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FSC Publishes Supporting Measures for Developing Domestic Banks'' Financial Intermediary Functions

2021-07-01
The Coronavirus disease 2019 (Convid-19) outbreak has affected the stability of the global economy and financial system since 2020. The Financial Supervisory Commission (FSC), after referencing the practices adopted by other financial supervisory authorities, has issued interim measures related to capital requirement of the banking sector to prompt banks to devote resources to providing credit to enterprises and individuals that could mitigate the impact of the pandemic on  real economy and ensure the banking system to maintain its financial and operational risk bearing capacity. Besides, with relief measures     adopted by the government, domestic banks also provided moratorium or extensions for those who suffered from the pandemic to help them through the pandemic.
To encourage domestic banks to keep developing financial intermediary functions and supporting enterprises and individuals with funding need, the FSC convened a video conference with 6 domestic systemically important banks (D-SIBs) on June 23, 2021, and reached the following consensus:
1.    Deferring the implementation of the " Basel III: Finalising Post-Crisis Reforms" (hereinafter referred to as the Finalized Document) by one year.
(1)    The Basel Committee on Banking Supervision (BCBS) announced the deferral by one year on March 27, 2020. The Finalized Document announced in December 2017 will be implemented starting from 2023. The capital adequacy requirement in the Finalized Document included the standardized approach and internal ratings-based (IRB) approach for credit risk, market risk and operational risk, leverage ratio and output floor requirements.
(2)    As the financial supervisory authorities of Hong Kong, Canada, and Australia have recently announced additional deferral of all or part of requirements of the Finalized Document, the FSC will defer the implementation schedule of the Finalized Document in Taiwan by one year to 2024. In addition, the FSC will also complete the amendments of regulations as soon as possible for domestic banks to prepare in advance and those who are willing to apply for the adoption of the IRB approach to submit their applications.
2.    Deferring the implementation of 2% additional internal capital requirement that D-SIBs must meet: To ensure domestic banks' capacity for supporting the real economy, the FSC, after exchanging views with D-SIBs, decided to defer the implementation of the 2% additional internal capital requirement  by one year (i.e., implementation shall be achieved before the end of each of four years starting from 2022 to 2025) so that D-SIBs will be flexible to devote more resources to supporting the relief measures. With regard to the schedule for D-SIBs to report the "Contingency plan for business crisis", since D-SIBs stated that they will report the plan on schedule before the end of August 2021, no adjustments were made.
The FSC stated that as of the end of March 2021, the average common equity ratio, tier 1 capital ratio, and capital adequacy ratio, of the domestic banks were 11.85%, 12.81%, and 14.77%, respectively, showing the sufficient capital adequacy and sound risk bearing capabilities of domestic banks under stress scenario based on the supervisory stress test results in 2021. To balance the sound risk management of domestic banks and relief measures to support the economy, the FSC has adopted the aforementioned prudent supervision measures to lower banks' capital requirements and release internal resources, that have enabled banks to respond to the pandemic, continue to support the needs of enterprises and individuals, and keep developing their financial intermediary functions. The FSC will continue to supervise the risk management of domestic banks, and maintain a resilient and well-functioning financial system.
 
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  • Update: 2021-07-26
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