option premium and settlement when the option is exercised may be either in the denominated foreign currency or NTD, but shall be specified in the contract.

(4)Only "plain vanilla" options may be transacted. Without the approval of the Bank, contracts shall not be structured to combine with options or other foreign exchange derivatives products, NTD or foreign currency principals, or other businesses and products.

5.NTD cross currency swap business (CCS):

(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 annual aggregate settlement 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 ask its customer to submit documents evidencing actual demand at the time of transaction, the transaction amount shall be included in the annual aggregate settlement 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 aforementioned annual aggregate settlement amount.

(4)In the settlement of cross currency swaps, the banking enterprise shall examine whether the customer has filled out a Declaration Statement in accordance with the Regulations for Declaration and whether the customer has entered information under the "Nature of Foreign Exchange Receipts and Disbursements or Transactions" of the Declaration Statement according to the nature of the actual transaction, and also has noted "cross currency swaps transaction" on the Statement. 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 transaction report along with the Declaration Statement.

(5)The exchange of principal or interest for 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 rules when engaging in the foreign exchange derivatives business not involving NTD exchange rate:

1.Foreign currency margin trading business:

(1) Shall not be conducted with foreign currency loans.

(2) Without the approval of the Bank, authorized banks shall not conduct the business under this subparagraph by the discretionary account service nor“joint account”. Regulations governing the discretionary account service will be separately prescribed by the Bank.

(3) Authorized banks shall not accept term deposits or other collaterals under a third party’s name as the collateral for foreign currency margin trading.

2. In carrying out foreign exchange forward and swap transactions between foreign currencies, when the contract is rolled over, the price shall be reset based on the current market exchange rate rather than the original contract rate.

3. In carrying out foreign exchange swaps and cross currency swap transactions between foreign currencies, the appropriate "remittance classification and code number" shall be indicated on the other relevant transaction certificates and included in the daily transaction report at the time of settlement.

4. Credit default swap and credit default option businesses:

(1) Counterparties are limited to legal entities who are also professional customers.

(2) Where the counterparty is a domestic customer, unless the competent authority agrees it could be a protection seller, the domestic customer should be the protection buyer in a credit derivatives transaction.

(3) Where a domestic customer is the protection seller in a credit derivatives transaction, the reference entity shall meet the requirements set out by its competent authority and shall not be a government or company in Mainland China Area or any company directly or indirectly owned by which with at least 30% shares.

(4) Where the authorized bank itself is the protection seller and the reference entity is an interested party, the terms of the transaction shall not be more favorable than those offered to other counterparties in the same category, and shall comply with the relevant regulations.

(5) Where the contracts under this subparagraph are combined into a structured product, the counterparties shall be limited to professional institutional investors and foreign legal entities who are also professional customers.

5. Where the contracts under this subparagraph are combined into a structured product, restrictions and rules applicable to individual products and underlyings shall be followed.

6. An authorized bank shall not switch the foreign exchange derivatives business originally offered by itself to providing information and consulting services on offshore financial derivatives.

Unless it is otherwise provided by the Bank, an authorized bank's foreign exchange derivatives business not involving NTD exchange rate shall not be linked to the following:

1. Asset securitization related securities or products.

2. Unlisted individual stocks, stock indices or exchange-traded funds in Mainland China Area.

3. Securities privately placed domestically or abroad.

4. Certificates of beneficial interest that are issued overseas by domestic securities investment trust enterprises and are not listed for trading on a securities market.

5. Any Taiwan stock index compiled by a domestic or foreign institution and related financial products, but this restriction shall not apply to an index compiled by TPEX or TWSE, either singly or in collaboration with another institution.

For authorized banks to engage in a foreign exchange derivatives business that is not yet approved by the Bank, the Bank may specify in the letter of approval matters of compliance for such business or authorize the "Taipei Foreign Exchange Market Development Foundation" ("the Foundation") to coordinate with "R.O.C. Bankers Association" ("Bankers Association") to draw up guidelines for the business with respect to counterparties, 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 non-compliance events to the Bank and other related matters, and report those guidelines to the Bank for approval. The same procedure shall be followed for any changes thereto.

An authorized bank shall act in accordance with these Regulations, and in addition, other applicable rules and the guidelines mentioned in the preceding paragraph when conducting the foreign exchange derivatives business.

For foreign currency deposit 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.

Authorized banks that set up foreign currency automatic teller machines shall limit the accumulated cash withdrawals to an equivalent of USD 10,000 per account per day.

Authorized banks shall issue foreign currency Negotiable Certificates of Deposits in book entry form. The Bank will prescribe separately relevant matters of compliance, method of issuance and reporting reguirements, or authorize the Bankers Association to draw up those rules and submit to the Bank for approval. The same procedure shall be followed for any changes thereto.

