1. Adopting of a “negative list” for OBU products; all products are, in principle, liberalized:

2. Allowing securities firms to set up OSU

3. Expanding DBU business

4. Financial import substitution

5. Deploying financial businesses actively in Asia

6. Making/amending of five financial acts

Main amendments	Expected benefits
Ease restrictions on bank reinvestments: The limit on total bank reinvestment shall be based on “net value” not paid-in-capital.	Expand the business in the international market: According to the estimate, domestic bank merger and acquisition capability may increase overall by NT$500 billion.
Revised the caps for interest rate of cash card and credit card: From September 1, 2015 the interest rate of cash cards and revolving interest rate of credit cards shall not exceed 15% per annually.	Effectively reduce the interest burden of card holders: Benefiting more than 1 million people.
Ease restrictions on bank issue of bonds: The restrictions on bond provision of medium and long-term credit have been lifted and stipulation that the time limit for return of principle should not be less than two years has been deleted.	Develop the domestic bond market: 1. Increase bank bond issue flexibility, meeting institutional investor demand by the issuance of debentures of various terms.  2. The estimate of the issuance amount of debentures this year (2015) is NT$232.0 billion.

Main amendments	Expected benefits
Increase international insurance businesses: Including the scope of international insurance business in international financial business.	Increase insurance industry business opportunities, enhance the industry’s competitiveness.
Allowing OIU to be established in the ROC: OIU can be established by foreign insurance companies in the ROC and are allowed to conduct policy holder and insurer related insurance business outside ROC territory.	1. Increase market scale, increase premium income: it is estimated that, in the first year, premium income will increase by around NT$5 billion and continue to increase year after year. 2. Nurture international talent, increase employment opportunities.

Main amendments	Expected benefits
Promotion of an immediate correction mechanism: Introduces supervisory measures for RBC ratio grade of insurance companies. An insurance company with seriously inadequate RBC shall face supervision, takeover, closedown and liquidation or dissolution ordered by government.	In future, public money will no longer be used to deal with problem insurance companies”. When an insurance company’s RBC is seriously deficient (net value is still positive) it will be forcibly taken over in accordance with regulations.
Allowing banks to engage in concurrent insurance agent business and insurance broker business: In the past, when banks established  insurance agent or broker companies customers often were confused about the relationship between the parent and subsidiary and were unclear as to who to complain to.	Expected benefits of liberalization: Banks can establish insurance departments, protecting the rights of consumers.

Main amendments	Expected benefits
Improper sale of financial products: In serious cases the person in charge can be relieved of their position or business license revoked.	Encourage operators to be careful with regards the sale of financial products, protecting the rights of investors.
Increase of operator fine liability and adding of punitive damages claim right: 1.    Fine of NTG$300,000-1,000,000 can now be imposed. In serious case the maximum fine limit will not apply. 2.    Courts can impose punitive damages up to three times the damage caused.	Increasing the fines that can be imposed on operators and adding the punitive damages claim right, strengthening protection of financial consumers.
Strengthened management of the remuneration system and high risk products: 1. Financial services enterprises should set a sales personnel remuneration system and have it approved by the Board of Directors or the Executive Board of Directors. 2. The initial sale of complex, high risk products by financial services enterprises should be reported to and approved by the Board of Directors or the Executive Board of Directors.	Encourage management to attach importance to remuneration system and complex high risk products, avoiding a culture of inappropriate sales to protect the consumer.
A group ombudsman case mechanism has also been added: In cases of financial consumer disputes caused by single objective fact, a group ombudsman case can be initiated (more than 20 consumers authorize a designated juristic person to initiate an ombudsman case.)	Resolve financial consumer disputes with single objective fact in a unified way, helping disadvantaged financial consumers apply for an ombudsman case and saving ombudsman case resources.

Chairman Chen just mentioned a number of accomplishments that have been achieved in recent years, such as the opening of cross-strait finance and RMB business, promotion of offshore securities units, and the cleanup of troubled insurance institutions. Despite all these achievements, it has recently been stated in the news media that our financial environment is still not liberalized enough. This is unfair to Chairman Chen. I want to take this opportunity, on behalf of all our colleagues at the Financial Supervisory Commission, to express our sincere gratitude to Chairman Chen for his contributions to our financial industry, and for the good foundation that he has laid for the banking industry.

After I take over as chairman, the FSC will face great expectations from all sorts of people. I come from the financial industry, and have worked at the FSC for four years, so I have many old acquaintances here. Picking up where Chairman Chen has left off, I hope I can make some contribution to the financial sector. I intend to work together with Vice Chairpersons Wang and Wu, our other FSC commissioners, and the four Director-Generals to achieve this goal.

