Banking Law of the Republic of
Bureau of Monetary Affairs Ministry of
Finance Financial Research Department The Committee
for Savings Promotion
Banking Law of the Republic of
Promulgated on
As amended and promulgated on
(This Banking Law is written in Chinese and the Chinese version shall govern in the event of any discrepancy with the English translation.)
Banking Law of the Republic of
Contents
Chapter I..............General Provisions................................................ 1
Chapter II............ Incorporation of Bank, and Amendment, Suspension and Dissolution of Their Business........................26
Chapter III.........Commercial Banks................................................34
Chapter IV..........Savings Banks........................................................37
Chapter V............Speclalized Banks............................................... 41
Chapter VI..........Trust Investment Companies.............................46
Chapter VII........Foreign Banks............................................................54
Chapter VIII......Penal Provisions.......................................................57
Chapter IX..........Supplementary Provisions....................................65
CHAPTER I GENERAL PROVISIONS
Article 1
This Law is enacted to streamline banking business, to
provide protection to depositors, to facilitate the development
of productive enterprises, and coordinate the operation of bank
credit with national financial policy.
Article 2
The term "bank" referred to herein means an institution organized
and registered hereunder to conduct banking business.
Article 3
A bank may conduct the following business:
1. accept checking account deposits;
2. accept various other deposits;
3. manage trust funds as entrusted;
4. issue financial bonds;
5. extend loans;
6. discount negotiable instruments;
7. invest in securities;
8. invest directly in productive enterprises;
9. invest in residential and commercial construction;
l0. engage in domestic and foreign remittances;
11. engage in the acceptance of commercial drafts;
12. issue letters of credit;
13. engage in domestic and foreign guarantee services;
14. act as a collecting and paying agent;
15. undertake the underwriting and trading of securities for itself or for its customers;
16. engage in management and consultation for issuing bonds;
17. act as a registrar for the issuance of securities and bonds;
18. manage various kinds of property as trustee;
l9. engage in business related to securities investment trust;
20. buy and sell gold, silver and foreign currencies;
21. engage in warehousing, custodial, and agency services related to any item described above; and,
22. engage in other related business as may be approved by the central competent authority.
Article 4
The scope of business that a bank may be authorized to conduct shall be prescribed by the central competent authority, within the scope of this Law, in accordance with the category to which it belongs and shall be clearly indicated on the banking license issued to it, provided, however, that any business relating to foreign exchange shall be approved by the Central Bank of China.
Article 5
Credit extended by a bank hereunder shall be classified as short-term credit for a term within one year; medium-term credit for a term of more than one year but less than seven years; long-term credit for a term exceeding seven years.
Article 5-1
The term "deposit taking" referred to herein means an act with regard to accepting money or soliciting funds from members of the public or from persons at large on terms that the principal shall be repaid or that a sum equals to or higher than the principal shall be paid.
Article 5-2
The term "credit" referred to herein means the instrument through which a bank may extend loans, grant overdrafts, discount negotiable instruments, issue guaranty, accept drawing on bills of exchange, and engage in other business as approved by the central competent authority.
Article 6
The term "checking account deposit" referred to herein means a non-interest bearing deposit which can, as agreed upon, be withdrawn from time to time by check signed by the depositor or by automation equipment for payment order purposes.
Article 7
The term "demand deposit" referred to herein means a deposit which can be withdrawn at any time by the depositor with a passbook or in any other manner as agreed upon.
Article 8
The term "time deposit" referred to herein means a deposit for a fixed term which can be withdrawn upon maturity by the depositor with a deposit certificate or in any other manner as agreed upon.
Article 9
The term "savings deposit" referred to herein means a demand or time deposit by an individual or a non-profit making body corporate for the purpose of savings.
Article 10
The term "trust funds" referred to herein means funds received by a bank as trustee and managed in accordance with the terms of a trust agreement for the benefit of a beneficiary designated by the trustor.
Article 11
The term "financial bonds" referred to herein means bonds issued upon approval from the central competent authority by a bank in accordance with relevant provisions hereof to provide medium- and long-term credit.
Article 12
The term "secured credit" referred to herein means credit extended by a bank
1. mortgage on movable property or real estate;
2. pledge on movable property or rights;
3. negotiable instrument(s) receivable from business transaction(s) of the borrower; or,
4. guarantee extended by competent treasury authorities at various levels, banks or government authorized credit guaranty organizations.
Article 13
The term "unsecured credit" referred to herein means credit not secured by the collaterals described in the preceding Article.
Article 14
The term "medium- or long-term loan repayable by installment" referred to herein means a loan extended by a bank based on the borrower's ability to repay the debts and governed by a loan agreement entered into by both lender and borrower stipulating the terms of repayment of the principal and interest by installments, and other relevant conditions to be met by the borrower.
Article 15
The term "commercial bills" referred to herein means a bill of exchange or promissory note arising from domestic or foreign commercial transactions in goods or service.
Where the aforesaid bill of exchange is drawn on the person to whom the goods are sold or for whom services are rendered, and is accepted by such person, it is called a "trade acceptance."
Where the aforesaid person commissions a bank to act as the drawee, the bill of exchange accepted by the bank is called a "bank acceptance". The same is true if a bill of exchange drawn by a goods seller or service provider in the amount not exceeding the sales price on the basis of a bill of sale and accepted by the bank commissioned by the seller to act as the drawee.
