Directions for the Operation of Book-Entry Central Government Securities — CBC — TW

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[Related Circulars]

Title：

Directions for the Operation of Book-Entry Central Government Securities

Announced Date： August 06, 1997

Amended Date： November 25, 2015

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Chapter 1 General Principles

[Authorized Regulations]

These Directions are specially prescribed by the Central Bank of the Republic of China (Taiwan) (hereinafter referred to as “the Bank”) for the management of book- entry central government securities (hereinafter referred to as“book-entry CGS”).

Except where otherwise provided by law, management of book-entry CGS shall be undertaken in accordance with these Directions.

Particulars of the issuance and buyback of book-entry CGS, such as the issue name, type, serial number, form, method, date, amount, coupon rate, date for repayment of principal and interest (method of repayment), the time and place of auctions, the underlying exchange government held shares, the period, the price and the procedures for exchange, redemption at holders’ (issuer’s) option of the Central Government Exchangeable Bonds (hereinafter referred to as “Exchangeable Bonds”) shall be handled in the manner as publicly announced by the Ministry of Finance.

Book-entry CGS are in registered form, and the particulars of purchase, transfer, trust, lodgement, depository of reserves, pledge, and serving as public guarantee shall be registered in accordance with these Directions. Unless duly registered, protestation against a third party shall not be provided.

Terms in these Directions are defined as follows:

(1)“Book-entry CGS” refers to central government bonds issued in registered form (hereinafter referred to as “book-entry CGBs”) in accordance with Article 6 of the Central Government Development Bonds and Loans Act, and treasury bills issued in registered form (hereinafter referred to as “book-entry treasury bills”) in accordance with Article 5 of the Treasury Bills and Short-term Loans Act.

(2)“Exchangeable bonds” refer to book-entry bonds which may be exchanged for stocks held by the central government (hereinafter referred to as “government-held stocks”), the government repays with government-held stocks or the principal to the bonds holders based on the terms of the agreement.

(3)“Strippable bonds” refer to interest-bearing government bonds made up of interest and principal payments that can be separately traded as announced by the Ministry of Finance.

(4)“Separate Trading of Registered Interest and Principal of Securities (STRIPS) ” refers to “coupon STRIPS” and “principal STRIPS”, that are zero coupon bonds derived from strippable bonds and traded separately with no interest payment but repaid at par value at maturity.

(5)“Clearing banks” refer to banks and Chunghwa Post Co., Ltd. appointed by the Bank to handle registrations, transfers, associated fund settlements, as well as payment of maturing principal and interest of book-entry CGS.

(6)“Registration institutions” refer to Department of the Treasury and Department of Banking of the Bank (hereinafter referred to as “Department of the Treasury” and “Department of Banking”), and clearing banks that perform registration of book-entry CGS.

(7)“Own account” refers to the securities account owned by the Bank or a clearing bank in its own book.

(8)“Customer account” refers to the securities account owned by a corresponding customer at the Bank or a clearing bank.

(9)“Transfer registrations” refer to the registrations of inward or outward title transfers of book-entry CGS carried out due to purchase, trading, succession, gift, trust, or other reasons.

(10) "Lodgement registrations" refer to the registrations of inward or outward possession transfers of book-entry CGS when the underlying securities serve as the lodgement objects deposited with the Court.

(11) "Return registrations" refer to the registrations of inward or outward possession transfers of book-entry CGS when the underlying securities serving as the lodgement object deposited with the Court are returned to the original depositor or delivered to a third party.

(12)“Restricted transfer registrations” refer to the registrations of restricted inward or outward transfers without changes in book-entry CGS ownership, such as pledge registrations, public guarantee registrations (where duly deposited in the Bank, the Treasury, or a bank to serve as a guarantee), or reserves deposit registrations (where duly deposited in the Bank to serve as trust fund reserves or indemnity reserves).

(13)“Revocations with ownership transfers” refer to a third party applying to a clearing bank for revocations of original registrations and for registrations of inward or outward transfers of securities ownership when the securities serve as public guarantees or depository reserves and should be transferred to the third party under a court order of compulsory enforcement.

(14)“Cancellations with ownership transfers” refer to a buyer of securities applying to a clearing bank for cancellations of original certificates and for inward or outward transfers of securities ownership when the securities are the underlyings of an issued repurchase transaction (repo) certificate and the repo seller has not carried out cancellations of the original certificate with the clearing bank prior to the prescribed time on the maturity date of transactions such that the securities may be transferred to the repo buyer.

(15)“Intrabank transaction registrations” refer to various registrations performed between two trading parties whose securities accounts are maintained at the same registration institution.

(16)“Interbank transaction registrations” refer to various registrations performed between two trading parties whose securities accounts are maintained at different registration institutions.

(17)“Par value” refers to the registered value of book-entry CGS. The minimum registration unit is NT$100,000 and other units used must be multiples of NT$100,000.

(18)“Transferable balance” refers to the balance of a clearing bank securities account at Department of the Treasury after subtracting the balance of interbank restricted outward transfer registrations.

(19)“Disposable balance” refers to the balance in a clearing bank’s own securities account or its customer’s securities account after subtracting the balance of restricted outward transfer registrations, repo certificates issued by the clearing bank, and other intrabank deductible balances.

(20)“Transactions accompanied by payment” refer to book-entry CGS transactions accompanied by payment made for awarded securities, buybacks, delivery-versus-payment transfers, payment of principal and interest, as well as the collection of interbank transfer fees and disbursement of payment processing fees by the Bank.

Registrations carried out by a Registration Institution shall be as follows:

(1) Aggregate registration by Department of the Treasury of all Registration Institution securities accounts, and registration of restricted transfers on their customer accounts.

(2) Transfer registration and restricted transfer registration processed by Department of Banking for its own accounts in connection with open-market operations, deposits for reserve (bonds), and short-term accommodation.

(3) Various registrations processed by a clearing bank for its owned accounts and its customers’ accounts.

The representative office of a Registration Institution shall process with registrations for its own accounts and customer accounts; branches of the Registration Institution may perform registration operations [for the Bank] given prior reporting to the Bank for approval and recordation.

The Registration Institution shall issue a written notice containing information on its representative office and branches to Department of the Treasury for filing reference. Any changes in the above items shall likewise be reported.

In order to perform various securities registrations, a natural person or a juristic person shall open a securities account and a demand deposit account at a clearing bank；A clearing bank shall open a securities account at Department of the Treasury.

When applying to open a securities account or a cash account, amend basic information of an account, or close an account, the applicant shall fill out an Application for Opening/ Amending / Closing CGS Account Form (Form 1); When applying to open an account, a Seal Impression Card (Form 2) shall also be filled out.

For the purpose of performing trust registration of the Securities, a trustee shall open an extra securities trust account and an extra deposit trust account with the clearing bank.

A Registration Institution shall issue a book-entry central government securities passbook to customers for all registration in connection with the securities, and may, at the customer’s request, provide an Account Verification Statement (Form 3).

Customers may select either booklets or loose-leaf passbooks for their use (Form 4), but shall obtain approval from the Registration Institution prior to switching from one type to another. The use of the passbooks shall be dictated by the “Directions for (Loose-leaf) Passbook Use” (Appendices 1 and 2).

The “Central Government Securities Settlement System” (hereinafter referred to as the “CGSS”) is a computer network linking the Bank and clearing banks, with the Bank as interbank online center (hereinafter referred to as “CGSS Center”) to effect real-time interbank transfers of securities.