First of all, I have three ideas about financial supervision. First, the most important concern of financial supervision is legal compliance. Financial institutions must follow strict discipline, abide by laws and regulations, and pay attention to risk management. If financial institutions don't manage risks and have no discipline, they cannot be run sustainably. These are the most important foundations of a financial institution's management.

Second, we hope to strike a balance between supervision and financial development in order to provide financial institutions with an environment where they can flourish. We also wish to hear more advice from financial institutions so that we can enable our domestic financial institutions to diversify their businesses. In addition, the global center of economic gravity is shifting—from north to south, and from west to east. Taiwan, being located in Southeast Asia, will be part of the new center of world economic development. For this reason, we encourage financial institutions to strengthen their presence in Asia and Southeast Asia. The FSC will be studying what measures it can take to help our financial institutions reach out beyond Taiwan and create a more brilliant future.

Third, the focus of the FSC goes beyond the financial industry. We also need to facilitate the development of the overall economy. Article 1 of the Banking Act explicitly provides that, in addition to protecting the interests of depositors, banks also need to facilitate development of the economy as a whole. Therefore, in addition to maintaining sound banking operations, we hope that the financial sector can assist with the development of other industries as well.

Finally, Chairman Chen has laid a very good foundation. It is our job now to build upon it. The FSC is going to open its doors wide, and listen to opinions from all sectors. We welcome financial firms to share their views with us at any time. Thank you all very much.

In addition, with the entry into force on 1 July 2012 of an amended version of the "Organic Act Governing the Establishment of the Financial Supervisory Commission," the words "Executive Yuan" have been eliminated from the FSC's name, and the FSC Board of Commissioners has been reconfigured. The financial experts who had already been serving on the board have been joined by the Minister of Finance, the Minister of Economic Affairs, the Minister of Justice, and the Minister of Economic Planning and Development to facilitate communication and coordination on financial supervisory matters. Although the FSC's name has been changed, it retains the same organizational structure as before, and performs the same duties and functions. The FSC exercises its financial supervisory authority independently in accordance with the law, and continues to implement policies designed to promote financial industry development and execute financial supervision.

Among the various strategies that might be pursued in order to promote development of Taiwan's financial industry and make it more competitive, two strategies that trigger the most concern and discussion within society are, firstly, how to expand cross-strait financial ties, and secondly, how to develop the asset management business. The FSC has adopted a "Program for Development of Financial Businesses with Cross-Strait Characteristics" and a "Program for Development of a Taiwan-Centric Wealth Management Platform for Domestic Consumers," both of which are currently being implemented. The establishment of a cross-strait currency settlement mechanism has long been anxiously awaited by our domestic financial institutions, which have for some time been seeking greater flexibility in the currency denomination of the instruments in which they invest, and a greater range of choice in investment targets or the underlying instruments of derivatives. Thanks in no small part to the efforts of financial services firms, considerable successes have already been achieved.

And after several years of hard work, we've now seen a breakthrough with the Cross-Strait Securities and Futures Supervisory Cooperation Platform, under which framework the FSC and the mainland's China Securities Regulatory Commission met for the first time in January 2013. The purposes of the meeting were to determine the supervisory cooperation matters to be addressed under the Platform, to establish a mechanism for regular meetings, and to reach conclusions regarding cross-strait market access and two-way capital flows. It is hoped that such meetings will yield a consensus between the two authorities on how to jointly promote sound management of the securities and futures industry and how to work for market stability. This was truly a milestone achievement, and the FSC intends to build upon it through continuing efforts to establish more open markets.

The assets of insurers are rapidly increasing. In addition to steps taken for the sake of stronger supervision, the FSC is also actively working to help insurers achieve better capital efficiency. In order to promote sound operation and development of insurance enterprises, the FSC intends to afford insurers a wider range of investment choices. With this end in mind, we have eased restrictions on overseas investments, and now allow insurers to invest in public utilities and social service enterprises. At the same time, the FSC is also requiring insurers to do a better job of risk management. In particular, we require that insurers establish clear self-regulatory rules to govern their real estate investments.

In order to improve the risk-bearing capacity of banks, regulatory amendments adopted by the FSC with reference to Basel III requirements expressly provide that an institution's common equity ratio, Tier 1 capital ratio, and capital adequacy ratios must be factored into any determination regarding its capital adequacy, and minimum capital ratios will go up annually beginning from 2013. In addition, to help make banks more resilient to economic downturns, the FSC starting in 2013 will be implementing new differential incentives and regulatory measures to encourage banks to raise their bad debt allowances against guarantee liabilities for Class 1 credit assets to 1% or higher as quickly as possible.