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

The NTD exchange rate for a single foreign exchange transaction with a customer for an amount of less than US$10,000 shall be posted at the banking enterprises' business premises before 9:30 AM on each business day.

Banking enterprises that engage in the purchase and sale of foreign currency cash shall exchange foreign currency cash according to their quoted prices and shall enhance the ability to identify counterfeit foreign currency notes, and handle counterfeit notes in accordance with the Regulations Governing the Handling of Counterfeit and Altered Foreign Currency Notes and Coins.

A foreign currency settlement bank authorized by the Bank shall comply with the following provisions when conducting foreign currency settlement business:

1.Unless with permission of the Bank, a foreign currency settlement bank shall not, at its own discretion, suspend the business during the period of operation; it shall forthwith inform the Bank if it is unable to operate normally or it suspends/ terminates the participation of participants in the foreign currency settlement system (hereinafter referred to as participating entities).

2.A foreign currency settlement bank shall readily provide the Bank with relevant information as required by the Bank and deliver statistical reports to the Bank periodically.

3.A foreign currency settlement bank shall set a fee schedule and report it to the Bank for record; the same provision applies when a foreign currency settlement bank changes its fee schedule.

4.A foreign currency settlement bank shall setup operational guidelines for agreements with participating entities and report the same to the Bank for record. For participating entities that violate the terms of the contract with a foreign currency settlement bank and disrupt the smooth operation of the foreign currency settlement system, the foreign currency settlement bank shall take actions pursuant to the terms of the contract and report those violations to the Bank according to the circumstances of violations.

5.A foreign currency settlement bank shall not refuse the Bank's request to examine its businesses or review related data.

6.Where a foreign currency settlement bank provides intraday overdraft pledged by certificates of deposits issued by the Bank, central government bonds or other collateral of participating entities, it shall establish related operating procedures and report them to the Bank for record.

7.A foreign currency settlement bank shall agree with clearing institutions and participant entities not to revoke payment instructions once settled.

When an authorized bank concurrently conducting the trust business engages in the businesses provided in Article 17 and Article 17-1 herein, the authorized bank shall abide by the following provisions, unless it is otherwise stipulated or approved by the Bank:

1. The delivery and return of trust assets and the receipts and payments of other related funds shall be made in foreign currency or foreign currency denominated property.

2. The receipts and payments of trustee related funds shall be effected through a foreign currency trust asset account opened by the trustee at an authorized bank.

3. The utilization of trust assets shall comply with the provisions set forth by the competent authority and be limited to foreign currency denominated products, and in addition, shall not involve or be linked to NTD interest rate or exchange rate index.

4. Reports shall be submitted in accordance with the Bank-prescribed format.

When an authorized bank issues foreign currency bank debentures, the authorized bank shall retain funds raised therefrom in foreign currency, and if necessary, convert the funds into NTD by means of swap or CCS. The authorized bank shall also submit reports to the Bank according to the Bank-prescribed format.

Unless it is otherwise provided by the Bank, the interest rate on the foreign currency bank debenture issued by an authorized bank inside the ROC shall only be a positive floating rate or fixed rate and shall not be linked to any derivative or structured note.

An authorized bank shall abide by the following provisions when issuing general foreign currency bank debentures, subordinated foreign currency bank debentures or other foreign currency bank debentures not involving equity:

1. The terms and conditions of the issue shall abide by the applicable regulations at the place of issue.

2. For foreign currency bank debentures with a repayment period of more than one year, the authorized bank shall declare the external debt in accordance with the Directions for the Declaration of Medium- and Long-Term External Debts by Private Enterprises.

3. If the repayment of the principal and interest involves the foreign exchange settlement against NTD, the authorized bank shall follow the Regulations for Declaration and relevant provisions.

The preceding three paragraphs do not apply to an authorized bank that issues foreign currency convertible bank debentures, foreign currency exchangeable bank debentures or other foreign currency bank debentures involving equity outside the ROC shall follow the Regulations Governing Issuance of Bank Debentures by Banks, Regulations Governing the Offering and Issuance of Overseas Securities by Issuers and other provisions of the Bank.

To engage in foreign exchange business during non-standard business hours, an authorized bank shall comply with the following rules:

1.The amount of each foreign exchange settlement shall be limited to NTD 500,000 or its equivalent in foreign currency; and

2.Foreign exchange transactions conducted during non-standard business hours shall be included in the same-day or next-day "Daily Transaction Report" and "Daily Foreign Exchange Position Report" in accordance with its description of operations submitted or the Bank’s regulations.

The provisions of Subparagraph 1 of the preceding paragraph shall apply mutatis mutandis to the business of purchase and sale of foreign currency cash and traveler's checks conducted by non-authorized banks during non-standard business hours, and to the outward and inward remittance business conducted by Chunghwa Post during non-standard business hours.

