Draft Amendment to the Financial Holding Company Consolidated Capital Adequacy Management Measures

General Explanation

To regulate the capital adequacy ratio calculated on a consolidated basis by financial holding companies, the "Financial Holding Company Consolidated Capital Adequacy Management Measures" (hereinafter referred to as these Measures) were promulgated on October 31, 2001, pursuant to the authorization of Article 40 of the Financial Holding Company Act. Since then, these Measures have undergone six amendments in response to the implementation of Financial Accounting Standard No. 34, the practical circumstances of financial holding companies in our country, international methods for calculating qualified capital for financial groups, and the establishment of a calculation method for the statutory capital requirements of financing lease subsidiaries.

In accordance with the "Insurance Company Capital Adequacy Management Measures," which have been amended to align with the Insurance Capital Standard (ICS) issued by the International Association of Insurance Supervisors (IAIS) on December 5, 2024, and to support the policy direction of the new generation solvency regime for insurance companies in our country, provisions regarding minimum capital requirements, capital tier classification standards, and composition items of various capital types have been revised. These changes are mandated to take effect starting in 2026. Accordingly, these Measures are amended to coordinate with the new system implemented by the insurance industry.

The current text of these Measures consists of nine articles. This amendment revises five articles. The key points of the revision are listed below:

1. Coordination with the New Insurance System: Given that the new system implemented by the insurance industry starting in 2026 is relatively complex, and the time required for practitioners to calculate capital adequacy ratios and for accountants to perform audits is longer, a proviso is added to the preamble of the reporting schedule. This explicitly states that if the competent authority has other provisions, those shall prevail. This allows for flexibility in extending the reporting deadline during the initial implementation of the new system. (Amended Article 6)
2. Transitional Mechanism for Insurance Subsidiaries: To assist financial holding companies with insurance subsidiaries in coping with the impact on group capital adequacy ratios and financing planning during the initial alignment with the new generation solvency regime (Taiwan Insurance Solvency, TIS) and related transitional measures, it is specified that financial holding companies may calculate the group capital adequacy ratio based on the qualified capital and statutory capital requirements of insurance subsidiaries adjusted for applicable transitional measures. Relevant capital adjustment mechanisms are also established. (Amended Article 8)
3. Alignment of Capital Instruments: Given that the Class I restricted capital instruments defined in the "Insurance Company Capital Adequacy Management Measures" are similar in nature to the Other Tier 1 Capital (non-common equity) of banks, to ensure clear and consistent application of regulations, insurance industry Class I restricted capital instruments are added to the scope of capital instruments excluded from the total limit on preferred shares and subordinated bonds of financial holding companies. This is coordinated with amendments to the "Bank Capital Adequacy and Capital Tier Management Measures," and relevant cited article numbers are adjusted. (Amended Articles 2 and 4)
4. Effective Date: These Measures shall take effect on January 1, 2026. (Amended Article 9)

Comparison Table of Draft Amendments to the Financial Holding Company Capital Adequacy Management Measures

Amended Article	Current Article	Explanation
Article 1	These Measures are promulgated pursuant to Article 40 of the Financial Holding Company Act (hereinafter referred to as this Act).	This article has not been amended.