The FSC has also been busy at work to safeguard the interests of financial consumers. The Financial Ombudsman Institution, which commenced operations on 2 January 2012, has a set of standard operating procedures in place to ensure effective resolution of complaints and ombudsman cases involving disputes between financial institutions and consumers. The public will save a lot on litigation expenses thanks to this system. In the meantime, we've identified the promotion financial literacy as one of the best things we can do to better safeguard the interests of financial consumers. With this goal in mind, we established a Financial Education Task Force in 2012 to integrate the resources of the FSC and the nation's various financial industry self-regulatory organizations. These resources will be put to use in our work to raise the level of general financial literacy in Taiwan. The FSC will continue overseeing the Financial Ombudsman Institution to ensure fair, reasonable, speedy, and effective resolution of financial consumer disputes, thereby safeguarding the interests of financial consumers and strengthening their confidence in our financial markets.

In order to build a more robust financial environment, the FSC will continue to deregulate and take measures to increase the size of our financial markets. And to support the development of cross-strait financial industry ties, we will encourage financial institutions to develop high-quality products. More active trading in our bond markets, coupled with further development of markets for fund products, derivatives, and stocks, are the keys to creating a more diverse range of financial products, which in turn will support the emergence of strong asset management services. At the same time, the FSC intends to employ more finely tuned differential regulatory measures to allow greater flexibility for well-run financial institutions, and we are going to continue with efforts to promote internationalization. Financial institutions will be encouraged to expand their overseas presence and provide better financial services to offshore customers, so as to expand Taiwan's financial markets.

2011 marked the 100^th anniversary for founding the Republic of China, thus a year worthy of celebrating. For our financial services sector, it was a particularly important year.

Despite the impact of the eurozone debt crisis, an unexpectedly sluggish global economic recovery, and problems plaguing the efforts of some sectors of the Taiwan economy to achieve industrial upgrading, our domestic banks nevertheless managed to post pre-tax earnings in excess of NT$200 billion, while their average NPL ratio fell to 0.43% and their average NPL coverage ratio went up to 251.83%. All these figures are the best they have been in more than a decade. However, it cannot be denied that the global economy and financial markets continue to face uncertainty. Moreover, the Basel Committee on Banking Supervision (BCBS) has required the adoption of new capital adequacy requirements from 2013 in order to bolster the quality and quantity of capital, and our domestic banks need to prepare for the new requirements. The FSC on the one hand is aligning with global financial supervisory trends by continuing to study possible changes to Taiwan's capital adequacy regulations. At the same time, we are also encouraging banks to actively raise their NPL coverage ratios, improve their gross loan coverage ratios, and work out proper dividend policies in order to strengthen their risk-bearing capacity.

In order to better protect the interests of financial consumers, we have shepherded a "Financial Consumer Protection Act" (FCPA) through to enactment by our legislature, thus marking the beginning of a new era in the development of our financial services industry. The FCPA was promulgated by the President on 29 June 2011 and entered into force on 30 December. Moreover, the Financial Ombudsman Institution (FOI), a financial consumer dispute resolution body which was established upon the authority of the FCPA, commenced operations on 2 January 2012. The FSC will continue overseeing the FOI to ensure that it acts in line with the legislative intent of the FCPA by working in a professional, impartial, and proactive manner to handle financial consumer disputes, so as to win public trust.

In addition, an amendment to "Securities and Exchange Act" was promulgated on 4 January 2012 in order to further increase the depth and breadth of Taiwan's securities markets. Key amended provisions include the following: (1) a new chapter focusing specifically on foreign companies has been added in order to flesh out legislative provisions governing foreign companies when they seek to list their securities in Taiwan; (2) the range of companies that are required to prepare IFRS-compliant financial reports has been specified in order to facilitate efforts to bring Taiwan more closely in line with international accounting principles; (3) a newly added provision gives shareholders of companies listed on the Taiwan Stock Exchange, GreTai Securities Market, or the Emerging Stock Market the right to apply for investigation of certain company matters in order to protect their interests; and (4) for applications to list securities, suspend a listing, reinstate a suspended listing, or permanently delist securities, the FSC has switched from a prior approval requirement to a registration requirement in order to accommodate standard operating practices within the industry.

