Regulations Governing Foreign Exchange Business of Banking Enterprises

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Title：

Regulations Governing Foreign Exchange Business of Banking Enterprises

Inactive Regulations

Announced Date： July 23, 2003

Amended Date： Amended on September 9, 2016（effective from September 11, 2016）

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Chapter 1 General Provisions

(Basis of legislation)

Article 1

These Regulations are prescribed pursuant to Paragraph 2, Article 35 of "the Central Bank of the Republic of China (Taiwan) Act ".

(Application)

Article 2

The provisions of these Regulations shall govern the foreign exchange business of banking enterprises. Matters not provided herein shall be subject to provisions under other relevant laws and regulations.

(Definitions of Banking Enterprise and Authorized Bank)

Article 3

The term "banking enterprise" as used in these Regulations shall mean banks, Agricultural Bank of Taiwan Corporation (hereinafter referred to as "Agricultural Bank"), credit cooperatives, credit departments of farmers' or fishermen’s associations, and the Chunghwa Post Co., Ltd. (hereinafter referred to as "Chunghwa Post") inside the territory of the Republic of China.

The term "authorized bank" as used in these Regulations shall mean banks or Agricultural Bank approved by the Central Bank of the Republic of China (Taiwan) (hereinafter referred to as the "Bank" ) to engage in foreign exchange business and issued a certificate of authorization therefor.

(Definition of Foreign Exchange Business)

Article 4

The term "foreign exchange business" as used in these Regulations includes the following:

1.Export-related foreign exchange business;

2.Import-related foreign exchange business;

3.Outward and inward remittance business (including purchase and sale of foreign currency cash and traveler 's checks) ;

4.Foreign currency deposit business;

5.Foreign currency loan business;

6.Foreign currency guarantee business;

7.Foreign exchange derivatives business; and

8.Other foreign exchange businesses.

The term "foreign exchange derivatives” as used in these Regulations shall mean the following contracts excluding domestic and foreign asset-backed securities, structured notes, and convertible or exchangeable corporate bonds, as well as offshore structured products as defined in the Regulations Governing Offshore Structured Products:

1.Contracts involving foreign exchange and the values of which are derived from interest rates, exchange rates, equities, indices, commodities, credit events or other interests.

2.Contracts composed of the contracts mentioned in the preceding subparagraph.

3.Structured products involving foreign exchange.

The term "contracts" as used in Subparagraphs 1 and 2 of the preceding paragraph shall mean margin contracts, futures contracts, forward contracts, swap contracts, option contracts, or other contracts of a similar nature.

The term "structured product" as used in these Regulations shall mean a synthetic contract composed of fixed-income products or gold with derivatives, which cannot be offered in the name of deposit.

The term "complex high-risk foreign exchange derivatives" as used in these Regulations shall mean foreign exchange derivatives that meet the definition of complex high-risk product provided in the Regulations Governing Internal Operating Systems and Procedures for Banks Conducting Financial Derivatives Business (hereinafter referred to as the“Regulations Governing Internal Operating Systems and Procedures”).

The Provisions of Paragraph 1 of Article 3, Subparagraph 1 and S ubparagraph 2, paragraph 1 of Article 3 of the Regulations Governing Internal Operating Systems and Procedures shall apply mutatis mutandis to the definitions of the terms “professional customer”, “professional institutional investor” and “high net worth corporate investor” in these regulations.

(Data Protection)

Article 5

Unless otherwise provided by other laws or the competent authorities, banking enterprises shall maintain the confidentiality of customer information gathered from foreign exchange business, and shall adopt proper security measures in compliance with Paragraph 1, Article 27 of the Personal Information Protection Act if personal information is involved.

Chapter 2 Application for and Commencement of Foreign Exchange Business

(Business Approval and Reporting for Record)

Article 6

Unless otherwise provided by these Regulations or the Bank, a banking enterprise may engage in foreign exchange business only after it has applied to the Bank and has been issued a certificate of authorization or a letter of approval.

Unless otherwise provided by these Regulations or the Bank, banking enterprises shall not engage in any foreign exchange business not yet approved by the Bank or reported to the Bank for record.

(Scope of Business)

Article 7

Banks and Agricultural Bank may apply for approval to engage in all or part of the business categories listed in Paragraph 1 of Article 4 herein.

Chunghwa Post may apply for approval to engage in outward and inward remittances or purchase and sale of foreign currency cash and traveler's checks.

Credit cooperatives and credit departments of farmers' or fishermen's associations may apply for approval to engage in purchase and sale of foreign currency cash and traveler's checks.

(Application Qualifications and Procedures)

Article 8

Unless otherwise provided by these Regulations or other laws and regulations, banks and Agricultural Bank that apply for approval to become authorized banks shall comply with the following provisions:

1.Domestic banks and Agricultural Bank shall:

(1) Maintain the ratio of regulatory capital to risk-weighted assets at a level in compliance with the requirements set forth by the competent authority;

(2) Deploy sufficient experienced personnel to conduct foreign exchange business;

(3) Participate in joint processing of foreign exchange business with other authorized banks for an accumulated amount up to US$400 million or up to 7,000 transactions;

(4) Maintain a sound financial position for the last three years; and

(5) Have not had any sanction or correction imposed by the competent authority due to violation of financial regulations in the past year, or if there has been any sanction or correction, have made concrete improvements recognized by the competent authority.

2.Branches of foreign banks in Taiwan (hereinafter referred to as "foreign banks") shall be approved by the Financial Supervisory Commission (hereinafter referred to as the "FSC") to establish branches in Taiwan and deploy sufficient experienced foreign exchange personnel.

When a bank or Agricultural Bank applies to the competent authority for establishing an international banking department to engage in foreign exchange business, the competent authority shall forward the application to the Bank for reviewing the qualifications prescribed in Subparagraph 1 of the preceding paragraph.

Foreign banks approved to engage in foreign exchange business within the territory of the Republic of China may remit inwardly or outwardly capital or working capital only after having obtained a separate approval from the FSC.

(Application Documents)

Article 9

A bank or Agricultural Bank intending to apply for approval to become an authorized bank shall submit the following documents:

1.Documents evidencing the competent authority's approval for registration of establishment;

2.Intended Scope of foreign exchange business;

3.Names and locations of overseas correspondent banks;

4.Name and address of the responsible person within the territory of the Republic of China;

5.Capital and working Capital to be remitted to the territory of the Republic of China, as well as the categories and amounts of foreign exchange funding sources; and

6.Other data or documents specified by the Bank.

