A Taiwan bank that meets the following requirements may apply to the Competent Authority for approval to establish a subsidiary bank in Mainland Area:
1. The bank is in compliance with the law, is soundly managed and has not been subject to any disciplinary action, or has been subject to disciplinary action but specific remedial actions have been taken therefor and accepted by the Competent Authority within three (3) years prior to application;
2. The bank’s ratio of Tier 1 capital to risk-weighted assets after deducting the amount allocated for the proposed investment in the subsidiary bank in Mainland Area is 8% or higher;
3. The bank’s non-performing loan ratio is 1.5% or lower during the latest fiscal half year;
4. The bank’s loan loss coverage ratio is 100% or higher during the latest fiscal half year;
5. The bank’s employees have international financial knowledge and experience; and
6. The bank has established a branch and operated business in a member country of OECD for five years or longer, and said branch is free of major regulatory violation and free of remedial actions to be taken for deficiencies found in a financial examination within one year prior to application.
If a third-area subsidiary bank meets the requirements set forth in subparagraphs 1 to 5 of the preceding paragraph, its Taiwan parent company may apply to the Competent Authority for approval for said third-area subsidiary bank to establish a subsidiary bank in Mainland Area.

A Taiwan bank or a third-area subsidiary bank that meets the requirements set forth in Subparagraphs 1 to 4, Paragraph 1 of the preceding article and its branch in Mainland Area is not subject to any disciplinary action, or has been subject to disciplinary action but correction actions have been taken therefor and accepted by the Competent Authority, the Taiwan bank or Taiwan parent company of the third-area subsidiary bank may apply to the Competent Authority for approval to change its branch in Mainland Area into a subsidiary bank.

A Taiwan bank intending to establish a subsidiary bank or to change its branch into a subsidiary bank in Mainland Area shall submit the following documents to the Competent Authority for approval:
1. Application;
2. A feasibility study;
3. Business plan;
4. Minutes of the board resolution;
5. Financial reports for the last three (3) years;
6. A calculation worksheet for the ratio of equity capital to risk-weighted assets of the bank after deducting the amount allocated for the proposed investment in the subsidiary bank in Mainland Area;
7. The internal control and audit systems, operations management, and performance evaluation method for the subsidiary bank to be established in Mainland Area;
8. The operational and regulatory compliance status of branches already established in a third area or in Mainland Area;
9. Documents verifying that the appointed managerial personnel of the subsidiary bank at and above the rank of deputy general manager meet the qualification requirements set forth in Paragraph 2 hereof; and
10. The list of proposed directors and supervisors and their education and work experience; and
11. Such other information or documents as may be required by the Competent Authority.
The proposed managerial personnel of the subsidiary bank at and above the rank of deputy general manager mentioned in the preceding paragraph should have good moral character and professional leadership abilities, are free of the situations set forth in Article 3 of the Regulations Governing Qualification Requirements, and comply with the provisions in Paragraph 3 Article 3-1 and Paragraph 1, Article 6 of the same Regulations.
When a third-area subsidiary bank intends to establish a subsidiary bank or to change its branch into a subsidiary bank in Mainland Area, its Taiwan parent company shall submit the following documents to the Competent Authority for approval:
1. Application;
2. A feasibility study;
3. Business plan;
4. Minutes of the board resolution of both the parent company and the third-area subsidiary bank;
5. Financial reports for the last three (3) years;
6. A calculation worksheet for the ratio of equity capital to risk-weighted assets of the third-area subsidiary bank after deducting the amount allocated for the proposed investment in the subsidiary bank in Mainland Area;
7. The internal control and audit systems, operations management, and performance evaluation method for the subsidiary bank to be established in Mainland Area;
8. The operational and regulatory compliance status of branches already established in a third area or in Mainland Area; and
9. Such other information or documents as may be required by the Competent Authority.
When a Taiwan bank makes an application under Paragraph 1 hereof, the bank may concurrently apply for the setup of a branch by the subsidiary bank by submitting a feasibility study report and business plan for the branch. The branch of the subsidiary bank must be established within one year from the date of approval by the Competent Authority. Otherwise, the Competent Authority may annul the approval granted.