We also completed an amendment to the "Insurance Act" in 2011, key points of which include the following: (1) life insurance enterprises engaged in foreign-currency denominated non-investment life insurance business are now allowed to apply to the competent authority for permission not to count investments made in connection with this type of business against the quota for their total foreign investments; and (2) all insurance agencies and insurance brokerages bigger than a certain size are required to establish internal control and internal audit systems in order to ensure sound development of the insurance industry. In addition, the need for prudential supervision and observance of financial accounting principles must be properly balanced with the business needs of insurers, the FSC established a foreign exchange volatility reserve mechanism in late 2011. Under the mechanism, life insurers since 1 March 2012 have had the option of regularly setting aside provisions to their foreign exchange volatility reserve to establish a buffer against foreign exchange volatility. The FSC has also adopted a coordinated set of related measures designed to afford life insurers greater flexibility in their efforts to manage currency risk and reduce costs, thereby achieving stronger financial footing.

2011 was also a very good year for cross-strait financial ties. The FSC and the mainland's China Banking Regulatory Commission established the Cross-Strait Banking Supervisory Cooperation Platform, thus inaugurating a framework for systematic, regular meetings between supervisory authorities from the two sides. The two sides have met twice so far, and have already helped the mainland branches of six Taiwan banks commence business operations. Thanks to commitments made under the Early Harvest lists of the Economic Cooperation Framework Agreement (ECFA), these banks have been able to apply for permission to handle RMB banking business for Taiwan-invested firms in the mainland, and one of the banks has already had its application approved. In addition, financial services firms are now much less restricted in the range of business activities that they are allowed to conduct on the other side of the Taiwan Strait. For example, we have eliminated restrictions on the permissible business scope of domestic banking units (DBUs), offshore banking units (OBUs), and offshore commercial representations of Taiwan banks, as well as restrictions on what kind of counterparties they are allowed to do business with. In addition, the OBUs and offshore commercial representations of Taiwan banks are now allowed to handle RMB banking business. The FSC will continue actively seeking to win more favorable market access conditions in the mainland for Taiwan's financial services firms, and will move forward steadily to promote closer cross-strait financial industry ties and cooperation.

To promote sound development of our financial services industry, the FSC has adopted a set of "financial services development" objectives and strategies, and these have been incorporated among the main policy focuses of the government's "Golden Decade, National Visions" plan. Looking to the future, the FSC will continue implementing a series of initiatives in line with the Golden Decade plan and the financial services development strategies. In this regard, we have identified "the development of financial services with special cross-strait characteristics" and "development of a Taiwan-centered Personal Financial Planning Platform" as the two main strategies for developing our financial services industry. By developing financial services with special cross-strait characteristics, we hope to see domestic financial services firms: (1) make use of cross-strait economic and trade activities as a foundation for integrating their domestic branches, overseas commercial branches, and their commercial presences in the mainland; and (2) plan for the development of services related to the needs of Taiwan-invested enterprises in the mainland. By developing a Taiwan-centered Personal Financial Planning Platform, we hope to achieve the goal of "getting the money of our citizens into domestic financial institutions, where it is handled by our citizens and invested globally to obtain maximum returns for our citizens."

Yuh-Chang Chen, Chairman

Financial Supervisory Commission (FSC)

The Financial Supervisory Commission (FSC) is the competent authority responsible for supervising, regulating, and facilitating the development of financial market and financial services in Taiwan, and for conducting financial examinations. The FSC helps to create a business climate that is favorable to the needs of financial institutions here. My Commission carefully monitors the financial and business soundness of financial institutions, pays close attention to their corporate governance, and works continually to strengthen safeguards for financial consumers. Our key goal has always been to keep the financial market moving in a positive direction over the long term.

Thinking has changed in the field of financial supervision since the 2008 financial crisis. The number one concern of reform efforts has shifted to the need for stronger prudential supervision at both the micro and macro levels, and for beefed up protections of financial consumers. The financial service industry is covered under the Early Harvest list of the cross-strait Economic Cooperation Framework Agreement (ECFA) signed in June 2010. This marks a significant milestone and turning point in the development of our financial service industry. In response to changes in economic and financial conditions at home and abroad, and to keep in step with the latest international trends in financial supervision, the FSC needs to make adjustments to its financial sector development strategy, and to the focus of its supervisory work. With that goal in mind, and heedful of the principles of prudential supervision, we are encouraging financial institutions to innovate and expand their markets. At the same time, we are also improving safeguards for financial consumers, strengthening capital adequacy and risk management, pushing for greater internationalization, gradually building up cross-strait ties in the financial industry, expanding the size of capital markets, and taking steps to establish Taiwan as a capital-raising platform. These measures are intended to make our financial institutions more competitive, increase the soundness of their business operations, maintain financial stability, and promote the development of our financial markets.