(Application for Branches)

Article 10

For the branches of an authorized bank to apply for approval to engage in the foreign exchange business listed in Subparagraphs 1 through 6, paragraph 1, Article 4 herein, the head office of the domestic bank or Agricultural Bank, or the Taipei branch of a foreign bank shall submit documentation detailing the intended scope of business, and attach photocopies of the branch's business license and the curricula vitae of operations and auditing personnel.

(Personnel Qualifications)

Article 11

When an authorized bank engages in foreign exchange business listed in Subparagraphs 1 through 6, paragraph 1, Article 4 herein, its operations and auditing personnel shall hold foreign exchange business licenses or meet the following qualifications:

1.An operations personnel shall have at least three-month experience in the relevant foreign exchange business.

2.An auditing personnel shall have at least six-month experience in the relevant foreign exchange business.

(Application for Foreign Exchange Derivatives Business)

Article 12

An authorized bank may engage in the following foreign exchange derivatives businesses without application:

1.Foreign exchange forward (excluding New Taiwan dollar (NTD) non-deliverable forward);

2.Foreign Exchange swap; and

3. Combinations of foreign exchange derivatives not involving NTD exchange rate and already approved by the Bank or reported to the Bank for record that are linked to the underlying asset with the same risk and combined through the same transaction contract excluding complex high-risk foreign exchange derivatives transactions entered with customers other than professional institutional investors and high net worth corporate investors.

4. Foreign exchange derivatives transactions not involving NTD exchange rate between domestic authorized banks and between a domestic authorized bank and a foreign bank.

5. Domestic and foreign futures contracts not involving NTD exchange rate traded by a futures trader.

To engage in any foreign exchange derivatives business other than those provided in the preceding paragraph, an authorized bank shall apply to the Bank for approval or report to the Bank for record based on the following criteria:

1.Application for approval before commencing:

(1)First-time application for foreign exchange derivatives business.

(2)Foreign exchange derivatives business not yet approved by the Bank or has been approved for less than six months, and foreign exchange derivatives linked thereof.

(3)NTD non-deliverable foreign exchange forward business.

(4)Foreign derivatives involving NTD exchange rate, combinations thereof and combinations with other derivatives, NTD principal, foreign currency principal, or other business (product).

(5)Discretionary foreign currency margin trading business.

2.Reporting for record before commencing: The business of recommending those foreign exchange derivatives products already approved by the Bank or reported to the Bank for record by the designated branch of an authorized bank under the authorization of its head office.

3.Reporting for record after commencing: Only for authorized banks that have been approved to engage in any of the foreign exchange derivatives businesses.

(1)Foreign exchange derivatives business approved by the Bank for over six months and not involving NTD exchange rate.

(2)Foreign exchange derivatives business provided to professional institutional investors and high net worth corporate investors without involving NTD exchange rate and not yet approved by the Bank or approved for less than six months, which should comply with the relevant rules of the competent authority.

(3)Information and consulting services on offshore financial derivatives under the approval of the competent authority. The underlying asset shall not involve domestic interest rates, exchange rates, equities, indices, commodities, credit events, fixed-income or other interests.

Where a professional institutional investor accepts trading orders, signs a trust agreement, discretionary services agreement, investment-linked insurance contract or offers privately placed fund, and carries out transactions provided in Items 2 and 3, Subparagraph 3 of the preceding paragraph in its name, the trustors/mandatories, policyholders or subscribers shall also be a professional institutional investor or high net worth corporate investor.

(Required Documentation for Application for Foreign Exchange Derivatives Business)

Article 13

An authorized bank shall submit the following documents when applying to the Bank for approval to engage in businesses under Subparagraph 1, paragraph 2 of the preceding article:

1.A statement of regulatory compliance;

2.Minutes with the resolution of the board of directors to engage in the foreign exchange derivatives business for a domestic bank and Agricultural Bank or letter of authorization from the head office or the regional command center of a foreign bank;

3.Curricula vitae of operations and relevant management personnel;

4.Risk disclosure statement;

5.Product profiles;

6.Operational guidelines; and

7.Risk management related documents.

An authorized bank shall submit the following documents when reporting to the Bank for record to engage in businesses under Subparagraph 2, paragraph 2 of the preceding article and may commence the businesses only after receiving a letter of acknowledgement from the Bank:

1.A photocopy of letter of consent from the competent authority;

2.Minutes with the resolution of the board of directors to engage in businesses under this paragraph for domestic banks and Agricultural Bank or letter of authorization from the head office or the regional command center of a foreign bank; and

3.Authorization guidelines set out according to relevant rules.

Within one week of carrying out the first transaction under Items 1 and 2, Subparagraph 3, paragraph 2 of the preceding article, an authorized bank shall report to the Bank for record with the product description (must be a product actually transacted with the date of transaction, date of settlement, expiration date, notional principal amount, exercise price or other relevant indexes and parameters) and documents provided in Subparagraphs 1 ~ 5 of paragraph 1 hereof. The authorized bank may carry out the next transaction of the business only after receiving a letter of acknowledgement from the Bank.

When an authorized bank engages in businesses under Items 3, Subparagraph 3, paragraph 2 of the preceding article, it shall summit a letter of approval from the competent authority and documents provided in Subparagraphs 1 ~ 3, paragraph 1 hereof within one week after commencing the business.

(Qualifications of Personnel Handling Foreign Exchange Derivatives Business)

Article 14

When engaging in foreign exchange derivatives business listed in Subparagraph 7, paragraph 1, Article 4 herein, the operations and management personnel of an authorized bank shall meet at least one of the following qualifications:

1.Having completed at least 60 hours of training on derivatives and risk management held by domestic financial training institutions and received a certificate therefor; the training must cover theories and practices on foreign exchange derivatives transactions, relevant laws and regulations,accounting and risk management;

2.Having one year of internship in foreign exchange derivatives business at a domestic or foreign financial institution; or

3.Having at least six-month working experience in foreign exchange derivatives business at domestic or foreign financial institutions.

