Wed, Nov 06, 2019 - Page 12 News List

FSC, central bank mull easing rules

‘WHY WASTE TIME?’No legal amendment is needed to allow local firms to open overseas banking unit accounts at domestic banks, FSC Chairman Wellington Koo said

By Kao Shih-ching  /  Staff reporter

The Financial Supervisory Commission (FSC) and the central bank are discussing whether to allow local companies to open offshore banking unit (OBU) accounts in domestic banks, FSC Chairman Wellington Koo (顧立雄) said on Monday.

Only overseas individuals, companies and non-financial institutions may open OBU accounts, which accept foreign-currency deposits, and allow clients to transfer and manage foreign funds, according to the Offshore Banking Act (國際金融業務條例).

Domestic companies or individuals may open OBU accounts at local banks only if they plan to apply for loans denominated in foreign currencies, Koo told a meeting of the legislature’s Finance Committee.

The act does not need to be amended to allow domestic companies to open OBU accounts, he said.

“Article 4 of the act states that OBUs can provide loans in foreign currencies to individuals or companies in the nation,” he added.

OBUs have not provided loans denominated in foreign currencies to domestic firms and individuals because regulators have not encouraged them to do so, Koo said.

OBUs, which have been left outside the jurisdiction of domestic banking operations to facilitate overseas investments and international trade, are attractive to companies, as they are not subject to interest income tax, corporate value-added tax or sales tax.

“Many Taiwanese companies set up branches or paper companies overseas to open accounts at OBUs. Why do we waste their time when we can allow them to open accounts directly?” Koo said.

The move is expected to help domestic companies manage their foreign funds more conveniently and boost local banks’ wealth management business, he said.

However, Chinese Nationalist Party (KMT) Legislator William Tseng (曾銘宗) said that the central bank is not likely to agree with the proposal, as it prioritizes stabilizing the foreign-exchange rate.

“Central bank Governor Yang Chin-long (楊金龍) has told the Finance Committee that he is open-minded about how OBUs set their interest rates on foreign loans, but is more conservative about fluctuations in the exchange rates,” Tseng said.

Koo said the commission has made some progress in its talks with the central bank and would continue to discuss the issue of OBU account taxes with the Ministry of Finance.

Central bank Deputy Governor Yen Tzung-ta (嚴宗大) told the meeting that the central bank would cooperate with the FSC to boost lenders’ wealth management business under the premise of maintaining stability in the financial system.

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