The Taiwan Depository & Clearing Corporation (hereinafter referred to as“TDCC”), with a linkage to the Bank, shall effect the real-time book-entry transfers of the underlying stocks according to the information transmitted by the CGSS. The TDCC, with links to its correspondent clearing banks(hereinafter referred to as “TDCC- correspondent clearing bank”), shall effect real-time book-entry transfers of STRIPS.

Any participants in the Securities System shall observe such matters and procedures for data security as set forth in the relevant provisions in the “Central Bank Computer Communications Services System.”

10.

A clearing bank shall use the services of CBC Interbank Funds Transfer and Settlement System (hereinafter referred to as “ CIFS”) operated by Department of Banking, and its bank funds-Type I reserve account (hereinafter referred to as “bank reserve account”) opened at Department of Banking to effect interbank funds settlement associated with transactions processed by the CGSS.

11.

The cut-off time for acceptance of interbank transfers by the CGSS Center shall be 5:00 p.m. (see table 1 for details of CGSS Operation Schedule). No late transfers will be accepted. This provision shall not apply, however, in case of system malfunction or policy support.

When requesting an extension of CGSS operating hours, a clearing bank shall notify Department of the Treasury by telephone prior to the cut-off time set forth in the preceding paragraph, and shall fax an Application for Extension of CGSS Operating Hours (Form 5) to Department of the Treasury within thirty minutes after the scheduled cut-off time.

A clearing bank that requests for extension of CGSS operating hours shall report, no later than three business days from the date of request, to Department of the Treasury in writing, stating the cause of system failure, operating status and improvement measures thereof; Department of Banking shall also be notified if the aforementioned extension of CGSS operating hours in the preceding paragraph involves the support of the CIFS.

Chapter 2 Appointment and Management of Clearing Banks

12.

A bank may apply to the Bank for appointment as a clearing bank in accordance with these Directions by meeting the following requirements:

(1) Net worth after the accounting books were closed at the end of the most recent year is at least NT$15 billion.

(2) The ratio of regulatory capital to risk-weighted assets for the most recent half year reviewed by a certified public accountant (CPA) is above the minimum requirement set forth by the competent authority.

(3) Average return on equity before taxes for the most recent three years audited by a CPA is above 6%.

Under any of the following conditions, a bank may also apply to the Bank for being appointed as a clearing bank:

(1) A surviving bank or a newly established bank on account of merger/ consolidation of a clearing bank.

(2) A recipient bank acquiring the clearing business from a clearing bank or a transferee bank acquiring shares from a clearing bank.

(3) In case of merger/consolidation, a non-clearing bank subsidiary proposed to be a clearing bank by the financial holding company.

13.

A bank shall apply for appointment as a clearing bank by filling out an “Application for Book-Entry Central Government Securities Clearing Bank” (Form 6) for submission to Department of the Treasury along with a copy of its financial statements and other documents required.

Applications may be approved by the Bank based on need as determined by bond market developments.

14.

A clearing bank having been appointed by the Bank, shall contact the Department of Information Management of the Bank (hereinafter referred to as “Department of Information Management”) to set up online connections, and shall complete online tests within one year from the date of appointment. Otherwise, the Bank may revoke the status of a clearing bank.

Following the successful completion of various tests as set out in the preceding paragraph, which shall be undertaken jointly with the Department of Information Management and Department of the Treasury, Department of the Treasury will issue a letter informing the clearing bank of the date upon which it may commence operation.

15.

A clearing bank shall establish rigorous internal controls and exercise the diligence of a good custodian with regard to performing registrations, clearing funds, transmitting trading messages, and issuing, cancelling and cancelling with ownership transfer of repo certificates. Except for the information duly provided under relevant laws, a clearing bank may not divulge any customer information.

16.

Under any of the following circumstances, the Bank may issue a letter notifying a clearing bank to effect improvement:

(1) Failure to perform book-entry securities operations in accordance with these Directions.

(2) Failure to effect transfers of funds in accordance with the CGSS data handling protocols.

(3) Occurrence of any other events hindering smooth operation of the CGSS.

17.

Under any of the following situations, and where warranted by the circumstances, the Bank may terminate a clearing bank’s appointment, suspend its appointment for a specific period of time, or disallow new branches of the bank to carry out clearing bank junctions:

(1) Failure to effect improvement following a notification in accordance with the preceding Direction.

(2) Violation of relevant regulations or material negligence resulting in severe hindrance to the operations of the CGSS.

(3) Suspension of any department’s operations by the central competent authority, resulting in inability to perform operations of book-entry CGS.

(4) Appointment of a receiver or conservator by the central competent authority.

(5) An order from the central competent authority to cease operations.

18.

When requesting for exit from the CGSS, a clearing bank shall give advance written notice to Department of the Treasury one month prior to the scheduled exit date.

19.

Where a clearing bank’s appointment is suspended by the Bank, the clearing bank shall pay off relevant transfer fees and clear any outstanding balance in the securities account.

Where a clearing bank withdraws from the CGSS or it’s license is terminated by the Bank, in addition to effecting clearing procedures as set forth in the preceding paragraph, it shall close its securities account as well.

Chapter 3 Issuance and Subscription

20.

Bidding in book-entry bond auctions is restricted to central government bond dealers only (hereinafter referred to as “bond dealers”); natural persons and other juristic persons shall submit bids through bond dealers under bond dealers’ names.

Bidding in book-entry treasury bill auctions is restricted to banks, Chunghwa Post Co., Ltd., bills finance companies, securities firms, and insurance enterprises only; natural persons and other juristic persons shall submit bids through bills houses under bills houses’ names.

21.

Successful bidders shall carry out the following matters prior to the issuance of the book-entry CGS:

(1)Filling out and submitting the “Application for CGS Subscriptions Registration ” (Form 7) to correspondent clearing banks to effect registrations, specifying the aggregate par amount and amount payable for securities awarded on their own accounts and on customers’ accounts, prior to the following deadlines:

i. Book-entry bonds: prior to 3:30 p.m. on the next business day following the auction.

ii. Book-entry treasury bills: prior to 3:30 p.m. on the auction date.

(2) Making payments for securities awarded on their own accounts and on customers’ accounts to correspondent clearing banks prior to the prescribed time on the issue date.

22.

Clearing banks shall carry out the following matters prior to the issuance of book-entry CGS:

(1) Transmitting messages in the “Book-Entry Central Government Securities Subscription Statement” (Form 8) to the Bank, prior to the following deadlines:

i. Book-entry bonds: prior to 12:00 p.m. on the second business day following the auction.

ii. Book-entry treasury bills: prior to 5:00 p.m. on the auction date.

(2) Transmitting payment messages for securities awarded on their own accounts and on customers’ accounts, classified according to respective successful bidders, to the Bank to effect payments prior to 3:00 p.m. on the issue date. The Bank shall debit a clearing bank’s reserve account and credit the clearing bank’s securities account for the amount specified in the payment instructions accordingly. In the event that successful bidders fail to effect settlement, the clearing bank shall notify the Bank to make adjustments.

(3) Upon receiving the Bank’s confirmation of payment messages on the issue date, clearing banks shall transfer securities to the customers’ securities accounts according to the customer data listed in the “Application for CGS Subscription Registration” submitted by the successful bidders.

Chapter 4 Intrabank Trade Registrations

23.

