Pending Cabinet approval, regulations restricting the freedom of Taiwan-based banks to establish subsidiaries in mainland China and invest in financial institutions there will soon be eased, the Financial Supervisory Commission said Sept. 1.
FSC Banking Bureau Director-General Kuei Hsien-nung said that with this regulatory easing, Taiwan banks will not need to have two branches in operation before they can set up a subsidiary.
According to the FSC, a subsidiary is permitted to conduct yuan-denominated transactions, while a branch office is not.
Moreover, channels into the vast market across the strait will no longer be limited to two out of three options: a branch, a subsidiary or shares in a mainland Chinese bank.
FSC officials said as this regulation is lifted, subsidiaries of Taiwan banks will be able to perform all the business activities of their parent banks, which means Taiwan banks should benefit from their strong competitiveness in individual financial services such as credit cards and small loans.
In addition, both Taiwan-based banks and their overseas subsidiaries will be free to invest in mainland Chinese banks, in contrast to the previous limit of investment in just one such institution.
Six major Taiwan banks operating in mainland China are expected to benefit immediately—the Land Bank of Taiwan, Chang Hwa Bank, First Commercial Bank, Cathy United Bank, Taiwan Cooperative Bank and Hua Nan Commercial Bank.
The FSC made these changes through revisions to the Regulations Governing Approval of Banks to Engage in Financial Activities Between the Taiwan Area and the Mainland Area.
At the same time, the FSC doubled the deposit ceiling for mainland Chinese banks operating in Taiwan to NT$3 million (US$10,345).
To strengthen risk management, the commission also stipulated that the cumulative allocated operating capital and total investment of a Taiwan bank in mainland China should not exceed 15 percent of its net worth, while equity investments made by a Taiwan financial holding company should not go beyond 10 percent of its net worth. (THN)
Write to Aaron Hsu at pj1210meister@mail.gio.gov.tw