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    FSC Taiwan on Basel Standards, ESG Disclosure, and Stress Test Results

    July 01, 2021

    The Financial Supervisory Commission of Taiwan (FSC Taiwan) published results of the supervisory stress tests for 2021 and decided to postpone the implementation of final Basel III standards for one year, to 2024. This announcement is in response to the COVID-19 pandemic and is in line with the March 2020 announcement by the Basel Committee of Banking Supervision (BCBS) on the deferral of implementation date of the final Basel III standards by one year. FSC Taiwan highlighted that it will adjust the implementation schedule for the final Basel III standards after taking into account the practices in different countries. In addition, FSC Taiwan is amending the regulations governing information to be published in annual reports of public companies in 2020 to require companies to disclose environmental, social, and governance (ESG) related information.

    To further improve the quality of ESG information disclosure and provide more comparable information, FSC Taiwan will revise the annual report schedules and add reference examples and disclosure guidelines to guide companies to disclose more important environmental and social issues, such as the quantitative information of carbon emissions, water consumption, and waste. In the social aspect, companies will be required to disclose more specific and quantitative contents such as occupational safety and workplace diversity and equality, to realize the goal of sustainable development of enterprises. Additionally, FSC Taiwan has formulated draft principles on the review and supervision of information disclosures by the Securities Investment Trust Funds in relation to the ESG-related topics. The principles have been drafted to standardize the format of information disclosure by ESG funds and to strengthen the integrity of information disclosure of the prospectus on ESG investment policies. The Securities Investment Trust and Consulting Association has been asked to seek opinion from industry participants on the draft principles and the results of this exercise are expected to be released before the end of July 2021.

    FSC Taiwan also published the results of the supervisory stress test for 2021, which showed that the average common equity, tier 1 capital, capital adequacy, and leverage ratios of 36 domestic banks were above the statutory minimum standards. The results indicate that domestic banks have maintained strong capacities for bearing risks and capital adequacy during the pandemic. The overall loan-loss provisions of domestic banks remain relatively high and banks still maintain high capital adequacy. FSC Taiwan had requested 36 domestic banks to conduct the stress tests to understand the impact of the low interest rate environment and the impact of the COVID-19 pandemic on the capital adequacy of domestic banks.

     

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    Keywords: Asia Pacific, Taiwan, Banking, Securities, Basel, ESG, Climate Change Risk, Disclosures, COVID-19, Stress Testing, Regulatory Capital, Credit Risk, Market Risk, Diversity and Inclusion, FSC Taiwan

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