The term "discount" referred to herein means the purchase by a bank of a bill of exchange or promissory note at a discount by deducting in advance the interest from the face value of the bill of exchange or promissory note.
Article 16
The term " letter of credit" referred to herein means an instrument issued by a bank at the request of a customer to notify and authorize a designated beneficiary, upon performance of agreed conditions, to draw a bill or other instrument in accordance with a prescribed form and within a sum certain in money to be accepted or paid by the bank or its appointed agent.
Article 17
The term "reserve against
deposit" referred to herein means the amount deposited by a bank in the
Central Bank of
Article 18
The term "responsible officer of a bank" referred to herein means the person designated to be responsible in accordance with provisions of the Company Law or other laws or its articles of incorporation.
Article 19
The term "competent authority" referred to herein means the Ministry of Finance of the central government; and the Department of Finance of a provincial or municipal government.
Article 20
The term "bank" referred to herein is classified into the following four categories:
1. commercial bank;
2. savings bank;
3. specialized bank; and,
4. trust investment company.
The name of a bank, unless otherwise set up by the government, shall reflect the category to which it belongs or its speciality.
Article 21
A bank and/or its branches may not commence business until the establishment procedures prescribed in Chapter II have been completed.
Article 22
A bank may not engage in any business other than that authorized by the central competent authority.
Article 23
The minimum amount of capital of various banks in various districts of the country shall be authorized or adjusted by the central competent authority at its discretion according to the population distribution and economic status of each district, and the category to which a bank belongs.
If the capital of a bank does not meet the minimum amount after the aforesaid adjustment, the central competent authority shall instruct the bank to increase its capital within a prescribed time limit and shall revoke its authorization if it fails to comply with the prescribed time limit.
Article 24
Bank capital shall be denominated in the national currency of the Republic of China.
Article 25
Bank stock shall be in the form of registered stock.
Unless the approval of the central competent authority has been obtained, a person shall not hold shares in a bank in excess of 5% of the total issued shares of the bank, nor shall related persons hold shares in excess of 15% in aggregate.
"A person" referred to in the preceding paragraph includes a natural person as well as a body corporate; the ambit of related persons shall extend to cover a person, [his or her] spouse or a relative by blood within the second degree [of that person] or enterprise of which a person or his spouse is the responsible officer of such an enterprise.
If a person or related persons shall have held shares in excess of the limit set by paragraph 2 hereof before this Law comes into force, the central competent authority may make such order with respect to readjustment of shareholding as is practicable.
Article 26
The central competent authority may restrict the establishment of a new bank or of an additional branch in a certain locality depending on domestic economic and financial conditions.
Article 27
The bank may not establish a foreign branch
unless authorized by the central< competent authority in consultation with
the Central Bank of
Article 28
Commercial banks and specialized banks may set up subordinate savings and trust departments; provided that each of such departments provides its own capital and maintains independent operating and accounting systems in compliance with Article 23 Chapters II, IV orVI herein.
Article 29
Unless otherwise provided by the law, a legal entity which is not a bank shall not carry on the business of deposit taking, managing trust funds or managing property entrusted by amember of the public or providing foreign exchange services for domestic and foreign customers.
Whoever contravenes the above shall be banned from the above activities by the competent authority or the authority in charge of the registered business in conjunction with the judicial police organization with a view to prosecuting the same. If the contravention is by a body corporate, its responsible officer shall with regard to relevant obligations be jointly and severally liable to discharge such obligations with the body corporate.
The authorities concerned shall have power, in carrying out their duties with respect thereto, to lawfully search and compound the books of account and other documents, and to remove the sign boards or other facilities or take such actions or dispositions as may be necessary.
Article 29-1
Accepting money or soliciting funds from members of the public or from persons at large, whether by way of loan, accepting investment funds, invitation to become shareholders or in any other name shall be deemed as taking a deposit if [the person who accepts such money or funds] promises to pay or pays a sum by way of bonus, interest, dividends or any other reward, which is grossly disproportionate to the principal sum received.
Article 30
Where a borrower, an applicant for letter of credit, or a guaranteed party is a company limited by shares and, pursuant to a board of directors resolution, has made a written commitment to a bank to establish security over specified assets in favor of the bank as collateral and do not grant to other creditors any pledge or mortgage affecting such assets, the bank extending a loan, issuing letters of credit or providing guarantee may excuse or temporarily suspend mortgage registration on real estate or movable property, and transfer and control of collateral; provided, however, the debitor shall effect the registration or transfer within the time prescribed by the bank whenever the bank deems it necessary.
Where the borrower, the applicant for a letter of credit or the guaranteed party breaches the commitment referred to in the preceding paragraph, the directors participating in making the decision which breaches the commitment shall, along with the person who committed the breach, be jointly and severally liable to compensate for damages.
Article 31
When a bank opens a letter of credit or undertakes acceptance of commercial papers, the contractual relationship between the bank and its customer shall be governed by an agreement.
If a bank engages in the aforesaid operation, the security, if required, shall be provided by the customer pursuant to the provisions of Article 12.
Article 32
A bank shall not extend unsecured credit to an enterprise of which 3% or more of the paid-in capital is held by the bank, the bank's responsible officer, any of its staff members, any of its major shareholders, of any person as an interested party of its responsible officer or any of its credit officers, unless such credit is extended for consumer's credit purpose or to the government.