Article 2	The definitions of terms used in these Measures are as follows:<br><br>1. Capital Adequacy Ratio Calculated on a Consolidated Basis by Financial Holding Companies (hereinafter referred to as Group Capital Adequacy Ratio): Refers to the Group Qualified Capital Net Amount divided by the Group Statutory Capital Requirement.<br>2. Group Qualified Capital Net Amount: Refers to the sum of the qualified capital of the financial holding company and the qualified capital of each subsidiary calculated according to its shareholding ratio (Total Group Qualified Capital), minus the deduction amounts specified in Article 4.<br>3. Qualified Capital of Financial Holding Companies: Refers to the balance after deducting goodwill and other intangible assets, deferred assets, and treasury shares from the sum of common stock, preferred stock, subordinated bonds, advance capital, reserves, accumulated profits and losses, and other equity of the financial holding company.<br>4. The preferred stock and subordinated bonds mentioned in the preceding paragraph shall meet the following conditions:<br>  (1) The amount issued in each issuance shall be fully paid.<br>  (2) The financial holding company, subsidiaries or investment enterprises that are not allowed to hold shares of the financial holding company under Article 38 of this Act, shall not provide guarantees, collateral, or other arrangements to enhance the priority of repayment of holders.<br>  (3) The issuance term shall be seven years or more, with a reduction of at least 20% per year in the last five years.<br>  (4) If the redemption date agreed upon for preferred stock or subordinated bonds is earlier than the issuance term, the "issuance term" refers to the agreed redemption date.<br>  (5) The total amount of preferred stock and subordinated bonds included in qualified capital shall not exceed one-third of the qualified capital of the financial holding company, excluding Other Tier 1 Capital (non-common equity) meeting the conditions specified in Article 10 of the "Bank Capital Adequacy and Capital Tier Management Measures" and Class I Restricted Capital meeting the conditions specified in Article 2 of the "Insurance Company Capital Adequacy Management Measures," and not exceeding the statutory limit. The calculation method for the statutory limit is as follows:<br>    1. The calculation basis is the balance after deducting "Qualified Capital of Non-Bank and Non-Insurance Subsidiaries" and "Total Amount of Preferred Stock and Subordinated Bonds Issued by the Financial Holding Company" from "Qualified Capital of the Financial Holding Company".<br>    2. The statutory limit is the amount obtained by dividing the basis in the preceding item by 85% and then multiplying by 15%.<br>  (6) If the payment of dividends or interest and principal of preferred stock or bonds causes the group capital adequacy ratio of the financial holding company to fall below the minimum requirement, the payment of dividends or interest and principal shall be deferred.<br>5. Subsidiary: Refers to the subsidiaries specified in Paragraph 1, Item 4 of Article 4 of this Act.<br>6. Qualified Capital of Subsidiaries: Refers to the qualified capital of subsidiaries calculated in accordance with Paragraph 1 of Article 3.<br>7. Group Statutory Capital Requirement: Refers to the sum of the statutory capital requirement of the financial holding company and the statutory capital requirements of each subsidiary calculated according to its shareholding ratio, minus the deduction amounts specified in Article 4.<br>8. Statutory Capital Requirement of Financial Holding Companies: Refers to the balance after deducting cash (including cash equivalents), receivable taxes (including receivable tax refunds), prepaid taxes, the book value of short-term fund utilization under Paragraph 1 of Article 39 of this Act, goodwill and other intangible assets, and deferred assets from the total assets of the financial holding company.<br>9. Statutory Capital Requirement of Subsidiaries: Refers to the statutory capital requirement of subsidiaries calculated in accordance with Paragraph 2 of Article 3.<br>10. Capital Surplus: Refers to the positive difference between the qualified capital and the statutory capital requirement of each company calculated according to these Measures.<br>11. Capital Deficit: Refers to the negative difference between the qualified capital and the statutory capital requirement of each company calculated according to these Measures.	Given that the Class I restricted capital instruments defined in the "Insurance Company Capital Adequacy Management Measures" are similar in nature to the Other Tier 1 Capital (non-common equity) of banks, to ensure clear and consistent application of regulations, provisions related to the nature of capital instruments excluded from the total limit on preferred shares and subordinated bonds of financial holding companies are added, along with adjustments to relevant cited article numbers in coordination with amendments to the "Bank Capital Adequacy and Capital Tier Management Measures."
Article 3	The qualified capital of subsidiaries of financial holding companies shall be calculated separately according to the following industries and methods:<br><br>1. Banking, Bill Finance Companies, Securities Firms, and Insurance Companies: Calculated based on the net amount of qualified own capital, own capital, or equivalent amounts calculated in accordance with the relevant regulations on capital adequacy of each industry.<br>2. Trust Companies, Futures Companies, Venture Capital Enterprises, and Financing Lease Companies: Calculated based on book net value.<br>3. Credit Card Companies: Calculated by analogy to the banking industry.<br>4. Foreign Financial Institutions: Unless otherwise specified by the local regulatory authority, calculated by analogy to trust companies, futures companies, and venture capital enterprises.<br>5. Other Financial-Related Enterprises: Unless approved by the competent authority to be calculated by analogy to relevant business industries, calculated by analogy to trust companies, futures companies, and venture capital enterprises.<br><br>The statutory capital requirement of subsidiaries of financial holding companies shall be calculated separately according to the following industries and methods:<br><br>1. Banking Industry: Calculated based on the product of the total risk-weighted assets and the statutory minimum capital adequacy ratio in accordance with the relevant provisions of the "Bank Capital Adequacy and Capital Tier Management Measures".<br>2. Bill Finance Companies, Securities Firms, and Insurance Companies: Calculated based on the product of the total risk-weighted assets, the equivalent amount of operational risk, risk capital, and the statutory minimum standard ratio, or equivalent amounts, in accordance with the relevant regulations on capital adequacy of each industry.<br>3. Trust Companies, Futures Companies, and Venture Capital Enterprises: 50% of the total amount of all own assets minus receivable taxes (including receivable tax refunds) and prepaid taxes.<br>4. Financing Lease Companies: 10% of the total amount of all own assets minus receivable taxes (including receivable tax refunds) and prepaid taxes.<br>5. Credit Card Companies: Calculated by analogy to the banking industry.<br>6. Foreign Financial Institutions: Unless otherwise specified by the local regulatory authority, calculated by analogy to trust companies, futures companies, and venture capital enterprises.<br>7. Other Financial-Related Enterprises: Unless approved by the competent authority to be calculated by analogy to relevant business industries, calculated by analogy to trust companies, futures companies, and venture capital enterprises.	This article has not been amended.
