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Implementation of Financial Examinations

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Legal basis:

According to Paragraph 1 of Article 2 and Article 4 &5 of the “Organic Act of the Financial Supervisory Commission (FSC)” and other applicable financial regulations, the Financial Examination Bureau (FEB) conducts financial examinations at financial institutions within the FSC’s jurisdiction. In addition, according to Paragraph 1 of Article 7 of the “Agricultural Finance Act”, the FEB conducts examinations at agricultural financial institutions empowered by the Council of Agriculture, Executive Yuan.

Types of financial examinations:

Financial examinations consist of full-scope examinations, targeted examinations and commissioned examinations.

The frequency and implementation of examinations:

A. Implementation of Full-scope Examinations:
i. The FEB conducts examinations for head offices of financial institutions, in principle, once during each 2-year period. The examination frequency for these institutions also depends on the results assessed by the differential financial examination mechanism.
ii. Implementation of full-scope examinations in 2018 and 2019:
Units: number of financial institutions
Types of financial institutions20192018
Financial holding companies79
Domestic banks *5048
Foreign bank branches in Taiwan911
Credit cooperatives1211
Bills finance companies53
Life insurance companies1112
Non-life insurance companies137
Securities firms, securities investment trust companies and securities finance companies*1924
*: The statistics include full-scope examinations conducted at head offices, domestic and foreign branches of the institutions.
B. Implementation of Targeted Examinations:

Referring to financial supervisory information and in response to financial supervisory policies, the FEB conducted targeted examinations during the past year as follows:

i. The targeted examinations conducted by the FEB in 2019 were “operations of anti-money laundering, counter-terrorism financing and non-proliferation for various types of financial institutions”, “the FHCs’ management mechanisms of interested-party transactions”, “electronic payment business for domestic banks”, “credit card and cash card business for domestic banks”, “digital financial services of domestic banks”, “domestic banks’ information security of the IoT appliance”, “internal control of domestic banks’ trading rooms”, “domestic banks’ security maintenance, monitoring and emergency response of host system”, “security control of information system and internal management (including the operations of anti-money laundering) for Chunghwa Post Co., Ltd.”, “internal management for the cross-district branches or the branches in remote areas of Credit Unions”, “business management and IT operations for the electronic payment institutions”, “securities investment business for insurance companies”, “operations for preventing conflicts of interest with regard to equity trader for life insurance companies”, “the implementation of IFRS 9 for life insurance companies”, “broker business of insurance brokerage firms, insurance agent companies and reinsurance companies”, “sub-brokerage business for securities firms and broker business of securities firms’ branches”, “Robo-Advisor business for securities investment trust companies and securities investment consulting companies”, “discretionary investment business and the business of master agents of offshore funds for securities investment trust companies”, and etc.
ii. The targeted examinations conducted by the FEB in 2018 were “operations of anti-money laundering, counter-terrorism financing and non-proliferation for various types of financial institutions”, “corporate governance of FHCs”, “information security on SWIFT systems for the domestic banks and foreign bank branches in Taiwan”, “compliance of cybersecurity of financial services for domestic banks”, “credit businesses for the branches of the domestic banks”, “practices of establishing anti-money laundering and terrorism financing database for the domestic banks”, “mortgage loans of the domestic banks”, “improvement of the domestic banks’ deficiencies found in financial examinations and the implementation of the domestic banks’ internal audit”, “operations management of the domestic banks’ foreign branches (subsidiaries)”, “broker business of the securities firms”, “target maturity bond fund of securities investment trust companies”, “real estate and securities investment of insurance companies”, “electronic commerce systems of life insurance companies”, “insurance brokers’ and insurance agents’ business by the bancassurance channel”, “business operations and IT operations of the electronic payment institutions and electronic stored value card issuers”, “business operations and IT operations of institutions engaging in credit card business”, etc.
C. Commissioned examinations:

According to Paragraph 1 of Article 7 of the “Agricultural Finance Act”, the FEB conducts examinations at agricultural financial institutions and information centers empowered by the Council of Agriculture, Executive Yuan. In total, the FEB completed 137 examinations in 2019 and 130 examinations in 2018.

Visitor: 5800   Update: 2020-01-14