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Regulations Eased on Collateral Acceptable to Domestic Banks for Foreign Currency Credit Extension
Frances Hsieh/Wei-Ni Wang
To help the banking industry develop foreign currency credit extension business, the Financial Supervisory Commission (FSC) issued a letter (Ref. No.: Chin-Kuan-Yin-Wai-10250000340) on 19 February 2013 to broaden the range of eligible collateral acceptable to OBUs and overseas branches of domestic banks for foreign currency credit extension and revoked the FSC letter (Ref. No.: Chin-Kuan-Yin-5-09650003710) previously issued on 9 October 2007. Details are described as following:
According to the FSC letter (Ref. No.: Chin-Kuan-Yin-5-09650003710), when OBUs and overseas branches of domestic banks conduct foreign currency credit extension, the collateral provided by the borrower should not include certificates of foreign currency deposits issued by a domestic banking unit (DBU) to its non-affiliated entity. However, after the amendment to the previous FSC letter (Ref. No.: Chin-Kuan-Yin-5-09650003710) this time, with regard to using certificates of foreign currency deposits issued by a DBU as collateral, collateral acceptable to overseas branches of domestic banks for foreign currency credit extension is not limited to certificates of foreign currency deposits issued by a DBU held by the borrower or its affiliated entity, but extended to those held by any third party. Given the above, overseas branches of domestic banks can accept any certificates of foreign currency deposits issued by DBUs, OBUs and overseas branches provided by the borrower or others, as collateral, similar to what an OBU does.