Article 4	The Group Qualified Capital Net Amount is the balance after deducting the following amounts from the Total Group Qualified Capital:<br><br>1. The book value of the financial holding company's equity investment in subsidiaries and other qualified capital investments, minus the already reduced amount, is the amount that can be included in capital.<br>2. For subsidiaries whose qualified capital and statutory capital requirements are calculated according to the methods for trust companies, futures companies, venture capital enterprises, and financing lease companies, the capital surplus of such subsidiaries.<br>3. For subsidiaries whose qualified capital is calculated according to the methods for the banking industry or bill finance companies, one-half of the amount of capital surplus from subordinated bonds of such subsidiaries (excluding those meeting the conditions for Other Tier 1 Capital (non-common equity) specified in Article 10 of the "Bank Capital Adequacy and Capital Tier Management Measures"), after supplementing the capital deficit of other banking or bill finance companies.<br>4. For subsidiaries whose own capital is calculated according to the insurance industry method, one-half of the amount of capital surplus from capital-nature bonds of such subsidiaries (excluding those meeting the conditions for Class I Restricted Capital specified in Article 2 of the "Insurance Company Capital Adequacy Management Measures"), after supplementing the capital deficit of other insurance companies.<br><br>The investment book value already deducted from the Total Group Qualified Capital in the preceding paragraph shall no longer be included in the Group Statutory Capital Requirement.	1. In coordination with the amendment to the "Bank Capital Adequacy and Capital Tier Management Measures," the original Article 8 has been renumbered to Article 10, and the cited article number in Item 3 of Paragraph 1 is amended accordingly.<br>2. Given that the Class I restricted capital instruments defined in the "Insurance Company Capital Adequacy Management Measures" are similar in nature to the Other Tier 1 Capital (non-common equity) of banks, the regulations cited in Item 4 of Paragraph 1 are amended in coordination.
Article 5	If the common stock, preferred stock, and subordinated bonds issued by a financial holding company fall under any of the following circumstances, they shall be deemed as not issued when calculating the qualified capital of the financial holding company:<br><br>1. The financial holding company holds such capital instruments in entities over which it has significant influence.<br>2. A subsidiary of the financial holding company holds such capital instruments.<br><br>For common stock, preferred stock, and subordinated bonds issued by a financial holding company, other than those specified in the preceding paragraph, if there are other circumstances that diminish the substantive benefit of the financial holding company using them as qualified capital, they shall be presumed to be non-qualified capital when calculating the qualified capital of the financial holding company.	Article 4-1<br>If the common stock, preferred stock, and subordinated bonds issued by a financial holding company fall under any of the following circumstances, they shall be deemed as not issued when calculating the qualified capital of the financial holding company:<br><br>1. The financial holding company holds such capital instruments in entities over which it has significant influence.<br>2. A subsidiary of the financial holding company holds such capital instruments.<br><br>For common stock, preferred stock, and subordinated bonds issued by a financial holding company, other than those specified in the preceding paragraph, if there are other circumstances that diminish the substantive benefit of the financial holding company using them as qualified capital, they shall be presumed to be non-qualified capital when calculating the qualified capital of the financial holding company.<br><br>Article number changed, content not amended.
