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

Subject:
Please be informed that Explanation 2 and 3 of this Letter respond to the inqury 
from your branch whether, if a customer pledges his/her time deposits with the bank 
for the issuance of a Letter of Credit or Letter of Guarantee, or provides time 
deposits of another person to the bank as collateral to borrow money from the same 
bank, such time deposits can be deducted from the liabilities of liquid 
reserves.

Explanations:
1.This Letter responds to a letter of your bank, dated May 7, 1999 (Ref. No. (88) 
　Feng-049).
2.According to Subparagraphs 3 and 4 of Direction 2 of the "Directions for 
　Auditing Liquidity of Financial Institutions", time deposits used in calculating 
　the liabilities of liquid reserves shall be the net amount of the time deposits 
　minus the amount pledged. Using time deposits with the bank as collateral for the 
　issuance of a Letter of Credit or Letter of Guarantee is not the same as pledging 
　time deposits for the purpose of borrowing and therefore the time deposits in 
　question cannot be deducted from the basis for calculating liabilities of the 
　liquid reserves.
3.With respect to whether time deposits can be deductd from calculation of 
　liabilities of the liquid reserves if a customer pledges the time deposits of 
　another person with the bank to borrow money, it is noted that a condition for 
　borrowing against time deposits is that the borrower must be the same person as 
　the depositor in accordance with Article 2 of "Regulations Governing the Pledge 
　and Early Termination of Time Deposits", Therefore, a customer providing time 
　deposits of another person against which to borrow does not meet the condition of 
　pledge. According to the provisions of the "Directions for Auditing Liqudity of 
　Financial Institutions", such pledged time deposits cannot be deductd from 
　calculation of liabilities of the liquid reserves either.