The Financial Supervisory Commission of Taiwan (FSC Taiwan) published the guidelines for climate risk financial disclosure of domestic banks, set out measures for the management of real estate loans, and extended the timeline for payment deferrals in light of the continued disruptions from the pandemic. The supervisory authority also designated six banks as domestic systemically important banks (D-SIBs): CTBC Bank, Cathay United Bank, Taipei Fubon Commercial Bank, Mega International Commercial Bank, Taiwan Cooperative Bank, and First Commercial Bank. The list of D-SIBs remains the same as that in the previous year.
Guidelines for climate risk financial disclosures
The guidelines on climate risk disclosures are expected to be implemented starting from 2022. Thus, beginning from 2023, the domestic banks shall perform the financial disclosure of climate-related risks for the previous year before the end of June each year. The guidelines require domestic banks to establish an appropriate climate-related risk and opportunity management mechanism based on the scale and nature of their business and to disclose information on climate risks from the aspects of corporate governance, strategy, risk management, and indicators and goals. The guidelines stipulate that banks shall set out internal rules and mechanisms to regularly review whether they comply with the requirements under the guidelines. FSC Taiwan is allowing banks to make regular disclosures and use the "Comply or Explain" approach on matters they cannot disclose or cannot explicitly disclose at the initial stage of implementing the guidelines. FSC Taiwan has requested the Bankers Association of the Republic of China to form a special project team to develop a "Domestic Banks' Climate-Related Risk Management Practice Handbook" to assist domestic banks in successfully processing the related disclosures.
Measures for management of real estate loans
In its communication on real estate loans, FSC Taiwan emphasized that banks must implement the "5Ps principle" for their real estate credit extension businesses. They must control the credit limit and concentration of the overall real estate credit extension businesses based on their risk tolerance and strengthen post-loan management. They must also appropriately evaluate and increase the allowance for doubtful accounts based on a risk management approach to enhance their risk-bearing capacity and enhance the health of business operations. These requirements shall be incorporated into banks’ internal control and audit systems and included as critical internal audit items. Banks are required to abide by the related conditions, credit limits, and other management measures in the “Regulations Governing the Extension of Mortgage Loans by Financial Institutions.”
Extension of payment deferrals on loans
FSC Taiwan decided to extend the timeline for COVID-19-related payment deferrals from the end of December 2021 to the end of June 2022. The relief measure applies to mortgages, auto loans, consumer loans, and credit card debt, among others. Borrowers and credit card holders can apply for a deferral of 3 to 6 months on the repayment of outstanding debt. Default penalties or default interest will be exempt during the deferred period. Until the obligation becomes due, it will not be treated as a bad debt and an instance of late payment will not be included in the debtor's credit record.
- Press Release on Climate Disclosure Guidelines
- Guidelines on Climate Disclosures (PDF in Chinese)
- Press Release on Real Estate Loan Measures
- Letter on Real Estate Loan Measures (in Chinese)
- Press Release on List of D-SIBs
- Press Release on Payment Deferrals (in Chinese)
Keywords: Asia Pacific, Taiwan, Banking, Climate Change Risk, Disclosures, ESG, Lending, Real Estate Loans, Payment Deferrals, Loan Repayment, Credit Risk, D-SIBs, Regulatory Capital, COVID-19, Basel, FSC Taiwan
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