TAIWAN Law and Practice Contributed by: James Huang, Eddie Hsiung and Maggie Huang, Lee and Li, Attorneys-at-Law
head office and the liquidity risk management measures applicable to the Taiwan branch. Additional Requirements for Systemically Important Banks In 2019, the FSC announced the supervisory measures for systemically important banks in Taiwan, which are required to meet 4% addition - al capital buffer requirements with their Common Equity Tier 1 capital in the four years after desig - nation. The 4% additional capital buffer includes a 2% additional regulatory capital buffer and a 2% bank’s internal capital buffer. Systemically important banks in Taiwan are required every year to submit their contingency action plans for dealing with situations where the capital is not sufficient. They are also required to conduct and report two-year stress test results to the FSC. Six banks are currently designated as systemi - cally important banks: • CTBC Bank; • Cathay United Bank; • Taipei Fubon Commercial Bank; • Mega International Commercial Bank; • Taiwan Cooperative Bank; and • First Commercial Bank.
because of obvious deterioration in the bank’s business or financial condition; • a bank’s capital is graded as being seriously inadequate and 90 days have lapsed since the date the bank was so graded (however, if a bank is ordered by the FSC to undertake capital restructuring or a merger within a pre - scribed period and fails to do so, the 90 days should be calculated from the day subse - quent to the prescribed period); or • the losses of a bank exceed one third of the bank’s capital and the bank fails to make up such deficit within three months. If the FSC places a bank in receivership, the duties and powers of the bank’s shareholders’ meeting, board of directors, directors, supervi - sors and audit committee shall be suspended. The receiver appointed by the FSC has the power to manage the bank’s business and to dispose of the bank’s properties. The FSC has the power to resolve failing banks in an orderly manner. In local practice, seven banks were placed under receivership from 2006 to 2008. The FSC divided their assets into non-performing assets and other assets, and sold them separately. The non-performing assets were sold to asset management compa - nies while the other assets were sold to other banks, with a certain amount of compensation agreed to be paid by the FSC. The depositors, employees and non-deposit creditors suffered little harm. FSB Key Attributes of Effective Resolution Regimes Following the crisis management guidance under the FSB Key Attributes of Effective Reso - lution Regimes, systemically important banks in Taiwan are required to annually submit their contingency action plans for dealing with situa -
8. Insolvency, Recovery and Resolution
8.1 Legal and Regulatory Framework Principal Means of Resolving a Failing Bank The FSC may take over a bank if: • there is a concern that a bank might not be able to pay its debts when due or there might be a detriment to the depositors’ interests
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