Directions Governing Designated Dealers for Open Market Operations

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Title：

Directions Governing Designated Dealers for Open Market Operations

Announced Date： August 06, 1999

Amended Date： Amended on March 20, 2020

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2. These Directions are prescribed by the Central Bank of the Republic of China (Taiwan) (hereafter referred to as "the Bank") to implement a system of designated dealers in open market operations for the purpose of strengthening the efficiency of open market operations and promoting the sound development of financial markets.

[Authorized Circulars]

3. Designated dealers for open market operations (hereafter referred to as "designated dealers") of the Bank are classified into the following two categories:

(1)General designated dealers: Financial institutions with healthy business operations that are able to comply with the Bank's management of market liquidity.

(2)Primary central government bonds dealers: Financial institutions with qualifications for trading central government bonds that are able to provide liquidity in government bond trading and promote the sound development of the government bonds market.

With the approval of the Bank, a financial institution may concurrently operate as a general designated dealer and as a primary central government bonds dealer.

[Authorized Circulars]

4. A bank or Chunghwa Post Co., Ltd. may apply to the Bank to serve as a general designated dealer if the following criteria are met:

(1)Banks:

i.Net worth of NT$20 billion or above in the most recent fiscal year ;

ii.A long-term credit rating for the most recent year of at least A- or the equivalent, rated by a credit rating agency approved or recognized by the Financial Supervisory Commission (FSC) or a reputable international credit rating agency;

iii.Ratio of equity capital to risk-weighted assets in the most recent report to the FSC that meets the minimum capital adequacy ratio specified in Article 5 of the Regulations Governing the Capital Adequacy and Capital Category of Banks.

(2)Chunghwa Post Co., Ltd.: Net worth of NT$20 billion or above in the most recent fiscal year.

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5. A general designated dealer shall

(1)Participate in the Bank's open market operations and offer two-way price quotations and make transactions in the interbank call loan market;

(2)Comply with the " Matters Requiring Implementation by General Designated Dealers for Open Market Operations";

(3)Provide market information to the Bank when necessary.

The "Matters Requiring Implementation by General Designated Dealers for open market operations" as referred to in Subparagraph 2 of the preceding paragraph shall be drafted by the Taipei Interbank Money Center, Bankers Association of the Republic of China and submitted to the Bank for approval.

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6. A general designated dealer may apply to the Bank for assistance in case of funding needs arising from compliance with the Bank's policies.

8. A bank, a bills finance company, a securities company, and Chunghwa Post Co.,Ltd. may apply to the Bank for approval to become a primary central government bonds dealer if it holds qualifications for trading central government bonds and meets the following criteria:

(1)Banks: Same criteria as specified in Subparagraph 1 of Direction 3.

(2)Bills finance companies and securities companies:

i.Net worth of NT$6 billion or above in the most recent fiscal year;

ii.A long-term credit rating for the most recent year of at least BBB- or the equivalent, rated by a credit rating agency approved or recognized by the FSC or a reputable international credit rating agency;

iii.For a bills finance company, its ratio of equity capital to risk-weighted assets in the most recent report of capital adequacy information submitted to the FSC shall meet the minimum requirement specified in Article 41 of the Act Governing Bills Finance Business; for a securities company, its regulatory capital adequacy ratio in the report shall be 200% or above.

(3)Chunghwa Post Co., Ltd.: Same criteria as specified in Subparagraph 2 of Direction 3.

8. A primary central government bonds dealer may participate in the Bank's open market operations as a counterparty and shall

(1)Engage in auction bids for central government bonds, when-issued trading of central government bonds, and two-way price quotations in central government bonds secondary market;

(2)Comply with relevant rules established in the "Matters Requiring Implementation by Primary Central Government Bonds Dealers";

(3)Provide the Bank with information on its central government bonds position and relevant trading details, and with market information when necessary.

The "Matters Requiring Implementation by Primary Central Government Bonds Dealers" in Subparagraph 2 of the preceding paragraph shall be drafted by Taipei Exchange and submitted to the Bank for approval.

[Authorized Circulars]

9. A primary central government bonds dealer may apply to the Bank for assistance in case of funding needs arising from compliance with the Bank's policies.

Taipei Exchange may provide related privileges for primary central government bonds dealers.

10. The Bank may award those designated dealers that perform well in implementing items specified in Directions 4 and 7.

[Authorized Circulars]

11. A designated dealer shall submit annual financial statements that have been audited and certified by a certified public accountant, approved by its Board of Directors, and recognized by its supervisors to the Department of Banking of the Bank within four months after the end of each fiscal year.

Where necessary,the Bank may assign personnel to conduct onsite inspections or request the relevant business manager(s) to provide explanation.

12. When a financial institution applies for designated dealership, it shall submit an official letter with application documents, photocopies of relevant certification and proof of financial status to the Department of Banking of the Bank.

Applicants deemed qualified under both Directions 3 and 6 may apply to serve concurrently as a general designated dealer and a primary central government bonds dealer.

The Bank may re-select designated dealers when necessary. Previously qualified designated dealers shall re-apply in accordance with the relevant rules. Designated dealers that fail to re-apply or are not approved by the Bank shall be disqualified.

13. A designated dealer that wishes to cancel its status shall issue an official letter to the Department of Banking of the Bank for the Bank's approval to revoke its status.

15. The Bank may suspend or rescind the status of designated dealers under any of the following conditions on their part:

(1)Failure to meet the criteria specified in Directions 3 and 6.

(2)Violation of rules in Paragraph 1, Direction 4; Paragraph 1, Direction 7; or Paragraph 1, Direction 10.