Regulations Governing Foreign Exchange Business of Banking Enterprises

Transcription

1 Title Regulations Governing Foreign Exchange Business of Banking Enterprises Amended Date Category Central Bank of the Republic of China (Taiwan) ( 中 央 銀 行 ) Chapter 1 General Provisions Article 1 Article 2 Article 3 Article 4 These regulations are prescribed pursuant to Paragraph 2, Article 35 of The Central Bank of the Republic of China(Taiwan) Act. 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. The term "banking enterprises" as used in these Regulations shall mean banks, credit cooperatives, credit departments of farmers' associations, credit departments of fishermen's associations, and the Chunghwa Post Co., Ltd. The term " foreign exchange business" as used in these Regulations comprises the following items: 1. Foreign exchange business export related; 2. Foreign exchange business import related; 3. Inward and outward remittances; 4. Foreign currency deposits; 5. Foreign currency loans; 6. Foreign currency payment guarantees; 7. Foreign exchange derivatives business; and 8. Other foreign exchange businesses.

2 The term "foreign exchange derivatives business" as used in these Regulations shall mean dealing, brokerage and agent activities of contracts involving foreign exchange, and whose values are derived from assets, interest rates, exchange rates, commodities, stock prices, indices, or other related products. The term "contracts " as used in the preceding paragraph shall mean margin contracts, futures, forward contracts, swaps, options, or other contracts of a similar nature. Article 5 Unless otherwise provided by other laws or the competent authorities, banking enterprises shall maintain the confidentiality of information concerning their customers' deposits, loans, and remittances. Chapter 2 Commencement of Foreign Exchange Business Article 6 Article 7 Article 8 A banking enterprise shall apply to the Central Bank of the Republic of China (Taiwan)(hereinafter referred to as the Bank) for engaging in foreign exchange business, and may engage in the said business only after being issued a certificate of authorization or a letter of approval. Foreign exchange business may not be operated without the approval of the Bank. A bank may apply for engaging in all or part of the business categories listed in Paragraph 1 of Article 4. Credit cooperatives, the credit departments of farmers' or fishermen's associations may apply for purchasing and selling foreign currency cash and traveler's checks. The Chunghwa Post Co., Ltd. may apply for engaging in international remittances, purchasing and selling foreign currency cash and traveler's checks. Unless otherwise provided by these Regulations or other laws and regulations, domestic

3 and foreign banks within the territory of the Republic of China that apply to the Bank for engaging in foreign exchange business (hereinafter referred to as authorized banks) shall comply with the following provisions: 1. Domestic banks shall: (1)Maintain capital to risk-weighted assets ratio at 8% or above; (2)Deploy sufficient experienced personnel for conducting foreign exchange business; (3)Participate in joint processing of foreign exchange business with other authorized banks for an accumulated amount up to United States dollars 400 million or up to 7,000 transactions; and (4)Maintain a sound financial position for the last three years. 2. Foreign banks shall be approved by Financial Supervisory Commission, Executive Yuan (hereinafter referred to as "FSC") to establish branches in Taiwan. When a bank applies to FSC for establishing a foreign department to engage in foreign exchange business, FSC shall forward the application to the Bank to review 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 FSC. Article 9 Banks intending to become authorized banks shall submit written applications with the following documents to the Bank for approval: 1. Documents evidencing FSC's approval for registered establishment; 2. Scope of foreign exchange business; 3. Names and locations of overseas correspondent banks;

4 4. Name and address of the statutory 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. Article 10 When engaging in foreign exchange business listed in Subparagraphs 1 through 6, Paragraph 1, Article 4, the operations and auditing personnel of an authorized bank 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. Article 11 For the branches of an authorized bank to engage in the foreign exchange business listed in Subparagraphs 1 through 6, Paragraph 1, Article 4, the bank's head office shall apply to the Bank for approval by submitting documentation detailing the intended scope of business, and attaching photocopies of the bank's business license and the curriculum vitae of operations and auditing personnel. Article 12 When engaging in foreign exchange derivatives business listed in Subparagraph 7, Paragraph 1, Article 4, the operations and management personnel of an authorized bank shall meet at least one of the following qualifications: 1. To have completed courses on derivatives and risk management held by domestic or foreign financial training institutions, the total amount time spent on attending the courses shall be at least 3 months;