Operations and management personnel handling the recommendation of foreign exchange derivatives shall meet at least one of the following qualifications:

1.Having one of the qualifications listed in the preceding paragraph;

2.Having passed the qualification exam for structured product salesperson held by domestic financial training institutions and received a certificate therefor; or

3.Having passed the qualification exam for financial derivatives salesperson held by domestic financial training institutions and received a certificate therefor.

Operations and management personnel handling the trading, marketing, risk management, settlement or accounting, as well as compliance personnel, auditing personnel, and operations and management personnel handling the recommendation of foreign exchange derivatives shall attend at least 12 hours of training courses on derivatives offered by domestic financial training institutions or by the authorized bank itself. The training courses on derivatives offered by domestic financial training institutions shall comprise no less than one half of the total hours of training received.

Personnel of an authorized bank handling foreign exchange derivatives business shall possess professional ability, and the authorized bank shall draw up professional qualification requirements and a related training system.

(Application for Establishment of Foreign Currency Settlement Bank)

Article 15

To engage in foreign currency settlement business through a clearing institution, authorized banks shall apply to the Bank for approval to become a foreign currency settlement bank.

Authorized banks making an application mentioned in the preceding paragraph shall submit the following documents and information to the Bank for review within the designated period set by the Bank. The Bank will select and give approval to one bank to conduct the foreign currency settlement business after reviewing those documents:

1.A business plan to engage in foreign currency settlement business;

2.The latest audited financial report; and

3.Other information that supports the applicant’s eligibility.

The designated period referred to in the preceding paragraph will be announced by the Bank.

A foreign currency settlement bank approved by the Bank shall be granted a five-year concession period to engage in the foreign currency settlement business, starting from the date of commencement.

(Application for Engaging in Non-discretionary Money Trust Business)

Article 16

An authorized bank concurrently conducting a trust business that engages in non-discretionary NTD or foreign currency money trust business and uses the trust funds to invest in foreign-currency denominated securities shall submit the following documents to the Bank regarding outward and inward remittance of trust funds for approval:

1.Documents evidencing the competent authority's approval for engaging in money trust business;

2.Minutes with the resolution of the board of directors to engage in non-discretionary NTD or foreign currency money trust business for a domestic bank and Agricultural Bank or a letter of authorization from the head office or a regional command center of a foreign bank;

3.A statement of foreign exchange regulatory compliance;

4.Descriptions of the designated currency for receipts and disbursement and foreign exchange settlement procedures; and

5.Other documents specified by the Bank.

(Application for Foreign Currency Collective Investment Trust Account Business)

Article 17

An authorized bank concurrently conducting a trust business that engages in foreign currency denominated collective investment trust account business shall submit the following documents regarding outward and inward remittances of trust funds to the Bank for approval before establishing a collective investment trust account for the first time:

1.A photocopy of the business license;

2.A letter of approval from the competent authority, but exempted for the collective investment trust accounts that accept funds from professional investors;

3.A resolution of the board of directors for a domestic bank and Agricultural Bank to engage in foreign currency denominated collective investment trust account business or a letter of authorization from the head office or the regional command center of a foreign bank;

4.A management and utilization plan for the foreign currency denominated collective investment trust account;

5.The risk level of the collective investment trust account and the risk tolerance level of investors who could bear the risk of the account, but exempted for the collective investment trust accounts that accept funds from professional investors only, provided it is stated in the application letter; and

6.Terms and conditions of the collective investment trust account.

An authorized bank that concurrently conducts a trust business and has obtained approval from the Bank to establish a foreign currency denominated collective investment trust account does not need to apply to the Bank for approval for subsequent establishments of foreign currency denominated collective investment trust accounts.

(Application for Establishment of Foreign Currency Automatic Teller Machine)

Article 18

To set up foreign currency automatic teller machines (ATM), an authorized bank shall apply to the Bank by submitting descriptions of relevant operations (including risk management measures) and identifying the names of the offices controlling the foreign currency ATM, a list of locations, and report to the Bank for record within one week after the setup; the preceding provision applies when there is a change to the descriptions of operations.

If an authorized bank intends to set up additional foreign currency ATMs after it has reported to the Bank for record according to the preceding paragraph, the bank is only required to inform the Bank by submitting a document identifying the names of the offices controlling the foreign-currency ATM and a list of locations within one week after the setup.

(Electronic Transaction Business)

Article 19

To engage in electronic transaction business involving foreign exchange, authorized banks and Chunghwa Post shall apply to the Bank for approval or report to the Bank for record in accordance with the rules, application procedures and the description of relevant operations set forth by the Bank.

The term "electronic transaction business" referred to in the preceding paragraph shall mean transactions carried out with customers through all kinds of electronic and communications equipment.

Authorized banks and Chunghwa Post that engage in the business mentioned in Paragraph 1 hereof shall comply with the following provisions:

1.Where the transaction is carried out over the Internet, the authorized bank shall be capable of performing computerized verification of transaction contents such as classification of remittances.

2.Unless it is otherwise provided by the Bank, before offering services in foreign exchange receipts and disbursements or transactions over the Internet, an authorized bank shall first request the customer to apply for the service in person and complete the relevant formalities, and shall verify the customer's identification documents or basic registration information.

3.When applying to the Bank to engage in business involving NTD exchange settlement over the Internet with values equal to or over an equivalent of NT$500,000, an authorized bank shall first pass the test of the Online Civil Outward/Inward Remittances Declaration Yearly aggregate settlement amount Query System.

(Application for Conducting Foreign Exchange Business during Non-standard Busnies)

Article 20

To engage in foreign exchange business during non-standard business hours, an authorized bank shall submit a description of the relevant operations (including the cut off time for including the relevant transactions in the same-day or next-day "Daily Transaction Report" and "Daily Foreign Exchange Position Report"; the preceding provision applies when there is a change to the services.

Designated branches of an authorized bank that has been approved by the Bank according to the preceding paragraph are not required to apply for separate approval on a case-by-case basis to conduct the business, provided the branches engage in the foreign exchange business in the preceding paragraph in accordance with the authorized bank's description of operations.

(Application for Establishment of Foreign Exchange Processing Center or Outsourci)

Article 21

Where an authorized bank has established its own domestic foreign exchange processing center to process relevant foreign exchange operations, it shall submit a description of relevant operations, operating procedures, and the curricula vitae of operations and auditing personnel to the Bank for record within one week after commencing its operation. In the event that an authorized bank uses other methods to assign a third party to process relevant foreign exchange operations, the bank shall apply to the Bank for approval by submitting the operational plans for outsourcing. If the Bank has not objected within 15 days from the day following receipt of the application, the bank may proceed to process the operation straightway.

