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[Law Basis]
[Print]
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I. General Provisions
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(Basis of Establishment)
1.In order to facilitate the smooth operation of the real-time gross settlement
mechanism, the Central Bank of the Republic of China (Taiwan)(hereafter referred
to as "the Bank")
hereby prescribes the Directions in accordance with provisions of Paragraph 2,
Direction 9 of the Directions for the Central Bank of the Republic of China
Accommodations to Banks. All matters not covered under the Directions shall be
handled according to other pertinent regulations of the Bank.
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(Eligible Parties)
2.Eligible parties of intraday overdrafts include domestic banks, branches of
foreign banks in Taiwan, the Chunghwa Post Co., Ltd., trust investment
companies, bills finance corporations and other financial institutions
approved by the Bank.
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II. Operation and Accounting
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(Account Opening)
3.A financial institution shall apply for intraday overdrafts to the Bank
after signing a contract of intraday overdrafts and opening a "guarantee
of overdraft" account with the Department of Banking of the Bank (hereafter
referred to as "the Department of Banking").
The Bank may refer to Article 19 of the Directions for the Central Bank of
the Republic of China (Taiwan)Accommodations to Banks to give its approval.
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(The Conduct Of Intraday Overdrafts)
4.A financial institution utilizes the interbank funds transfer and settlement
system of the Bank to conduct its interbank funds transfer and settlement
business. When the book balance of its "Interbank Funds" account at the Bank
is short for payment, the Bank may make payments in advance for the amount of
intraday overdrafts within the limit permitted.
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(The limit of Intraday Overdrafts)
5.The limit of intraday overdrafts shall be determined by the Bank according to
total value of the collateral pledged by the financial institution. Whenever
necessary, the Bank may change the limit by considering factors, such as the
bank's operating performance, credit rating, support of monetary policies, and
deposits and other debt reserves.
When collateral is saliently insufficient to pay off intraday overdrafts in
the case of a substantial market price decline, the Bank may lower the limit
of intraday overdrafts.
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(Termination of Overdrafts)
6.If a financial institution fails to repay any intraday overdraft before the
deadline, the Bank will send a notice stating the amount of unpaid overdrafts
to the institution electronically.
If an institution fails to repay any overdraft after the payback deadline,
the Bank may charge penalty interest on the unpaid overdrafts, and has first
priority to deduct it from its "Interbank Funds" account at the Bank on the
next business day.
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III. Collateral
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(Guaranty and Eligible Collateral)
7.A financial institution applying for intraday overdrafts to the Bank shall
pledge eligible collateral that covers the value of the overdraft in full.
Eligible collateral as referred to in the preceding Paragraph are limited
to the following classes:
(1) Class 1 collateral: Negotiable certificates of time deposit and
certificates of time deposit issued by the Bank, book-entry central
government bonds, book-entry treasury bills, and other book-entry
securities approved by the Bank.
(2) Class 2 collateral: Physical central government bonds and treasury
bills, and other physical securities approved by the Bank.
(3) Class 3 collateral: Deposits in use at the financial institution at
that time, reserve accounts B minus a certain percentage of the balance
after other accommodation pledges; the percentage shall be adjusted by
the Bank in the light of financial circumstances.
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(Valuation)
8.The valuation methods of eligible collateral are as follows:
(1) Central government bonds, treasury bills, negotiable certificates of
time deposit and certificates of time deposit issued by the Bank, and
other securities issued with a face value shall be valued at face value.
(2) Central government bonds, treasury bills, and other securities issued at
a discount shall be valued at the issue price.
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(The Pledging of Collateral)
9.A financial institution shall send a "Provision for Pledge" order to notify
the Bank for transferring Classes 1 and 2 collateral to collateral accounts,
which become valid. If a financial institution provides book-entry central
government bonds or book-entry treasury bills as collateral, it shall fill
out " Application Form of Pledging of Bookentry Central Government Bond"
(including "Intraday overdrafts"words in the column of "Notes") to the
settlement bank. The pledge shall be made automatically after the
settlement bank has sent a message to the Bank.
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(Application Documentation and Online Confirmation)
10.A financial institution providing class 2 collateral shall firstly
register the collateral of the particulars online, and then submit the
relevant documents to apply for the delivery of the physical securities
to the Department of Banking. An institution may send pledge message
online only after a confirmation has been received from the Department of
Banking.
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(Priority of Pledges)
11.If the balances of a financial institution's classes 1 and 2 collateral
pledged to the Bank are still insufficient to cover the intraday overdrafts
, the Bank may transfer class 3 collateral, within its limit, to the
collateral account as a pledge for intraday overdrafts.
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(Application for Pledge Cancellation)
12.A financial institution providing collateral may apply for canceling its
pledge to the Bank, except for the amount of intraday overdrafts not yet
repaid. For those who provide book-entry central government bonds and
book-entry treasury bills as collateral, the settlement bank shall be
notified electronically to take it out of pledge after the confirmation
has been received from the Bank. ("Application for Cancellation of Pledge"
is not required).
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(Pledge Cancellation and Revolving Pledge)
13.A financial institution shall repay the intraday overdrafts secured by class
1 and 2 collateral only after repaying those secured by Class 3 collateral.
The Bank shall automatically cancel the pledge of Class 3 collateral.