Transfer registrations between accounts at the same clearing bank shall be carried out in accordance with the following provisions:

(1) Delivery-versus-payment transfer: The transferor and transferee shall fill out an “Outward Transfer Registration (and Request for Collection) Form” (Form 9) and an “Inward Transfer Registration (and Request for Payment) Form” (Form 10) respectively for processing by the clearing bank. Following the confirmation of a match between the transferee’s and the transferor’s trading information, the clearing bank shall effect the transfers of securities and corresponding funds, and record the same in passbooks for the transferor and transferee. Confirmation of trade match may be omitted where a customer has made prior arrangements with the clearing bank.

(2) Free-of-payment transfer: The clearing bank may directly proceed with the transfer of securities in accordance with the “Outward Transfer Registration (and Request for Funds Collection) Form” filled out by the transferor except in cases of donations, successions or trusts, which require the attachment of relevant documents. The transferee may update the passbook at the clearing bank.

The application for transfer registration mentioned in the preceding paragraph may be transmitted by secured electronic means, provided it has been so agreed between the customer and the clearing bank.

24.

Intrabank Lodgment Registration shall be carried out in accordance with the following provisions:

(1) The depositor shall submit documents for lodgment request (lodgment statements, court decrees, etc.) and fill out an "Application for Treasury Custody " (Form 11) for processing by the clearing bank. After having certified the relevant documents, the clearing bank shall process Lodge-out Registration for the lodger and Lodge-in Registration for the Court. The clearing bank shall print the passbook and give it to the lodger together with a "Lodgment Certificate of Treasury Custody " (Form 11-1), and shall print relevant slips of the " Deposit Certificate of Treasury Custody " (hereinafter referred to as a " Deposit Certificate") (Forms 12, 12-1, 12-2, and 12-3).

(2) If several persons (including several persons with joint ownership) apply for joint lodgement, they shall submit Lodgement Registration request as prescribed in the preceding Paragraph. The lodgers may use the name of one person in the group and his/her ID Card number (or profit-seeking enterprise uniform number) as a representative. The clearing bank shall record the representative’s name and ID Card number (or profit-seeking enterprise uniform number) of the joint lodgement and the total number of lodgers in the account name columns of the relevant slips of the Deposit Certificate. The clearing bank shall print the Deposit Certificate number on the joint lodgers lists which shall be affixed to the relevant slips of the Deposit Certificate for filing.

25.

Intrabank Return Registration and the conversion or sale of the lodged securities shall be carried out in the following manners:

(1) Full return or recipience:

i. The recipient shall submit the Deposit Certificate with the authorized signature of the Court to the clearing bank for return or recipience. After having certified the authorized signature, the clearing bank shall process the Return-Out Registration for the Court and the Return-In Registration for the recipient based on the Deposit Certificate, print the passbook and give it to the recipient. The Court may have its passbook entry updated at the clearing bank.

ii. If several persons (including several persons with joint ownership) jointly return or receive the lodged securities, they shall apply in accordance with the procedures set out in subparagraph 2, Direction 24.

(2) Partial return or recipience:

i. After having certified the authorized signature of the Court, the clearing bank shall divide the Deposit Certificate into two new Deposit Certificates pursuant to the Court Letter stating the proportions of the lodged securities to be reserved and to be received, and print the relevant slips for each new certificate. Apart from the slip for clearing bank, other slips shall be handed over to the governing Court.

ii. Recipience procedures shall be processed in accordance with the full return or recipience procedures.

(3) Conversion of lodged securities:

To convert lodged securities by law, the lodger shall attach the documents for lodgement request (lodgment statements, court decrees, or certificates of confirmation), and shall apply for Lodgement Registration with the newly-provided securities as security lodgement in accordance with Direction 24, and shall apply for Return Registration with the originally-lodged securities in accordance with this Direction.

(4) Sale of lodged securities:

i. After having certified the authorized signature of the Court, the clearing bank shall sell outstanding securities recorded on the Deposit Certificate in accordance with the Court’s compulsory enforcement order.

ii. The clearing bank shall transfer the securities into the security account assigned by the transferee, total the sum of money remained after sale together with the principal, interest, and yield of the matured securities, fill out (copies of)Receipt of Treasury Deposit, and transfer the sum to the custody account of court enforcement case monies for allocation.

26.

Intrabank restricted transfer registration shall be carried out in accordance with the following:

(1) The pledgor (guarantee provider) shall fill out an “Application for Pledge Registration” (Form 13) ( “Application for Public Guarantee Registration ” (Form 14)) and submit to the clearing bank for registration. The clearing bank shall perform outward restricted transfer registration for the pledgor (guarantee provider) and inward restricted transfer registration for the pledgee (guarantee recipient) in accordance with the application, print a passbook together with a “Certificate of Pledge Registration” (Form 13-1) (Certificate of Public Guarantee Registration” (Form 14-1)) and provide them to the pledgor (guarantee provider); the pledgee (guarantee recipient) may update his passbook at the clearing bank.

(2) To register a pledge default agreement on the pledged securities, the pledgor shall fill out an “Application for Registration of Pledge Default Agreement” (Form 13-2) together with the contract of pledge default agreement and submit to the clearing bank for processing. The clearing bank shall register the pledge default agreement in accordance with the application, print a “Certificate of Book-Entry CGS Pledge Default Agreement” (Form 13-3), and provide it to the pledgor; the pledgee may update his passbook at the clearing bank or obtain a pledge default agreement certificate from the clearing bank.

27.

Intrabank revocation of restricted transfer registration, exercise of pledge, and revocation of public guarantee registration with ownership transfer under court order for compulsory execution shall be carried out in accordance with the following:

(1)Revocation of restricted transfer registration:

i. The pledgor (guarantee provider) shall fill out an “Application for Revocation of Pledge Registration or Public Guarantee Registration” (Form 15), with the pledgee’s (guarantee recipient’s) seal affixed as proof of consent for processing by the clearing bank.

ii. According to the documents prescribed in the preceding item, the clearing bank shall revoke the restricted transfer registration for the pledgor (guarantee provider) and the pledgee (guarantee recipient), print a passbook together with a “Certificate of Revocation of Pledge Registration or Public Guarantee Registration” (Form 15-1), and provide them to the pledgor (guarantee provider); the pledgee (guarantee recipient) may update his passbook at the clearing bank.

(2) Exercise of pledge:

i. Based on the actual result of the pledgee’s exercise of pledge, the transferee shall fill out a “Notice of Exercise of Pledge of Book-Entry CGS" (Form 16) with the pledgee’s seal affixed as proof of consent for processing by the clearing bank. The following documents shall be also attached depending on the circumstances:

(i)Petition for court auction: Documents related to court auction shall be attached.

(ii)Realization by the pledgee: Certificates which conform to Article 19 of the Enforcement Act of the Part of Rights In Rem of the Civil Code (certified by a notary public or commercial groups, showing sale at market price) shall be attached.

(iii)Agreement with the pledgor that the pledgee shall obtain the pledge: The contract between the pledgor and pledgee shall be attached.