(Application for Issuance of Foreign Currency Denominated Financial Bonds)

Article 22

To issue foreign currency denominated financial bonds inside the Republic of China, an authorized bank shall, prior to issuance, submit the letter of approval (letter of acknowledgement) from the competent authority and relevant information (including planned issue date, issue amount, terms and fund utilization plan) to the Bank for record.

(Application for Conducting Foreign Exchange Business by Non-authorized Banks)

Article 23

Banking enterprises other than authorized banks that plan to engage in purchase and sale of foreign currency cash and traveler's checks shall apply to the Bank for approval according to the following rules:

1.The head offices for domestic banks, Agricultural Bank and their branches, and the Taipei branch for foreign banks, shall submit a written application together with a photocopy of its business license (or a photocopy of establishment approval letter issued by the competent authority) and the curricula vitae of operations and auditing personnel.

2.For credit cooperatives (head office or branches), the head office shall submit a written application together with a photocopy of the credit cooperative's business license, the curricula vitae of the operations and auditing personnel, the balance sheet and statement of comprehensive income of the preceding fiscal year, and documents evidencing whether the credit cooperative has been subject to any sanctions for violation of financial regulations in the past year.

3.For the credit departments of farmers' or fishermen's associations and their branches, the farmers' or fishermen's association shall submit a written application along with a photocopy of the approval certificate and curricula vitae of operations and auditing personnel to be reviewed and approved by the Council of Agriculture, Executive Yuan before the application is forwarded to the Bank for approval.

4.For Chunghwa Post and its post offices, Chunghwa Post's head office shall submit a written application along with a photocopy of the FSC's letter of approval (for post offices established after January 1, 2003), and curricula vitae of operations and auditing personnel to the Bank for approval.

Operations and auditing personnel handling the business mentioned in the preceding paragraph shall have at least five days experience in related foreign exchange business.

The provisions of Subparagraph 4, paragraph 1 hereof shall apply mutatis mutandis to the approval process for outward and inward remittance business of Chunghwa Post and its post offices , and the provisions of Article 11 herein shall apply to the qualifications of their operations and auditing personnel.

(Relocation, Name Change or Closure)

Article 24

When a banking enterprise that has been approved to engage in foreign exchange business pursuant to Article 10 or Subparagraphs 1 ~ 3, paragraph 1 of the preceding article is relocated or changes its name, the banking enterprise shall, within one week after the receipt of the business license or the approval certificate, apply to the Bank for a new certificate of authorization or report to the Bank for record. In the event of relocation, the curricula vitae of operations and auditing personnel shall also be submitted to the Bank.

When Chunghwa Post or a post office under it that has been approved to engage in foreign exchange business pursuant to Subparagraph 4 of paragraph 1 or paragraph 3 of the preceding article is relocated or changes its name, it shall, within one week after the receipt of the letter of approval from the FSC or the letter of approval from its head office, report to the Bank for record. In the event of relocation, the curricula vitae of operations and auditing personnel shall also be submitted to the Bank.

When a banking enterprise that has been approved to engage in foreign exchange business is closed, the banking enterprise shall, within one week after the closure, turn in the certificate of authorization to the Bank or report to the Bank for record.

(Application for Conducting Foreign Exchange Business during Non-standard Busines)

Article 25

Banking enterprises other than authorized banks that plan to engage in the Bank-approved business of purchase and sale of foreign currency cash and traveler's checks during non-standard business hours are not required to apply to the Bank for approval.

The provisions of Article 20 herein shall apply mutatis mutandis to Chunghwa Post and its post offices conducting Bank-approved outward and inward remittance business during non-standard business hours.

(Supplementary Documentation)

Article 26

Banking enterprises applying for foreign exchange business or reporting the business for record will be granted a designated period for providing the supplementary documentation or information and making corrections if the documentation or required information submitted were found to be incomplete. The Bank may reject the application or reporting if the supplementary documentation or information and corrections were not submitted during the designated period.

(Rejection of Application)

Article 27

The Bank may reject a banking enterprise's application for foreign exchange business in the event of any of the following:

1.Qualifications of the applicant do not comply with the regulations;

2.The applicant has failed to assist declarants to fill out the Declaration Statement of Foreign Exchange Receipts and Disbursements or Transactions (hereinafter referred to as "Declaration Statement" ) as required;

3.A high error rate in the certificates, reports and forms prepared by the applicant;

4.The applicant had violated the provisions of these Regulations or relevant rules in the past year and the violation is of a serious nature; the applicant was ordered to rectify the situation by the Bank, but has failed to do so within the period specified by the Bank; or

5.Other facts that are sufficient to indicate that the applicant may hinder sound operations of the business, or that the applicant is unable to meet financial policy requirements.

When a banking enterprise reports to the Bank for record with regard to the foreign exchange business it engages in, if the banking enterprise submits false documents or the business reported does not fall under the types of business that require reporting for record, the Bank will reject the reporting, and depending on the severity of the situation, impose a warning, demand remedial action, or suspend the specific foreign exchange business for a specified period of time, or withdraw the banking enterprise’s privilege of commencing a foreign exchange business that requires reporting for record according to these Regulations by reporting the business to the Bank for record.

(Suspension, Revocation or Cancellation of Approval)

Article 28

If a banking enterprise has any of the following situations in conducting foreign exchange business, the Bank may, depending on the severity of the situation, order the banking enterprise to suspend the business for a specified period of time, revoke or cancel all or part of the approved businesses, or bar the banking enterprise from applying for new foreign exchange business or add new branches to conduct the foreign exchange business for a specified period of time:

1.The banking enterprise fails to commence operation within six months after being issued a certificate of authorization or letter of approval. The applicant may request for an extension with valid reasons. If agreed by the Bank, the banking enterprise may have an extension of no more than three months. An institution may apply for an extension only once;

2.The banking enterprise has violated the provisions of these Regulations and the violation is of a serious nature; or was ordered to rectify the situation by the Bank, but has failed to do so within the period specified by the Bank;

3.After the banking enterprise has been approved to engage in various foreign exchange businesses, its original application documents were found to contain false information or representation of a serious nature;

4.The banking enterprise suspends operations, is dissolved, or declares bankruptcy; or

5.Other facts that are sufficient to indicate that the banking enterprise may hinder sound operations of the business, or that the banking enterprise is unable to meet financial policy requirements.