The amount of the consumer's credit referred to in the preceding paragraph shall be prescribed by the central competent authority.
A major shareholder as referred to herein means a shareholder of the bank who holds 1% or more of the outstanding shares of the bank; where the major shareholder is a natural person at law, the shares held by his or her spouse and minor child (children), if any, shall be counted in the number of shares held by the major shareholder.
Article 33
Where a bank extends secured credit to an enterprise of which 5% or more of the paid-in capital is held by the bank, the bank's responsible officer, any of its staff members, any of its major shareholders, or any person as an interested party of its responsible officer or any of its credit officers, the credit shall be secured against collateral in full, and the terms and conditions thereof shall not be more favorable than those of credit in the same category to other borrowers. If the amount of proposed credit exceeds the limit set by the central competent authority, such proposed credit shall be approved at a board of directors meeting attended by more than two thirds of all directors and at which meeting at least three fourths of the votes held by the directors present are cast in favor of such proposed credit.
The ceiling, the aggregate amount and the
terms and conditions of the credit as well as credit in the same category to
other borrowers referred to in the preceding paragraph shall be prescribed by
the central competent authority in consultation with the Central Bank of
Article 33-1
An interested party as referred to in the two preceding
Articles shall denote one of the following situations:
1. spouse, a relative by blood within the third degree or a relative by marriage within the second degree of the responsible officer or a credit officer of the bank .
2. The enterprise in the form of a sole proprietorship or partnership carried on by the responsible officer or by a credit officer of the bank or by an interested party referred to in 1. above.
3. An enterprise of which 10% or more of its shares or its share capital is held or owned by each and/or all of the responsible officer or a credit officer of the bank or by an interested party referred to in 1. above.
4. An enterprise of which the bank's responsible officer, credit officer or an interested party referred to in 1. above is a director, supervisor or manager unless the office of such a director, supervisor or manager was acquired by virtue of an investment of the bank and with the approval of the central competent authority.
5. A body corporate or other form of organization of which any of the bank's responsible officer, credit officer or an interested party referred to in 1. above serves as the legal representative or attorney in fact.
Article 33-2
A bank shall not extend unsecured credit to the responsible officer or the major shareholder(s) of any other bank with which the bank has business relationship, or to an enterprise whose responsible officer is the first-mentioned responsible officer. Where a bank extend secured credit to the foregoing credit recipients, Article 33 shall govern.
Article 33-3
The central competent authority may impose restrictions on credit to be extended by a bank to a person or related persons, or on other transactions to be commensurated between the bank and such persons. The ceiling of such credit shall be prescribed by the central competent authority.
With respect to " a person " and the ambit of " related persons", the provisions of paragraph 3 of Article 25 shall be applicable.
Article 34
A bank shall not solicit deposits by offering subsidies, gifts or any other means in addition to the prescribed interest rate unless a bonus is distributed pursuant to a trust fund agreement.
Article 35
The responsible officer or staff members of a bank shall on no account accept commission, compensation, or other undue benefit from a depositor, borrower, or other customer in any form whatsoever.
Article 35-1
The responsible officer or staff members of a bank shall not concurrently hold any position in another bank, except that with prior approval of the central competent authority, he or they may sit on the board of directors or supervisors of such other bank by virtue of the bank's equity participation in that bank.
Article 35-2
The qualification for a bank's responsible officer shall be prescribed by the central competent authority.
Article 36
The central competent authority, when
necessary, may, after consulting with the Central Bank of
The central competent authority, when
necessary, may, after consulting with the Central Bank of
The major assets and the major liabilities referred to in the preceding paragraph shall be defined by the central competent authority after taking into account the nature of business engaged in by banks of various kinds.
Article 37
A bank shall, in extending a loan, determine the value of the borrower's pledged or mortgaged property on the basis of such property's current market value, rate of depreciation and market ability.
In order to regulate credit, the Central
Bank of
Article 38
A bank may extend a medium- or long-term loan for the purpose of financing the purchase and construction of residential or commercial buildings, provided that the maximum term shall not exceed 20 years.
Article 39
A bank may extend a medium-term loan to an individual for the purchase of durable consumer goods; or it may discount a promissory note for said purchase, issued by the purchaser and endorsed by the distributor/seller.
Article 40
The method of handing medium- and long-term
installment loans may apply to the loans mentioned in the preceding two
Articles. If necessary, the Central Bank of
Article 41
The bank interest rate shall be based on a rate per annum and shall be displayed at the place of business.
Article 42
The reserve against deposit ratio shall be
fixed within the following range by the Central Bank of
1. checking account deposit: 15% to 40%
2. demand deposit: 10% to 35% 3. savings deposit. 5% to 20%
4. time deposit: 7% to 25%
The aforesaid reserve against deposit shall
be adjusted according to the bank's daily deposit balance. The adjustment and
auditing methods shall be prescribed by the Central Bank of
In order to regulate credit the Central Bank of China, when necessary, may establish a separate reserve against deposit ratio for checking account deposits and demand deposits effective from a certain date, notwithstanding the maximum ratio prescribed in paragraph 1 (of this Article).
