The FSC announced the preliminary list of D-SIBs in Taiwan and the draft of the amendment to the "Regulations Governing the Capital Adequacy and Capital Category of Banks"
2019-06-27
The Basel Committee on Banking Supervision (the BCBS), following the requests by the G20 Leaders, set out the assessment methodology and policy measures for global systemically important banks (G-SIBs) in 2011 to improve the loss absorbency, capital adequacy and business resilience of G-SIBs and therefore to maintain the stability of the financial system. The BCBS further issued “A Framework for Dealing with Domestic Systemically Important Banks” in 2012 which extended the G-SIBs framework to domestic systemically important banks (D-SIBs) and required individual jurisdictions to identify D-SIBs within their borders and implement strengthened supervisory measures. To be in line with the principles developed by the BCBS for D-SIBs and take into account the practices adopted by the US, the UK, Japan, Hong Kong and Singapore in designating their D-SIBs, the FSC has proposed the assessment methodology and supervisory measures for D-SIBs in Taiwan.
Assessment Factors and Designation Process for D-SIBs in Taiwan:
With regard to the policy framework for D-SIBs in Taiwan, the FSC has developed a methodology for assessing the degree to which banks are systemically important in the domestic markets and identifying whether banks hold significant positions as to the country. The enhanced supervisory measures for the D-SIBs have already been introduced by the FSC to mitigate negative impacts incurred by the business risk of D-SIBs on the entire financial system and therefore maintain soundness of the banking system and support development of the real economy.
With reference to international standards, the FSC utilizes four categories of bank-specific factors in assessing domestic systemic importance of banks in Taiwan: size, interconnectedness, substitutability and complexity. Take into consideration the fact that 100% government-owned banks have the same credibility as the government, the FSC excluded such government-owned banks from the assessment process. Banks in the preliminary list of D-SIBs include CTBC Bank, Cathay United Bank, Taipei Fubon Commercial Bank, Mega International Commercial Bank, and Taiwan Cooperative Bank. The FSC will officially release the list of D-SIBs together with the relevant revised regulations in the near future and will undertake assessment and update the list of D-SIBs periodically.
Supervisory Measures for D-SIBs in Taiwan:
1. 4% Additional Capital Buffer Requirements:
D-SIBs in Taiwan are required to meet 4% additional capital buffer requirements with their CET1 capital in four years after the year of designation. The 4% additional capital buffer includes a 2% additional regulatory capital buffer and a 2% bank’s internal capital buffer. Accordingly, the minimum CET1 ratio, Tier 1 capital ratio and capital adequacy ratio requirements for D-SIBs under this D-SIBs policy framework will be 11%, 12.5% and 14.5% respectively.
2. Contingency Plans for Business Crisis:
After designation, D-SIBs in Taiwan are required to report to competent authorities “Contingency Plans for Business Crisis” in the following years. In such plans, D-SIBs shall elaborate on emergency actions they might take on the occasion of capital shortage.
3. 2-year Stress Test:
Additionally, according to the principles of supervisory review in Pillar II, D-SIBs are mandated to conduct and report 2-year stress test results to competent authorities.
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Update：
2019-10-22