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

1.

1. These Directions are prescribed by the Central Bank of the Republic of China (Taiwan)(hereafter referred to as "the Bank") for the purpose of implementing the provisions of Article 25 of the Central Bank of the Republic of China Act and Article 43 of the Banking Act of the Republic of China.

2.

2. The term "financial institutions" as used in these Directions includes banks (domestic banks, local branches of foreign banks), agricultural financial institutions (credit departments of farmers' associations, credit departments of fishermen's associations, Agricultural Bank of Taiwan), and credit cooperatives.

3.

3. The items of New Taiwan Dollar-denominated liabilities against which financial institutions are required to put up liquid reserves are as follows:

(1) Checking deposits (including checking deposits and certified checks).

(2) Demand deposits

(3) Savings deposits (including passbook savings deposits, lump–deposit/ lump-payment savings deposits, installment-deposit/lump– payment savings deposits, lump-deposit/installment-payment savings deposits, interest-withdrawal savings deposits, and bank employees' savings accounts, provided those portions already pledged are deducted)

(4) Time deposits (including time savings deposits and negotiable certificates of deposit, provided those portions already pledged are deducted)

(5) Government Treasury deposits (the net balance after deducting the re-deposits at the Bank's Treasury Department)

(6) Net dues to banks in call loan market

(7) Bills/bonds sold under repurchase agreements.

(8) Other liabilities as designated by the Bank.

4.

4. All items of New Taiwan Dollar-denominated liabilities of financial institutions shall be subject to a minimum liquid reserve ratio requirement (hereafter referred to as "liquidity ratio"), which shall be set by the Bank in consultation with the Financial Supervisory Commission, Executive Yuan (hereafter referred to as "the FSC").

5.

5. Qualified liquid reserve assets for financial institutions shall be limited to the followings New Taiwan Dollar-denominated assets:

(1) Excess reserves;

(2) Net dues from banks in call loan market;

(3) Re-deposits at designated banks with term to maturity of no more than one year (either bank re-deposits with the Bank or Grassroots financial institution re-deposits with banks mandated by the Bank);

(4) Certificates of deposit issued by the Bank;

(5) Government bonds;

(6) Treasury bills;

(7) New Taiwan dollar-denominated bonds issued in Taiwan by international financial organizations approved both by the Bank and the FSC; and New Taiwan Dollar-denominated corporate bonds issued in Taiwan by foreign issuers in accordance with the "Regulations Governing the Offering and Issuance of Securities by Foreign Securities Issuers";

(8) Negotiable certificates of deposit (net balance of each bank's holdings after deducting negotiable certificates of deposit it has issued);

(9) Bank debentures (including subordinate bank debentures, the amount of which being limited to the net-debit position of its bank debentures issued by other banks after subtracting those issued by itself);

(10) Banker's acceptances (net balance of each bank's holdings after deducting drafts it has accepted);

(11) Trade acceptances;

(12) Commercial papers (net balance of each bank's holdings after deducting face value of commercial papers it has guaranteed);

(13) Corporate bonds (net balance of each bank's holdings after deducting face value of corporate bonds it has guaranteed); and

(14) Other liquid assets as approved by the Bank.

The holding positions on bonds and bills referred to in the preceding paragraph shall include reverse repurchase agreements (RS) but exclude repurchase agreements (RP).

Bills as listed in subparagraphs 10 through 12 of paragraph 1 hereof are limited to those in compliance with the provision of subparagraph 1, Article 4 of "The Act Governing Bills Finance Business" and purchased from the money market.

The amounts of qualified liquid reserve assets listed in subparagraphs 4 through 14 of paragraph 1 hereof shall be calculated according to the following rules, provided the financial institution has recorded them according to the Statement of Financial Accounting Standards No. 34; the preceding provision does not apply to assets recorded not according to the above Statement:

(1) For assets classified as "financial assets held for trading" and "financial assets designated as at fair value through profit or loss" recorded under "financial assets at fair value through profit or loss", the amount shall be that after adding/deducting valuation adjustment.

(2) For assets classified as "available-for-sale financial assets", the amount shall be that after deducting accumulated impairment loss and adding/deducting valuation adjustment.

(3) For assets classified as "held-to-maturity financial assets" or "non-active market debt instruments", the following rules shall be undertaken:

i. For assets listed in subparagraphs 4 through 6 of paragraph 1 hereof, the amount is that after deducting accumulated impairment loss.

ii. For assets listed in subparagraphs 7 through 14 of paragraph 1 hereof shall not serve as liquid reserve assets.