(iv) Other forms of disposal: The contract between the pledgor and pledgee shall be attached. Where a third party is involved, the relevant contract shall be attached.

ii. Unless not being requested to deduct funds from the transferee’s cash account to settle the transaction, the clearing bank shall, in accordance with the documents prescribed in the preceding item, carry out a simultaneous revocation of the pledgor and pledgee’s restricted transfer registration and a transfer of securities between the pledgor and the transferee, print a passbook together with a “Certificate of Exercise of Pledge” (Form 16-1), and provide them to the transferee; the pledgor and pledgee may update their passbooks at the clearing bank.

iii. If requested to deduct funds from the transferee’ s cash account to settle the transaction, the clearing bank shall carry out securities transfers as set forth in the preceding item, as well as carry out funds transfers between the transferee and the pledgor.

iv. The provisions in item ii hereof apply mutatis mutandis to the exercise of pledge that does not involve the transfer of funds.

(3) Revocation of public guarantee registration with ownership transfer under court order for compulsory execution shall be carried out in accordance with the following:

i. The transferee shall fill out a “Notice of Revocation of Public Guarantee Registration With Ownership Transfer” (Form 17) with the guarantee recipient’s seal affixed as proof of consent for processing by the clearing bank.

ii. The clearing bank shall, based on the information in the preceding item, carry out a simultaneous revocation of the guarantee provider’s and the recipient’s restricted transfer registrations and a transfer of securities between the guarantee provider and transferee, print a passbook together with a “Certificate of Revocation of Public Guarantee Registration With Ownership Transfer” (Form 17-1), and provide them to the transferee. The guarantee provider and the recipient may update their passbooks at the clearing bank.

28.

Qualified central government bond traders or securities dealers may apply to strip strippable bonds (hereinafter referred to as “bond stripping”) or to reconstitute stripped bonds (hereinafter referred to as “bond reconstitution”).

Clearing bank bond stripping or bond reconstitution shall be performed as follows:

(1) Bond stripping: The applicant shall fill out an “Application for Stripping Form” (Form 18) and submit it to the clearing bank. The clearing bank shall strip, in accordance with the application form, the interest-bearing government bonds into coupon STRIPS and principal STRIPS and transmit the message to TDCC, which shall transfer coupon STRIPS and principal STRIPS into the applicant’s centralized depository securities account. The clearing bank shall print the passbook and issue a“Certificate of Stripping”(Form 18-1) to the applicant.

(2) Bond reconstitution: The Applicant applying for reconstitution of principal STRIPS and coupon STRIPS into interest-bearing government bonds shall comply with the relevant regulations of TDCC, through which messages are transmitted to the TDCC correspondent clearing bank and reconstituted bonds are transferred to the securities account of the applicant. The applicant may update the passbook at the clearing bank.

29.

When carrying out issuance, cancellations or cancellations with ownership transfer of repo certificates, a clearing bank shall proceed in accordance with the following provisions:

(1) Issuance of repo certificates:

The applicant shall fill out an “Application for Issuance of Repo Certificates” (Form 19) and submit it to the clearing bank. The clearing bank shall print the passbook and issue a certificate to the applicant.

(2) Cancellations of repo certificates:

When a repo certificate comes due or for early annulment of contract, the applicant shall apply for the cancellation at the clearing bank by submitting the original certificate issued by the clearing bank, relevant application form and proof of payment with the applicant’s registered seal affixed. The clearing bank shall print the passbook for the applicant.

(3) Cancellations of repo certificates with ownership transfers:

When a repo comes due but the repo seller has not presented proof of payment prior to the prescribed time on the maturity date, the applicant (repo buyer) may apply to the clearing bank for cancellations of certificates, and transfers of securities by submitting the original certificate issued by the clearing bank, identity document, and an “Application for Cancellations of Repo Certificates with Ownership Transfers” (Form 19-1). The clearing bank shall print the passbook for the applicant, and the transferor (repo seller) may update the passbook at the clearing bank.

30.

When exchangeable bonds are redeemed at holders’option, the applicant shall fill out an “Application for Exchange of Central Government Exchangeable Bonds for Government-held Stocks/Redemption at Holders’ Option of Central Government Exchangeable Bonds” (Form 20) for processing by the clearing bank. The clearing bank shall print the passbook to the applicant.

31.

A clearing bank, when performing the registrations, stripping, reconstitution of book-entry CGS, and issuance, cancellations, cancellations with ownership transfers of repo certificates and redemption at holders’ option of exchangeable bonds, shall proceed in accordance with the following provisions:

(1) Verifying that the seal on the application form matches the registered seal of the applicant.

(2) Verifying that the information in the application form matches that originally filed with the clearing bank.

(3) Verifying that the disposable balance of the applicant’s securities account or the balance of cash account is greater than or equal to the amount of the outward transfers applied for or the repo certificate to be issued.

(4) Verifying whether the par value of the reconstituted or stripped coupon STRIPS is consistent with the minimum registration unit or its integral multiples; whether the par value of the principal STRIPS corresponds with that of the coupon STRIPS.

(5) Performing transfer registration:

i.Delivery-versus-payment transfer: debiting the amount from the transferor’s securities account and crediting the amount to the transferee’s securities account; at the same time, crediting the amount to the transferor’s cash account and debiting the amount to the transferee’s cash account.

ii.Free-of-payment transfer: debiting the amount from the transferor’s securities account and crediting the amount to the transferee’s securities account.

(6) Performing lodgement registration: debiting the amount from the depositor's securities account and crediting the amount to the Court’s securities account.

(7) Performing return registration: debiting the Court’s securities account and crediting the recipient 's securities account by the same amount.

(8) Performing restricted transfer registration: crediting the amount of restricted outward transfers to the pledgor’s (guarantee provider’s) securities account and debiting the disposable balance from the pledgor’s (guarantee provider’s) securities account by the same amount, and crediting the amount of restricted inward transfers to the pledgee’s (recipient’s) securities account.

(9) Performing revocations of pledge registrations (general revocations of public guarantee registrations): debiting the amount of restricted outward transfers from the pledgor’s (guarantee provider’s) securities account and crediting the disposable balance to the pledgor’s securities account by the same amount, and debiting the amount of restricted inward transfers to the pledgee’s (recipient’s) securities account.

(10) Performing exercise of pledge (revocations of public guarantees registration with ownership transfers): debiting the amount of restricted outward transfers from the pledgor’s (guarantee provider’s) securities account while crediting the disposable balance to the pledgor’s securities account by the same amount, and debiting the amount of restricted inward transfers from the pledgee’s (recipient’s) securities account and debiting the amount and the disposable balance from the pledgor’s (guarantee provider’s) securities account while adding up the amounts to the transferee’s securities account.

(11) Performing bond stripping: debiting the interest-bearing government bonds from the applicant’s securities account for the amount to be stripped and crediting STRIPS to the TDCC’s securities account by the same amount.

(12) Performing bond reconstitution: debiting STRIPS for the amount to be reconstituted from the TDCC’s securities account and crediting interest-bearing government bonds to the applicant’s securities account by the same amount.

(13) Issuing repo certificates: crediting the amount of repo certificates issued to the applicant’s securities account and debiting the disposable balance from the applicant’s securities account by the same amount.

(14) Cancellations of repo certificates: debiting the amount of repo certificates from the applicant’s securities account and crediting the disposable balance to the applicant’s securities account by the same amount.

(15) Cancellations of repo certificates with ownership transfers: debiting the amount of repo certificates issued from the transferor’s securities account while crediting the disposable balance to the transferor’s securities account by the same amount; in addition, debiting the amount and the disposable balance from the transferor’s securities account while crediting the amount to the applicant’s securities account.

