Taiwan's Financial Supervisory Commission proposes to let offshore securities branches place client funds with foreign custodian banks subject to minimum ratings

Taiwan's Financial Supervisory Commission published an advance notice of a draft amendment to the Regulations Governing Offshore Securities Branches that would broaden where offshore securities branches can deposit offshore clients’ funds and introduce eligibility and credit rating requirements for foreign custodian banks. Under the proposal, when an offshore securities branch conducts account custody business for offshore individuals, juristic persons, government agencies, or financial institutions, it could place customer funds not only in foreign exchange deposit accounts at offshore banking branches but also in foreign exchange deposit accounts at a foreign custodian bank that the securities firm deals with. To support customer fund safety, the draft adds foreign custodian bank qualifications and minimum credit rating standards, including recognition for custodians that have established branches or subsidiaries of securities firms or banks in the territory of the Republic of China, and otherwise requiring specified long-term and short-term debt ratings, such as S&P BBB- and A-3, Moody’s Baa3 and P-3, Fitch BBB- and F3, Taiwan Ratings twBBB- and twA-3, or Fitch Ratings Taiwan BBB-(twn) and F3(twn). The draft will be published in the Executive Yuan’s official gazette, with a general description and comparison table made available on the FSC website for public consultation. Comments can be submitted within 60 days from the day after the announcement via the FSC Laws and Regulations Retrieving System.