A Taiwan bank must have obtained the approval of the Competent Authority before applying to [the financial authority in] Mainland Area for the establishment of a subsidiary bank or for changing its branch into a subsidiary bank in Mainland Area. When the Taiwan bank replaces its managerial personnel appointee for the subsidiary bank above the rank of deputy general manager, the bank shall submit documents verifying that the new appointee meets the qualification requirements set forth in Paragraph 2 of the preceding article to the Competent Authority for approval; when the Taiwan bank changes the planned address, capital or amount of investment for the subsidiary bank, the bank shall submit relevant documents to the Competent Authority for approval.
A Taiwan bank shall promptly inform the Competent Authority after obtaining approval from the financial authority in Mainland Area [to establish a subsidiary bank or change its branch into a subsidiary bank] and submit the following documents to the Competent Authority for recordation before the subsidiary bank commences business:
1. An approval letter from the financial authority in Mainland Area;
2. Business items approved by the financial authority in Mainland Area;
3. Planned date for commencement of business and detailed address [of the subsidiary bank];
4. Names of managerial personnel of the subsidiary bank at and above the rank of deputy general manager;
5. List of directors and supervisors of the subsidiary bank; and
6. Such other information or documents as may be required by the Competent Authority.
A Taiwan bank that sets up a subsidiary bank by investing in a bank in Mainland Area shall promptly inform the Competent Authority after obtaining approval from the financial authority in Mainland Area and submit information under Subparagraphs 1, and 4 to 6 of the preceding paragraph as well as the amount of investment and the equity structure of the invested bank to the Competent Authority for recordation.
When a Taiwan bank intends to close its subsidiary bank in Mainland Area, the bank shall first obtain approval from the Competent Authority before applying to the financial authority in Mainland Area. The Taiwan bank shall also submit the approval letter from the financial authority in Mainland Area and the planned closing date to the Competent Authority for recordation before closing the subsidiary bank.
A Taiwan parent company must have obtained the approval of the Competent Authority before its third-area subsidiary bank may apply to [the financial authority in] Mainland Area for the establishment of a subsidiary bank or changing its branch into a subsidiary bank in Mainland Area. The Taiwan parent company shall promptly inform the Competent Authority after obtaining approval from the financial authority in Mainland Area, and submit the documents set out in Subparagraphs 1 to 3 of Paragraph 2 hereof to the Competent Authority for recordation before the subsidiary bank in Mainland Area commences business.
A third-area subsidiary bank that sets up a subsidiary bank by investing in a bank in Mainland Area shall promptly inform the Competent Authority after obtaining approval from the financial authority in Mainland Area and submit information under Subparagraphs 1, 5 and 6 of Paragraph 2 hereof as well as the amount of investment and the equity structure of the invested bank to the Competent Authority for recordation.
The provisions in Paragraph 4 hereof apply mutatis mutandis to a Taiwan parent company when its third-area subsidiary bank intends to close its subsidiary bank in Mainland Area.

A Taiwan bank may apply to the Competent Authority for approval for its subsidiary bank in Mainland Area to set up a branch, provided its subsidiary bank in Mainland Area is not subject to any disciplinary action, or has been subject to disciplinary action but remedial actions have been taken therefor and accepted by the Competent Authority.
When a Taiwan bank’s subsidiary bank in Mainland Area intends to set up a branch, the Taiwan bank shall submit the following documents to the Competent Authority for approval:
1. Application;
2. A feasibility study;
3. Business plan;
4. Minutes of the board resolution of both the bank and its subsidiary bank;
5. The financial report and regulatory compliance status of the subsidiary bank for the latest fiscal year;
6. A calculation worksheet for the ratio of equity capital to risk-weighted assets of the subsidiary bank for the latest fiscal half year;
7. The internal control and audit systems, operations management, and performance evaluation method of the subsidiary bank; and
8. Such other information or documents as may be required by the Competent Authority.

A Taiwan bank must have obtained the approval of the Competent Authority before its subsidiary bank in Mainland Area may apply to [the financial authority in] Mainland Area for the establishment of a branch, and shall promptly inform the Competent Authority after obtaining approval from the financial authority in Mainland Area. The preceding provision applies when a subsidiary bank intends to close a branch in Mainland Area.
A Taiwan bank shall submit the following documents to the Competent Authority for recordation before the branch of its subsidiary bank in Mainland Area commences business:
1. An approval letter from the financial authority in Mainland Area;
2. Business items approved by the financial authority in Mainland Area;
3. Planned date for commencement of business and detailed address [of the branch]; and
4. Such other information or documents as may be required by the Competent Authority.