A banking enterprise whose approval is revoked or cancelled in accordance with the preceding paragraph shall, within seven days from receiving the disposition, turn in its certificate of authorization or letter of approval; should the banking enterprise fails to do so, the Bank will nullify the certificate or the approval.

A banking enterprise that is ordered by the Bank or the relevant competent authority to suspend or stop applying for foreign exchange business for a specified period of time shall not commence any foreign exchange business that requires reporting for record according to these Regulations by reporting the business with the Bank for record if the period of suspension has not expired or if it fails to propose proper, concrete improvement measures during the period of suspension, or if its proposed improvement measures have not been accepted by the competent authority.

Chapter 3 Management of Foreign Exchange Business

(Know Your Customers)

Article 29

Banking enterprises engaged in foreign exchange business shall first verify the identity or primary registration data of the customer, and ensure that supporting documents comply with the regulations.

(Conducting Business on behalf of OBU)

Article 30

An authorized bank may, within the scope of foreign exchange business approved by the Bank, accept the designation of the offshore banking unit (OBU) of the same bank to handle its OBU business in accordance with the Offshore Banking Act, the Offshore Banking Act Enforcement Rules, and other relevant provisions.

(Foreign Exchange Derivatives Involving NTD Exchange Rate)

Article 31

When an authorized bank engages in foreign exchange derivatives business involving NTD exchange rate, the following rules shall apply:

1.NTD deliverable foreign exchange forward (DF) business

(1)Based on genuine needs for foreign exchange receipts or disbursements, and the same need shall not be involved in multiple contracts.

(2)When entering into contracts or processing settlements with clients, either the transaction documents supporting genuine needs for foreign exchange receipts or disbursements, or a written approval from the competent authorities shall be verified.

(3)Term: determined according to practical needs for foreign exchange receipts or disbursements.

(4)When the contract is rolled over, the price shall be set based on the current market exchange rate rather than the rate of the original contract.

2.NTD foreign currency swap business (FX SWAP)

(1)FX swap is a simultaneous purchase and sale of identical amounts of one currency for another with two different value dates.

(2)Counterparties and documents: No documents are required for domestic legal entities; for foreign legal entities and natural persons, documents of approval issued by the competent authorities shall be verified.

(3)In the settlement of foreign exchange swap, the banking enterprise shall confirm whether the customer has filled out a Declaration Statement in accordance with the "Regulations Governing the Declaration for Foreign Exchange Receipts and Disbursements or Transactions" (hereinafter referred to as the "Regulations for Declaration") and whether the customer has entered information under the "Nature of Foreign Exchange Receipts and Disbursements or Transactions" of the Declaration Statement according to the nature of the actual transaction, and also notes it as a "foreign exchange swap ". In addition, the "remittance classification and code number" provided by the Department of Foreign Exchange of the Bank shall be indicated on the foreign exchange memo, and included in the daily transaction report along with the Declaration Statement.

(4)The swap transaction amount need not be included in the annual aggregate settlement amount as specified in Subparagraph 3, paragraph 1, Article 4 of the Regulations for Declaration.

(5)When the contract is rolled over, the price shall be set based on the current market exchange rates rather than the rates of the original contracts.

3.NTD non-deliverable foreign exchange forward business (NDF):

(1)Counterparties are limited to other domestic authorized banks and each authorized bank’s overseas branches, head office (parent bank) and branches of head office (parent bank).

(2)The format, content, and accounting of contracts shall be segregated from those of delivery forward (DF) business.

(3)Contracts under this item shall not be rolled over or terminated before maturity.

(4)Net cash settlement shall be applied uniformly upon maturity.

(5)Margin trading is not allowed for NDF transactions.

(6)Without the approval of the Bank, contracts shall not be structured to combine with other derivatives products, NTD or foreign currency principals, or other businesses and products.

(7)For NTD non-deliverable forwards of US$5 million or above, the Department of Foreign Exchange of the Bank shall be notified immediately by telephone.

4.NTD exchange rate option business:

(1)Counterparties are limited to domestic and foreign legal entities.

(2)An option may be settled by net settlement or gross settlement, but the settlement method shall be specified in the contract.

(3)The currency used for option premium and settlement when the option is exercised may be either in the denominated foreign currency or NTD, but shall be specified in the contract.

(4)Only "plain vanilla" options may be transacted. Without the approval of the Bank, contracts shall not be structured to combine with options or other foreign exchange derivatives products, NTD or foreign currency principals, or other businesses and products.

5.NTD cross currency swap business (CCS):

(1)Counterparties are limited to domestic and foreign legal entities.

(2)For cross currency swaps involving the exchange of principal both at inception and maturity, domestic legal entities are not required to submit transaction documents. Both the principal and interest need not be included in the annual aggregate settlement amount as specified in Subparagraph 3, paragraph 1, Article 4 of the Regulations for Declaration.

(3)For other types of cross currency swaps, the bank shall ask its customer to submit documents evidencing actual demand at the time of transaction, the transaction amount shall be included in the annual aggregate settlement amount as specified in Subparagraph 3, paragraph 1, Article 4 of the Regulations for Declaration. However, if the foreign exchange receipts and disbursements or transactions are for the export or import of goods, providing services, or other uses approved by the competent authorities, they need not be included in the aforementioned annual aggregate settlement amount.

(4)In the settlement of cross currency swaps, the banking enterprise shall examine whether the customer has filled out a Declaration Statement in accordance with the Regulations for Declaration and whether the customer has entered information under the "Nature of Foreign Exchange Receipts and Disbursements or Transactions" of the Declaration Statement according to the nature of the actual transaction, and also has noted "cross currency swaps transaction" on the Statement. In addition, the "remittance classification and code number" provided by the Department of Foreign Exchange of the Bank shall be shown on the foreign exchange memo, and included in the daily transaction report along with the Declaration Statement.

(5)The exchange of principal or interest for each term in the future is deemed as a foreign exchange forward contract, and shall be reported on the daily foreign exchange forward transaction report when entering into contract.