5 2. To hold a foreign exchange derivatives business license; 3. To have one year training or internship in foreign exchange derivatives business at a domestic or foreign financial institution; 4. To have at least six-month working experience in foreign exchange derivatives business at domestic or foreign financial institutions. Article 13 An authorized bank may engage in foreign exchange forward and swaps transactions without application. However, to engage in any other foreign exchange derivatives business, an authorized bank shall submit the following documents according to the type of business intended and apply to the Bank for approval: 1. Foreign exchange derivatives business involving the New Taiwan dollar exchange rate: Submit a statement of regulatory compliance, resolution of board of directors to apply for foreign exchange derivatives business for domestic banks or letter of authorization from the head office or regional command centers for foreign banks, product profiles, operational guidelines, risk management, risk disclosure statements, and curriculum vitae of the relevant personnel. 2. Any structure combination of foreign exchange derivatives business in the preceding item with other business already authorized by the Bank or other competent authorities: Submit documents listed in the preceding subparagraph. 3. Foreign exchange derivative business not involving the New Taiwan dollar exchange rate: For first time application by an authorized bank to engage in foreign exchange derivatives business or new financial products not yet approved by the Bank, documents listed in Item 1 shall be submitted. 4. Foreign exchange derivatives business (not involving the New Taiwan dollar exchange

6 rate) already approved by the Bank and further structure combinations thereof: Before engaging in this business, submit a statement of regulatory compliance, resolution of board of directors to apply for foreign exchange derivatives business for domestic banks or letter of authorization from the head office or regional command centers for foreign banks, risk disclosure statement, and curriculum vitae of the relevant personnel. However an authorized bank may engage in structure combination of foreign exchange derivatives that involve products in the same categories and that are created through the same transaction contracts without application. When an authorized bank, which has been approved to conduct derivatives business pursuant to the preceding regulation, engages in the foreign exchange derivatives business not involving the New Taiwan dollar, it should submit to the Bank a product profile, product introduction, and the documents required under Item 4 of the preceding paragraph within one week after such business has commenced for record. If within three (3) weeks after receiving such report, the Bank does not object thereto, the Bank's silence shall be deemed an approval for record. The scope of the afore-mentioned foreign exchange derivatives business not involving the New Taiwan dollar shall be determined by the Bank separately. Article 13-1 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. Having reviewed them, the Bank will select and give

7 approval to one bank to conduct the foreign currency settlement business: 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 the business commences. Article 14 Article 15 An authorized bank that has been approved by FSC to engage in money trust business shall submit the following documents regarding outward and inward remittance of trust funds to the Bank to apply for engaging in New Taiwan dollar or foreign currency specific money trusts earmarked for investing in securities denominated in foreign currencies: 1. Documents evidencing FSC's approval for engaging in money trust business; 2. To apply for the afore-mentioned business with the resolution of board of directors for domestic banks or letter of authorization from the head office or regional command centers for foreign banks; 3. Statement of foreign exchange regulatory compliance; 4. Descriptions of which currency shall be received and redeemed and foreign exchange settlement procedures; 5. Other documents specified by the Bank. To offer foreign currency automatic teller machine (ATM) services, an authorized bank

8 shall apply to the Bank by submitting relevant operational guidelines and identifying the names of the offices controlling the ATM, a list of locations, and risk control measures. Article 16 Article 17 To engage in electronic business involving foreign exchange, authorized banks shall submit a description of relevant procedures when applying to the Bank. Authorized banks applying for engaging in foreign exchange receipts and disbursements or transactions with values equal to or over New Taiwan dollars 500,000 on the Internet shall first pass the test of the Online Civil Outward/Inward Remittances Declaration Yearly Aggregate Settlement Amount Query System, and also be capable of performing computerized review of transaction contents such as classification of remittances. Before offering services in foreign exchange receipts and disbursements or transactions on the Internet, an authorized bank shall first request the customer to visit the bank in person to apply for and follow the procedures stipulated. The authorized bank shall verify the customer's identification documents or basic registration information when processing an application. To engage in foreign exchange business outside business hours, an authorized bank shall submit a description of relevant procedures when applying to the Bank, and shall comply with the following rules: 1. The amount of each foreign exchange settlement shall be limited to New Taiwan dollars 500,000 or its equivalent in foreign currency; and 2. Foreign exchange transactions conducted outside business hours shall be included in the "Daily Transaction Report" and "Daily Foreign Exchange Position Report" on the following business day.