Article 43
In order to urge a bank to maintain proper
liquidity of its assets, the Central Bank of
Article 44
In order to provide for a sound financial standing for banks, the ratio of a bank's shareholders' equity to its risk weighted assets shall not be less than 8% unless it is otherwise approved by the central competent authority. If the said ratio is less than the prescribed ratio, the bank's power to distribute surplus profits may be restricted by the central competent authority subject to such regulations as may be enacted by the central competent authority.
The scope and calculation of shareholders' equity and risk weighted assets referred to in the preceding paragraph shall be prescribed by the central competent authority.
Article 45
The central competent authority may at any time assign it's own official(s), request any appropriate institution(s), or direct the local competent authority to assign its official(s) to audit a bank's or related persons' business operations, finance and other related matters, or may direct the bank or the related persons to prepare and submit based on facts, within a prescribed time limit, its or their financial statements, inventory of properties or other relevant information and reports.
The central competent authority, when necessary, may assign specialists or technicians to verify such matters, statements or reports as are required to be audited pursuant to the preceding paragraph and to submit reports based on facts found to the central competent authority at cost to the bank.
Article 46
A deposit insurance organization may be formed by the government or banks in order to safeguard the interests of depositors.
Article 47
Banks may draw up regulations and form an interbank borrowing organization in order to regulate their reserves among themselves and to enhance the efficiency of money and credit regulation.
Article 47-1
Any institution engaged in the business of
money market transactions or credit card services shall obtain approvals to
that effect from the central competent authority. Regulations of such business
shall be prescribed by the central competent minimum standard,
the central competent authority shall notify the bank to adjust the ratio
within a prescribed time limit. authority after
consulting with the Central Bank of
Article 48
A bank may not accept a third party's order to stop payment from a deposit or a remittance or to take possession of collateral or objects in custody or other similar requests unless pursuant to court judgment or other provisions of law. Unless otherwise provided by law or by regulations of the central competent authority, a bank shall not divulge any information of its customers relating to deposits, loans and remittances.
Article 49
At the close of each fiscal year, a bank shall submit its business report, balance sheet, inventory of property, profit and loss statement, and resolution on distribution of surplus profit to the central competent authority and the Central Bank of China for recording within 15 days after they are ratified by the shareholders' meeting and shall publish the balance sheet in a daily newspaper circulating in the vicinity.
Article 50
A bank shall, after payment of taxes but before making any distribution of surplus profit, set aside 30% its surplus profit as legal reserve; any distribution of surplus profit in cash shall not exceed 15% of the authorized capital before the legal reserve shall have equaled the authorized capital.
When the legal reserve shall have equaled the authorized capital, a bank shall not be bound by the restriction imposed by the preceding paragraph.
A bank may, in addition to the legal reserve, provide for special reserve in accordance with its articles of incorporation or by resolution of the shareholders' meeting.
Article 51
The business hours and holidays of banks may be prescribed and announced by the central competent authority.
CHAPTER II INCORPORATION OF BANKS, AND AMENDMENT, SUSPENSION AND DISSOLUTION OF THEIR BUSINESS
Article 52
A bank shall be a body corporate. Unless the law otherwise provides or unless it has been specially approved prior to the amendment of this Law, a bank shall be a company limited by shares.
The requirements for the establishment of a bank or a financial institution in accordance with this Law or other laws shall be prescribed by the central competent authority.
Article 53
The following items shall be submitted to the central competent authority in obtaining authorization to incorporate a bank:
1. the category to which a bank belongs, its name and type of organization;
2. its total capital;
3. its business plan;
4. its domicile of principal office and branches; and,
5. its name, native place, domicile and residence, history of employment, and amount of share subscription of the promoters.
Article 54
After obtaining the authorization of the competent authority, a bank shall be incorporated as a company pursuant to the provisions of the Company Law. After the capital is fully paid in and company registration completed, the bank shall apply for a business license to the central competent authority with the following documents:
1. certificate of incorporation;
2. certificate of
paid-in capital issued by the Central Bank of
3. articles of incorporation;
4. list of shareholders and minutes of shareholders' meetings;
5. list of directors and minutes of directors' meeting; and,
6. list of managing directors and minutes of managing directors' meeting; and,
7. list of supervisors and minutes of supervisors' meeting.
When a bank not organized as a company limited by shares is granted authorization by the central competent authority, it may apply directly (to such authority) for a business license, in which case the provisions of the preceding paragraph shall apply mutatis mutandis.
Article 55
When a bank commences its business operations, the particulars listed on the business license issued by the central competent authority shall be posted at its head office and branches.
Article 56
If an application for a business license is found by the central competent authority after issuance (of such license) to contain any materially false statement or misrepresentation, the authorization granted to the bank shall be revoked immediately.
Article 57
A bank shall, in establishing a branch, submit a business plan and location of the branch to the central competent authority for approval and issuance of a business license. Before the relocation or revocation of such a branch, the bank Article 59 shall also apply to the central competent authority for approval.
When a bank intends to establish, relocate or revoke its office(s) of non-business purpose, or auto-service equipment outside its business establishments, the bank shall file with the central competent authority an application to that effect. The bank may effect such establishment, relocation or revocation if the central competent authority does not reject that application within a specific time period following that application; provide, however, that the bank shall not proceed to effect such establishment, relocation or revocation during the waiting period.
Regulations of the preceding two paragraphs shall be prescribed by the central competent authority.