Enhancing consumer safeguards: The FSC sent a draft version of the  Financial Consumer Protection Act to the Legislative Yuan, which passed it into law on 3 June 2011. This act requires that the provisions in financial transaction contracts must be fair, advertising must be truthful, and risks must be properly disclosed. It also sets out the procedures for filing a complaint in the event of a dispute, and specifies how complaints are to be examined and handled. The act provides a legal basis for the establishment of a dispute resolution body, and provides for non-litigious means of resolving consumer disputes. These measures are designed to protect consumers, who are at a disadvantage in terms of financial resources and professional expertise. In addition, the FSC will continue working to promote financial literacy, exercise more rigorous reviews of applications for the issuance of structured notes, classify investors according to their expertise while carrying out channel regulation, and strengthen regulation of the advertising, soliciting, and promotional activities of financial institutions. We will also be paying very close attention to their disclosure of the rights, obligations and risks connected with financial products.

Strengthening capital adequacy and risk management: The recent trend in international financial supervision is to pay close attention to the quality and quantity of regulatory capital, to ensure it is sufficient to absorb future losses. The Basel Committee on Banking Supervision (BCBS) on 16 December 2010 raised minimum capital requirements and issued new rules governing buffer capital. The FSC, in order to strengthen the capital adequacy and risk management of our financial institutions, has required banks to draw up proper plans for long-term capital allocations and dividend policies. In addition, in order to facilitate the business management needs of financial institutions, we also raised the maximum bank deposit guarantee to NT$3 million, and at the end of 2010 discontinued the blanket deposit guarantee.

Expansion of capital markets and establishment of funding platform: In order to enhance the depth and breadth of Taiwan's capital markets, and encourage high-quality firms of strategic significance to list in Taiwan, the FSC is working to upgrade the skills of financial industry professionals and reassess the underwriting system, and has also amended legal provisions pertaining to insider trading and the business activities of foreign firms in Taiwan. These measures are intended to build up Taiwan as a capital-raising platform for high-tech and innovative industries. In order to strengthen corporate governance, we intend to require a broader range of listed companies to establish independent directors and executive compensation committees, and encourage companies to work harder to ensure ethical business practices and fulfill their corporate social responsibility.

Promotion of internationalization: The FSC encourages financial institutions to actively develop a global presence. We are also taking active part in international financial bodies, and are entering into MOUs with other authorities in order to expand Taiwan's international participation and cooperation in the financial world, and to help our financial institutions develop their overseas businesses. In March 2011, the FSC officially became a full signatory to the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (IOSCO MMOU).

Building up cross-strait ties in the financial field: The financial service is covered under the Early Harvest list of the cross-strait Economic Cooperation Framework Agreement (ECFA) signed in June 2010, which is very helpful to Taiwan's financial service firms in their efforts to establish a presence in mainland China. In line with our government's overall policy with mainland China, the FSC will actively seek advantageous market access for our financial service firms to expand the scope of their business activities. In addition, we will also adjust restrictions on the access of financial firms from mainland China into our market, in accordance with the principles of parity and prudential supervision so as to ensure that these changes do not have any significant impact upon the domestic market.

The FSC has always encouraged financial institutions to keep in step with changing societal and economic conditions, and the evolving needs of their customers, by developing new products and innovative new business models. With regard to the plans of financial institutions to meet their business development needs by engaging in M&A activities, the FSC will be concentrating its efforts on establishing a fair, reasonable, and transparent legal environment. While abiding by the principles of prudential supervision and respecting market mechanisms, we will take a close look at the financial soundness of firms engaging in M&A activities to make sure that such activities do not erode their capital base. At the same time, we will also be carefully tracking post-M&A situations to watch for any deterioration in firms' financial and operational soundness, or any decline of market fairness and discipline. We must be vigilant on all these fronts in order to safeguard the interests of shareholders, employees, and customers.

The FSC stands ready to review conditions in Taiwan's financial industry as well as trends and practices in international financial supervision. Where the resulting findings indicate changes are necessary, we will adjust our supervisory policies and measures, and amend legislation. Placing equal emphasis on financial stability and respect for market mechanisms, and maintaining a positive focus on what can be done to improve the industry, we will be taking steps to create a favorable business climate for financial institutions. Our vision is to facilitate the growth of financial markets and the development of financial service industries.

Yuh-Chang Chen, Chairman

Financial Supervisory Commission (FSC), Executive Yuan

June 2011

May 2010