A financial institution shall submit an "Application for Cancellation of
Pledge " order to cancel the pledge of Classes 1 and 2 collateral. The Bank
shall continually pledge it to secure intraday overdrafts before the
application for cancellation has been approved.
Class 2 collateral mentioned in the preceding paragraph may be collected
only after submitting the documentation and application to the Department
of Banking following the revocation of the right of pledge.
The collateral out of pledge may be pledged in revolution.
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(Disposal of Collateral)
14.If a financial institution fails to repay its intraday overdrafts in full
by deadline, the Bank may, whenever necessary, proceed to dispose of the
pledged collateral in part or full, to cover the amount of intraday
overdrafts. Items to be disposed of are, in order, negotiable certificates
of time deposit and certificates of time deposit issued by the Bank, book-
entry treasury bills, book-entry central government bonds, physical
treasury bills, physical central government bonds, other securities, and
reserve accounts B.
A financial institution shall still be liable for its repayment obligations
if the proceed from the disposal of collateral in the preceding Paragraph
is insufficient. The Bank shall refund any excess proceed.
The Bank may reduce the size of the financial institution's intraday
overdrafts at an appropriate time.
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(Over-the-Counter Processing for Offline Institutions)
15.A financial institution that is not connected to the Bank's Interbank Funds
System shall submit the "Application Table of Contact Personnel for Financial
Institution's Intraday Overdrafts" in advance, and submit the "Application
form of the Quota and Pledge for Intraday Overdraft" and the "Application
form of Cancellation of Pledge for Intraday Overdrafts "to the Department of
Banking for making and canceling a pledge.
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(Query and Printout)
16.A financial institution may make online queries concerning its pledged
collateral and the amount of a ready overdraft and still available at any
time. A print out of the relevant statements can be produced to form the
basis for accounting. The Bank will not issue any receipt. When in doubt,
a financial institution may query and check the particulars of the
collateral transaction. If a financial institution finds any error, it
shall immediately notify the personnel of the Department of Banking to make
the necessary correction.
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(Online Monitoring)
17.The Bank may monitor pledges and pledge cancellations, time and amount of
intraday overdrafts for all or specific financial institutions to watch
their fund positions and financial conditions.
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IV. Assessment of Interest
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(Assessment of Overdraft Interest)
18.Intraday overdrafts interest shall be assessed as the product of the amount
and number of minutes for which the financial institution's account is
overdrawn as follows:
(1) Interest on intraday overdrafts pledged by Classes 1 and 2 collateral is
payable at a rate of the Bank's rate of accommodation with collateral in
effect on that day.
(2) Interest on intraday overdrafts pledged by Class 3 collateral is payable
at a rate of 1.5 times of the Bank's rate of accommodation with collateral
in effect on that day.
For the first six months of the implement of these Directions, the intraday
overdrafts pledge by Classes 1 and 2 collateral shall be free from interest
charges, and the interest on intraday overdrafts pledged by Class 3 collateral
shall be payable at the Bank's rate of accommodations with collateral. After
six months, the Bank may adjust the interest rates according to the
effectiveness and its service needs.
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[Related Circulars]
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(Collection of Overdraft Interests)
19.Interest on intraday overdrafts shall be assessed once a month. The Department
of Banking shall deduct interest from the financial institution's "Interbank
Funds" account at the Bank on the 15th day of the following month.
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V. Penalties
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(Assessment of Penalty Interest)
20.If a financial institution fails to repay any intraday overdrafts by deadline
, the Bank, besides keeping the original pledge, may on the following business
day impose an penalty interest in the following manner, until the unpaid
overdrafts is paid in full:
(1) The penalty interest on overdrafts pledged by classes 1 and 2 collateral
is payable at a rate of 1.2 times of the Bank's rate of accommodations
without collateral in effect on that day.
(2) The penalty interest on overdrafts pledged by classes 3 collateral is
payable at a rate of 1.5 times of the Bank's rate of accommodations
without collateral in effect on that day.
If a financial institution fails to repay any intraday overdrafts for two
consecutive business days after the deadline, the penalty interest for
the second business day shall be imposed in the following manner, until the
unpaid overdrafts is paid in full, and the Bank may suspend the qualification
of intraday overdrafts starting on the third business day:
(1) The penalty interest on overdrafts pledged by classes 1 and 2 collateral
is payable at a rate of 2.4 times of the Bank's rate of accommodations
without collateral in effect on that day.
(2) The penalty interest on overdrafts pledged by classes 3 collateral is
payable at a rate of 3 times of the Bank's rate of accommodations
without collateral in effect on that day.
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[Related Circulars]
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(Collection and Disposal of Penalty Interest)
21.A financial institution that fails to repay its intraday overdrafts by
deadline shall repay the overdrafts and pay penalty interest in full on
the next business day as a first priority. The Department of Banking shall
deduct the payment from the financial institution's "Interbank Funds"
account at the Bank, and take appropriate measures in light of its violation.
Such events shall serve as a major reference guiding the financial
institution's subsequent participation in the Bank's various services.
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(Suspension of Overdraft Qualifications)
22.If a financial institution has had intraday overdrafts suspended twice during
the past year, in accordance with Paragraph 2, Direction 20, the Bank may take
appropriate measures and suspend its eligibility for intraday overdrafts for a
certain period.
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