(Foreign Exchange Derivatives Not Involving NTD Exchange Rate)

Article 32

Authorized banks shall comply with the following rules when engaging in foreign exchange derivatives business not involving NTD exchange rate:

1. Foreign currency margin trading business:

(1) Shall not be conducted with foreign currency loans.

(2) Without the approval of the Bank, authorized banks shall neither provide discretionary account service nor "joint account" in conducting the business under this subparagraph. Regulations governing discretionary account service shall be separately provided by the Bank.

(3) Authorized banks shall not accept term deposit or other collateral under a third party’s name as collateral for foreign currency margin trading.

2. In carrying out foreign exchange forward and swap transactions between foreign currencies, when the contract is rolled over, the price shall be reset based on the current market exchange rates rather than the original contract rate.

3. In carrying out cross currency swap transactions between foreign currencies, the appropriate "remittance classification and code number" shall be indicated on the other relevant transaction certificates and included in the daily transaction report at the time of settlement.

4. Credit default swap and credit default option business:

(1) Counterparties are limited to legal entities who are also professional customers.

(2) Where the counterparty is a domestic customer, unless the competent authority agrees it could be a protection seller, the domestic customer should be the protection buyer in a credit derivatives transaction.

(3) Where a domestic customer is the protection seller in a credit derivatives transaction, the reference entity shall meet the requirements set out by its competent authority and shall not be a government or company in Mainland China Area or any company directly or indirectly owned by which with at least 30% shares.

(4) Where the authorized bank itself is the protection seller and the reference entity is an interested party, the terms of the transaction shall not be more favorable than those offered to other counterparties in the same category, and shall comply with the relevant provisions of the Banking Act.

(5) Where the contracts under this subparagraph are combined into a structured product, the counterparties shall be limited to professional institutional investors and domestic and foreign legal entities who are also professional customers.

5. Where the contracts under this subparagraph are combined into a structured product, restrictions and rules applicable to individual products and underlyings shall be followed.

6. An authorized bank shall not switch the foreign exchange derivatives business originally offered by itself to providing information and consulting services on offshore financial derivatives.

Unless it is otherwise provided by the Bank, an authorized bank's foreign exchange derivatives business not involving NTD exchange rate shall not be linked to the following:

1. Asset securitization related securities or products.

2. Unlisted individual stocks, stock indices or exchange-traded funds in Mainland China Area.

3. Securities privately placed domestically or abroad.

4. Certificates of beneficial interest that are issued overseas by domestic securities investment trust enterprises and are not listed for trading on a securities market.

5. Any Taiwan stock index compiled by a domestic or foreign institution and related financial products, but this restriction shall not apply to an index compiled by TPEX or TWSE, either singly or in collaboration with another institution.

(Other Rules for Foreign Exchange Derivatives Business)

Article 33

For authorized banks to engage in a foreign exchange derivatives business that is not yet approved by the Bank, the Bank may specify in the letter of approval matters of compliance for such business or authorize the "Taipei Foreign Exchange Market Development Foundation" ("the Foundation") to coordinate with "R.O.C. Bankers Association" ("Bankers Association") to draw up guidelines for the business with respect to counterparties, contract signing, transaction and settlement methods, the contents of risk disclosure statements, accounting principles, formats of financial statements and reports, information disclosure methods, methods for dispute resolution, procedure for reporting non-compliance events to the Bank and other related matters, and report those guidelines to the Bank for approval. The same procedure shall be followed for any changes thereto.

An authorized bank shall act in accordance with these Regulations, and in addition, other applicable rules and the guidelines mentioned in the preceding paragraph when conducting the foreign exchange derivatives business.

(Obligation to Disclose Interest Rates)

Article 34

For foreign currency deposit business, an authorized bank shall follow international business practice in determining and posting its own minimum deposit interest rates. The applicable interest rates for maturities not posted shall be negotiated between the authorized bank and its customer with reference to other posted rates with similar maturities. Interest rates that are subject to negotiation shall be announced publicly.

The announcement in the preceding paragraph shall be displayed in the business hall, and also posted on a publicly accessible website or disclosed to the general public through other means.

(Matters of Compliance for Foreign Currency ATM)

Article 35

Authorized banks that set up foreign currency automated teller machines (ATM) shall limit the accumulated cash withdrawals to an equivalent of US$10,000 per account per day.

(Issuance of Foreign Currency Negotiable Certificates of Deposits)

Article 36

Authorized banks shall issue foreign currency Negotiable certificates of deposits in book entry form. The Bank will prescribe separately relevant matters of compliance, method of issuance and reporting reguirements, or authorize the Bankers Association to draw up those rules and submit to the Bank for approval. The same procedure shall be followed for any changes thereto.

(Obligation to Disclose Exchange Rates)

Article 37

The exchange rates used for foreign exchange transactions between a banking enterprise and a customer may be solely determined by the banking enterprise.

The NTD exchange rate for a single foreign exchange transaction with a customer for an amount of less than US$10,000 shall be posted at the banking enterprises' business premises before 9:30 AM on each business day.

(Acceptance and Identification of Foreign Currency Cash)

Article38

Banking enterprises that engage in the purchase and sale of foreign currency cash shall exchange foreign currency cash according to their quoted prices and shall enhance the ability to identify counterfeit foreign currency notes, and handle counterfeit notes in accordance with the Regulations Governing the Handling of Counterfeit and Altered Foreign Currency Notes and Coins.

(Foreign Currency Settlement Business)

Article 39

A foreign currency settlement bank shall comply with the following rules when conducting foreign currency settlement business:

1.Unless with permission of the Bank, a foreign currency settlement bank shall not, at its own discretion, suspend the business during the period of operation; the bank shall forthwith inform the Bank if it is unable to operate normally, or suspends/ terminates the participation of any participants in the foreign currency settlement system (hereinafter referred to as “participating entities”).

2.A foreign currency settlement bank shall assiduously establish sound internal control and audit systems (including business management and accounting systems), proper segregation mechanisms, and step up the assessment of the moral character and integrity of its employees to prevent data misuse. The bank shall also establish vigorous security control and operation procedures to maintain the reliability and stability of the foreign currency settlement system.

3.A foreign currency settlement bank shall maintain a high level of security and operational reliability of the foreign currency settlement system, and has emergency response mechanisms in place to ensure the timely completion of daily operations. A bank shall also periodically examine its backup mechanisms and conduct drills to ensure that those mechanisms meet its business demands.

