Regulations Governing the Business of Negotiable Instruments Exchange and Clearance of Accounts among Banks

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Title：

Regulations Governing the Business of Negotiable Instruments Exchange and Clearance of Accounts among Banks

Announced Date： December 29, 1980

Amended Date： Amended on February 1, 2019

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I. General Provisions

(Legal Basis)

Article 1

These Regulations are prescribed pursuant to Article 32 of the Central Bank of the Republic of China (Taiwan) Act.

(Definition)

Article 2

"Business of negotiable instruments exchange and clearance of accounts among banks" as used in these Regulations refers to the exchange of negotiable instruments between financial institutions, the clearance of amounts receivable or payable among financial institutions and relevant businesses.

II. Establishment and Operation of Clearinghouse

(Establishment and Organization of Clearinghouse)

Article 3

Institutions that engage in the business of negotiable instruments exchange and clearance of accounts among banks shall be called clearinghouses. A clearinghouse shall be a foundation and established with the approval of the Central Bank of the Republic of China (Taiwan) (hereafter referred to as "the Bank").

(Establishment and Supervision of the Clearinghouse)

Article 4

The establishment, supervision and administration of foundations established in accordance with the preceding article shall be governed by the Foundations Act, the Regulations Regarding Authorization Provisions of the Foundations Act by the Central Bank of the Republic of China (Taiwan), and the Regulations Governing the Accounting Treatment and the Preparation of Financial Reports for Foundations Overseen by the Central Bank of the Republic of China (Taiwan).

(Operation of Board of Directors)

Article 5

The board of directors of a clearinghouse shall meet at least once every three months, and minutes of each meeting shall be reported to the Bank for record within one month after the conclusion of the meeting.

(Full-time Responsible Persons)

Article 6

The chairman of the board, president, vice president or persons holding comparable positions of a clearinghouse shall in principle be full-time positions. Notwithstanding the foregoing, such principle may be waived under special circumstances subject to the approval of the Bank.

(Advisory Committee)

Article 7

A clearinghouse may establish an advisory committee. The committee shall be composed of representatives appointed or recommended by the financial institutions participating in the clearing operations, and shall be responsible for studying and giving advice on matters related to clearing operations, business development, regulatory affairs or other important matters.

III. Exchange of Negotiable Instruments and Clearance of Accounts

(Application for Participation in exchange of Negotiable Instruments)

Article 8

All financial institutions that have been approved to conduct checking deposit business may apply to a clearinghouse to participate in the clearing of negotiable instruments as a clearing entity. Branches of clearing entities shall without exception participate in their local clearinghouse [operations], provided that negotiable instruments received by credit cooperatives, farmers' associations or fishermen's associations shall, as instructed by the Bank, be cleared through the Taiwan Cooperative Bank, Ltd. or other clearing entities.

Any financial institution that has not applied to participate in the clearing of negotiable instruments in accordance with the preceding paragraph may engage a clearing entity as its agent for the clearing of negotiable instruments. The engaged financial institution is required to apply to the clearinghouse for its consent before providing the aforementioned service.

(Responsibility of a Clearing Agent)

Article 9

A clearing entity engaged as an agent for the clearing of negotiable instruments shall assume on behalf of the represented entity all liability with respect to clearing.

(Types of Negotiable Instruments)

Article 10

Types of negotiable instruments covered under these Regulations are as follows:

1.Bank drafts (including bankers' acceptances);

2.Promissory notes (including cashier's checks);

3.Checks (including treasury (public) checks); and

4.Other payment certificates approved by the Bank for exchange.

Negotiable instruments mentioned in the preceding paragraph can be in written or electronic form.

(Settlement of Receivable and Payable Balances)

Article 11

A clearing entity shall open a deposit account with the Bank or a correspondent bank of the Bank. Payable or receivable clearing balances of the clearing entity shall be paid or collected through the aforementioned account.

Where there is a necessity for a clearing entity that has not opened a deposit account with the Bank to pay or collect payable or receivable clearing balances through the Bank, the clearing entity shall first apply to the clearinghouse for permission to transact the payments or collections through another clearing entity's deposit account with the Bank. The clearinghouse shall report the same to the Bank for record.

(Operation in the Circumstances of Insufficient Deposit Balance for Settlement)

Article 12

Where the balances in a clearing entity's deposit account mentioned in the foregoing article are insufficient to pay a given day’s clearing balances, the clearing entity shall make up the shortfall within the time period prescribed by the Bank or a correspondent bank of the Bank.

A clearinghouse shall prescribe a response mechanism on how to complete the clearing operation on the same day when a clearing entity violates the provisions of the preceding paragraph and becomes unable to pay its clearing balance for the day, and report the same to the Bank for record.

Where a clearing entity is unable to pay a given day’s clearing balance that might seriously undermine the clearing operation, the clearinghouse may, with approval of its board of directors, temporarily suspend such entity’s clearing operation and report the same to the Bank for record. The Bank in turn will forward the information to the Financial Supervisory Commission.