(16) Processing of application(s) for redemption at holders’ option of exchangeable bonds: crediting the amount of application for redemption at holders’option to the applicant’s securities account and debiting the disposable balance from the applicant’s securities account by the same amount.

Chapter 5 Interbank Trading Registration

32.

When registration institutions perform interbank transaction registration, the party that initiates the transmission of transaction message is the transferor bank, the party that receives the message is the transferee bank. Registration institutions shall be responsible for any errors in the execution of transfer orders that result in injury to the rights and interests of its customers.

The information flows for interbank transfer, exchange for government-held stocks, bond stripping or reconstitution are as follows:

(1) Delivery-versus-payment transfer:

i.The transferor bank and the transferee bank shall transmit messages to the CGSS Center. After the transaction message is matched and confirmed, it is sent to the CIFS for settlement of the transaction.

ii.The CGSS Center shall reject the message, if the disposable balance of the securities account of the transferor bank is insufficient to cover the trade, or if the securities data transmitted by the transferor bank is inconsistent with that in the CGSS Center.

iii When the CIFS executes payment settlement, a transaction for which the clearing bank does not have sufficient fund to cover shall not be rejected immediately, but shall be subject to queuing, with payment for awarded securities at level one priority, with other payments at level four.

iv.The transferor bank may initiate an instruction to cancel a transaction message still queuing for a match. Once the instruction is accepted by the CGSS Center, the cancellation shall be confirmed and the original transaction message shall be returned, unless otherwise matched.

v. Once the CIFS completes the settlement of the transaction, the CGSS Center shall effect securities transfers between the transferor bank and the transferee bank, and send the results to the transferor bank and the transferee bank respectively.

(2)Free-of-payment transfer, restricted transfer registration, lodgment registration, and return registration: The transferor bank transmits the message to the CGSS Center. Upon the receipt of such message, the CGSS Center will proceed with the transfer of securities between the transferor bank and the transfee bank according to the instruction of the transferor bank and sends the message to the transferee bank. The transferee bank should send the Bank the processing result, which will be forwarded to the transferor bank.

(3)Exchangeable bonds for government-held stocks: the CGSS Center processing the exchange of exchangeable bonds for government-held stocks through the CGSS Center shall debit the securities account of the transferor bank as instructed by the transferor bank and transmit the message to TDCC.

(4)Bond stripping: Once a bond stripping transaction performed by a clearing bank is received by the CGSS Center, the CGSS Center shall effect transfers, in accordance with the instruction of the transferor bank, debiting the interest- bearing government bonds from the transferor bank account for the amount to be stripped and crediting STRIPS to the account of the TDCC correspondent clearing bank by the same amount, and transmit the message to the TDCC correspondent clearing bank.

(5)Bond reconstitution: Once a bond reconstitution transaction performed by the TDCC correspondent clearing bank is received by the CGSS Center, the CGSS Center will effect transfers, in accordance with the instruction of the TDCC correspondent clearing bank, debiting STRIPS from the TDCC correspondent clearing bank account for the amount to be reconstituted and crediting the interest-bearing government bonds to the transferee bank account by the same amount.

The provisions in item (ii), subparagraph 1 of the preceding paragraph shall apply mutatis mutandis to the method for transmitting transaction messages involving no payment specified in subparagraphs 2–5 of the preceding paragraph.

33.

The transferor bank and the transferee bank for interbank transfer, exchange for government-held stocks and bond stripping or bond reconstitution as listed in the previous direction are defined as follows:

(1) Transfer registrations: The registration institution which the assignor corresponds with is the transferor bank (assignor bank); the registration institution which the assignee corresponds with is the transferee bank (assignee bank).

(2) Lodgment registrations: The registration institution which the depositor corresponds with is the transferor bank (depositor bank); the registration institution which the Court corresponds with is the transferee bank (custodian bank).

(3) Return registrations: The registration institution which the Court corresponds with is the transferor bank (custodian bank); the registration institution which the guarantee recipient corresponds with is the transferee bank (recipient bank).

(4) Restricted transfer registrations: The registrations institution which the pledgor, the guarantee provider, or the reserves depositor corresponds with is the transferor bank (pledgor bank, guarantee provider bank or depositor bank); the registration institution which the pledgee or the guarantee recipient corresponds with is the transferee bank (pledgee bank or recipient bank).

(5) Revocation of restricted transfer registrations, exercise of pledge, and revocation of public guarantee (reserves deposit) with ownership transfer: The registration institution which the pledgee or the recipient corresponds with is the transferor bank (pledgee bank or recipient bank); the registration institution which the pledgor or the guarantee provider or the reserves depositor corresponds with is the transferee bank (pledgor bank or guarantee provider bank or reserves depositor bank).

34.

The transferor bank, when sending instructions such as interbank transaction transfer, exchange for government-held stocks and bond stripping or bond reconstitution, shall proceed in accordance with the following instructions：

(1) Transfer registration: The messages shall be classified into delivery- versus-payment and free-of-payment, and shall include the transaction serial number, the transferor bank, the securities account number of the transferor, the account name of the transferor, personal ID number (profit- seeking enterprise uniform number) of the transferor, the transferee bank, the securities account number of the transferee, the account name of the transferee, personal ID number (profit-seeking enterprise uniform number) of the transferee, the securities code, and the amount of securities; delivery-versus-payment transfers shall include additional information on cash account number of the transferor, cash account number of the transferee, and the amount of funds. Transfer registrations arising from a trust, shall also include relevant information on the establishment or termination of the trust.

(2) Restricted transfer registration: In addition to the provisions on free-of- payment transfer messages prescribed in the preceding subparagraph apply mutatis mutandis to restricted transfer registration, messages of whether there is a pledge default agreement, interest beneficiary and the type of restricted transfer registration shall be also included.

(3) Lodgment registration and return registration: The provisions on free-of- payment messages prescribed in subparagraph 1 hereof shall apply mutatis mutandis to information to be included in the message.

(4) Exchange of government-held stocks: The messages shall include transaction serial number, the transferor bank, the securities account number of the transferor, the account name of the transferor, personal ID number (profit- seeking enterprise uniform number) of the transferor, centralized depository account number of the transferor, the securities code, the amount of the securities, the exchange price, the securities code of the underlying stocks, the number of stocks exchanged, and the amount payable for odd stocks.

(5) Bond stripping or bond reconstitution: The messages shall include transaction code, transferor bank, securities account number of the transferor, profit seeking enterprise uniform number of the transferor, centralized depository account number of the transferor, the security code, the amount of the securities, and attached coupon series；Bond stripping shall also include other relevant information such as the interest income accrued before stripping and the amount of tax withheld.

35.

Interbank transaction registration, exchange for government held stocks, bond stripping or bond reconstitution, except for the manner of registration and relevant forms to which the provisions for intrabank transactions shall apply mutatis mutandis, shall be processed in accordance with the following provisions：

(1) Interbank transfer registrations:

i. Delivery-versus-payment transfers: The transferor shall apply at the transferor bank, the transferee shall apply at the transferee bank; the transferor bank and the transferee bank shall, according to the processing results of the Bank, carry out outward transfer registration and corresponding funds transfer for the transferor, as well as inward transfer registration and corresponding funds transfer for the transferee. However, in the case of open market operations involving the purchase or sale of book- entry CGS, relevant funds transfers shall be initiated by the Bank.

ii.Free-of-payment transfers: The transferor shall apply at the transferor bank；the transferor bank shall perform outward transfer registrations for the transferor, and then shall transmit relevant messages to the transferee bank, which shall perform inward transfer registrations for the transferee.