9 Article 18 Article 19 Article 20 Article 21 Where the authorized bank has established its own domestic foreign exchange processing center to process relevant foreign exchange back office work, the bank shall submit the relevant operational guidelines and procedures to the Bank within one week after the commencement of its operation. In the event that the authorized banks use other methods to assign third parties to process the relevant foreign exchange back office work, the banks shall apply to the Bank for approval by submitting the operational plans for outsourcing. If the Bank has not expressed a negative opinion within 15 days from the day following receipt of the application, the bank may proceed to process the work automatically. Where there is a need to engage in purchasing and selling foreign currency cash and traveler's checks by the branches of an authorized bank, or the banks and their branches that have not been authorized by the Bank to engage in foreign exchange business (hereinafter referred to as non-authorized banks), the bank's head office shall submit to the Bank a description of the scope of the intended business, a photocopy of the bank's business license (or a photocopy of establishment letter issued by FSC) and the curriculum vitae of operations and auditing personnel, except for the branches of an authorized bank which only engage in the money exchange of foreign currency. Operations and auditing personnel at the branches of authorized banks and at nonauthorized banks and their branches who engage in the purchasing and selling of foreign currency cash and traveler's checks shall possess at least one-week (five business days) experience in foreign exchange business. The provisions of Item 1 of Article 17 shall apply, mutatis mutandis, when branches of

10 authorized banks and non-authorized banks and their branches have been authorized by the Bank to engage in the purchasing and selling of foreign currency cash and traveler's checks outside business hours. Transactions conducted under the afore-mentioned business shall be included in the "Daily Transaction Report" and "Daily Foreign Exchange Position Report" on the following business day by the branches of authorized banks. Non-authorized banks and their branches shall include the transactions in the "Daily Transaction Report" on the following business day. Article 22 Article 23 Article 24 When a Credit Cooperative (head office or branch) first applies for approval to purchase and sell foreign currency and traveler's checks, the head office of the credit cooperative shall submit a written application together with a photocopy of the credit cooperative's business license, the curriculum vitaes of the operations and auditing personnel, the balance sheet and income statement of the previous fiscal year, and shall truthfully explain the status of any sanctions imposed on it for violation of financial regulations within the past twelve (12) months. For the credit departments of farmers' or fishermen's associations or their branches to apply for the purchasing and selling of foreign currency cash and traveler's checks, the farmers' or fishermen's association shall submit a written application along with a photocopy of the business license, curriculum vitae of operations and auditing personnel to be reviewed by to the local competent authorities, who shall then forward the application to the central competent authorities and then to the Bank. For a post office under the Chunghwa Post Co., Ltd. to apply for international

11 remittances, to purchase and sell the foreign currency cash and traveler's checks, the company's head office shall submit a written application along with a photocopy of FSC's approval letter (for the post offices which were established after January 1, 2003), and curriculum vitae of operations and auditing personnel to the Bank for approval. Article 24-1 If a relocation or name change is made by the branches of authorized banks, nonauthorized banks and their branches, the head office of credit cooperatives and their branches, or the credit departments of farmer's or fishermen's associations and their branches that have been approved to engage in the foreign exchange business pursuant to Articles 11, 19, 22 and 23, depending on the type of situation, it is required for them to apply for a new certificate or notify the Bank within a week after the receipt of a business license or approval certificate. In the event of relocation, the curriculum vitae of operations and auditing personnel shall also be submitted to the Bank. If the relocation or name change is made by the post offices under the Chunghwa Post Co., Ltd., which have been permitted to engage in foreign exchange business pursuant to the preceding provisions, it is necessary for them to notify the Bank within a week after the receipt of the letter issued by FSC or the letter issued by its head office. In the event of relocation, the curriculum vitae of operations and auditing personnel shall also be submitted to the Bank. Article 25 The provisions of Article 10 shall apply, mutatis mutandis, to operations and auditing personnel performing international remittances business at post offices under Chunghwa Post Co., Ltd.