IV. Business Rules of Clearinghouse

(Participation Agreement for Clearing Negotiable Instruments)

Article 13

A clearinghouse shall prescribe a "Participation Agreement for Clearing Negotiable Instruments" which shall clearly state the following particulars:

1.The qualifications required for application to be a clearing entity;

2.Criteria for determining the amount of clearing margin a clearing entity must post, deposit restrictions and conditions for its return;

3.A clearing entity may act as a clearing agent for other financial institutions that are non-clearing participants;

4.Negotiable instruments collected by a clearing entity from another clearing entity shall be presented to the local clearinghouse to carry out clearing; if a negotiable instrument presented for payment is dishonored, the payer clearing entity shall return the dishonored negotiable instrument to the local clearinghouse for exchange;

5.Branches of clearing entities shall, without exception, participate in local clearing of negotiable instruments and the [parent] clearing entity shall submit for clearing all negotiable instruments from other clearing entities accepted by its branches and assume full liability associated with their clearing;

6.A clearing entity shall open a deposit account with the Bank or a correspondent bank of the Bank; settlement of all payable and receivable clearing balances and dishonored negotiable instrument clearing balances shall be conducted in accordance with the Directions for the Central Bank of the Republic of China (Taiwan) to Govern Electronic Interbank Funds Transfer and Settlement and other relevant regulations; and

7.Other protocols to be observed by clearing entities.

(Service Fees)

Article 14

A clearinghouse shall prescribe criteria for all processing fees collected for the provision of services.

(Operating Procedures for the Clearing of Negotiable Instruments)

Article 15

A clearinghouse shall prescribe procedures for handling negotiable instruments clearing, and other necessary operation protocols.

(Processing Rules for dishonored Negotiable Instruments)

Article 16

A clearinghouse shall adopt protocols with financial enterprises that conduct checking account operations to govern the handling of dishonored checks and other related matters.

(Gathering and Reporting Credit Information related to Negotiable Instruments)

Article 17

For the purpose of conducting negotiable instruments exchange, clearinghouses and financial institutions that conduct checking account operations shall collect the credit information of checking account holders, and the financial institutions shall provide clearinghouses with credit information in their possession.

Clearinghouses shall duly note changes to credit information mentioned in the preceding paragraph, and periodically provide financial institutions that conduct checking account operations with the following information of account holders with significantly impaired credit records:

1.In case of a personal account, the name and identification card number of holder.

2.In case of an account held by a business or group that is a non-juristic-person, the account name and the name and identification card number of its responsible person; and

3.In case of an account held by a juristic person, the account name and the uniform business number of the company or business or the withholding uniform invoice number.

Credit information referred to in Paragraph 1 hereof includes basic account opening information, information on loss reporting and stop payment, cancellation of pay order, dishonored check record (including alert accounts and frozen accounts), rejected accounts, investigation results and court decisions on committed crime associated with use of negotiable instruments, presenters, negotiable instruments exchanged, and other relevant credit information. Notwithstanding the foregoing, credit information that shall be collected by financial institutions that conduct checking account operations exclude investigation results or court decisions on committed crime associated with use of negotiable instruments.

A clearinghouse shall, to the extent necessary for matching the accuracy of basic data files of nationwide checking account holders, collect household registration data pertaining to changes to the name or identification card number of personal account holders and the responsible person registration data of juristic person accounts.

A clearinghouse shall make available for public inquiry dishonored check records and rejected transaction information of checking account holders and other relevant credit information.

For the collection of personal information referred to in Paragraph 1 and Paragraph 4 hereof and related information security matters, a clearinghouse shall develop a security maintenance plan to prevent the theft, alteration, destruction, loss or leakage of personal information.

(Reporting of Business Rules for Clearinghouse)

Article 18

The business rules prescribed by a clearinghouse in accordance with the provisions of the preceding five articles shall be submitted to the Bank for record; the same shall apply to all amendments thereto.

V. Supplemental Provisions

(Internal Controls for the Processing of Credit Information Related to Negotiable Instruments)

Article 19

A clearinghouse shall strengthen internal constraints and closely supervise the conduct of personnel with respect to the handling of the record of dishonored checks due to insufficient funds and other credit history information.

(Handling of Violations)

Article 20

Where a clearing entity's violation of these Regulations or [other] negotiable instrument clearing rules and regulations is of serious nature and might seriously undermine the clearing operations, a clearinghouse may, with approval of its Board of Directors, temporarily suspend such entity's clearing operations and report the same to the Bank for record. The Bank in turn will forward the information to the Financial Supervisory Commission.

(Supervision of Clearinghouse)

Article 21

A clearinghouse shall submit scheduled or unscheduled business, financial or other relevant reports as prescribed or notified by the Bank; the Bank may assign an officer to examine the business, finance or other matters of a clearinghouse.

(Date of Promulgation)

Article 22

These Regulations shall take effect on February 1, 2019.