Regulations Governing the Banking Activity and the Establishment and the Investment by Financial Institution Between the Taiwan Area and the Mainland Area Article 12

The aggregate amount of credit that third-area branches and OBUs of a Taiwan bank extend in the business in Paragraph 1 of preceding article plus the aggregate amount of credit they extend to juristic persons in any country and area outside Mainland Area in which the credit line or funds are transferred for use by any individuals, juristic persons, organizations, other institutions in Mainland Area or their branches in any country and area outside Mainland Area may not exceed 30 percent of the combined net assets of the Taiwan bank’s third-area branches and OBUs after final settlement of accounts in the previous fiscal year. However, the amounts of short-term trade financing and international syndicated loans are not included in the calculation.For a Taiwan bank that meets the following criteria, the Competent Authority may, after consulting the Central Bank with respect to the application, raise the percentage of aggregate amount of credit to net assets up to 50 percent for the credit extension business under the preceding paragraph:1. The bank’s average non-performing loan ratio during the half year before application is below 1.5%;2. The bank’s average loan loss coverage ratio during the half year before application is 80% or higher;3. The bank’s ratio of equity capital to risk-weighted assets for the latest fiscal half year is 10% or higher; and4. The percentage of aggregate amount of credit to the net assets of the bank’s third-area branches and OBUs for credit extension business under the preceding paragraph is already more than 20 percent before the application is made.After a Taiwan bank has been approved by the Competent Authority to raise the percentage (of net assets) for credit extension business according to Paragraph 1 hereof, the Taiwan bank shall report to the Competent Authority on the ratios set out in Subparagraphs 1 to 3 of the preceding paragraph before the end of January and July each year. If the bank fails to comply with the preceding provision, the Competent Authority may reduce the percentage for its credit extension business, and concurrently inform the Central Bank.