Article 58
Proposed merger of banks or alteration of registration particulars pursuant to paragraphs 1, 2 or 4 of Article 53, shall be subject to the approval of the central competent authority; thereafter, the bank shall apply for alteration of company registration and a new business license.
The aforesaid merger or alteration shall be posted at the bank's head office or branch within 15 days after the issuance of a new business license.
Article 59
Where a bank violates paragraph 1 of the preceding Article, the central competent authority shall order the bank to suspend its operations and make the necessary corrections within a prescribed time limit.
Article 60
When applying for a business license, a bank is required to pay a license fee, the amount of which shall be decided by the central competent authority.
Article 61
Where a bank is to be dissolved by a resolution of a shareholder's meeting, the bank shall submit the reason for dissolution together with the minutes of the shareholders' meetings and plans for repayment of debts to the central competent authority for approval before proceeding with liquidation.
The central competent authority shall revoke the authorization granted to the bank immediately upon approval of the dissolution pursuant to the preceding paragraph.
Article 62
If the business or the financial condition of a bank is such that it is unable to pay its debts or there develops a situation where the interest of its depositors may be in jeopardy, the central competent authority may order the bank to suspend its business and set a time limit for the bank to reconstruct, to cease carrying on part of its business, to appoint an inspector to supervise the conduct of the business, to take over the business of the bank or to take such action as may be necessary, and may request the authority concerned to restrict the responsible officer of the bank to leave the country.
The central competent authority may suspend all or some of the powers of shareholders' meetings, directors or supervisors at the time of appointing an inspector to supervise the conduct or to take over the business of the bank.
The regulations for inspection and take-over of the business of a bank referred to in the two preceding paragraphs shall be made by the central competent authority.
With regard to the suspension of business referred to in paragraph 1 hereof, the bank may apply to the central competent authority for permission to resume business within the period of time set for reconstruction, provided that it has recovered its ability to pay its debts within said period of time. If a bank should fail to resume business within the time set by the central competent authority for reconstruction, the central competent authority shall revoke the authorization granted to the bank. In such an event, the time when the bank is ordered to suspend business shall be deemed to be the time when winding up shall commence and the procedure with respect to reconstruction shall be deemed that of liquidation.
The provision of the four preceding paragraphs shall apply
mutatis mutandis to a bank or to a financial institution established pursuant to a law other than this Law.
Article 63
Unless otherwise provided herein the provisions pertaining to the ordinary liquidation proceedings of a company limited by shares shall apply mutatis mutandis to the liquidation of a bank or settlement of its debts. However, special liquidation proceedings shall be followed if the liquidation is caused by reasons described in Article 335 of the Company Law or where the situation mentioned in paragraph 2 of the preceding Article exists.
The aforesaid settlement proceedings shall be supervised by the competent authority, which may send an official to oversee the proceedings.
Article 64
Where the accumulated losses of a bank exceed one-third of its capital, its directors or supervisors shall report this immediately to the central competent authority. The central competent authority may order the aforesaid bank to replenish its capita] loss within a prescribed time limit. If the bank fails to do so, its operations shall be suspended.
Article 65
Where a bank has been ordered to suspend operations and has failed to correct relevant matters within the prescribed time limit, the central competent authority shall revoke its authorization.
Article 66
Where the authorization of a bank has been revoked by the central competent authority, the bank shall declare dissolution and shall commence liquidation proceedings immediately.
Article 67
Where a bank's dissolution has been approved or authorization revoked, it shall submit its business license (to the central competent authority) for cancellation within a prescribed time limit. Should it fail to do so, the central competent authority shall cancel its business license by public announcement.
Article 68
A court shall consult with the central competent authority in supervising the special liquidation proceedings of a bank. When necessary, the court may request the central competent authority to recommend a liquidator or appoint an official representative to assist the liquidator in executing the proceedings.
Article 69
After commencing liquidation proceedings, a bank may not amortize any capital stock or distribute any dividends unless all debts have been paid in full. During the course of liquidation, the bank shall dispose of its trust funds or trust properties to pursuant the terms of the trust agreement.
CHAPTER III COMMERCIAL BANKS
Article 70
The term "commercial bank" referred to herein means a bank whose primary functions are to receive checking account deposits and extend short-term credit.
Article 71
A commercial bank may engage in the following operations:
1. receive checking account deposits;
2. receive demand deposits;
3. receive time deposits;
4. extend short-term and medium-term loans;
5. discount negotiable instruments;
6. invest in government bonds, short-term bills, corporate bonds, and financial bonds;
7. engage in domestic and foreign remittances;
8. engage in acceptance of commercial drafts;
9. issue domestic and foreign letters of credit;
10. engage in domestic and foreign guaranty business;
11. act as a collecting and paying agent;
12. underwrite government bonds, treasury bills, corporate bonds, and company stocks;
13. engage in warehousing, custodial, and agency services related to any business described above; and,
14. engage in other related business as may be approved by the central competent authority.
Article 72
The total outstanding amount of medium-term loans extended by a bank may not exceed its balance of time deposits received.
Article 73
A commercial bank may extend credit to securities dealers or securities finance companies in connection with issuance and trading of securities.
The regulations governing the aforesaid credit facilities shall be prescribed by the Central Bank of China.
Article 74
A commercial bank may not invest in real estate which it does not use itself or in other enterprises, unless such investment is in line with a government economic development project and is approved by the central competent authority.