12 Article 26 Article 27 Article 28 Article 29 The provisions of Article 20 shall apply, mutatis mutandis, to operations and auditing personnel at credit cooperatives, the credit departments of farmers' or fishermen's associations and their branches and post offices under Chunghwa Post Co., Ltd. that engage in the purchasing and selling of foreign currency cash and traveler's checks. The provisions of Subparagraph 1 of Article 17 shall apply, mutatis mutandis, to credit cooperatives and the credit departments of farmers' or fishermen's associations and their branches that have been authorized by the Bank to engage in the purchasing and selling of foreign currency cash and traveler's checks, as well as to post offices under the Chunghwa Post Co., Ltd. that have been authorized by the Bank to engage in international remittances, purchasing and selling foreign currency cash and traveler's checks. Transactions conducted under international remittances and purchasing and selling of foreign currency cash and traveler's check transactions by the afore-mentioned banking enterprises outside business hours shall be included on the ''Daily Transaction Report'' or ''Daily Details Table''on the following business day. Banking enterprises applying for foreign exchange business will be granted a designated period for providing supplementary information and making corrections if the documentations submitted were found to be incomplete. The Bank may reject the application if supplementary information and corrections were not submitted during the designated period. 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 regulations;

13 2. The applicant has failed to fully assist declarants to fill out the Declaration Statement of Foreign Exchange Receipts and Disbursements or Transactions (hereinafter referred to as Declaration Statement); 3. A high number of errors in the certificates, reports and forms prepared by the applicant; 4. The applicant had seriously violated the provisions of these Regulations and was rectified by the Bank, but has failed to improve within the period specified by the Bank; 5. There is evidence indicating that the applicant may hinder sound operations of the business, or that the applicant is unable to meet financial policy requirements. Article 30 The Bank may revoke or cancel its approval to any banking enterprise engaging in foreign exchange business in the event of any of the following: 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 appropriate reasons. If approved, the banking enterprise may have an extension of no more than three months. An institution may apply for extension only once; 2. The banking enterprise has seriously violated the provisions of these Regulations and was rectified by the Bank, but has failed to rectify within the period specified by the Bank; 3. After being issued a certificate of authorization or letter of approval, or after being approved to engage in various foreign exchange business, the banking enterprise was found to have provided false information in its application which is deemed a

14 serious violation; or 4. The banking enterprise suspends operations, is dissolved, or declares bankruptcy. Chapter 3 Management of Foreign Exchange Business Article 31 Article 32 Article 33 Article 34 Banking enterprises engaging in foreign exchange business shall first verify the identity or primary registration data of the customer, and ensure that supporting documents comply with regulations. Banking enterprises shall accept a customer's request for purchasing and selling of foreign exchanges in accordance with regulations provided by the Bank. The exchange rates used for foreign exchange transactions between a banking enterprise and a customer may be solely determined by the banking enterprise. The exchange rate for a single non-cash foreign exchange transaction with a customer for an amount of less than ten thousand United States dollars ( US$10,000) shall be posted at the banking enterprises' business premises before 9:30 AM on each business day. The bid/ask spread shall be reported to the Bank for record. Any change to the spread shall also be reported. 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 formats, contents, and completion instructions of the reports and forms prescribed in the previous two paragraphs shall conform to the "Directions Governing Banking Enterprises in Conducting Foreign Exchange Business" separately provided by the Bank,

