This content is from: Local Insights

Guidelines for opening accounts with foreign banks

Chun-yih Cheng

Foreign banks are not subject to the jurisdiction of the Financial Supervisory Commission (FSC) and deposits with foreign banks abroad are not protected by the deposit insurance scheme in Taiwan. The FSC guidelines therefore prohibit foreign banks from soliciting customers in Taiwan to open accounts with foreign banks abroad.

Further, according to the commitments made by Taiwan when joining the World Trade Organisation, foreign banks' cross border deposit services are not allowed and Taiwan branches of foreign banks may provide information on opening accounts with foreign banks only upon customers' requests. Further, the account opening documents shall be directly delivered by customers to foreign banks without any assistance from their Taiwan branches.

However, there were breaches of the guidelines recently and such breaches have triggered a revision of the guidelines by the FSC. Key changes are as follows:

(a) The Taiwan branches of foreign banks shall not in any way, including displaying information on the counter, solicit customers to request information on opening accounts with foreign banks.

(b) After being requested by customers to provide information on opening accounts with foreign banks:

(i) the Taiwan branches shall not fill out the forms on behalf of customers, review or approve the account opening and accept funds on behalf of foreign banks, or transmit forms on behalf of customers.

(ii) the Taiwan branches shall expressly inform customers whether the accounts are protected by the foreign deposit protection scheme and that the accounts are not protected by deposit insurance scheme in Taiwan.

(iii) the Taiwan branches shall ask customers to sign a declaration acknowledging that: the customer was not solicited by the Taiwan branches;

the Taiwan branches cannot fill out and transmit the forms on a customer's behalf; the Taiwan branches shall not review or approve the account opening on behalf of foreign banks; and foreign banks and their accounts are not subject to the regulation of Taiwan law and the deposits are not protected by the deposit insurance scheme in Taiwan.

(c) The Taiwan branches shall not in any way assist foreign banks to solicit customers to open accounts or to deposit funds with foreign banks. Employees of Taiwan branches shall not have any kind of contract with foreign banks to engage in the foregoing assistance. This provision is also applicable to subsidiaries and representative offices of foreign banks mutatis mutandis.

(d) The Taiwan branches shall inform the audit officers of foreign banks to ensure that foreign banks and their affiliated banks or entities shall not dispatch staff to Taiwan to solicit account opening or to accept funds. Head offices of foreign banks shall covenant to the FSC that they shall establish internal control systems to prevent their branches or affiliates from breaching the FSC guidelines. Such covenants shall be submitted to the FSC before the end of 2010 by foreign banks which already have branches in Taiwan. This provision is also applicable to subsidiaries and representative offices of foreign banks mutatis mutandis.

Chun-yih Cheng

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