FSC Taiwan Issues Multiple Regulatory Updates
The Financial Supervisory Commission of Taiwan (FSC Taiwan) announced certain measures in context of the pandemic as well as a disclosure rule for environmental, social, and governance (ESG) funds. The regulatory authority decided to defer the implementation of Basel III reforms by one year, as part of the response to the pandemic. In addition, the 2% additional internal capital requirement that the domestic systemically important banks, or D-SIBs, must meet has also been postponed by one year, to ensure that domestic banks will be in a position to support economic activity. Furthermore, FSC Taiwan has adopted a number of measures to spur financial institutions to improve mechanisms related to digital finance amid COVID-19 pandemic. Banks are encouraged to handle COVID relief loans digitally whenever possible and are allowed to handle identity confirmation online for relief loans.
FSC Taiwan has approved a security mechanism (filed by the ROC Bankers Association) that allows existing corporate customers of banks to take loans online and allows for corporate COVID relief loans to be handled digitally. FSC Taiwan also asked the ROC Bankers Association to further study security mechanisms that would allow new corporate customers to take loans and handle identity confirmation online. This new approach will be implemented after the Bankers Association has completed the necessary model contracts and self-regulatory rules. FSC Taiwan also published an administrative rule on the screening criteria of systemically important banks. A bank designated by the FSC Taiwan as a systematically important bank shall meet the enhanced supervision requirements, as listed in the rule, from the year following the designated date. The administrative rule came into effect on July 30, 2021.
Additionally, FSC Taiwan is encouraging "bill finance companies" to introduce ESG concepts into business operations; a bill finance company is a financial market participant and has the function of allocating credit resources. In July 2021, FSC Taiwan also announced a disclosure rule for ESG funds issued by Securities Investment Trust Enterprises (SITEs) to strengthen the integrity of the prospectus on ESG investment funds. FSC Taiwan has set out the following key supervisory principles for review of ESG fund disclosures:
- When a SITE offers an ESG fund, the issuance plan, prospectus, and other such documentation must disclose ESG investment objectives and measurement standards, investment strategies and methods, investment ratios and allocations, performance indicators, exclusion criteria, risk warnings, participation in stewardship, and regular disclosures.
- An existing ESG fund whose prospectus does not make all of the aforementioned disclosures must correct the deficiency within six months of the date of issuance of the review principles.
- For an existing non-ESG fund whose prospectus has an "Investment Strategy and Features" section that already includes references to "sustainability" and "corporate social responsibility," or whose investment strategies or asset allocations take ESG concepts into consideration, if a proposal is made to rename the fund as an ESG fund, the SITE may do so without convening a beneficiaries meeting as long as the name change would not change the product positioning or basic investment strategy of the fund. However, the SITE must file an attorney's opinion affirming that the proposed name change would not have any material impact on the interests of the beneficiaries and apply with FSC Taiwan for approval to amend the trust agreement. The SITE must also publicly announce and inform beneficiaries of the change 30 days before the amended trust agreement enters into force.
Related Links
- Press Release on Deferred Basel Reforms
- Press Release on Financial Digitalization
- Rule on Screening Criteria of Systemic Important Banks (in Chinese)
- Press Release on ESG Concepts by Bill Finance Companies (in Chinese)
- Press Release on ESG Fund Disclosures
Keywords: Asia Pacific, Taiwan, Banking, Securities, Basel, COVID-19, Regulatory Capital, ESG, Climate Change Risk, Disclosures, Credit Risk, Sustainable Finance, D-SIB, FSC Taiwan
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Michael Denton, PhD, PE
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
