Rules Revised for the Establishment of Commercial Banks

        On April. 26, the Financial Supervisory Commission passed a revision of the standards for the establishment of commercial banks to provide a legal basis for the establishment of subsidiary banks by foreign financial institutions for the purpose of acquiring Taiwanese banks. Since a subsidiary set up in this way would be limited to merger with or takeover of domestic banks, this would not necessarily lead to an increase in the number of banks in Taiwan . The key points of the revision are given below:

1.          Foreign financial institutions may, with approval, apply to establish a commercial bank for the purpose of merging with or acquiring the full business operations as well as assets and liabilities of a domestic bank; and, since the foreign financial institution will be the sole founder and shareholder, the requirements for public raising of funds and the holding of a founding meeting, the establishment of a shareholders’ meeting, the setting up of online connections prior to the commencement of business, and a certain scale of business are deleted.

2.          A provision is added requiring foreign financial institutions that apply to the competent authority to establish a commercial bank should submit, with their application, the minutes of the board of director’s meeting at which the decision was made or other documents indicating the intent to establish a bank in Taiwan. In addition, foreign financial institutions that set up a commercial bank with the approval of the competent authority should, within three months of completing company establishment and registration, also complete merger or takeover procedures. The financial institution may, with proper reason, apply for a single three-month extension, but those who extend the time period without permission may have their permit revoked by the competent authority.

3.          In regard to the qualifications of the commercial bank’s directors, supervisors, and managers, the provisions of the Regulations Governing Qualification Requirements for Responsible Persons of Banks will apply. The qualifications of founders will be determined by the provision of Article 3, Paragraph 1 of the Regulations, and the rules for the qualifications of directors, supervisors, and managers contained in Articles 5 through 9 of the original regulations are deleted.

4.          In compliance with the purpose for which a foreign financial institution applies to establish a commercial bank, which is merger with or takeover of a domestic bank, a provision is added permitting its equity to be used for the merger with or takeover of a domestic bank’s total business as well as its assets and liabilities.

5.          Since the articles regarding savings banks have already been deleted from the Banking Law, the provisions regarding the establishment of savings banks contained in Article 22 of the original regulations are also deleted.

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