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[Law Basis]
[Print]
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I. General Provisions
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〈Purpose〉
1. The Central Bank of the Republic of China (Taiwan) (hereafter referred to
as "the Bank") promulgates these Directions to conduct open market operations.
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〈Types of open market operations〉
2. The open market operations under these Directions include the following:
(1) Issuance of the Bank certificates of deposit (hereafter referred to
as "CDs").
(2) Repurchase agreement transactions on bonds (bills) (hereafter referred
to as “repo transactions”).
(3) Outright purchases of bonds (bills).
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〈Trading platform for open market operations〉
3. Open market operations shall be conducted through the online
network operation system for open market operations established by
the Bank (hereafter referred to as “Online Operation System”) or
by other means approved by the Bank.The operating procedure of the
Online Operation System shall be conducted in accordance with the
“Online Network Operation Directions for the Central Bank of China
(Taiwan)'s Open Market Operations”.
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II. Issuance of CDs
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〈Counterparties of CDs issuance and holding institutions〉
4. Eligible CDs holders are banks, credit cooperatives, bills finance
companies, Agricultural Bank of Taiwan Co., Ltd. (hereafter referred
to as “Agricultural Bank”), Chunghwa Post Co., Ltd. (hereafter
referred as “Chunghwa Post”), and other financial institutions as
approved by the Bank.Credit cooperatives shall entrust Taiwan
Cooperative Bank Co., Ltd. with subscribing CDs or submitting bids at
CDs auctions.
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〈Forms of CDs and transferring〉
5. The CDs shall be registered, and issued in book-entry form.The
maximum tenor of CDs shall be three years.
The CDs issued in non-negotiable form shall not be transferred
without the prior consent of the Bank.CDs shall not be transferred
until account transfer procedures have been completed at the
Department of Banking of the Bank (hereafter referred to as
“Department of Banking”).
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〈Means of issuance of CDs〉
6. CDs shall be issued in the following manners:
(1) By Subscription: The Bank shall set the CDs issue date,
tenors, interest rates and other relevant conditions with
reference to the funding situation of the banking system
and interest rate level in the financial market, and announce
the information through the Online Operation System or by
other means.
(2) By auction: The Bank shall announce the issue date, tenors,
total offer amount, maximum allocation for each bidder and
other relevant terms via press release before the Bank conducts
the auction. Between the announcement of issuance and the
notification of subscription or auction results, the Bank
reserves the right to cancel or modify the terms and conditions
of CDs issuance.
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〈Subscription of CDs〉
7. In consideration of the funding situation in the financial markets
and the monetary policy issues, the Bank shall decide the amount
of CDs that each financial institution can purchase of subscriptions.
The number and amount of each subscription for each financial
institution are as follows:
(1) For each tenor of CDs, each financial institution shall submit
only one subscription.
(2) The amount of each subscription shall be in multiples of NT$5 million.
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〈CDs Auction〉
8. The CDs auction shall be made on a multiple rate basis. The
allocation of CDs shall depend on the bidding rates submitted
by individual financial institutions. The determination of auction
is based on the following rules:
(1) For bids lower than the maximum rate set by the Bank, rates
are ranked in ascending order from low to high.
(2) If the remaining amount offered by the Bank is insufficient to
cover bids of the same rate, the allocation will be pro rata
based on the sizes of the bids submitted. NT$5 million is the
smallest allocation unit.
The number of bids, amount and rate for each bid submitted by each
financial institution shall comply with the following rules:
(1) A maximum of five bids for each tenor of CDs.
(2) The total value of all bids submitted for each tenor of CDs shall
not exceed the total issue amount and shall be in multiples of
NT$5 million.
(3) The bidding rate shall be limited three digits after the decimal
point.
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〈Notification of CD issuance results〉
9. With regard to the results of CD subscription or auction, the Bank
shall notify each subscriber or bidder the approved purchase amount
and the allocation information through the Online Operation System
or by other means.
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〈Fund delivery of CDs〉
10. Payments related to CD purchases, repayment of principal and
interest upon maturity, and early termination will be handled
as follows:
(1) The settlement for subscription or successful bids, will
be deducted directly from the account of the financial
institution at the Department of Banking at a designated
time on the CD issue date.
(2) When a CD matures or is terminated early, the Bank shall
transfer the amount payable into the account of the holding
financial institution at the Department of Banking.
(3) For a financial institution which does not have an account
at the Department of Banking, it shall submit a document
issued by another financial institution which agrees to make
or collect payment on its behalf, and with the consent of
the Bank, make or receive CD-related payments through the
account of the agent opened at the Department of Banking.
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〈Letters of confirmation of CDs〉
11. After a financial institution has completed payment for CDs,
the Department of Banking shall issue letters of confirmation
of CDs through the Online Operation System or in written form.
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〈Early termination of CDs〉
12. The principal and interest of the CDs will be repaid in one lump
sum upon maturity. Early termination of CDs is not allowed
unless with the Bank's consent.
The calculation of accrued interest on early terminated CDs
will be based on the actual number of days held and the lower
value of the coupon rate or the offer rate of a CD with the
nearest but shorter tenor as announced by the Bank at the time
the early terminated CD was issued.No interest will be accrued
for a holding periods less than 28 days.
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〈Deadline for canceling the pledge of CDs〉
13. For pledged CDs, pledgers must cancel the pledge no later than
12:00 noon one business day before the maturity date.