(2)Interbank lodgment registration: The depositor shall apply at the depositor bank；the depositor bank shall perform outward transfer registration for the depositor, and then transmit the relevant message to the custodian bank, which shall perform inward transfer registration for the Court and print relevant slips of Deposit Certificate. If several persons (including several persons with a joint ownership relationship) apply for joint lodgement, the depositor bank shall also fax the list of depositors to the custodian bank.

(3)Interbank return registration: The recipient shall apply at the custodian bank; the custodian bank shall perform outward transfer registration for the Court and then shall transmit relevant message to the recipient bank, which shall perform inward transfer registration for the recipient. If several persons (including several persons with a joint ownership relationship) apply for joint return or collect, the custodian bank shall also fax the list of recipients to the recipient bank.

(4)Interbank restricted transfer registration: The pledgor (guarantee provider or reserves depositor) shall apply to the pledgor bank (guarantee provider bank or reserves depositor bank)；the pledgor bank shall perform restricted outward transfer registration and then shall transmit relevant message to the pledgee bank (the recipient bank), which shall perform restricted inward transfer registration for the pledgee (recipient).

(5)Revocation of interbank restricted transfer registration, the exercise of pledge, and revocation of public guarantee (reserves deposits) with ownership transfer:

i. Revocation of pledge registration, public guarantee registration, and reserves depository registration: The pledgor (guarantee provider or reserves depositor) shall apply at the pledgee bank (recipient bank); the pledgee bank (recipient bank) shall perform revocation of restricted inward transfer registration for the pledgee (recipient) and then shall transmit the relevant message to the pledgor bank (guarantee provider bank), which shall perform revocation of restricted outward transfer registration for the pledgor (guarantee provider or reserves depositor).

ii.Exercise of pledge: The transferee shall open a securities account at the pledgor bank, and shall apply at the pledgee bank based on the result of the pledgee’s exercise of pledge. The pledgee bank shall perform revocation of restricted inward transfer registration for the pledgee and then shall transmit the relevant message to the pledgor bank, which shall perform revocation of restricted outward transfer registration for the pledgor and the securities transfer between the pledgor and the transferee.

iii.Revocation of public guarantees (reserves deposits)with ownership transfer: The transferee shall open a securities account at the guarantee provider bank (reserves depositor bank), and shall apply for revocation at the recipient bank based on the results of the Court’s mandatory execution. The recipient bank shall perform revocation of restricted inward transfer registration for the recipient and then shall transmit relevant message to the guarantee provider bank (reserves depositor bank), which shall perform revocation of restricted outward transfer registration for the guarantee provider (reserves depositor), and perform the securities transfer between the guarantee provider (reserves depositor) and the transferee.

(6) Exchange of government-held stocks: The applicant shall fill out an “Application for Exchange of Central Government Exchangeable Bonds for Government-held Stocks/Early Sell Back of Central Government Exchangeable Bonds” (Form 20) and submit it to the clearing bank. The clearing bank shall, after confirming the par value of the securities slated for exchange and the number of government-held stocks to be received by the applicant to be correct, debit the amount from the applicant’s securities account and transmit the relevant message to TDCC. TDCC shall then transfer the stocks to the applicant’s centralized depository securities account.

(7) Bond stripping: The applicant shall apply at the transferor bank；the transferor bank shall debit the interest-bearing government bonds from the applicant’s securities account for the amount to be stripped and transmit the message to TDCC correspondent clearing bank; the TDCC correspondent clearing bank shall credit that amount of STRIPS to TDCC securities account and transmit the message to TDCC, which shall credit STRIPS to the applicant’s centralized depository securities account by the same amount.

(8) Bond reconstitution: The applicant shall apply in accordance with the relevant regulations of TDCC and shall transmit the message through TDCC to TDCC correspondent clearing bank；the TDCC correspondent clearing bank shall debit STRIPS from TDCC securities account for the amount to be reconstituted and transmit the message to the transferee bank, which shall credit that amount of interest-bearing government bonds to the applicant’s securities account.

Chapter 6 Interest and principal repayment

36.

Interest payments and principal redemption for book-entry CGS shall be processed in accordance with the following provisions:

(1) Maturity of the book-entry CGS (STRIPS excluded):

i. Department of the Treasury shall calculate the amount of principal and interest payable, based on the records of the securities accounts of registration institutions, as of the close of business day prior to the date of principal and interest payment. These payments shall be transferred to the bank reserve account of the registration institutions prior to 10：00 a.m. on the date of principal and interest payment.

ii. Based on the book balances in its own securities accounts and customers’ securities accounts on the record date as described in the preceding subparagraph, registration institutions shall calculate the amount of principal and interest payable, and following the transfer of principal and interest by Department of the Treasury, transfer the net amount, after the deduction of withholding taxes, to its own cash accounts and customers' cash accounts prior to 12:00 p.m. on the date of principal and interest payment.

iii. Where it is agreed that interest payment shall be received by the transferors who provide the securities as a guarantee or margin deposit, the clearing bank and the transferee may enter an agreement, that the clearing bank shall transfer, in accordance with the list of transferors list provided by the transferee, the net amount after the deduction of withholding tax to the cash accounts of the transferors on the date of principal and interest payment; if the transferor is an interbank customer, the amount shall be remitted to the cash account of the interbank customer.

(2) Maturity of STRIPS:

i. Department of the Treasury shall calculate the amount of principal payable based on the book balances in the securities accounts at the TDCC correspondent clearing bank as of the close of the business day before maturity date of the coupon STRIPS and the principal STRIPS, and shall transfer the principal to the bank reserve account of TDCC correspondent clearing bank prior to 10：00 a.m. on the maturity date.

ii.TDCC correspondent clearing bank will transfer, in accordance with the STRIPS holders list provided by TDCC, the net amount after withholding tax to the cash accounts of the STRIPS holders prior to 12:00 p.m. on maturity date; if the holder is an interbank customer, the amount shall be remitted to the deposit account of the interbank customer.

(3) Exchangeable Bonds Redeemed at Holders’ (Issuer’s) Option:

i. Department of the Treasury shall calculate the amount of principal and interest payable based on the book record accumulated amount to be redeemed at holders’ option (the records of balances in securities accounts) at the clearing banks at the end of the announced record date. These payments shall be transferred to the bank reserve accounts of the registration institutions prior to 10：00 a.m. on the fifth business day after the date.

ii. Based on the accumulated amount to be redeemed at holders’ option (final balances in own accounts and customers’ accounts) on the same record date as in the preceding subparagraph, registration institutions shall calculate the amount of principal and interest payable, and following the transfer of principal and interest by Department of the Treasury, will transfer the net amount after withholding taxes to the various cash accounts for own accounts and customers’ accounts prior to 12:00 noon on the fifth business day after the record date of redemption at holders’(Issuer's) option.

When securities mature or if exchangeable bonds are redeemed at holders’ (Issuer's) option, after Department of the Treasury has transferred the principal and interest in accordance with subparagraph 1, item 1, subparagraph 2, item 1, or subparagraph 3, item 1 of the preceding paragraph registered information shall be closed in whole or in part. The exchange of exchangeable bonds for government-held stocks shall be handled in the same way.

37.