15 as well as other relevant regulations. Article 35 Article 36 With regard to the review of reports and forms submitted by authorized banks, the Bank may 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 if deemed necessary. Where an authorized bank operates foreign exchange derivatives business involving the New Taiwan dollar exchange rate, the following rules shall apply: 1. Delivery foreign exchange forward business "between the New Taiwan dollar and foreign currency" (1)Actual for demand foreign exchange receipts or disbursements, but one receipt or disbursement of foreign exchange may not be used in multiple contracts. (2)Entering into contracts or processing settlements with clients, either transaction documents supporting actual for demand foreign exchange receipts or disbursements, or a written approval from the competent authorities shall be verified. (3)Maturity: determined according to actual for demand foreign exchange receipts or disbursements. (4)The price of a rollover transaction shall be based on the current market exchange rate rather than the rate of the original contracts. 2. Foreign exchange swaps business "between the New Taiwan dollar and foreign currency" (1)In swaps transactions, when entering into spot foreign exchange settlement or a forward sale (forward purchase) of foreign exchange, the authorized bank shall enter into a foreign exchange forward contract with the same amount in the opposite

16 direction at the same time. (2)Counterparties: Domestic legal entities: no documents required. Foreign legal entities and natural persons: documents of approval issued by the competent authorities shall be verified. (3)In the settlement of swaps transactions, the Declaration Statement shall be filled out pursuant to the "Regulations Governing the Declaration for Foreign Exchange Receipts and Disbursements or Transactions" (hereinafter referred to as the Regulations for Declaration). Column 4 of the Declaration Statement "Nature of Foreign Exchange Receipts and Disbursements or Transactions" shall be filled out according to the nature of the actual transaction, and also noted as "foreign exchange swaps transaction'. 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 foreign exchange transaction report along with the Declaration Statement. (4)The swap transaction amount need not be included in the foreign exchange settlement and remittance aggregate amount as specified in subparagraph 3, Paragraph 1, Article 4 of the Regulations for Declaration. (5)The prices of rollover transactions shall be based on the current market exchange rates rather than the rates of the original contracts. 3. Non-Delivery New Taiwan dollar foreign exchange forward business (NDF): (1)Counterparties are limited to domestic authorized banks and the overseas branches or head offices of authorized banks. (2)The format, content, and accounting treatment of contracts shall be segregated from those of delivery foreign exchange forward (DF) business.

17 (3)Contracts under this item may not be rolled over or terminated before maturity. (4)Net cash settlement shall be applied uniformly upon maturity. (5)Transactions do not allow margin trade. (6)Without the approval of the Bank, contracts may not be structured to combine with other foreign exchange derivatives products, New Taiwan dollar deposits, foreign currency deposits, or other products. (7)For non-delivery New Taiwan dollar foreign exchange forward transactions of United States dollars 5 million or above, the Department of Foreign Exchange of the Bank shall be notified immediately by telephone. 4. New Taiwan dollar exchange rate option business: (1)Counterparties are limited to domestic and foreign legal entities. (2)Both net amount settlement and gross amount settlement upon maturity are allowed, but the settlement method shall be specified in the contracts. (3)The currency used for option premium and settlement if the option is exercised may be either in the denominated foreign currency or New Taiwan dollar, but shall be specified in the contract. (4)Only "plain vanilla" options may be transacted. Without the approval of the Bank, contracts may not be structured to combine with options or other foreign exchange derivatives products, New Taiwan dollar deposits, foreign currency deposits, or other products. 5. Cross currency swaps business "between the New Taiwan dollar and foreign currency": (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.

18 Both the principal and interest need not be included in the remittance aggregate 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 request its customer to submit documents evidencing actual demand at the time of transaction, the transaction amount shall be included in the remittance aggregate 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 remittance aggregate amount. (4)In the settlement of cross currency swaps transactions, the Declaration Statement shall be filled out pursuant to the Regulations for Declaration. Column 4 of the Declaration Statement "Nature of Foreign Exchange Receipts and Disbursements or Transactions" shall be filled out according to the nature of the actual transaction, and also noted as "cross currency swaps transaction". 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 foreign exchange transaction report along with the Declaration Statement. (5)The exchange of principal or interest in 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. Article 37 Authorized banks shall comply with the following regulations when engaging in foreign exchange derivatives business not involving the New Taiwan dollar exchange rate:

