The Financial Supervisory Commission (FSC) yesterday dealt a fifth round of punitive measures against banks that have broken customer verification rules relating to derivative sales such as yuan-linked target redemption forwards (TRF).
Among the 14 banks that received a citation, three were fined NT$2 million (US$66,408) while another three were fined NT$4 million, bringing the total amount of fines to more than NT$100 million since the beginning of the TRF crisis that left investors with massive losses.
The fines are likely to be the last as the TRF contracts are expiring and banks have stopped selling the risky derivative instrument.
The infractions were discovered during a probe conducted late last year, Banking Bureau Deputy Director-General Lu Hui-jung (呂蕙容) told a news conference in Taipei.
A number of banks had failed to verify the validity of information submitted by their customers, such as board of directors’ meeting minutes and financial reports, Lu said, adding that some of the documents were provided by banks to facilitate derivative sales.
In addition, banks had been lax in setting up offshore banking unit accounts for their clients, she said.
“The banks in question have neglected the required ‘know your customer’ checks, and the procedure has degraded into a set of routines that superficially meet compliance rules,” she said.
However, Lu was unable to provide details on how the methods used by the commission’s Financial Examination Bureau to determine wrongdoing related to document submissions by affected bank customers.
She said that while some of the affected customers had given their consent for banks to lend their aid in drafting the document on their behalf, banks had been overzealous in providing services to gain larger derivative sales.
Still, these customers have since entered arbitration and mediation with third-party organizations to resolve disputes about TRF losses, Lu said.
“The commission’s penalties would not affect the neutrality of third-party mediators,” Lu said.
The Financial Ombudsman Institution last week said that it has taken on 110 cases regarding derivative disputes, of which 62 have been completed and 48 are ongoing.
In related news, aggregate bank earnings in the first four months of this year fell 8.2 percent annually to NT$103.88 billion, due to a high basis set last year, commission data showed.
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