The nation’s five domestic systemically important banks (D-SIBs) would be rewarded with speedy reviews and other privileges from the Financial Supervisory Commission if they meet new capital standards, Banking Bureau Deputy Director Sherri Chuang (莊琇媛) told a news conference on Thursday.
The five banks would not need to apply with the commission for new investments in the financial sector of less than NT$50 million (US$1.7 million), Chuang said, adding that many banks are investing in financial technology, which requires less funds.
The D-SIBs would have advantages when applying to establish new branches in Taiwan and the commission would give them priority if they apply to set up branches in China or other overseas markets, she said.
The banks would also have privileges when applying to launch new businesses and products, Chuang said.
CTBC Bank (中國信託銀行), Cathay United Bank (國泰世華銀行), Taipei Fubon Bank (台北富邦銀行), Mega International Commercial Bank (兆豐銀行) and Taiwan Cooperative Bank (合庫銀行) were designated as D-SIBs by the commission in June due to their importance to the banking system.
They are required to maintain a minimum common equity tier-1 ratio of 9 percent, a minimum tier-1 capital ratio of 10.5 percent and no less than 12.5 percent in total capital adequacy ratio, the commission’s rules say.
The new capital cushion standards are 2 percentage points higher than those for other banks, while D-SIBs are expected to meet the standards in four years, the commission said.
The banks are encouraged to increase their capital by another 2 percentage points to reach a common equity tier-1 ratio of 11 percent, a tier-1 capital ratio of 12.5 percent and a total capital adequacy ratio of 14.5 percent, the commission said.
However, they have complained that meeting the higher standards would make them less competitive.
“As D-SIB is a new mechanism, we will not punish them if they cannot meet the standards in four years,” Chuang said.
“However, we believe that those rewards provide an efficient incentive for them to meet the standards,” she said.
None of the five banks met the standards as of the end of September, bureau data showed.
The banks could consider distributing fewer cash dividends next year or increasing their capital from retained earnings, Chuang said.
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