19 1. Foreign currency margin trading business: (1) May not be conducted with foreign currency loans, and the bank shall set a separate line of credit for each customer. (2) Without the approval of the Bank, authorized banks may neither provide full discretionary account management nor "joint account" in conducting the business. Regulations governing full discretionary account management shall be separately provided by the Bank. (3) Certificates of deposit or other collateral under a third party s name may not be pledged to the authorized banks as collateral for foreign currency margin trading. 2. Foreign exchange derivatives business involving stock prices or stock indices where the underlying product is denominated or settled in a foreign currency or related to a foreign market. 3. In providing forward exchange and swaps business between foreign currencies, the prices of rollover transactions shall be based on the current market exchange rates rather than the rates of the original contracts. 4. In providing cross currency swaps business between foreign currencies, the appropriate "remittance classification and code number" shall be indicated on other transaction certificates and included in the foreign exchange transaction daily report after settlement. 5. Structured products business linked to fixed-income products (deposits or bonds): (1) In providing "structured products" consisting of deposits or bonds linked to foreign exchange derivatives, the underlying foreign exchange derivative products shall be limited to those already approved by the Bank, and shall comply with applicable restrictions or rules on the relevant foreign exchange derivative products.

20 (2) The structured products mentioned in the preceding subparagraph shall not be categorized as deposit. 6. Structured products business linked to loans: (1) In providing "structured loans" consisting of loans linked to foreign exchange derivatives, the underlying foreign exchange derivatives products shall be limited to those already approved by the Bank. (2) The structured products shall comply with the provisions of Directions Governing Banking Enterprises for Operating Foreign Exchange Business, as well as relevant regulations applicable to each business category. Article 38 For a new foreign exchange derivatives business that has not yet been approved, an authorized bank shall apply for approval pursuant to the procedures set forth in Article 13; the relevant guidelines concerning the business shall be specified in the letter of approval issued by the Bank. The Bank may authorize the "Taipei Foreign Exchange Market Development Foundation" (" the Foundation") to coordinate with "R.O.C. Bankers Association" ("BA") to formulate guidelines for 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 incompliance to the Bank and other related matters. Such guidelines will become effective after the Bank's approval. The same procedure shall be followed for any amendments. An authorized bank shall act in accordance with relevant regulations and the above guidelines when conducting the foreign exchange derivatives business.

21 Article 38-1 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 its foreign currency settlement business during the period of operations; 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 (hereafter 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 the high security level 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

22 changes its fee schedule. 6. 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 may 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, the bank 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 may not be revoked once settled. Article 38-2 For banks that have been approved by the Bank to conduct foreign currency settlement business prior to the amendment and promulgation of these Regulations on January 25, 2013, the preceding article shall apply before the latest concession period expires; such banks shall make the necessary adjustments within six months if they currently do

23 not conform to the provisions of the preceding article. Article 39 Article 40 An authorized bank may accept the entrustment of the offshore banking unit (OBU) of the same bank to engage in OBU business. The scope and relevant regulations governing the business shall be separately provided by the Bank. For foreign currency deposits 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. Article 40-1 Authorized banks that have been approved to provide foreign currency automated teller machine (ATM) service shall limit the accumulated cash withdrawals by cardholders to US$10,000 or equivalent per person per day; the amount of foreign currency withdrawals in equivalent New Taiwan dollars (NTD) shall be combined with the cardholder s NTD ATM cash withdrawals from the same bank and the total shall not exceed the daily accumulated NTD ATM cash withdrawal limit set by the bank. Article 41 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.

