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 of financial institutions which are subject to the liquidity reserve requirement 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 due to financial institutions in the call loan market;

(7) Bills/bonds sold under repurchase agreements;

(8) Principals received from the sale of structured products by banks;

(9) Other liabilities as designated by the Bank.

4.

4. The minimum ratio of liquidity reserve requirement (hereafter referred to as “minimum liquidity ratio”) regarding New Taiwan Dollar-denominated liabilities of financial institutions shall be set by the Bank in consultation with the Financial Supervisory Commission, Executive Yuan (hereafter referred to as the "FSC") and the Council of Agriculture, Executive Yuan (hereafter referred to as the “COA”).

5.

5. Qualified liquid assets held by financial institutions to meet the liquidity reserve requirement shall be limited to the following New Taiwan Dollar-denominated assets:

(1) Excess reserves (The excess reserves equal to the actual reserves set aside by financial institutions less the required reserves. );

(2) Net due from financial institutions in the call loan market;

(3) Re-deposits at designated banks with the maximum term to maturity not exceeding one year (either bank re-deposits with the Bank or Grassroots Financial Institutions re-deposits with banks designated 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).

When the excess reserve balance in subparagraph 1 of paragraph 1 hereof is negative, the item shall be recorded as calculated; when the net balance of items in subparagraphs 8 to 10, subparagraph 12 and subparagraph 13 is negative, those items shall be recorded as zero.

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 not recorded 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, and re-deposits of Grassroots Financial Institutions at designated banks with terms to maturity of no more than one year pledged for the purpose of participating in emergency funding mutual support program that remain outstanding at the close of business shall be deducted from the liquid assets on a daily basis.

6.

6. Financial institutions shall calculate liquidity reserves on a daily basis and shall ensure that the actual liquidity reserves do not fall below the liquidity reserve requirement.

The liquidity reserve requirement of financial institutions mentioned in the preceding paragraph shall be calculated by multiplying New Taiwan Dollar -denominated liabilities listed in Direction 3 with the minimum liquidity ratio.

The actual liquidity reserves mentioned in the first paragraph shall be the sum of all New Taiwan Dollar-denominated liquid assets as provided in Direction 5.

7.

7. Financial institutions shall prepare the “Liquidity Reserve Adjustment Report” (Attachment 1) on a daily basis. Banks and the Agricultural Bank of Taiwan shall, before the 15th of each month, submit their “Liquidity Reserve Adjustment Report” of the previous calendar month to the Bank’s Department of Banking for examination, whereas credit departments of farmers’ associations, credit departments of fishermen’s associations, and credit cooperatives shall submit their “Liquidity Reserve Adjustment Report” to the bank designated by the Bank for examination.

When the daily actual liquidity reserves fall below the liquidity reserve requirement, a financial institution shall promptly report to the examination institution mentioned in the preceding paragraph. In the case of credit departments of farmers' associations, credit departments of fishermen's associations, and credit cooperatives, a copy of the report shall also be sent to the Bank’s Department of Banking.

The “Liquidity Reserves Adjustment Report” mentioned in the first 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 either by the surviving or by the newly established financial institution.

8.

8. The designated banks shall collect the “Liquidity Reserve Adjustment Report” 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 designated banks, then compile and submit accordingly the "Examined Liquidity Reserve Summary Report" (Attachment 2) to the Department of Banking prior to the end of the following month for recordation.

The Bank will produce the “Agricultural Finance Institutions Liquidity Reserve Summary Report “ based on the information that the credit departments of farmers' associations, credit departments of fishermen's associations, and the Agricultural Bank of Taiwan submitted.

The Bank will also produce the “Financial Institutions Liquidity Reserve Summary Report” based on the “Liquidity Reserve Adjustment Report” submitted by banks and the summary reports mentioned in the preceding two paragraphs.

The Bank will forward a copy of the “Financial Institutions Liquidity Reserve Summary Report” to the FSC and a copy of the “Agricultural Finance Institutions Liquidity Reserve Summary Report” to the COA.

9.

9. The Bank and the designated banks will audit the monthly liquidity reserve reports filed by financial institutions. If there are significantly suspicious falsification or fabrication, the Bank may conduct an on-site examination.

When the actual liquidity reserve of a financial institution fall below the liquidity reserve requirement, the Bank shall ask the FSC or the COA to notify the financial institution in question to make necessary adjustment within a specified period of time.

10.

10. In accordance with the instructions of the Bank’s Department of Financial Inspection, banks, the Agricultural Bank of Taiwan and credit cooperatives shall submit the “Term to Maturity Analysis of NTD Assets/Liabilities” (Attachment 3) on a monthly basis, and manage their maturity gaps of future cash flow ranging from 0 to 30 days.

Banks, the Agricultural Bank of Taiwan and credit cooperatives 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.

If the negative maturity gap of future cash flow ranging from 0 to 30days exceeds the reference value set by the Bank, the bank shall immediately report to the Bank's Department of Banking with explanations and measures for improvement. The Bank will forward the report to the FSC or the COA.

The Bank may demand banks, the Agricultural Bank of Taiwan and credit cooperatives to explain the gap based on the "Term to Maturity Analysis of NTD Assets/Liabilities" they have filed in accordance with paragraph 1 hereof; the Bank may conduct an on-site examination when needed.