Transactions conducted by non-authorized banks under the business mentioned in the preceding paragraph during non-standard business hours shall be included in the same-day or next-day "Daily Transaction Report."

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 interbank foreign exchange market shall comply with the rules formulated by the Foundation with reference to international customs after coordination with Bankers Association and reporting to the Bank.

An authorized bank shall set its total position limits for transactions between NTD and foreign currency, which shall be submitted along with the resolution of the board of directors (approval documents issued by the head office or regional headquarters of a foreign bank) to the Department of Foreign Exchange of the Bank.

The combined position of NTD non-deliverable forwards and NTD exchange rate options shall not exceed one-fifth of the afore-mentioned total position limit.

An authorized bank shall draw up its position limits such as "transaction positions for individual currencies" and an "overnight position for each trader". All its units shall abide by these position limits and carry out audits regularly.

Authorized banks shall fill out "Foreign Exchange Position Daily Reports" for all foreign exchange transactions involving NTD 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 reported by an authorized bank shall be consistent with those recorded on its internal books.

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.

When authorized banks engage in large NTD spot, forward or cross currency swap transactions with customers over the counter, or when Chunghwa Post engages in large NTD spot foreign exchange settlements with customers over the counter, or when the overseas branches of domestic authorized banks engage in large NTD non-deliverable forwards with customers with the approval of the competent authority, they shall transmit relevant data to the Bank’s Foreign Exchange Data Processing System pursuant to the following regulations:

1. When authorized banks and Chunghwa Post engage in the foreign exchange purchase or sale with the value equal to or over an equivalent of USD 1 million with a company, limited partnership or firm (excluding transactions from the export or import of goods processed with shipping documents), or with the value equal to or over an equivalent of USD 500,000 with an individual or an association, they shall transmit the data immediately on the contract day after verifying relevant supporting documents.

2. When authorized banks engage in NTD forwards or cross currency swaps(CCS) with the value equal to or over an equivalent of USD 1 million, they shall transmit the data before 12:00 noon on the next business day following the contract day after verifying relevant supporting documents.

3. When the overseas branches of domestic authorized banks engage in NTD non-deliverable forwards with the value equal to or over an equivalent of USD 1 million with onshore and offshore legal entities, offshore financial institutions and overseas branches of other authorized banks, they shall transmit the data before 12:00 noon on the next business day following the contract day.

When authorized banks engage in large NTD spot or forward transactions with customers via the Internet, or when Chunghwa Post engages in large NTD spot f oreign exchange settlements with customers via the Internet, they shall first pass the test of connection with the Bank’s Foreign Exchange Data Processing System; they shall transmit relevant data to the Bank’s Foreign Exchange Data Processing System pursuant to the following provisions:

1. When authorized banks and Chunghwa Post engage in foreign exchange purchase or sale with the value equal to or over an equivalent of USD 1 million with a company, limited partnership or firm (excluding transactions from the export or import of goods processed with shipping documents), or with the value equal to or over an equivalent of USD 500,000 from an individual or an association, they shall transmit the data immediately on the contract day after verifying relevant supporting documents.

2. When authorized banks engage in NTD forwards with the value equal to or over an equivalent of USD 1 million, they shall transmit the data immediately on the contract day after verifying the relevant supporting documents.

A banking enterprise shall connect with the Bank’s Foreign Exchange Data Processing System by one of the means below and comply with the Directions concerning Financial Institutions Using the Bank’s Foreign Exchange Data Processing System :

1. If the banking enterprise opts to develop its own server for the server-to-server connection, it shall follow the inter-agency specifications for the connection operation of the Foreign Exchange Data Processing System.

2. If the banking enterprise opts to use the Bank’s Foreign Exchange Data Reporting System, it shall follow the user manual of the Foreign Exchange Data Reporting System software and comply with the Directions Concerning Financial Institutions Using the Bank’s Foreign Exchange Data Reporting System.

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 relevant timetable for the banking enterprises to transmit reports to the Department of Foreign Exchange of the Bank is as follows:

1.Authorized banks and Chunghwa Post:

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

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

2.Non-authorized banks, credit cooperatives, and credit departments of farmer's or fishermen's associations shall submit daily reports on purchase and sale of foreign currency cash and traveler's checks to the Department of Foreign Exchange of the Bank before 12:00 noon on the following business day.

The formats, contents, filling instructions of the reports prescribed in the preceding three paragraphs and submitting methods of the reports and its attachments shall conform to the Directions Governing Banking Enterprises in Conducting Foreign Exchange Business separately provided by the Bank as well as other relevant regulations.

To examine reports and forms submitted by banking enterprises, the Bank may, if deemed necessary, dispatch personnel to inspect the relevant account books and documents of banking enterprises, or may request banking enterprises to provide truthful financial reports or other relevant information within a prescribed period of time.