24 An authorized bank participating in the inter-bank foreign exchange market shall comply with the rules formulated by the Foundation after coordination with BA, and with reference to international customs and had reported to the Bank. Article 42 Article 43 Article 44 An authorized bank shall set its total position limits for transactions between the New Taiwan dollar and foreign currency, which shall be submitted along with its board resolution (the Taiwan branches of foreign banks shall submit documentation of approval issued by their head offices) to the Department of Foreign Exchange of the Bank. The combined position of non-delivery New Taiwan dollar forward contracts and New Taiwan dollar exchange rate options may not exceed one-fifth of the afore-mentioned total position limit. An authorized bank shall determine its position limits including " transaction positions for individual currencies" and "overnight positions for each trader". All its offices shall abide by these position limits and make auditing regularly. Authorized banks shall fill out "Foreign Exchange Position Daily Reports" for all foreign exchange transactions involving the New Taiwan dollar 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 recorded on internal books of authorized banks shall be identical to those submitted to the Foreign Exchange Department. 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.

25 Article 45 Authorized banks, when engaging in large spot or forward transactions with clients over the counter, shall use the "Large Spot, Forward, and Cross Currency Swap (CCS) Transactions 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. Data on foreign exchange purchase or sale of United States dollars 1 million or above or its equivalent in other foreign currencies by a company or firm (excluding transactions from the export or import of goods processed with documentary bills), or of United States dollars 500,000 or above or its equivalent in other foreign currencies by an individual or an association shall be transmitted immediately on contract day. 2. Data on forward contracts transactions, and cross currency swap (CCS) transactions involving the conversion of New Taiwan dollars against foreign curriencies for United States dollars 1 million or above or its equivalent in other foreign currencies shall be transmitted before 12:00 noon on the business day following the contract. 3. Relevant transmitting operations shall be processed in accordance with the "Manual for the Online Data Transmitting System on Large Spot, Forward, and Cross Currency Swap (CCS) transactions" prescribed by the Department of Foreign Exchange of the Bank. Authorized banks, when engaging in large spot or forward transactions involving the conversion of the New Taiwan dollars through their internet bank network, shall first pass the Bank's requirments 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

26 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. After verifying the relevent transaction documents, data on foreign exchange purchase or sale of United States dollars 1 million or above or its equivalent in other foreign currencies by a company or firm (excluding transactions from the export or import of goods processed with documentary bills), or of United States dollars 500,000 or above or its equivalent in other foreign currencies by an individual or an association, shall be transmitted immediately on the contracting day. 2. After verifying the relevent transaction documents, data on forward contracts transactions involving the conversion of New Taiwan dollars against foreign currencies for 1 million or above or its equivalent in other foreign currencies shall be transmitted immediately on the contract day. Article 46 Article 47 Article 48 The relevant timetable for the authorized banks to transmit reports to the Department of Foreign Exchange of the Bank: 1. Daily Report: Before 12:00 noon of the following business day. 2. Monthly Report: Within ten (10) days after the end of each month. The scope of the daily report and monthly report described in the preceding Paragraph shall be separately regulated by the Bank. (repealed) Non-authorized banks, credit cooperatives, and credit departments of farmer's or fishermen's associations shall submit daily reports of purchasing and selling foreign currency cash and traveler's check to the Department of Foreign Exchange of the Bank

27 before 12:00 noon on the following business day. Article 49 Article 50 (repealed) The Chunghwa Post Co., Ltd. shall submit daily details tables for inward and outward international remittances to the Department of Foreign Exchange of the Bank before 12:00 noon on the following business day. Chapter 3-1 Management of Renminbi Business Article 50-1 An authorized bank that applies to the Bank for approval to become a Renminbi settlement bank in Taiwan area (hereafter referred to as RMB settlement bank ) and to engage in Renminbi clearing and settlement business in Taiwan area (hereafter 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 38-1: 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

28 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 in reference to the authorization document mentioned in the first subparagraph of the previous paragraph. Article 50-2 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. Article 50-3 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 (hereafter referred to as agent bank )and has submitted the settlement agreement already signed to the Bank for approval and record. 2. Cross-border trade in connection with RMB business 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.

29 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 regarding the scope of business for derivative RMB products and for proper management of RMB business. Chapter 4 Supplementary Provisions Article 50-4 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 Financial Supervisory Commission. Article 51 Article 52 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. These Regulations shall become effective on the date of promulgation. The effective dates of amendments to these Regulations shall be prescribed by the Bank.