FSC issues “Regulations Governing Domestic Juridical Persons Opening Accounts for the Purpose of Handling Loan-related Receipts and Disbursements in Offshore Banking Units”
2022-03-08
Press Release
March 8, 2022
FSC issues “Regulations Governing Domestic Juridical Persons Opening Accounts for the Purpose of Handling Loan-related Receipts and Disbursements in Offshore Banking Units”
To respond to the implementation of economic substance law in the international community, assist Taiwanese businesses in allocating funding across borders, satisfy their needs of cross-border fund allocation, and improve competitiveness in international markets, the FSC promulgated the Regulations on October 26, 2020 to allow domestic juridical persons to open accounts for the purpose of handling loan-related receipts and disbursements in offshore banking units (OBUs). To increase the flexibility for the use of such accounts, the FSC has held a meeting and invited the Central Bank, Ministry of Finance, Bankers Association of the Republic of China, and representatives of banks to exchange views. After that meeting, the FSC announced the draft amendment of the Regulations, and the period of public comments of the draft amendments was completed on February 7, 2022. The Regulations will soon be promulgated, and the amendment is summarized as follows：
1. Relaxed regulations on the transaction counterparties of the loan-related accounts:
The account was previously barred from association with domestic banking unit (DBU) accounts. Due to the practical needs of domestic juridical persons, the FSC allowed the accounts to engage in transactions with foreign currency accounts opened in the DBU of the same domestic juridical persons. (Subparagraph 1 and Subparagraph 2, Article 3 of the Regulations)
(1) Remittance from the DBU foreign currency account in the same domestic juridical persons to the loan-related account for the following loan-related payments: Principal and interest repayment for loans, related fees derived from loans, guarantee deposits for indirect credit facilities such as trade finance or guarantees, and deposits for loan-related foreign currency forward transactions and foreign exchange swaps for hedging purposes. (Item 1, Subparagraph 2, Article 3 of the Regulations )
(2) Remittance from loan-related account to the DBU foreign currency account held by the same domestic juridical persons: Balance of payments after remittance from the DBU foreign currency account for the aforementioned loan-related payments and account balance of the loan-related account after account settlement. (Item 2, Subparagraph 2, Article 3 of the Regulations )
2. Relaxing of opening method: The loan-related account was previously required to be opened through the inward transfer of loan funds and may not be opened through inward remittances. The proviso is enacted for cases where the purpose of the loan is that of an indirect loan such as trade finance or guarantee for which the funds are not directly remitted to the loan-related account. The FSC relaxed credit methods for the aforementioned conditions so that such accounts are not subject to the regulation that requires the first fund remitted to the account to be the loan fund. (Subparagraph 1, Article 5 of the Regulations )
3. Subsequent control restored to the general account management mechanisms: The loan-related account was originally required to control the parking time and maximum amount of customer funds. To increase the flexibility of the use of the account, the related control mechanisms returns to the post-loan management mechanisms and anti-money laundering mechanisms of each bank. (Subparagraph 2, Article 5 of the Regulations )
March 8, 2022
FSC issues “Regulations Governing Domestic Juridical Persons Opening Accounts for the Purpose of Handling Loan-related Receipts and Disbursements in Offshore Banking Units”
To respond to the implementation of economic substance law in the international community, assist Taiwanese businesses in allocating funding across borders, satisfy their needs of cross-border fund allocation, and improve competitiveness in international markets, the FSC promulgated the Regulations on October 26, 2020 to allow domestic juridical persons to open accounts for the purpose of handling loan-related receipts and disbursements in offshore banking units (OBUs). To increase the flexibility for the use of such accounts, the FSC has held a meeting and invited the Central Bank, Ministry of Finance, Bankers Association of the Republic of China, and representatives of banks to exchange views. After that meeting, the FSC announced the draft amendment of the Regulations, and the period of public comments of the draft amendments was completed on February 7, 2022. The Regulations will soon be promulgated, and the amendment is summarized as follows：
1. Relaxed regulations on the transaction counterparties of the loan-related accounts:
The account was previously barred from association with domestic banking unit (DBU) accounts. Due to the practical needs of domestic juridical persons, the FSC allowed the accounts to engage in transactions with foreign currency accounts opened in the DBU of the same domestic juridical persons. (Subparagraph 1 and Subparagraph 2, Article 3 of the Regulations)
(1) Remittance from the DBU foreign currency account in the same domestic juridical persons to the loan-related account for the following loan-related payments: Principal and interest repayment for loans, related fees derived from loans, guarantee deposits for indirect credit facilities such as trade finance or guarantees, and deposits for loan-related foreign currency forward transactions and foreign exchange swaps for hedging purposes. (Item 1, Subparagraph 2, Article 3 of the Regulations )
(2) Remittance from loan-related account to the DBU foreign currency account held by the same domestic juridical persons: Balance of payments after remittance from the DBU foreign currency account for the aforementioned loan-related payments and account balance of the loan-related account after account settlement. (Item 2, Subparagraph 2, Article 3 of the Regulations )
2. Relaxing of opening method: The loan-related account was previously required to be opened through the inward transfer of loan funds and may not be opened through inward remittances. The proviso is enacted for cases where the purpose of the loan is that of an indirect loan such as trade finance or guarantee for which the funds are not directly remitted to the loan-related account. The FSC relaxed credit methods for the aforementioned conditions so that such accounts are not subject to the regulation that requires the first fund remitted to the account to be the loan fund. (Subparagraph 1, Article 5 of the Regulations )
3. Subsequent control restored to the general account management mechanisms: The loan-related account was originally required to control the parking time and maximum amount of customer funds. To increase the flexibility of the use of the account, the related control mechanisms returns to the post-loan management mechanisms and anti-money laundering mechanisms of each bank. (Subparagraph 2, Article 5 of the Regulations )
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2022-03-31