The Financial Supervisory Commission (hereinafter, the “FSC”) promulgated the Rules for Issuing New Taiwan Dollar Financial Debentures by Taiwan Branches of Foreign Banks (hereinafter, the “Rules”) via the Jin-Guan-Yin-Wai-10702710830 Directive of April 17, 2018. Consisting of 13 articles, the Rules came into effect on the day of their promulgation and will allow branch offices of foreign banks to issue New Taiwan Dollar financial debentures. The Rules are highlighted below:
1. A Taiwan branch of a foreign bank may apply to the competent authority and may issue New Taiwan Dollar financial debentures upon approval. See Article 2 of the Rules for restrictions on the types of financial debentures that may be issued upon approval.
2. Restrictions on the qualifications of applicants: Basically if an applicant has insufficient loan loss provision or if its non-performing loan ratio exceeds 3% or if its legal violations are not yet cured or if it has sustained cumulative losses, it shall not apply. However, an exception is made in consideration of the fact that in the initial period when a branch office has just been set up by a foreign bank (first three years), the branch office is mostly still in a state of loss due to high fundamental deployment costs with business yet to be developed. Since this is not caused by the unsound financial structure or improper operation or management of the bank, the exceptional consideration is necessary. To provide a newly established bank with opportunities to participate in the financing of offshore wind power projects, it is specifically stipulated that a newly established branch office which has not been established for three years and which still has cumulative losses may still apply for issuance (Article 5 of the Rules).
3. Restrictions on the sales targets of financial debentures: This is limited to professional investors within the meaning of Article 3, Paragraph 3 of the Regulations Governing Offshore Structured Products. (Article 3 of the Rules)
4. Restrictions on the use of raised funds: This is limited to relevant financing for major infrastructure development, offshore wind power development and green industry development in Taiwan and the funds shall not be converted into foreign currencies for utilization. (Article 4 of the Rules)
5. Restrictions on the issuance quota of financial debentures: The amount of New Taiwan Dollar financial debentures which a branch office of a foreign bank applies to issue and the balance of its outstanding issues shall not be greater than eight times its net worth after its final accounting for the previous year. In addition, the head office shall issue a statement committing to assume the full liability for the issuance of debentures by its affiliates and for their obligations. (Article 7 of the Rules)
6. Restrictions on the term of approved issuance: Financial debentures shall be issued by a branch office of a foreign bank within one year after approval. If the issuance is not completed within the period, the approval shall be void. However, the one-year term of issuance may not apply if circular issuance within a specific period is approved by the competent authority. (Article 11 of the Rules)