Article 6	Financial holding companies shall report the capital adequacy ratio to the competent authority in accordance with the calculation methods and forms published by the competent authority, and according to the following provisions. However, if the competent authority has other provisions, those shall prevail:<br><br>1. Within three months after the end of each business year, report the group capital adequacy ratio reviewed by an accountant, and attach relevant materials.<br>2. Within two months after the end of each half business year, report the group capital adequacy ratio reviewed by an accountant, and attach relevant materials.<br>3. Within two months after the end of each business year and each half business year, report information related to the group capital adequacy ratio in accordance with the regulations on reporting data to the competent authority via the internet by financial holding companies.<br><br>The competent authority may, when necessary, order financial holding companies to fill out the group capital adequacy ratio at any time and attach relevant materials.	Article 5<br>Financial holding companies shall report the capital adequacy ratio to the competent authority in accordance with the calculation methods and forms published by the competent authority, and according to the following provisions:<br><br>1. Within three months after the end of each business year, report the group capital adequacy ratio reviewed by an accountant, and attach relevant materials.<br>2. Within two months after the end of each half business year, report the group capital adequacy ratio reviewed by an accountant, and attach relevant materials.<br>3. Within two months after the end of each business year and each half business year, report information related to the group capital adequacy ratio in accordance with the regulations on reporting data to the competent authority via the internet by financial holding companies.<br><br>The competent authority may, when necessary, order financial holding companies to fill out the group capital adequacy ratio at any time and attach relevant materials.<br><br>1. Article number changed.<br>2. Considering that the new system implemented by the insurance industry starting in 2026 is relatively complex, and the time required for insurance subsidiaries of financial holding companies to calculate capital adequacy ratios and for accountants to perform audits is longer, this will affect the reporting of the group capital adequacy ratio of their parent companies. Therefore, a proviso is added to the preamble of Paragraph 1, explicitly stating that if the competent authority has other provisions regarding the reporting schedule, those shall prevail. A regulatory interpretation will be issued, allowing financial holding companies with insurance subsidiaries to extend the reporting schedule for Paragraph 1 of this article, to retain flexibility in extending the reporting deadline during the initial implementation of the new system.
Article 7	Subsidiaries of financial holding companies shall comply with the relevant regulations on capital adequacy of each industry.<br><br>The group capital adequacy ratio calculated and reported by financial holding companies in accordance with these Measures shall not be less than 100%.<br><br>If the group capital adequacy ratio of a financial holding company does not reach the standard specified in the preceding paragraph, in addition to penalties under Article 60 of this Act, profits shall not be distributed in cash or other property. The competent authority may also take the following actions depending on the severity of the circumstances:<br><br>1. Order the financial holding company or its person in charge to submit a capital reconstruction or other financial business improvement plan within a specified time limit.<br>2. Restrict the addition of or order the reduction of statutory capital requirements, total risk-weighted assets, equivalent amount of operational risk, and risk capital.<br>3. Restrict the payment of remuneration, bonuses, compensation, car allowances, and other payments to directors and supervisors.<br>4. Restrict investments under Articles 36 and 37 of this Act.<br>5. Restrict the establishment of or order the限期 closure of branches or departments of subsidiaries.<br>6. Order the disposal of shares held in invested enterprises within a specified period.<br>7. Remove directors and supervisors, and notify the company registration authority to note this in the registration matters. If necessary, order the election of new directors and supervisors within a specified time limit.<br>8. Replace managers.	Article 6<br>Subsidiaries of financial holding companies shall comply with the relevant regulations on capital adequacy of each industry.<br><br>The group capital adequacy ratio calculated and reported by financial holding companies in accordance with these Measures shall not be less than 100%.<br><br>If the group capital adequacy ratio of a financial holding company does not reach the standard specified in the preceding paragraph, in addition to penalties under Article 60 of this Act, profits shall not be distributed in cash or other property. The competent authority may also take the following actions depending on the severity of the circumstances:<br><br>1. Order the financial holding company or its person in charge to submit a capital reconstruction or other financial business improvement plan within a specified time limit.<br>2. Restrict the addition of or order the reduction of statutory capital requirements, total risk-weighted assets, equivalent amount of operational risk, and risk capital.<br>3. Restrict the payment of remuneration, bonuses, compensation, car allowances, and other payments to directors and supervisors.<br>4. Restrict investments under Articles 36 and 37 of this Act.<br>5. Restrict the establishment of or order the限期 closure of branches or departments of subsidiaries.<br>6. Order the disposal of shares held in invested enterprises within a specified period.<br>7. Remove directors and supervisors, and notify the company registration authority to note this in the registration matters. If necessary, order the election of new directors and supervisors within a specified time limit.<br>8. Replace managers.<br><br>Article number changed, content not amended.