Article 75
A commercial bank's investment in real estate for its own use, with the exception of warehouses for business use, may not exceed the bank's net worth at the time of investment. Investment in warehouses for business use shall not exceed 5% of the total balance of deposits at the time of such investment.
Article 76
Real estate or securities acquired by a commercial bank through foreclosure of mortgage or pledge, except those acquired in compliance with the provisions of Articles 74 or 75, shall be disposed of within two years from the date of acquisition.
CHAPTER IV SAVINGS BANKS
Article 77
The term "savings bank" referred to herein means a bank whose primary functions are to receive savings from the general public through the receipt of deposits and the issuance of financial bonds in order to extend medium- or long-term credit.
Article 78
A savings bank may engage in the following operations:
1. receive savings deposits;
2. receive time deposits;
3. receive demand deposits;
4. issue financial bonds;
5. extend medium-term loans, loan-term loans as well as medium- and long-term loans repayable by installment to enterprises for the purchase of production equipment;
6. extend medium-term loans and medium- and long-term loans repayable by installment for the purpose of financing construction of commercial and residential buildings;
7. invest in government bonds, short-term bills, corporate bonds, and company stocks;
8. discount negotiable instruments;
9. engage in acceptance of commercial drafts;
10. engage in domestic and foreign remittances;
11. guarantee issue of corporate bonds;
12. act as a collecting and paying agent;
13. underwrite government bonds, treasury bills, corporate bonds, and company stocks;
14. engage in domestic and foreign guaranty business approved by the central competent authority;
15. engage in warehousing, custodial, and agency services related to any business described above; and,
16. engage in other related business as may be approved by the central competent authority.
Article 79
Time savings deposits shall not be withdrawn prior to the date of maturity, but the deposits may be either pledged by the depositors as security for loans to be obtained from the particular bank or terminated before the date of maturity on seven-day advance notice.
The regulations governing the aforesaid pledging or terminating of deposits shall be prescribed by the central competent authority in consultation with the Central Bank of China.
Article 80
Financial bonds issued by a savings bank may be sold at a discount or at a premium, but may not be redeemed for a period of less than 2 years from the date of issue.
The maximum amount of financial bonds issued by the savings bank shall not exceed 20 times the net worth of the issuing bank. Regulations governing the issuance shall be prescribed by the central competent authority in consultation with the Central Bank of China.
Article 81
The savings department of a commercial bank or a specialized bank may not issue financial bonds.
Article 82
A savings bank may extend short-term loans. However, the total outstanding short-term loans and discounted negotiable instruments may not exceed the total balance of its demand deposits and time deposits received.
Article 83
The investment in securities made by a savings bank shall be appropriately restricted, and the central competent authority shall prescribe the kind and the ceiling of such investment.
Article 84
Loans extended by a savings bank for the purpose of construction or purchase of residential or commercial buildings shall not exceed 20% of the aggregate amount of the total balance of deposits received and the financial debentures issued at the time of extending the loan(s), except that the loans are home loans extended against savings with prior approval of the central competent authority and for the purpose of encouraging savings and facilitating the purchase of homes for own use.
If the situation requires, the central competent authority may prescribe the maximum limit of home loans which savings banks may extend against savings.
Article 85
Where a bank operates a savings department, the transfer of funds between said department and other interbank departments shall be deemed to be that between two banks. Where the bank is adjudicated bankrupt, the external liabilities of the savings department, to be fulfilled from its own assets, shall take precedence over those of other interbank departments.
Article 86
The provisions of Article 75 herein shall apply mutatis mutandis to savings banks.
CHAPTER V SPECIALIZED BANKS
Article 87
To facilitate the availability of special credit for enterprises, the central competent authority may authorize the establishment of a specialized bank or may designate an existing bank to extend such credit.
Article 88
Special credit referred to in the preceding Article is divided into the following categories:
1. industrial credit;
2. agricultural credit;
3. export-import credit;
4. medium- and small-sized enterprise credit;
5. mortgage credit; and,
6. local credit.
Article 89
The scope of business of a specialized bank shall be determined pursuant to Article 3 by the central competent authority depending upon the primary functions of such a bank and the national economic development needs.
Article 90
The provisions of Article 80 shall apply mutatis mutandis to the issuance of financial bonds by a specialized bank whose primary functions are to provide medium- and long-term credit.
The funds collected by a specialized bank from financial bonds issued in accordance with the preceding paragraph shall be used solely for investment in enterprises eligible for financing or used for extending medium- and long-term loans.
Article 91
An industrial bank is a bank specializing in extending industrial credit.
The primary functions of an industrial bank are to extend medium- or long-term credit to meet the needs of industry, mining, transportation, and other public utility enterprises.
An industrial bank with approval from the central competent authority may engage in the operations of paragraph 1 of Article 73 herein.
Article 92
An agricultural bank is a bank specializing in extending agricultural credit.
The primary functions of an agricultural bank are to regulate the finances of rural areas and to extend credit to finance production in agriculture, forestry, fishery, animal husbandry and enterprises relevant thereto.
Article 93
To enhance its function of regulating agricultural credit, an agricultural bank may receive funds through farmers' associations to extend agricultural credit and to engage in financial business relevant to the livelihood of farmers.
Article 94
An export-import bank is a bank specializing in extending export- import credit.