When book-entry CGS registrations are carried out for the purpose of the establishment of pledge, public guarantee or depository of reserves, interest at maturity orinterest due to redemption of exchangeable bonds at issuer’s option shall be transferred to the bank reserve account of the pledgor bank (guarantee provider bank) by Department of the Treasury, and shall be transferred by the pledgor bank (guarantee provider bank) to the cash account of the pledgor (guarantee provider or reserves depositor) or the pledgee (recipient) based on the agreement between the applicant and the pledgee (recipient) at the time of application for registration. If the recipient of the interest is an interbank customer, the pledgor bank shall remit the interest to the cash account of the interbank customer.

38.

When book-entry CGS registrations are carried out for the purpose of the establishment of pledge, public guarantee and depository of reserves, then principal at maturity or principal due to redemption of exchangeable bonds at issuer’s option, prior to the revocation of the aforementioned registrations, shall be handled in accordance with the following provisions:

(1) Pledge registration: Department of the Treasury shall transfer the principal amount to the bank reserve account of the pledgor bank, which shall make payment only after notifying the interested parties first and retaining a record of the original registrations, and after the presentation by the interested party of documents demonstrating the consent of the other party or other valid documents as required by law.

(2) Public guarantee and depository of reserves registration: Department of the Treasury shall transfer the principal to the bank reserve account of the recipient bank, which shall transfer the amount to the recipient’s cash account to serve as public guarantee or depository of reserves.

39.

During lodgement period, the principal and interest on securities matured or exchangeable bonds redeemed at issuer’s option, or principal and interest on securities that are the underlying securities for repo certificates issued where the registrations of the certificates have not yet been cancelled prior to the repo maturity date shall be respectively handled in accordance with the following provisions:

(1) Securities are mature or exchangeable bonds are redeemed at issuer’s option during the lodgement period:

i.Department of the Treasury shall transfer the principal and interest on securities matured, or exchangeable bonds redeemed at issuer’s option to the bank reserve account of the clearing bank (custodian bank). The clearing bank shall withhold tax and keep custody of the after-tax sum as lodgement object.

ii.The clearing bank (custodian bank) shall pay the accrued interest on principal and interest of the securities matured or exchangeable bonds redeemed at issuer’s option, which are reserved as lodgement objects. When processing the return registration at the request of the recipient, the clearing bank shall calculate the principal, interest, accrued interest, and tax payable of the securities originally in its custody, and shall pay the net amount after withholding tax to the recipient.

(2) A repo becomes due but the underlying certificate is not yet cancelled: Department of the Treasury shall transfer the principal and interest on matured securites to the bank reserve account of the clearing bank of the repo seller. The clearing bank shall withhold tax, record the original registered item and retain such record, and disburse payment to the repo buyer after the repo buyer has submitted the repo certificate and relevant proof documents.

Chapter 7 Buyback

40.

Bidding in book-entry bond buybacks is restricted to bond dealers only; natural persons or other juristic persons shall submit bids through bond dealers under the bond dealers’ names.

Bidding in book-entry treasury bill buybacks is restricted to banks, Chunghwa Post Co.,Ltd., bills finance companies, securities firms, and insurance enterprises only ; natural persons or other juristic persons shall submit bids through bills houses under the bills houses’ names.

41.

Successful bidders shall carry out the following matters prior to the sellback of book-entry CGS:

(1) Filling out and submitting the “Application for CGS Sellback Registration ” (Form 21) to correspondent clearing banks to effect registrations, specifying the aggregate par amount and amount receivable for securities sold back on their own accounts and on customers’ accounts, prior to the following deadlines:

i. Book-entry bonds: prior to 3:30 p.m. on the next business day following the auction.

ii. Book-entry treasury bills: prior to 3:30 p.m. on the auction date.

(2) Delivering the securities sold on their own accounts and on customers’ accounts to correspondent clearing banks prior to the prescribed time on the buyback date.

42.

Clearing banks shall carry out the following matters prior to selling back book- entry CGS:

(1) Transmitting messages in the “Book-Entry Central Government Securities Sellback Statement ” (Form 22) to the Bank, prior to the following deadlines:

i. Book-entry bonds: prior to 12:00 p.m. on the second business day following the auction.

ii. Book-entry treasury bills: prior to 5:00 p.m. on the auction date.

(2) Transmitting delivery messages for securities sold back on their own accounts and on customers’ accounts, classified according to respective successful bidders, to the Bank to effect delivery prior to 3:00 p.m. on the buyback date. The Bank shall debit a clearing bank’s securities account and credit the clearing bank’s reserve account for the amount specified in the delivery instructions accordingly. In the event that successful bidders fail to effect delivery, the clearing bank shall notify the Bank to make adjustments.

(3) Upon receiving the Bank’s confirmation of delivery messages on the buyback date, crediting the net settlement amounts (after the deduction of withholding tax) to the customers’ funds accounts in accordance with the customer data listed in the “Application for CGS Sellback Registration” submitted by the successful bidders.

43.

Following the disbursement of buyback settlement amount by the Department of the Treasury, the original registrations of book-entry CGS shall be cleared in whole or in part.

Chapter 8 Account Affairs and Reporting of Data

44.

Registration institutions shall establish formal memorandum ledgers for book-entry CGS transactions; Department of the Treasury shall establish a “government book- entry securities management” assets memorandum ledger to control the number of securities issued by the Treasury, as well as a “government book-entry securities consigned management” liabilities memorandum ledger to control the amount of securities in own and customer accounts at the various registration institutions. Registration institutions shall establish a “government book-entry securities management” assets memorandum ledger for the purpose of cross-checking with the Bank's assets memorandum ledger, and shall also establish a “government book-entry securities consigned management” liabilities memorandum ledger in order to control the balances of securities in own and customers’ accounts.

Accounting ledgers listed in the preceding paragraph shall be managed according to the provisions of the “Central Public Debts Accounting System.”

45.

12313

Each day at the close of operations, a clearing bank shall print a “Trading of CGS” (Form 24), a “Trust of CGS”(Form 24-1), a “Balance of CGS” (Form 25), a “Daily Statement for the Exchange of Exchangeable Bonds” (Form 26), a “Daily Statement for Redemption at Holders’ (issuer’s) Option of Exchangeable Bonds” (Form 27), and a “Holding Analysis of Exchangeable Bonds” (Form 28), and a“ Daily Statement for Bond Stripping/Reconstitution” (Form 29) to be sent to the Bank for its files; the Bank will compile and print an “Aggregate Statement of Trading of CGS” (Form 30), an “Aggregate Statement ” for Trust of CGS”(Form 30- 1), an “Aggregate Statement for Balance of CGS”(Form 31), an “Aggregate Statement for Exchange of Exchangeable Bonds” (Form 32), an Aggregate Statement for the Redemption at Holder’s (Issuer’s) Option of Exchangeable Bonds” (Form 33), a “Aggregate Holding Analysis of Exchangeable Bonds ”(Form 34), and an “Aggregate Daily Statement for Bond Stripping/ Reconstitution” (Form 35).

46.

