Taiwan’s Financial Supervisory Commission Promulgates the “Operation Directions of Financial Institutions Applying for Business Trial” to Boost Financial Innovations

To expand the scope and impact of innovative financial products and services, foster financial innovation within the industry, and enhance competitiveness and consumer rights, Taiwan’s Financial Supervisory Commission (hereinafter “FSC”) promulgated the “Operation Directions of Financial Institutions Applying for Business Trial” (hereinafter the “Operation Directions”) in October 2024 as a standardized regulation for all financial institutions seeking to apply for business trials.  Below is a brief introduction to the Operation Directions:

I. Expand the Types of Financial Institutions Eligible to Apply for Business Trials

The term “Financial Institution” used in the Operation Directions includes banks, credit cooperatives, bills finance companies, credit card companies, trust enterprises, electronic payment institutions, securities firms, securities investment trust enterprises, securities finance enterprises, securities investment consulting enterprises, futures commission merchants, leverage transaction merchants, futures trust enterprises, managed futures enterprises, futures advisory enterprises, insurance companies, insurance cooperatives, insurance agents, and insurance brokers (Article 2 of the Operation Directions).

II. Release the Scope of Financial Business Trials

A financial institution may apply to the FSC, in accordance with the Operation Directions, for a business trial involving an item not yet permitted under an administrative regulation or interpretation by the FSC, a self-regulatory rule established by a financial industry association, or a rule of a self-regulatory organization (hereinafter the “Business Rules”), such as new business models and expansions of existing business models.  Once the business trial is approved by the FSC, it will not be subject to the Business Rules listed in the approval letter from the FSC, within the trial period and scope (Article 3 of the Operation Directions).

III. Encourage Collaboration Between Financial Institutions and Other Businesses

To encourage financial institutions to partner with domestic and international fintech companies or information service providers in developing innovative fintech application scenarios through cross-sector collaboration, financial institutions may submit an application to the FSC to conduct a business trial in partnership with relevant businesses outside the financial sector (Article 3 of the Operation Directions).

IV. Promote Financial Inclusion

To consistently promote financial inclusion in Taiwan and encourage financial institutions to introduce a diverse range of financial products and services for different societal groups, the FSC may prioritize applications and expedite the relevant review process if the business trial proposed by a financial institution contributes to the promotion and implementation of financial inclusion (Article 6 of the Operation Directions).

V. Specify the Required Documentation for a Business Trial Application

To accommodate the expansion of the business trial scope and facilitate the FSC’s evaluation of the trial plan’s appropriateness, the Operation Directions specify that financial institutions shall submit (i) a business plan and (ii) statements from compliance, risk management, internal control, information security, and relevant business units or personnel.  The business plan shall include the following details: legal basis and relevant regulatory analysis, variance analysis compared to current operations (such as transaction processes, trial scope, duration, regions, and expected benefits), measures to protect the rights and interests of financial consumers, investors, or clients, relevant marketing and sales conduct codes, internal controls and risk management, evaluation criteria for the success or failure of the business trial, follow-up measures in the event of trial failure or upon completion of the trial period, and anti-money laundering and counter-terrorism financing risk assessment and control measures (Article 4 of the Operation Directions).