The primary functions of an export-import bank are to extend medium- and long-term credit to facilitate the expansion of the export market and finance the importation of necessary equipment and raw materials for domestic industries.
Article 95
To ensure the supply of important raw materials needed by domestic industries, an export-import bank, with the approval of the central competent authority, may extend credit to domestic enterprises for investment abroad in producing such important raw materials.
Article 96
A medium- and small-sized enterprise bank is a bank specializing in extending medium- and small-sized enterprise credit.
The primary functions of a medium- and small-sized enterprise bank are to extend medium- and long-term credit to medium- and small-sized enterprises, to assist in improving their production equipment and financial structure, and to improve their operations and management.
The scope of business of medium- and small-sized enterprises shall be prescribed by the central competent authority of economic affairs and submitted to the Executive Yuan for approval.
Article 97
A mortgage credit bank is a bank specializing in extending mortgage credit.
The primary functions of a mortgage credit bank are to extend medium- and long-term credit for land development, urban improvement, community development, road construction, tourist facilities, housing construction, etc.
Article 98
A national bank is a bank specializing in extending local credit.
The primary functions of a national bank are to extend short- and medium-term credit required for regional development and to meet the needs of local citizens.
Article 99
National banks shall operate by districts, and in principle, there shall be only one such bank for each locality.
The total amount of loans extended by a national bank to each customer shall not exceed a prescribed amount.
The central competent authority shall prescribe the district within which a national bank is to operate and the ceiling of the total loan amount it may extend to each customer.
CHAPTER VI TRUST INVESTMENT COMPANIES
Article 100
The term "trust investment company" referred to herein means a financial institution which, for a specific purpose and in the capacity of a trustee, receives, manages and employs trust funds and administers trust properties, or acts as an investment intermediary to engage in specific investment related to the capital market. The operation as well as the control and management of a trust investment company shall be governed by this Law. Matters which are not provided hereunder shall be governed by other applicable laws. Regulations for control and management of trust investment companies shall be prescribed by the central competent authority.
Article 101
A trust investment company may engage in the following operations:
1. extend medium- and long-term loans;
2. invest in government bonds, short-term bills, corporate bonds, financial bonds, and listed stocks;
3. guarantee issuance of corporate bonds;
4. engage in domestic and foreign guarantee business;
5. undertake underwriting and trading of securities on its own behalf or for the account of its customers;
6. receive, manage, and employ various kinds of trust funds;
7. raise mutual trust funds;
8. manage various kinds of properties as entrusted;
9. act as trustee for bonds issue;
lO. act as a registrar for issuance of bonds and stocks;
11. act as agent for issuance, registration, transfer of securities, and for distribution and payment of dividends and bonuses;
12. act as executor of wills and administrator of estates of the deceased;
13. act as company reorganization supervisor;
14. provide consultation services for security issue and subscription and provide agency services related to any business described above; and,
15. other related business approved by the central competent authority.
A trust investment company may use non-trust funds in investing directly in productive enterprises or in the construction of residential and commercial buildings.
Article 102
In doing business as an underwriter or as a dealer on its own behalf, a trust investment company shall earmark a special working capital in an amount equal to at least 10% of its net worth. Prior to actual use, such capital may be kept in the form of cash, deposited with other financial institutions, or used to buy government bonds.
Article 103
A trust investment company shall deposit with the Central Bank of China, cash or any CBC-recognized securities as reserves for compensation of trust funds. The ratio of the compensation reserves to the aggregate value of various trust fund agreements shall be determined by the Central Bank of China within the range of 15% to 20%; provided, however, that such total deposited amount shall not be less than 20% of its total paid-in capital.
During the initial business period, a trust investment company shall for the time being set aside the aforesaid compensation reserves in an amount equal to 20% of its total paid-in capital. The ratio shall, after one year's operation, be adjusted at the end of each month according to the standard prescribed in the preceding paragraph.
Article 104
A trust agreement entered into between a trustor and a trust investment company for receipt, management and employment of various trust funds or administration of trust properties shall contain the following items:
1. method and scope of employment of funds;
2. method of property management;
3. distribution of earnings;
4. responsibilities of the trust investment company;
5. submission of accounting report;
6. schedule of fees and expenses and the calculation thereof; and,
7. other relevant matters as agreed upon.
Article 105
A trust investment company shall exercise the care of a good administrator in managing trust funds or trust properties as entrusted.
Article 106
A trust investment company shall be operated and managed by financiers with special expertise and experience who shall be assisted by qualified legal and accounting personnel and by other technicians needed for various kinds of operations.
Article 107
Where a trust investment company causes damage or loss to a trustor through violation of applicable laws and regulations, breach of trust agreement, or for any reason whatsoever attributable to the company's negligence, its directors, the officer-in-charge and the company shall be jointly and severally liable for compensation of such damage and loss.
The aforesaid liability shall extinguish if no suit is filed against the liable director or officer-in-charge within two years after the registration date on which they were relieved of duties.
Article 108
A trust investment company may not perform the following acts unless so authorized by a court decision or by written consent of the trustor, in which event the property shall be purchased at market price, or where the consent of the trustor is not obtained, the property shall be purchased by competitive bidding on the open market:
1. accept the title to trust properties;
2. create or acquire any interests in trust properties;
3 sale or transfer its own properties or interests to trustor;
4. engage in any transactions related to the preceding three items; and,
5. engage in any transaction concerning trust funds or trust properties with the company's directors, staff members or any interested third party connected with the trust funds managed by the company.