Clearing banks shall print “CGS Payment of Principal and Interest” (Form 36), “Monthly Statement for Exchangeable Bonds” (Form 37) and“ Monthly Statement for Bond Stripping/Reconstitution” (Form 38) for filing on a monthly basis.“Monthly Statement for CGS Disbursement and Collection of Principal and Interest Funds” (Form 39), “Holding Analysis of CGS” (Form 40), “Financial Institutions Holdings of CGS” (Form 40-1), and “Monthly Statement Disbursement and Collection of Exchangeable Bonds Odd Stocks Repayment Fund” (Form 41) should be printed and transmitted to the Bank for filing prior to the second business day of the following month. The Bank will compile a “Aggregate Monthly Statement for CGS Disbursement and Collection of Principal and Interest Funds” (Form 42), a“ Strippable Bonds Disbursement and Collection of Principal and Interest Funds” (Form 42-1), “Aggregate Monthly Statement for the Exchange of Exchangeable Bonds” (Form 43), a “Aggregate Monthly Statement Disbursement and Collection of Exchangeable Bonds Odd Stocks Repayment Funds” (Form 44) and “Aggregate Monthly Statement for Bond Stripping/Reconstitution” (Form 45) for Ministry of Finance records. A “Aggregate Holding Analysis of CGS” (Form 46) will be printed.

47.

Clearing banks shall produce a “Semi-annual Principal and Interest Payment Settlement Statement” (Form 47) once every six months, and the Bank will produce “Comprehensive Semi-annual Principal and Interest Payment Settlement Statement” (Form 48) and submit it together with the aforementioned Statement to the Ministry of Finance for the disbursement of processing service fees.

The statements that are required of to be printed by clearing banks, as prescribed in Direction 45 to the preceding paragraph shall, if needed, be stored in electronic media, and may be printed at any time.

Chapter 9 Management of System Failure and Correction of Account Errors

48.

In the event of malfunction or line interruption of the CGSS mainframe system resulting in full-scale online failures, the Department of Information Management shall immediately notify the Department of the Treasury, the Department of Banking and all online participants, and take appropriate actions depending on the circumstances of the contingency:

(1) In case of system interruption：

i. Payment for awarded securities and buyback:A clearing bank shall produce electronic medium that contain information on payments for awarded securities and the delivery of soldback securities,and submit the underlying electronic medium to Department of the Treasury for processing. The Bank shall produce electronic medium for the results of securities transfer against payment and funds transfer against delivery of soldback securities and give such electronic medium to the clearing bank for processing.

ii.Free-of-payment transfer, restricted transfer registration, lodgment registration, and return registration: operations shall be carried out in manual backup procedures. The transferor banks shall deliver all accepted transactions to Department of the Treasury on the [electronic] medium in whole batches； Department of the Treasury shall contact the Transferee banks to get the Bank serial numbers of the last received transactions and produce the information on the [electronic] medium for processing by the transferee banks. Transferee banks shall report the results of processing to Department of the Treasury by fax and telephone, and Department of the Treasury shall notify the relevant departments.

iii.The provisions in item (i) hereof shall apply mutatis mutandis to delivery-versus-payment transfer; the provisions in item (ii)hereof shall apply to exchange for government-held stocks, and bond stripping or reconstitution.

iv.The [electronic] medium produced by clearing banks according to the three preceding items shall be delivered in a sealed envelope attached with a detailed list and affixed with the authorized signature of the securities account.

(2) In case of CGSS mainframe system malfunction: CGSS operations shall be relocated to the off-site backup center of the Bank. If the off-site backup center is also inoperative, all online operations of interbank securities transaction shall be suspended and shall be reactivated after the CGSS is recovered.

When the CIFS experiences disruptions while the CGSS operates normally: Except in case of payment for awarded securities, buy back and repayment of principal and payment of interest, operations shall be backed up manually, in accordance with the Guidelines for Central Bank Electronic Interbank Funds Transfer and Settlement Procedures, all other payment-related transactions shall be executed after the CIFS is recovered.

49.

In the event of malfunction or line interruption of an online participant’s mainframe system, the participant shall immediately notify the Department of the Treasury and the Department of Information Management. Manual backup procedures shall be put in place if operations are not recovered by 5:00 p.m. When the cause of failure lies with a transferor bank, the transferor bank shall produce a medium containing accepted transaction data in a batch and send it, before the recovery of the system, to the Department of the Treasury prior to 6:30 p.m. The Bank shall in turn produce a medium containing the processed transactions received from the transferee bank and provide it to the transferor bank for processing. When the cause of failure lies with the transferee bank, the Bank shall produce a medium containing accepted transaction data to the transferee bank for processing. The transferee bank shall report the processing results to the Department of the Treasury by facsimile and telephone. The Department of the Treasury shall in turn forward the results to the relevant parties.

The medium referred to in the preceding paragraph, shall be delivered in a sealed envelope attached with a detailed list and affixed with the authorized signature of the securities account.

50.

Where the Bank, due to a system breakdown, causes interbank security transactions or funds transfers to be inconsistent with the original documentation of the clearing bank, the Bank shall make the necessary correction in accordance with the relevant accounting regulations.

51.

When a system participant discovers an error while reviewing its same-day transaction statement or through checking the comprehensive trading information for the given day, it shall immediately notify the relevant department of the Bank and take part in the investigation.

52.

When the transmission of an interbank transaction instruction of free-of-payment transfer, restricted transfer registration, lodgment registration, return registration, or exchange for government-held stocks does not conform with the original documents, a transferor bank shall transmit a message requesting for return of transfer upon obtaining approval from the transferee bank, which shall make a reversal transfer for correction accordingly.

The transferee shall offer its full cooperation in making the aforementioned correction when notified. If the balance of securities, stocks or funds of a transferee bank’s customer account is insufficient to cover a reverse correction transfer, the transferor bank shall negotiate with the customer to resolve the problem by itself.

The preceding two paragraphs do not apply to STRIPS.

53.

For transactions not conforming with the original documentation as under Direction 51 and item 1, Direction 52, which are not processed by the transferor bank on the same day but corrected at a later date, and where delay adversely affects the interest of the transferee bank, it may request the transferor bank to pay compensation interest incurred from the date of the transaction until the date of correction for any securities pending transfer during that period or for a shortfall in the transfer. The transferor bank shall not be liable for any other damages.

With the exception of previous agreements between the parties to a transfer, payment interest as per the preceding paragraph, shall be calculated, per diem, at the weighted average of the overnight interbank call loan rate, for the number of days of delay.

54.

Where a registration institution discovers an error connected with any type of book-entry CGS registration which makes the transaction invalid, it shall immediately investigate the source of the error and re-enter the transaction data. Interbank transactions that have not been effected before the cut-off time of the CGSS operation shall be rejected by the CGSS Center.

Chapter 10 Fees

55.

The Bank may charge transfer fees for carrying out interbank securities or funds transfers (Interbank Securities Transfer fees Schedules are in Appendix 2, Interbank Fund Transfer fees Schedules are provided in relevant rules for the CIFS). The fees shall be collected from customers by clearing banks and deducted per month from the bank reserve accounts of those clearing banks by the Bank.

56.

A clearing bank handling securities or funds transfers or issuance of repo certificates may charge transfer, issuance, or account maintenance fees. Assessment of charges and rates for intrabank trades shall be determined by clearing banks.

Chapter 11 Supplementary Provisions

57.

Matters relating to book-entry CGS, such as methods of opening and closing accounts, changing seals or reporting lost seals, use of passbooks and reporting lost passbooks, shall all be handled in accordance with relevant regulations of the Bank and clearing banks.

58.

Payment and withholding of the tax in relation to the transfer of book-entry CGS or repayment of principal and payment of interest shall be handled in accordance with relevant laws and regulations.

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