Article 8	If the insurance subsidiary of a financial holding company has been approved by the competent authority to apply the "Notes on Selective Transitional Measures for Own Capital and Risk Capital of Insurance Companies" (hereinafter referred to as Selective Transitional Measures), during the application period, the financial holding company may calculate the group capital adequacy ratio in accordance with the following provisions:<br><br>1. Calculate the group capital adequacy ratio based on the qualified capital and statutory capital requirements of the insurance subsidiary adjusted for the application of Selective Transitional Measures.<br>2. The Total Group Qualified Capital shall not deduct the capital surplus of insurance subsidiaries specified in Item 4 of Paragraph 1 of Article 4. However, starting in 2026, the amount exempted from deduction shall be reduced proportionally based on the remaining transitional years, and return to the calculation provisions of deduction in that item.<br>3. If the insurance subsidiary terminates the application of Selective Transitional Measures in advance, the financial holding company shall stop applying the provisions of the preceding two items from the date the subsidiary terminates the application.<br><br>Article 7<br>Financial holding companies that were approved by the competent authority to issue preferred stock or subordinated bonds meeting the conditions for Tier 1 Capital of banks before December 31, 2012, if they do not meet the conditions for Other Tier 1 Capital (non-common equity) specified in Article 8 of the "Bank Capital Adequacy and Capital Tier Management Measures" revised and promulgated on November 26, 2012, shall increase by at least 20% each year starting from 2013, and include them in the calculation of the limit that the total amount of preferred stock and subordinated bonds included in the qualified capital of financial holding companies shall not exceed one-third of the qualified capital of the financial holding company specified in Item 5 of Paragraph 4 of Article 2 (see attached calculation example for details).	1. Article number changed.<br>2. This article originally aimed to avoid the impact of the amendment to the "Bank Capital Adequacy and Capital Tier Management Measures" on the calculation of the group capital adequacy ratio of financial holding companies. It stipulated that adjustments should be made over a five-year transitional period starting from 2013. Considering that the adjustment period has been completed, the above transitional provisions are deleted.<br>3. To facilitate the insurance industry's alignment with the new generation solvency regime (Taiwan Insurance Solvency, TIS) in 2026, gradually strengthen its capital, and maintain the stability of the financial market, the competent authority has successively issued related response measures, including amending the "Notes on Insurance Companies Issuing Capital-Nature Bonds" to relax the scope of long-term corporate bonds of ten years or more that the insurance industry can issue, and issuing the "Notes on Selective Transitional Measures for Own Capital and Risk Capital of Insurance Companies" to assist domestic insurance companies in smoothly implementing the new generation solvency regime. In response to the adjustment of the scope of capital-nature bonds issued by the insurance industry and related transitional measures, a corresponding adjustment mechanism at the financial holding company level is added to facilitate financial holding companies with insurance subsidiaries in coping with the impact on the group capital adequacy ratio during the initial alignment phase.<br><br>4. To ensure that the calculation of the group capital adequacy ratio of financial holding companies can coordinate with the selective transitional measures of insurance subsidiaries, Item 1 is added, specifying that financial holding companies may calculate the group capital adequacy ratio based on the qualified capital and statutory capital requirements of insurance subsidiaries adjusted for the application of Selective Transitional Measures.<br>5. To support financial holding companies in meeting the capital strengthening needs of insurance subsidiaries during the initial alignment phase and to moderately alleviate the impact of capital limit regulations, Item 2 is added. However, considering regulatory consistency and stability, it is specified that starting in 2026, a mechanism of "proportional reduction based on the remaining transitional years" shall be adopted to guide financial holding companies to gradually adjust their capital structure.<br>6. Considering that the speed of financial adjustment varies among individual financial holding companies and their insurance subsidiaries, and some institutions may strengthen their capital structure and achieve alignment goals early, Item 3 is added, specifying that if an insurance subsidiary is approved by the competent authority to terminate the application of Selective Transitional Measures in advance, the calculation of the group capital adequacy ratio of the financial holding company shall synchronously return to the provisions of Articles 3 and 4 of these Measures.
Article 9	These Measures shall take effect on January 1, 2026.	Article 8<br>These Measures shall take effect on January 1, 2013.<br><br>The articles of these Measures revised and promulgated by the Financial Supervisory Commission on June 9, 2015, and January 28, 2021, shall take effect from the date of promulgation.<br><br>1. Article number changed.<br>2. The main purpose of this amendment is to coordinate with the "Insurance Company Capital Adequacy Management Measures" revised by the Financial Supervisory Commission on October 5, 2024, which shall take effect on January 1, 2026. Therefore, it is specified that the amended articles of these Measures shall take effect on January 1, 2026.
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