For assets mentioned in subparagraph 1 of paragraph 1 hereof, the amount of pledged " reserves account B" with the Bank shall be deducted. For assets mentioned in subparagraphs 3 through 14 of paragraph 1 hereof, the portions pledged or provided as guarantee shall be deducted. The portion of assets pledged to the Bank as collateral for intraday overdrafts, rediscount, short-term accommodations or accommodations with collateral that remains outstanding at the close of business shall be deducted from the liquid assets on a daily basis.

6.

6. With respect to the "net dues to banks in call loan market " as indicated in subparagraph 6, paragraph 1, Direction 3 and the "net dues from banks in call loan market" as indicated in subparagraph 2, paragraph 1, Direction 5, the net total for the entire month shall be calculated first. If the net total is due to banks, a daily average shall be filled in on a daily basis and serve as basis for putting up liquid reserve liabilities. If the net total is due from banks, a daily average shall be filled in on a daily basis and serve as the liquid reserve assets.

7.

7. Financial institutions shall put up liquid reserves on a monthly basis.

The daily average of liquid reserve requirement for a given month shall be the sum of average daily balance of all items of New Taiwan Dollar-denominated liabilities specified in Direction 3 multiplied by the liquidity ratio specified in Direction 4 for the whole month divided by the number of days in the month.

The daily average of actual liquid reserves for a given month shall be the sum of New Taiwan Dollar-denominated liquid reserve assets as provided in Direction 5 for the whole divided by the number of days in the month; financial institutions shall make their own adjustments to ensure their actual daily averages does not fall below their daily averages of liquid reserve requirement.

8.

8. Financial institutions shall compile the “Liquid Reserves Adjustment Report” (Attachment 1) on a monthly basis and submit it together with related detailed schedules before the 15th of the following month to the Bank’s Department of Banking(hereafter referred to as " the Department of Banking ") (for banks and Agricultural Bank of Taiwan) or to the banks mandated by the Bank (for credit departments of farmers' associations, credit departments of fishermen's associations, and credit cooperatives) for examination.

The Liquid Reserves Adjustment Report mentioned in the preceding paragraph shall be compiled by the head office of the financial institution. In the event of merger of financial institutions, the report shall be compiled by the surviving or newly established financial institution.

9.

9. The mandated banks shall collect the liquid reserves adjustment reports and relevant schedules prepared by credit departments of the farmers' associations and credit departments of fishermen's associations and credit cooperatives which are examined by branches of mandated banks, and compile accordingly the "Examined Liquid Reserves Summary Report" (Attachment 2) and submit the same to the Department of Banking prior to the end of the following month for examination and recordation.

The Bank will produce the “Agricultural Finance Institutions Liquid Reserves Status Report “ based on the information that the credit departments of farmers' associations and credit departments of fishermen's associations submit according to the preceding paragraph, and information submitted by the Agricultural Bank of Taiwan.

The Bank will produce a “Financial Institutions Liquid Reserves Status Report” based on the Liquid Reserves Adjustment Reports submitted by banks and the summary reports mentioned in the preceding two paragraphs.

The Bank will forward a copy of the Financial Institutions Liquid Reserves Status Report to the FSC and a copy of the Agricultural Finance Institutions Liquid Reserves Status Report to the Council of Agriculture, Executive Yuan(hereafter referred to as " the COA ")

10.

10. The Bank and the mandated banks will audit the monthly liquid reserve reports filed by financial institutions. Where there are serious instances of falsification or fabrication, the Bank may conduct an on-site examination.

When financial institutions fail to meet the minimum liquid reserve ratio requirement, the Bank shall ask the FSC or the COA to notify the financial institutions in question to make necessary adjustment within a specified period of time.

11.

11. Banks and the Agricultural Bank of Taiwan shall upload on a monthly basis the "Term to Maturity Analysis of NTD Assets/Liabilities" (Attachment 3) to the “Banks and Bills Finance Companies Supervisory Information Filing Window” according to the instructions of the Bank's Department of Financial Inspection, and control the capital gap for the flow of funds in the next one to thirty days.

Banks and the Agricultural Bank of Taiwan shall also report to the Bank's Department of Financial Inspection the historical experience and other parameters used in preparing the "Term to Maturity Analysis of NTD Assets/Liabilities" in the preceding paragraph, and subsequent changes thereto, if any.

Where the negative funding gap from the flow-of-funds in the next one to thirty days exceeds the reference value set by the Bank, the bank shall immediately report to the Bank's Department of Banking for providing explanations and proposing measures of improvement. The Bank will forward the report to the FSC or the COA.

The Bank may demand banks and the Agricultural Bank of Taiwan to explain the gap according to their "Term to Maturity Analysis of NTD Assets/Liabilities" listed in paragraph 1; the Bank may conduct an on-site examination when needed.