The Financial Supervisory Commission (“FSC”) indicates that in the ongoing efforts to help banks build the capability to provide customers with comprehensive investment and transaction management services, and to promote banks’ development of new financial products, the FSC will promulgate the amended Operation Directions Governing the Custody and Disposal of Clients' Equity-type Foreign Securities Obtained through Physical Delivery of Domestic and Offshore Structured Products or Structured Notes by Banks (Including OBUs) (referred to as the “Physical Delivery Directions” or the “Directions” hereunder) by expanding the scope of applicable products, and including offshore banking units (OBUs) in the applicable entities. 
　　According to the FSC, the Physical Delivery Directions was promulgated on July 18, 2022, mainly in consideration that when banks offer customers onshore structured products in accordance with the Regulations Governing Internal Operating Systems and Procedures for Banks Conducting Financial Derivatives Business (referred to as the “Derivatives Regulations”) or issues onshore structured notes in accordance with the Regulations Governing Banks Conducting Financial Products and Services for High-Asset Customers (referred to as the “High-Asset Regulations” hereunder) and such structured products involve physical delivery of foreign stocks for settlement, banks that do not have securities brokerage license will have to ask their customers to contact a securities firm when they plan to sell the foreign stocks, which is an inconvenience to customers. Thus the FSC issues the Physical Delivery Directions that allows banks to open an account with a securities firm in the name of custodian bank and help customers dispose the physically settled foreign stocks through the account, thereby providing customers with one-stop service. 
　　The amendment this time mainly gives consideration to practical needs which entails expanding applicable products to offshore structured products/notes in proprietary trade, and including OBUs in the applicable entities as summed up below: 
1.    Expanding applicable products to offshore structured products: The Directions originally applies only to onshore structured products traded according to the Derivatives Regulations and onshore structured notes issued according to the High-Asset Regulations. However in consideration that banks also have the needs to make physical settlement when they provide offshore structured products/notes in proprietary trading according to the High-Asset Regulations, the applicable products under the Regulations are expanded to offshore structured products/notes in addition to onshore structured products/notes.
2.    Including OBUs in applicable entities: In consideration that OBUs can also offer custody services, and have practical needs to provide physical settlement related services, OBUs are also included in the applicable entities in this amendment.  

　　The FSC indicates that after the amendment this time, customers who obtain equity-type foreign securities in the physical settlement of the aforementioned onshore and offshore structured products or structured notes through their bank can instruct their bank (including OBUs) to dispose the securities through a securities firm. While customers have access to more convenient services, banks can also expand their one-stop asset management services, offer customers settlement options, increase their ability in the development of innovative financial products and enhance international competitiveness.