Financial Supervisory Commission eases rules to allow foreign investors to use local equities as collateral
2022-11-22
Due to the need for movement of funds, foreign investors need to use the positions of their share investments to secure loans or as collateral or guarantee for derivative financial products in practice. At present, FSC has, according to Article 21 of the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals, allow foreign investors to get a loan from local financial institutions in New Taiwan Dollars to invest in domestic securities.
In order to attract foreign investors to continue to invest in Taiwan stock market, after considering the recommendations of the American Chamber of Commerce in Taiwan’s 2022 Taiwan White Paper and consulting the Central Bank, FSC will further allow foreign investors to use Taiwan’s TWSE-listed or OTC-listed securities as collateral for overseas investment activities.
In the preliminary plan, both foreign investors engaging in the overseas trading activities have to be foreign institutional investors (FINI) registered in Taiwan, and the capital provider needs to be a foreign securities firm or bank. The maximum collateral amount shall be a certain percentage of the value of Taiwan securities held by the foreign investor, and controlled by the local custodian institution entrusted by the foreign investor who provides the collateral on a daily basis. If the collateral is disposed of due to breach of contract, it shall be reported to the Central Bank and Taiwan Stock Exchange according to the regulations.
FSC has instructed Taiwan Stock Exchange Corporation (TWSE) and Taiwan Depository & Clearing Corporation to formulate the relevant supporting measures, including details such as the participants, collateral submission, replacement and recovery, disposal, control methods, etc., and relevant operating procedures, which are expected to be announced in the near future.
After the easing of the measure, if there is a need for funds by foreign investors for overseas investment activities in the future, they may use domestic TWSE-listed or OTC-listed securities as collateral to obtain the funds, without the need to sell Taiwan shares. This will help increase the foreign investors’ flexibility in fund usage and willingness to hold Taiwan shares, thereby reducing the selling of domestic securities as a source of funds, which will help promote the liquidity of the financial market and strengthen the stability of the stock market.
Contact Information
Unit: Securities Firms Division, Securities and Futures Bureau
Tel: (02) 2774-7112
For any further questions, please send e-mail to the following URL: FSCMail
In order to attract foreign investors to continue to invest in Taiwan stock market, after considering the recommendations of the American Chamber of Commerce in Taiwan’s 2022 Taiwan White Paper and consulting the Central Bank, FSC will further allow foreign investors to use Taiwan’s TWSE-listed or OTC-listed securities as collateral for overseas investment activities.
In the preliminary plan, both foreign investors engaging in the overseas trading activities have to be foreign institutional investors (FINI) registered in Taiwan, and the capital provider needs to be a foreign securities firm or bank. The maximum collateral amount shall be a certain percentage of the value of Taiwan securities held by the foreign investor, and controlled by the local custodian institution entrusted by the foreign investor who provides the collateral on a daily basis. If the collateral is disposed of due to breach of contract, it shall be reported to the Central Bank and Taiwan Stock Exchange according to the regulations.
FSC has instructed Taiwan Stock Exchange Corporation (TWSE) and Taiwan Depository & Clearing Corporation to formulate the relevant supporting measures, including details such as the participants, collateral submission, replacement and recovery, disposal, control methods, etc., and relevant operating procedures, which are expected to be announced in the near future.
After the easing of the measure, if there is a need for funds by foreign investors for overseas investment activities in the future, they may use domestic TWSE-listed or OTC-listed securities as collateral to obtain the funds, without the need to sell Taiwan shares. This will help increase the foreign investors’ flexibility in fund usage and willingness to hold Taiwan shares, thereby reducing the selling of domestic securities as a source of funds, which will help promote the liquidity of the financial market and strengthen the stability of the stock market.
Contact Information
Unit: Securities Firms Division, Securities and Futures Bureau
Tel: (02) 2774-7112
For any further questions, please send e-mail to the following URL: FSCMail
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Update：
2023-01-04