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") has prescribed these Directions to govern the examination of the operations of financial institutions, pursuant to the provision of Article 38 of the Central Bank of the Republic of China (Taiwan) Act (hereafter referred to as "the Act").

2. "Financial institutions" as referred to in Article 38 of the Act shall consist of:

(1) Financial Holding Companies;

(2) Banks;

(3) Credit Cooperatives;

(4) Credit Departments of Farmers' Associations or Fishermen's Associations;

(5) Insurance Companies;

(6) Bills Finance Companies;

(7) Securities Houses;

(8) Securities Finance Companies;

(9) Postal remittances and savings departments of postal institutions;

(10) Payment clearing institutions, and

(11)Other financial institutions established pursuant to legislative acts.

3. In conformity with the powers and functions authorized by the Act, the Bank, if necessary, may undertake the examination of the operations of financial institutions and the targeted examination of such operations under Chapter 3 of the Act.

The term "if necessary" as used in the preceding paragraph shall mean any one of the following circumstances:

(1) To determine whether or not a financial institution is in compliance with monetary, credit, foreign exchange policies, and with related regulations of the Bank;

(2) When material events taking place as a financial institution threaten the stability of the financial system or the integrity and efficiency of the payment and settlement system;

(3) When extraordinary transactions occur in financial markets regulated by the Bank;

(4) When a financial institution applies to the Bank for accommodations;

(5) When further examination is required in order to understand or verify the results of the Bank's off-site monitoring or the correction of defects of a financial institution;

(6) When the Financial Supervisory Commission, Executive Yuan ("FSC") coordinates with the Bank to address specific matters; and

(7)Others circumstances determined by the Bank.

4. The purpose of the Bank's examination of the operations of financial institutions shall be:

(1) To verify that financial institutions are complying with monetary, credit, foreign exchange policies, and with the relevant regulations of the Bank, and to assure effective implementation of relevant policies, laws and regulations;

(2) To fully and timely understand andmonitor material events of financial institutions and extraordinary trades in the financial market so that the Bank can establish appropriate policies to ensure the sound operation of the payment and settlement system, maintain financial market order and promote financial stability;

(3) To check the financial status and operations of financial institutions applying for accommodation and to evaluate whether it is appropriate to provide accommodation to such institutions and what the accommodation amount should be; and

(4) To review the merits, shortcomings and revisions that should be made to current financial laws and regulations, based on the operations of financial institutions.

5. The Bank, in principle, shall undertake examinations by way of field examination as follows:

(1) By direct examinations that the Bank assigns a team of examiners carrying authorizations to conduct in a maneuverable way at the premises of the examinee institution; or

(2) By joint examinations conducted with other regulatory personnel.

6. The Bank may adopt the following procedures in conjunction with field examinations:

(1) Off-site Monitoring: The Bank may analyze selected operational and financial reports and other materials submitted by financial institutions or the examination reports and other materials delivered by the Financial Supervisory Commission to determine related matters impacting the soundness of financial institutions and monetary, credit, and/or foreign exchange policies of the Bank;

(2) Correction of Shortcomings: In addition to imposing sanctions for violations , the Bank may follow up corrections and shortcomings of financial institutions; and

(3) Business Interview: The Bank may invite the responsible persons or the chief operating personnel of financial institutions to come to the Bank to provide reports and express opinions on specific matters.

7. Examination personnel of the Bank shall perform their duties under authorizations issued by the Bank. When joint examination is conducted, the examination shall be handled on the basis of the authorization issued by the Bank and the office document issued by the other regulator, respectively.

The authorization should be in triplicate, effective fromthe issuance date and expire upon completion of the examination.

The first copy of the authorization shall be kept by the authorized examination personnel and submitted to the Bank together with the examination report after the examination is finished.

The second copy of the authorization shall be provided by the authorized examination personnel to the responsible person of the examinee institution in person for record.

The third copy of the authorization shall be kept by the Bank for record.

8. Unless otherwise specifically instructed, examination personnel shall begin the examination within two (2) working days after receiving examination orders. If examination personnel cannot begin the examination within such period, an approval to extend the period is required.

9. Examiners shall carry out the required examinations diligently.

10. When conducting examinations, examiners may require examinee institutions to complete forms regarding matters to be examined and to provide related documents or give detailed explanations.

11. If an emergency or a material event occurs, examination personnel shall report to a superior or the officer-in-change.

12. If the examination personnel deem such measure to be necessary, such personnel shall sign or put a seal on the documents to be examined.

13. Examination personnel shall keep the examination plan, the proposed examination contents, the finances and operations of examinee institutions, and the examination results confidential. Upon the commencement of the examination, the examination personnel may notify the examinee institution of the examination plan and the examination contents so that the examinee institution can prepare related documents accordingly. During the examination, the examination personnel may communicate the preliminary examination results to the examinee institution.

After the examination is completed, except for reporting and handling approved matters, the examination personnel shall not disclose the contents of the examination report.

14. The examination personnel shall submit an examination report within fourteen (14) working days after completing the examination. If an examination report cannot be submitted by the due date for any specific reason(s), the examination personnel shall provide the reason(s) in advance.

15. Examiners conducting joint examinations shall submit the examination report in common. If the comments made are inconsistent, such inconsistency should be reported.

16. The Bank or the Department of Financial Inspection of the Bank shall, based on the severity of the violation, give examinee institutions warning notices and prescribe corrections, and dispatch a copy of the report to the Financial Supervisory Commission. If such corrections and warning notices involve administration or other legislative acts, then, in addition to the sanction(s) imposed by the Bank pursuant to the Act, such matter shall be transferred to the jurisdiction of the Financial Supervisory Commission or the other relevant regulator(s).

17. If corruption is detected or verified, the examiners in question shall be disciplined in accordance with relevant acts and regulations.