All financial institutions that have been approved to conduct checking deposit business may apply to a clearinghouse to participate in the clearing of negotiable instruments as a clearing entity. Branches of clearing entities shall without exception participate in their localclearinghouse [operations], provided that negotiable instruments received by credit cooperatives, farmers' associations or fishermen's associations shall, as instructed by the Bank, be cleared through the Taiwan Cooperative Bank, Ltd. or other clearing entities.
Any financial institution that has not applied to participate in the clearing of negotiable instruments in accordance with the preceding paragraph may engage a clearing entity as its agent for the clearing of negotiable instruments. The engaged financial institution is required to apply to the clearinghouse for its consent before providing the aforementioned service.

A clearing entity engaged as an agent for the clearing of negotiable instruments shall assume on behalf of the representedentity all liability with respect to clearing.

Types of negotiable instruments covered under these Regulations are as follows:
1.Bank drafts (including bankers’ acceptances);
2.Promissory notes (including cashier's checks);
3.Checks (including treasury (public) checks); and
4.Other payment certificatesapproved by the Bank for exchange.
Negotiable instruments mentioned in the preceding paragraph can be in written or electronic form.

A clearing entity shall open a deposit account with the Bank or a correspondent bank of the Bank. Payable or receivable clearing balances of the clearing entity shall be paid or collected through the aforementioned account.
Where there is a necessity fora clearing entity that has not opened a deposit account with the Bank to pay or collect payable or receivable clearing balances through the Bank, the clearing entity shall first apply to the clearinghouse for permission to transact the payments or collections through another clearing entity's deposit account with the Bank. The clearinghouse shall report the same to the Bank for record.

Where the balances in a clearing entity's deposit account mentioned in the foregoing article are insufficient to pay a given day’s clearing balances, the clearing entity shall make up the shortfall within the time period prescribed by the Bank or a correspondent bank of the Bank.
A clearinghouse shall prescribea response mechanism on how to complete the clearingoperation on the same day when a clearing entity violates the provisions of the preceding paragraph and becomes unable to pay its clearing balance for the day, and report the same to the Bank for record.
Where a clearing entity is unable to pay a given day’s clearing balance that might seriously undermine the clearing operation, the clearinghouse may, with approval of its board of directors, temporarily suspend such entity’s clearing operation and report the same to the Bank for record. The Bank in turn will forward the information to the Financial Supervisory Commission.