4.A foreign currency settlement bank shall readily provide the Bank with relevant information as required by the Bank and deliver statistical reports to the Bank periodically.

5.A foreign currency settlement bank shall set a fee schedule and report it to the Bank for record; the same provision applies when a foreign currency settlement bank changes its fee schedule.

6.A foreign currency settlement bank shall setup operational guidelines for the agreements with participating entities and report the same to the Bank for record. For participating entities that violate the terms of the contract they have entered with a foreign currency settlement bank and disrupt the smooth operation of the foreign currency settlement system, the bank shall take actions pursuant to the terms of the contract and report the violation to the Bank according to the circumstances of violation.

7.A foreign currency settlement bank shall not refuse the Bank’s request to examine its business or review related data.

8.Where a foreign currency settlement bank provides intraday overdraft pledged by certificate of deposits issued by the Bank, central government bonds or other collateral to participating entities, it shall establish related operating procedures and report them to the Bank for record.

9.A foreign currency settlement bank shall maintain its financial soundness and complies with all regulatory requirements, properly manage and control its intraday liquidity and exchange rate risks, establish guidelines of managing credit and liquidity risks, and report such rules to the Bank for record.

10.A foreign currency settlement bank shall enter agreements with clearing institutions and participant entities, through which payment instructions shall not be revoked once settled.

(Collective Investment Trust Account Business)

Article 40

When an authorized bank concurrently conducts a trust business that engages in foreign currency denominated collective investment trust account business, the utilization of trust assets in the foreign currency denominated collective investment trust account shall be limited to foreign currency denominated products and shall not involve or be linked to NTD interest rate or exchange rate index. In addition, receipts and payments of funds with customers shall be made in foreign currency.

(Issuance of Foreign Currency Denominated Financial Bonds)

Article 41

When an authorized bank issues foreign currency denominated Financial Bonds inside the ROC, the bank shall retain funds raised therefrom in foreign currency, and if necessary, convert the funds into NTD by means of swap or CCS. The authorized bank shall also submit reports to the Bank according to the Bank-prescribed format.

Unless it is otherwise provided by the Bank, the interest rate on the foreign currency Financial Bonds shall only be a positive floating rate or fixed rate and shall not be linked to any derivative or structured note.

(Operation during Non-standard Business Hours)

Article 42

To engage in foreign exchange business during non-standard business hours, an authorized bank shall comply with the following rules:

1.The amount of each foreign exchange settlement shall be limited to NTD 500,000 or its equivalent in foreign currency; and

2.Foreign exchange transactions conducted during non-standard business hours shall be included in the same-day or next-day "Daily Transaction Report" and "Daily Foreign Exchange Position Report" in accordance with its description of operations submitted or the Bank’s regulations.

The provisions of Subparagraph 1 of the preceding paragraph shall apply mutatis mutandis to the business of purchase and sale of foreign currency cash and traveler's checks conducted by non-authorized banks during non-standard business hours, and to the outward and inward remittance business conducted by Chunghwa Post during non-standard business hours.

Transactions conducted by non-authorized banks under the business mentioned in the preceding paragraph during non-standard business hours shall be included in the same-day or next-day "Daily Transaction Report."

(Interbank Transactions)

Article 43

An authorized bank may purchase or sell foreign exchange on the foreign exchange market or with the Bank, and may also hold long or short positions within the limits set by itself.

An authorized bank participating in the interbank foreign exchange market shall comply with the rules formulated by the Foundation with reference to international customs after coordination with Bankers Association and reporting to the Bank.

(Total Transaction Position)

Article 44

An authorized bank shall set its total position limits for transactions between NTD and foreign currency, which shall be submitted along with the resolution of the board of directors (documentation of approval issued by the head office for a foreign bank) to the Department of Foreign Exchange of the Bank.

The combined position of NTD non-deliverable forwards and NTD exchange rate options shall not exceed one-fifth of the afore-mentioned total position limit.

(Foreign Exchange Risk Management)

Article 45

An authorized bank shall draw up its position limits such as "transaction positions for individual currencies" and an "overnight position for each trader". All its units shall abide by these position limits and carry out audits regularly.

(Reporting of Foreign Exchange Position)

Article 46

Authorized banks shall fill out "Foreign Exchange Position Daily Reports" for all foreign exchange transactions involving NTD on a daily basis, and submit the reports to the Department of Foreign Exchange of the Bank on the following business day. Foreign exchange positions reported by an authorized bank shall be consistent with those recorded on its internal books.

Authorized banks shall report the estimated foreign exchange positions for the day to the Department of Foreign Exchange of the Bank by telephone at the end of each business day.

(Reporting of Large Transaction Data)

Article 47

When authorized banks engage in large NTD spot, forward or cross currency swap transactions with customers over the counter, or when Chunghwa Post engages in large NTD spot foreign exchange settlement with customers over the counter, or when the overseas branches of domestic authorized banks engage in large NTD non-deliverable forwards with customers with approval of the competent authority, they shall use the " Large NTD Spot, Forward, Cross Currency Swap (CCS), and Non-deliverable Forward (NDF) Information Online Transmitting System" under the "Online Civil Outward/ Inward Remittances Declaration Yearly Aggregate Settlement Amount Query System" to transmit relevant data to the Department of Foreign Exchange of the Bank pursuant to the following regulations:

1.When authorized banks and Chunghwa Post engage in foreign exchange purchase or sale exceeding an equivalent of US$ 1 million with a company or firm (excluding transactions from the export or import of goods processed with shipping documents), or exceeding an equivalent of US$ 500,000 with an individual or an association, they shall transmit the data immediately on contract day after verifying relevant supporting documents.

2.When authorized banks engage in NTD forwards or cross currency swaps (CCS)exceeding an equivalent of US$1 million, they shall transmit the data before 12:00 noon on the next business day following the contract day after verifying relevant supporting documents.

3.When the overseas branches of domestic authorized banks engage in NTD non-deliverable forwards exceeding an equivalent of US$1 million with onshore and offshore legal entities, offshore financial institutions and overseas branches of other authorized banks, they shall transmit the data before 12:00 noon on the next business day following the contract day.

