2017.5.15
Teresa Huang
The Financial Supervisory Commission (hereinafter, the “FSC”) promulgated the Administrative Rules for the Utilization of Special Reserves by the Financial Industry (hereinafter, the “Rules”) via the Jin-Guan-Bao-Cai-10602502351 Directive of May 15, 2017. Consisting of 9 articles, the Rules came into effect on the day of their promulgation. The highlights of the amendments lie in the addition of the scope by which special reserves (hereinafter, the “Reserves”) may be utilized by the financial industry and of specific commissioning matters concerning the utilization and management of the Reserves.
Article 2, Paragraph 3 of the Rules as amended specifically stipulates that the administrative management fee charged by the entrusted agency (i.e., Central Deposit Insurance Corporation) for the utilization and management of the Reserves shall be paid out of the interest and income generated by the entrusted agency from the utilization of the Reserves. To accommodate such requirement, Article 4, Paragraph 1, Subparagraph 3 of the Rules additionally stipulates that the utilization scope of the Reserves shall include “the administrative management fees required by the entrusted agency”. However, the administrative management fees shall be calculated by a specific percentage of the interest and income generated by the entrusted agency from the utilization of the Reserves and capped at 6%.
Article 6 of the Rules as amended additionally stipulates the utilization principles and scope of reserves by requiring attention to security, income generation and liquidity. In addition, the scope of utilization includes: (1) deposit in financial institutions; (2) investment in government bonds, treasury bills, financial debentures, negotiable certificate of time deposit issued by banks, bank’s acceptance bills, or commercial papers or corporate bonds guaranteed by banks or bills finance companies; (3) underwriting of bonds or short-term bills with (reverse) repurchase agreement; and (4) other utilization items approved by the competent authority.
Article 7 of the Rules as amended additionally stipulates that the entrusted agency shall prepare an annual utilization and management plan, submit the status of the utilization and management of the Reserves on a quarterly basis, and formulate risk control mechanisms for the utilization of the Reserves.