Cabinet wants rules for OBUs to be amended

In an effort to meet the financial needs of Taiwanese businesses, including those based in China, the Cabinet on Wednesday is expected to approve draft amendments to an international finance rule that will allow offshore banking units (OBUs) to expand their business scope.

If approved by the legislature, the relaxation of restrictions on cross-strait financial and banking exchanges is expected to facilitate direct-fund transactions through China-based OBUs, according to a Cabinet official who asked not to be named.

"Indirect cross-strait financial exchanges create difficulties for China-based Taiwanese businesses that wish to raise capital both at home and in China," the official said. "It also increases financial risks to domestic banks that grant loans to China-based Taiwanese businesspeople because the banks are not allowed to assess borrowers' business prospects in China."

By easing the regulations, OBUs could offer services to Taiwanese businesses abroad, the official said.

Under the draft, OBUs would be allowed to handle foreign-currency deposits for foreign government agencies, individuals or corporations based or stationed abroad. They would also be able to handle foreign-currency deposits for domestic or international financial institutions.

Under current rules, OBUs manage foreign-currency deposit transactions for government agencies, individuals, corporations or financial institutions, based either domestically or overseas.

Fines for OBUs violating the amended legislation would also be increased. Those providing banking services other than foreign-currency deposits stipulated in the law would face a fine of between NT$1 million and NT$5 million. The current fine ranges between NT$180,000 and NT$1.8 million.

Those refusing to correct the error may have their business privileges suspended or have their operating license revoked.

If related documents are hidden or intentionally damaged, or cooperation with inspectors is refused, operators could face a fine of between NT$1 million and NT$5 million.

The current penalty is between NT$180,000 and NT$1.8 million.

Those allowing investors purchasing foreign bonds not stipulated in the law would also be subject to a fine of between NT$1 million and NT$5 million. The current fine ranges between NT$120,000 and NT$1.2 million.

The draft amendments, proposed by the Ministry of Finance in collaboration with the Mainland Affairs Council, were reviewed and approved on Friday by Minister without portfolio Hu Sheng-cheng (胡勝正), who also doubles up as the chairman of the Cabinet's Council for Economic Planning and Development.

The liberalization of OBU rules is part of the Cabinet's long-term effort to assist the nation's businesspeople who wish to establish a base of operations in China as a step toward expanding their business globally, Hu said.

The Cabinet is also mapping out plans to entice businesspeople back from China until mechanisms to manage or ameliorate the risk of investing there are established.