2017.5.24
Grace Chiang
The Financial Supervisory Commission issued the Jin-Guan-Yin-Fa-10500284830 Circular of May 24, 2017 (hereinafter, the “Circular”) to indicate that the “government” in the requirement that banks may provide unsecured credit to the government does not include state-owned enterprises. Effective immediately, however, if a state-owned financial holding company takes out a loan from its bank subsidiary to perform its statutory capital increase obligation under Article 56 of the Financial Holding Company Law, unsecured credit may be provided on an exceptional basis.
Article 32, Paragraph 1 of the Banking Law provides: “No unsecured credit shall be extended by a bank to enterprises in which the bank holds three percent (3%) or more of the total paid-in capital, to its responsible person, to its staff members, to its major shareholders, or to any interested party of its own responsible person or of a staff member in charge of credit extensions, provided that the foregoing prohibition on unsecured credit shall not apply to consumer loans and loans extended to the government.” The Circular indicates that the “government” set forth in the proviso above does not include state-owned enterprises. However, a state-owned financial holding company which takes out a loan from its bank subsidiary to perform its capital increase obligation under Article 56 of the Financial Holding Company Law may be exempted from the restriction under such article.