A Taiwan bank must have reported to the Competent Authority for recordation before the branch of its subsidiary bank in Mainland Area may apply to [the financial authority in] Mainland Area for the establishment of a sub-branch. The preceding provision applies when a subsidiary bank intends to close a sub-branch in Mainland Area.
A Taiwan bank shall submit the following documents to the Competent Authority for recordation before a sub-branch in Mainland Area commences business:
1. An approval letter from the financial authority in Mainland Area;
2. Business items approved by the financial authority in Mainland Area;
3. Planned date for commencement of business and detailed address [of the sub-branch]; and
4. Such other information or documents as may be required by the Competent Authority.

A Taiwan bank shall appropriate funds exclusively for the capital of its subsidiary bank in Mainland Area and shall apply to the Competent Authority for approval before the capital of its subsidiary bank is increased or decreased.
Taiwan banks shall submit relevant documents to the Competent Authority for approval before they transfer their shareholding in their subsidiary bank in Mainland Area to others.
When the subsidiary bank in Mainland Area has any of the following situations, a Taiwan bank shall submit the following documents to the Competent Authority for approval in advance:
1. Merging, transferring, or assuming all or an essential part of assets or business of another financial institution.
2. Issuing equity-based securities.
3. Dissolved or suspended business.
4. Changing managerial personnel of the subsidiary bank at and above the rank of deputy general manager.
5. Changing the name of bank.

A Taiwan bank shall promptly report to the Competent Authority if its subsidiary bank in Mainland Area incurs losses. If the losses incurred exceed one third (1/3) of the subsidiary bank’s capital, the Competent Authority may order the Taiwan bank to propose a business improvement plan for the subsidiary bank and report the status of improvement periodically.
Where the financial conditions of the subsidiary bank in Mainland Area deteriorates significantly that the sound operation of the Taiwan bank might be adversely affected, the Competent Authority may order the Taiwan bank to propose an exit plan and carry it out after the approval of the Competent Authority.

A Taiwan parent company shall promptly inform the Competent Authority by submitting a report on the particulars of the event and relevant information if its subsidiary bank, branch or sub-branch in Mainland Area has any of the situations below:
1. Changing of business items or major management policy.
2. Changing of capital that results in change to Taiwan bank’s original ownership interest [in the subsidiary bank, branch or sub-branch].
3. Major investments.
4. Changing business address.
5. Undergoing reorganization, liquidation or bankruptcy proceedings.
6. Having business practices adopted in accordance with the local regulations and business customs but non-complying with the financial regulations in Taiwan Area.
7. Major loss has occurred or is foreseeable.
8. Having committed a material violation or business license being revoked or annulled by the financial authority in Mainland Area.
9. Having a material contingent or fraud incident.
10. Having made a report to the financial authority according to the local financial regulations in Mainland Area.
11. Other material events.
With respect to any of the situations specified in Subparagraph 1 to 6 of the preceding paragraph, a Taiwan bank shall report to the Competent Authority in advance.

A Taiwan bank shall comply with the following provisions after it has established a subsidiary bank in Mainland Area:
1. The bank shall input the basic and operating information of the subsidiary bank and its branch and sub-branch into an information reporting system designated by the Competent Authority;
2. The subsidiary bank shall undertake internal audit in accordance with the Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries. The bank shall submit the business audit report, independent auditor’s report, and financial examination report on its subsidiary bank prepared by the financial authority in Mainland Area to the Competent Authority for recordation;
3. The bank shall prepare consolidated financial statement including the subsidiary bank in Mainland Area along with other offshore branches of the bank and submit same to the Competent Authority for recordation; and
4. Such other information or documents as may be required by the Competent Authority.

When the subsidiary bank of a third-area subsidiary bank in Mainland Area intends to establish a branch or sub-branch, its Taiwan parent company shall report to the Competent Authority in advance for recordation before applying to [the financial authority] in Mainland Area. The preceding provision applies to the closure of a branch or sub-branch in Mainland Area.
Article 42 up to the preceding article shall apply mutatis mutandis to a Taiwan parent company after its third-area subsidiary bank has established a subsidiary bank in Mainland Area. However, change of managerial personnel of the subsidiary bank in Mainland Area at or above the rank of deputy general manager does not require approval from the Competent Authority.