A trust investment company engaging in the transactions in accordance with the proviso of the preceding paragraph shall, in addition to submittion to the central competent authority for record, be restricted as follows:
1. when a company decides to engage in a transaction, the director or staff member who has direct or indirect interest in the trust accounts, trust properties or securities in connection with the transaction, shall not participate in the decision-making for that transaction; and,
2. when a trust investment company engages in underwriting, trading of securities, or direct investment on its own behalf or for investors, directors or staff members of the trust investment company, also serving as directors or staff members of the company issuing such securities, shall not participate in the decision-making for that transaction.
Article 109
Prior to the employment of trust funds by a trust investment company according to a trust agreement, or prior to the continuing employment of said trust funds after having been accepted from its previous use, such funds shall be deposited with a commercial or specialized bank.
Article 110
A trust investment company may manage the following trust funds:
1. trust funds for purposes as designated by the trustor;
and,
2. trust funds for purposes determined by the company.
Where the trust funds are to be employed for purposes determined by the trust investment company, the company may specify in the trust agreement its acceptance of responsibility to compensate for any loss of principal.
To compensate for loss of principal, the trust investment company shall, at the close of each fiscal year, make a precise assessment of such principal loss and compensate for such loss by appropriating funds from a special reserve according to the provisions of the trust agreement.
The aforesaid special reserve shall be set aside from annual earnings derived from trust properties in accordance with standards prescribed by the competent authority.
Any surplus remaining in the special reserve after full compensation for principal loss shall be considered the company's earnings; in the event of insufficient funds, the company shall fully compensate for the loss out of its own funds.
Article 111
A trust investment company shall maintain special books and accounts for each trustor and each trust fund. The company shall keep separate accounts for company property and trust property and shall not commingle them.
A trust investment company may not borrow funds and employ them as trust funds.
Article 112
Creditors of a trust investment company may not apply to attach the trust properties or to exercise any other rights thereon.
Article 113
A trust investment company shall set up a trust property assessment commission to assess the trust properties of every trust account once every three months and to report the result thereof to the board of directors of the company.
Article 114
A trust investment company, according to the provisions of the trust agreements and regulations of the central competent authority, shall submit a periodic accounting report to every trustor and to the central competent authority.
Article 115
To issue trust certificates by public offering for raising mutual trust funds a trust investment company shall first draw up a proposal for such proposed issue and then submit the same to the central competent authority for approval.
The regulations governing the control and management of the aforesaid mutual trust funds shall be prescribed by the central competent authority.
Chapter VII FOREIGN BANKS
Article 116
The term "foreign bank " referred to herein means a bank organized and registered under the laws of a foreign country whose branch is recognized by the Government of the Republic of China and is registered pursuant to this Law and the Company Law to operate within the territory of the Republic of China.
Article 117
A foreign bank shall not proceed with establishment within the territory of the Republic of China before obtaining authorization from the central competent authority, and shall not commence operations until application for recognition and registration have been approved in accordance with the Company Law, and business license obtained pursuant to Article 54 herein.
Article 118
To meet the needs of international trade and industrial development, the central competent authority may designate the locations in which foreign banks may be established.
Article 119
An application filed by a foreign bank to obtain authorization for establishment shall, in addition to all the required particulars and documents contained in Article 435 of the Company Law, also state the location of such bank, accompanied by the bank's current balance sheet, profit and loss statement, and a certificate reflecting its credit standing issued by the competent authority of the foreign country of consularized by the consulate of the Republic of China in that country. Article 434 of the Company Law shall apply mutatis mutandis to the person qualified to act as representative or to counsel retained to file the applications, or to the documents attached to the application.
Article 120
A foreign bank shall appropriate funds exclusively earmarked for its business operations within the territory of the Republic of China. The provisions of Article 23 and 24 herein shall apply mutatis mutandis to a foreign bank.
Article 121
The scope of business of a foreign bank shall be prescribed by order of the central competent authority after consultation with the Central Bank of China in accordance with provisions of Article 71, Article 78 and the first paragraph of Article 101 herein. Where the scope covers foreign exchange business, approval shall be sought from the Central Bank of China.
Article 122
Any funds to be received or disbursed by a foreign bank shall be in the national currency of the Republic of China, unless the Central Bank of China has otherwise granted the bank permission to receive foreign currency deposits.
Article 123
The Chapters regarding commercial banks and trust and investment companies, and Article 79 and 84 of the Chapter regarding savings banks, shall apply mutatis mutandis to matters not provided for in this Chapter.
Article 124
Where a foreign bank acquires real estate necessary for its business operations, Article 376 of the Company Law shall govern.
CHAPTER VIII PENAL PROVISIONS
Article 125
Any person who violates the first paragraph of Article 29 hereof shall be imprisoned not less than one year but not more than seven years and may be fined not more than NTD 3,000,000.
Where the aforesaid offense is committed by a body corporate, the person(s) responsible therefor shall be punished.
Article 126
Where a company limited by shares breaches the commitment referred to in Article 30 hereof, the directors participating in making the decision which breaches the commitment shall, along with the person who committed the breach, be imprisoned not more than 3 years, detained