萬國法律事務所

Dual Currency Deposits (DCD) will not allowed to be sold at bank branches in the future. While conducting regular financial regulatory reviews, the Central Bank of Taiwan and the Financial Supervisory Commission found that bank branches have no license to sell derivative instruments. According to related regulations, bank branches are only allowed to receive documents, but not to promote or sell derivative instruments and only head offices are authorized to sell derivative instruments. This restriction is expected to result in a dramatic reduction of bank transactions involving derivative instruments. Via the Bankers Association, banks are now trying to persuade the Central Bank of Taiwan and the Financial Supervisory Commission (FSC) to waive this restriction.

The Bankers Association (BA) claims that as foreign structure notes can be sold legitimately at bank branches, there is no reason to restrict branches from selling DCDs. BA recommends that the Central Bank of Taiwan and the FSC should lift this restriction. However, the authorities are quite conservative and seem unwilling to waive the restriction. The DCD product, as such, is currently unavailable at bank branches.

A DCD is a foreign exchange linked deposit that combines a money market deposit with a currency option. The DCD is composed of a normal deposit and an option. This product provides a significantly higher yield on short-term deposits in one currency, in return for accepting "possible repayment" of the deposit in another currency.

The returns from DCDs may thus be higher than that from normal currency deposits. In the wake of the 2008 financial crisis, DCDs have become a major investment tool, and also one of the most profitable products for banks.

However, high returns usually come with high risk. To protect small investors from suffering losses from investing in these highly-complicated structure notes, Taiwan authorities raised the minimum amounts of investment from US$ 3,000 to US$ 20,000 in 2010. Now, the authorities have banned bank branches from selling DCDs due to the branches lacking the required licenses to deal in DCDs. Bank branches can now only receive documents from clients and transfer them to their head offices, as only head offices are permitted to sell DCD products.