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FSC to amend the relevant regulations governing qualification requirements and concurrent serving restrictions on responsible persons of banks and financial holding companies



To thoroughly supervise banks and financial holding companies, the Financial Supervisory Commission (FSC) announced on June 6, 2018 the plans to amend the "Regulations Governing Qualification Requirements and Concurrent Serving Restrictions and Matters for Compliance by the Responsible Persons of Banks" (Regulations Governing Responsible Persons of Banks) and "Regulations Governing Qualification Requirements for the Founder or Responsible Persons of Financial Holding Companies and Concurrent Serving Restrictions and Matters for Compliance by the Responsible Persons of a Financial Holding Company" (Regulations Governing Responsible Persons of Financial Holding Companies). The key points are as follows:
 
1.  To thoroughly enforce the concurrent serving restrictions, the scope of regulation being extended to include related parties of directors and supervisors:
 
(1) According to the current Regulations, directors and supervisors of banks and financial holding companies shall not have any conflicts of interest when holding concurrent offices. The draft amendments extend the scope to include related parties of directors and supervisors under the concurrent serving restrictions: where a director or supervisor, or a related parties thereof, of a bank holds a concurrent office as a director or supervisor at any other financial institution listed in Paragraph 3 of Article 3-1 of the Regulations Governing Responsible Persons of Banks, or a director or supervisor, or related parties thereof, of a financial holding company holds a concurrent office as a director or supervisor at any other financial holding company, it shall constitute a conflict of interest.
 
(2) Director or supervisor shall mean:
 
I. If the director or supervisor is a juristic person (under Paragraph 1 of Article 27 of the Company Act): the juristic person itself and the natural person designated by it.
 
II. If the director or supervisor is a natural person representing a juristic person (under Paragraph 2 of Article 27): the natural person and the juristic person represented by him or her.
 
III. If the director or supervisor is a natural person not representing any juristic person or the government: the natural person.
 
(3) The related parties mentioned above include the following:
 
I. Related parties of a natural person shall include (1) his or her spouse, blood relatives, and (2) any company in which such natural person and the person(s) listed in item (1) hold more than one third of the voting shares or equity capital, or a company or foundation in which such natural person and the person(s) listed in item (1) hold an office as chairman, general manager or have more than half of the board seats.
 
II. Related parties of a juristic person shall include (1) chairman of the juristic person, the chairman's spouse, blood relatives , (2) any company in which such juristic person and the person(s) listed in item (1) hold more than one third of the voting shares or in equity capital, or a company or foundation in which such jurisdiction person and the person(s) listed in item (1) hold an office as chairman, general manager or have more than half of the board seats, and (3) affiliates of the juristic person in accordance with the Company Act.
 
(4) Exceptions:
 
I. In the following circumstances, no conflict of interest is deemed to exist:
 
A.  Banks: The financial institution where the director or supervisor of the bank holds a concurrent office is a controlling company or a subsidiary company of the bank as provided under the Company Act; or a director or supervisor of a bank holds concurrent offices at other financial institutions in accordance with the relevant regulations governing banks and financial holding companies (for example, the circumstances set out under the proviso to Paragraph 3 of Article 3-1 of the Regulations Governing Responsible Persons of Banks; or the concurrently held positions approved because of investments set out under Article 12 of the Regulations Governing Responsible Persons of Financial Holding Companies).
 
B. Financial holding companies: A director or supervisor of a financial holding company holds concurrent offices at other financial holding companies in accordance with the relevant regulations governing banks and financial holding companies (for example, the concurrently held positions approved because of investments set out under Article 12 of the Regulations Governing Responsible Persons of Financial Holding Companies).
 
II. The Regulations mentioned above do not apply to the government and the banks or financial holding companies wherein 100% of shares are directly held by the government; provided, however, that the juristic director, juristic supervisor or their representatives are not allowed to hold concurrent offices at other financial institutions or financial holding companies unless approved by the competent authority.
 
2.  Increasing the percentage of professional directors:
 
(1) When a bank or a financial holding company has assets of over 1 trillion New Taiwan Dollars, the number of its professional directors shall be adjusted as follows:
 
I. It is required to have 3 professional directors if there are less than 5 directors.
 
II. Appoint 1 additional professional director for every 3 more directors if there are more than 5 directors.
 
III.It is required to have 3 professional managing directors if there is a board of managing directors.
 
(2) The professional directors of banks or financial holding companies must be natural persons, and there can be 5 professional directors who are natural persons if the bank's or financial holding company's full board of directors comprises over 13 directors.
 
(3) Exceptions: banking subsidiaries of financial holding companies, 100% government-owned banks, and 100% government-owned financial holding companies are not required to appoint natural persons as professional directors.
 
The FSC held a public hearing about the draft amendments on August 1, 2018 and issued a press release on August 2, 2018 to indicate it expects to complete the amendments in the fourth quarter of 2018 and put them into effect on July 1, 2019. However, in case the directors or the supervisors have not finished their term of office on July 1, 2019, the bank or the financial holding company may apply the new Regulations when said term of office expires.


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