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III. Repo transactions on bonds (bills)
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〈Counterparties of repo transactions〉
14. Counterparties of repo transactions include banks, bills finance
companies, Agricultural Bank, Chunghwa Post, securities firms
designated by the Bank as dealers for open market operations
(hereafter referred to as "designated dealers"), and other financial
institutions approved by the Bank.
Financial institutions, mentioned in the preceding paragraph,
that are not proprietaries will entrust designated dealers to
issue confirmations for repos transactions undertaken.
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〈Eligible bonds (bills) and tenors〉
15. Eligible bonds (bills) for repo transactions include CDs,
government issued or guaranteed bonds, bank debentures, bank
accepted or guaranteed bills.The Bank may buy eligible bonds
(bills) in a repo transaction at a discount. The tenor of a
repo transaction shall not be longer than 30 days.
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〈Means of repo transactions〉
16. Repo transactions of bonds (bills) will be conducted in the
following means:
(1) By application: The Bank shall set the repo date, eligible
collaterals, tenor, yield and other relevant conditions with
reference to the funding situation of the banking system and
interest rate level in the financial market and announce the
information through the Online Operation System or by other
means.
(2) By auction: The Bank will announce the repo date, eligible
collaterals, tenor, total offering amount, maximum allocation
for each individual bid and other relevant information via
press release before the Bank conducts the auction.Between
the announcement of repo transactions and the notification of
application or auction results, the Bank reserves the right
to cancel or modify the terms and conditions of repo transactions.
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〈Application of repo transactions〉
17. In consideration of the funding situation in the financial markets
and the monetary policy issues, the Bank shall decide the amount
of repo transactions that each financial institution can undertake.
The number and amount of transactions undertaken by individual
financial institution are as follows:
(1) For repo of the same tenor and with the same category of
eligible collaterals, a financial institution shall only
undertake one transaction.
(2) The amount of each transaction shall be in multiples of
NT$5 million.
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〈Auction of repo transactions〉
18. The repo transactions auction shall be made on a multiple yield
basis. The allocation of repo transaction shall depend on the
yield submitted by individual financial institutions. The
determination of auction allocation is based on the following
rules:
(1) For bids higher than the minimum bid yield set by the Bank,
rates ranked from high to low.
(2) If the remaining amount offered by the Bank is insufficient
to lower bids of the same rate, the allocation will be pro
rata based on the sizes of the bids submitted. NT$5 million
is the smallest allocation unit.
The number, amount and yield bid by each financial institution
are as follows:
(1) A maximum of five bids for each tenor of repo and with the
same categories of eligible collateral.
(2) The total value of all bids submitted for each tenor of repo
shall not exceed the total amount and shall be in multiples
of NT$5 million.
(3) The bidding yield shall be limited three digits after the
decimal point.
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〈Notification of repo transactions〉
19. The Bank will notify each applicants or bidders the approved
amount or the allocation and the allocation information of repo
transactions through the Online Operation System or by other means.
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〈Settlements of repo transactions〉
20. Financial institutions shall be in accordance with the approved
or allocated amount, prepare a repurchase agreement, trade
confirmation, and other relevant documents to settle DVP with
the Department of Banking in the following methods:
(1) The financial institution shall transfer the eligible bonds
(bills) into a Bank designated account before a designated
time on the trade date, and the Bank will transfer the proceeds
into the account of the financial institution at the Department
of Banking.
(2) The Bank will deduct the amount from the account of the financial
institution opened at the Department of Banking at a designated
time on the repo maturity date as agreed, and return the previously
delivered bonds (bills) to the financial institution.
(3) For a financial institution which does not have an account at the
Department of Banking, it may submit a document issued by another
financial institution which agrees to make or collect payment on
its behalf, and with the consent of the Bank, make or receive repo
transactions related payments through the account of the agent
opened at the Department of Banking.
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〈Extraordinary circumstances of repo transactions〉
21. If a financial institution has contingent liquidity needs under extraordinary
economic or financial circumstances, the financial institution may apply to
the Bank to undertake repo transactions, and proceed with the transaction after
the Bank deliberates the situation and gives its consent.
The counterparty, tenor, manner and operation of repo transactions mentioned
in the preceding paragraph are not subject to the restrictions set forth in
Direction 14, Paragraph 3 of Direction 15, or Directions 16 to 18 herein.
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IV. Outright Purchases of Bonds (Bills)
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〈Methods for outright purchases of bonds (bills) and applicable provisions〉
22. Outright purchases of bonds (bills) will be carried out by application.
The provisions in Direction 14, Paragraph 1 of Direction 15, Subparagraph 1
of Paragraph 1 and Paragraph 2 of Direction 16, Directions 17 and 19 herein
shall apply mutatis mutandis to counterparties, eligible bonds (bills),
methods, application operation and result notification of outright purchases
of bonds (bills).
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〈DVP settlement and payment upon maturity of outright purchases〉
23. The provisions in Subparagraphs 1 and 3 of Direction 20 herein shall apply
mutatis mutandis to DVP settlement of outright purchases of bonds (bills).
The issuer or its designated paying agent shall remit the amount payable
for bonds (bills) purchased outright by the Bank into the Bank’s designated
account on the maturity date of such bonds (bills).
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V. Supplemental Provisions
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〈Penalties for violation〉
24. In the event that a financial institution fails to make payment or DVP
settlement in accordance with the provisions in Directions 10, 20 and 23,
or fails to comply with provisions of these Directions and the violation
is of serious nature, the Bank may ban the financial institution from
participating in the Bank’s open market operations for a specific period
of time.
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