In line with the policy to encourage financial innovation, to make financial services widely accessible, and to support financial institutions in the age of digital commerce, Taiwan's Financial Supervisory Commission (FSC) announced on April 26, 2018 Guidelines for Establishing Direct Banks (Guidelines).
According to the FSC's agenda, the first direct bank is expected to be established by the end of 2019. Some requirements stipulated in the Guidelines are as follow:
1. The number of permitted direct banks: 2.
2. Minimum paid-in capital: NT$ 10,000,000,000, the same standard as for regular commercial banks.
3. Scope of business: The scope of business of direct banks is the same as that for regular commercial banks.
4. Qualifications:
(1) To ensure that direct banks meet professional standards, at least one of the promoters must be a bank or a financial holding company; such bank or financial holding company must hold (or promise to hold in a certain period) at least 50% of the shares. Further, the financial and business status of the major shareholder must facilitate management of the direct bank.
(2) Basic principles of major shareholder qualification review:
- A major shareholder must have integrity and must uphold the law. S/he must provide reasonable explanation of his/her interests concerning the direct bank, and must abide by the imperative and prohibitive provisions that regulate the responsible persons of regular banks.
- Managing strategies for the direct bank and collaboration with financial institutions.
- S/he has no disadvantageous effect on the finance and business of the direct bank or on the public interest.
- Explanations on data security measures and the protection of the rights of the future managing team and employees.
- Investment framework for acquiring shares of the direct bank.
- Business and financial evaluation of the direct bank within three fiscal years after acquiring the shares. (A majority shareholder that is a financial institution must also explain the effects of acquiring the shares on the financial institution.)
- For a major shareholder not a financial institution, business models may be provided for review if such shareholder possesses expertise in financial technology or e-commerce.
5. Supervisory principles: The difference between a direct bank and a traditional bank is the channel through which services are provided. A direct bank is in essence a regular commercial bank. Thus, a direct bank must operate under the same existing supervision and comply with the same regulations applicable to regular banks.
6. Business location: Other than the head office and the customer service centers, direct bank businesses cannot establish a physical branch.
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