萬國法律事務所

The Basel Committee on Banking Supervision has decided to increase bank capital ratios starting in 2013, and banks will be asked to increase the core Tier 1 capital from 2% to 7%. Although Taiwan is not a member of the Basel Committee, according to an official of the Financial Supervisory Commission (FSC), the agency that oversees Taiwan’s banks, Taiwan will adopt the Basel Committee policy of the international financial system.

According to Regulations Governing the Capital Adequacy Ratio of Banks, Tier 1 capital consists of the aggregate of common shares, non-cumulative perpetual preferred shares, non-cumulative subordinated debts without maturity dates, advanced receipts for capital shares, capital surplus (apart from fixed asset appreciation surplus), legal reserves, special reserves, retained earnings (less any insufficiency of the operating reserves and allowance for bad debt), minority interests, and equity adjustment, minus goodwill and treasury stocks. But, according to an officer at one domestic bank, if Tier 1 capital will only consist of common shares after the application of Basel III, such new calculation formula will lower the current Tier 1 capital ration.

With respect to the Tier 1 capital of Taiwan’s domestic banks, according to the Central Bank of the Republic of China, Tier 1 capital to risk-weighted assets of domestic banks is averaged at the rate of 8.89%, of which HSBC Taiwan is at the highest rate of 14.17% and Taiwan Business Bank has the lowest rate at 6%. Further, according to a foreign investment analyst, the ratio of common shares of banks mainly held by the government and middle-sized or small-sized banks is less than 7%. If the new regulations require increasing the ratio of common shares, the aforementioned banks will need to have a capital increase in cash.