4.Relevant transmissions shall be processed in accordance with the "Manual for the Online Data Transmitting System on Large NTD Spot, Forward, Cross Currency Swap (CCS), and Non-deliverable Forward Transactions" prescribed by the Department of Foreign Exchange of the Bank.

When authorized banks engage in large NTD spot or forward transactions with customers over the Internet, or when Chunghwa Post engages in large NTD spot foreign exchange settlement with customers over the Internet, they shall first pass the Bank's requirements of the "Internet Bank's Large Spot and Forward Transactions Information of Internet Bank Online Transmitting System"; they shall use the "Large Spot and Forward Transactions Information Online Reporting and Transmitting System", which is linked under the "Outward/Inward Remittances Yearly Aggregate Settlement Amount Online Query System", to transmit relevant data to the Department of Foreign Exchange of the Bank pursuant to the following regulations:

1.When authorized banks and Chunghwa Post engage in foreign exchange purchase or sale exceeding an equivalent of US$ 1 million with a company or firm (excluding transactions from the export or import of goods processed with shipping documents), or exceeding an equivalent of US$ 500,000 from an individual or an association, they shall transmit the data immediately on the contract day after verifying relevant supporting documents.

2.When authorized banks engage in NTD forward exceeding an equivalent of US$1 million, they shall transmit the data immediately on the contract day after verifying the relevant supporting documents.

(Submission of Reports)

Article 48

When submitting reports and forms prescribed in these Regulations, banking enterprises shall attach relevant supporting documents and appendices.

The Department of Foreign Exchange of the Bank may request banking enterprises to fill out additional reports and forms if necessary.

The relevant timetable for the banking enterprises to transmit reports to the Department of Foreign Exchange of the Bank is as follows:

1.Authorized banks and Chunghwa Post:

(1)Daily Report: Before 12:00 noon of the following business day.

(2)Monthly Report: Within ten days after the end of each month.

2.Non-authorized banks, credit cooperatives, and credit departments of farmer's or fishermen's associations shall submit daily reports on purchase and sale of foreign currency cash and traveler's checks to the Department of Foreign Exchange of the Bank before 12:00 noon on the following business day.

The formats, contents, filling instructions of the reports prescribed in the preceding three paragraphs and submitting methods of the reports and its attachments shall conform to the Directions Governing banking enterprises in Conducting Foreign Exchange Business separately provided by the Bank as well as other relevant regulations.

(Examination)

Article 49

To examine reports and forms submitted by banking enterprises, the Bank may, if deemed necessary, dispatch personnel to inspect the relevant account books and documents of banking enterprises, or may request banking enterprises to provide truthful financial reports or other relevant information within a prescribed period of time.

Chapter 4 Management of Renminbi Business

(Application for and Operation of Renminbi Settlement Bank)

Article 50

An authorized bank that applies to the Bank for approval to become a Renminbi settlement bank in Taiwan area (hereinafter referred to as“RMB settlement bank”) and to engage in Renminbi clearing and settlement business in Taiwan area (hereinafter referred to as “RMB settlement business”) shall first obtain approval from the regulatory authority in Mainland China Area to engage in RMB clearing and settlement and submit the following documents:

1.Documents evidencing the approval described above; and

2.Documents describing the categories and contents of RMB settlement business and related risk management mechanisms (including its head office’s guarantee to render assistance, assume all payment liabilities and provide liquidity support in the event of liquidity and/or payment crisis).

A RMB settlement bank shall comply with the following rules in addition to the provisions in Article 39 herein:

1.Draw up a template for RMB settlement agreement to be signed with financial institutions, and submit it to the Bank for prior approval.

2.Provide RMB related clearing and settlement services in accordance with the approved contents of the template agreement mentioned in the preceding subparagraph. Provide sufficient supply of RMB bills and properly handle their repatriation.

3.Provide a list of financial institutions that have entered RMB settlement agreements and settlement-related statistical data requested by the Bank.

4.Engage in RMB settlement business during the concession period granted by the Bank with reference to the authorization document mentioned in the first subparagraph of the previous paragraph.

(Signing of Renminbi Settlement Agreement)

Article 51

Both domestic and foreign financial institutions may enter RMB settlement agreements with the RMB settlement bank; in the case of domestic financial institutions, the financial institution must be a banking enterprise that has been approved by the Bank to engage in foreign exchange or RMB business.

(Matters of Compliance for Renminbi Business)

Article 52

Banking enterprises conducting RMB business shall comply with the following rules in addition to these Regulations and other rules governing foreign exchange business:

1.Unless otherwise regulated by the Bank, open a RMB settlement account with the RMB settlement bank before engaging in RMB business; the same provision shall apply to a banking enterprise that has opened a RMB nostro account with an agent bank in Mainland China Area (hereinafter referred to as “agent bank” ) and has submitted the signed settlement agreement to the Bank for approval and record.

2.Cross-border trade in connection with RMB business involving the transfer of funds into and out of Mainland China Area shall be cleared and settled through the RMB settlement bank or an agent bank.

3.A banking enterprise that has already been approved by the Bank to engage in purchase and sale of RMB bills shall carry out this business in accordance with these Regulations.

4.In providing RMB purchase or sale services to natural persons, the amount is limited to RMB 20,000 for cash transaction per person per transaction, and RMB 20,000 for non-cash transaction per person per day.

5.In providing RMB bills withdrawal through a foreign currency ATM, the amount of each withdrawal per person shall not exceed 20,000 RMB.

6.In providing natural persons with the service of RMB remittance to Mainland China Area, the customers shall be limited to individuals with a Republic of China Citizenship ID Card and the transaction must be carried out through the RMB settlement bank or an agent bank; in addition, the remittance purpose shall fall under current account, and the amount of remittance shall not exceed 80,000 RMB per person per day.

7.Other rules set out by the Bank for proper management of RMB business.

Chapter 5 Supplementary Provisions

(Mutatis Mutandis Application to Branches of Mainland China Banks in Taiwan)

Article 53

The provisions of these Regulations regarding foreign banks shall apply mutatis mutandis to branches of Mainland China banks established in Taiwan area under the approval of the FSC.

(Administrative Enforcement)

Article 54

The Bank may take action pursuant to the provisions of the Administrative Enforcement Law against any banking enterprise that fails to operate in accordance with the provisions of these Regulations.

(Date of Implementation)

Article 55

These Regulations shall come into force on the date of promulgation.