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

1. The Central Bank of the Republic of China (Taiwan) (hereafter referred to as "the Bank") promulgates these Directions to conduct 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).

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”.

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.

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”).

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.

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.

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.

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.

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.

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.

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.

13. For pledged CDs, pledgers must cancel the pledge no later than 12:00 noon one business day before the maturity date.

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.

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.

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.

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.

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.

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.

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.

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.

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).

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).

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.