Taiwan: FSC Proposes Increased Seats

Taiwan's Financial Supervisory Commission (FSC) last year amended the Regulations Governing Qualification Requirements for Founders or Responsible Persons of Financial Holding Companies and Concurrent Serving Restrictions and Matters for Compliance by Responsible Persons of Banks and the same regulations for financial holding companies (“Regulations”) to increase the number of the seats for natural person professional directors.

The amendment to the Regulations has been effective since July of 2019. However, if the terms of the current directors have not expired, such amendment will apply the next time banks/financial holding companies re-elect directors. The FSC is now proposing another amendment to increase the number of the seats for professional directors so as to strengthen the corporate governance of banks and financial holding companies.

Many questions have been raised with regard to the re-election of the directors in compliance with said amendment to the Regulations. These questions are in regard to who will nominate the professional directors and whether the votes for professional natural person directors will be counted separately from those who cast for independent directors. Moreover, questions have been raised as to what will happen if the board of directors fails to meet the standards in the regulations, and how will the FSC order the bank/financial holding company to correct such situations. Also, questions remain as to whether the bank and financial holding company will make corrections by re-election or other means. As the re-election of directors of major banks and financial holding companies will take place in 2020, the FSC has stated that it will clarify the rules of the new regulations by early 2020.

The FSC has also urged bank associations to amend their relevant corporate governance guidelines stipulating that independent directors of the banks and financial holding companies shall not be elected as independent directors for three consecutive terms in order to enhance the functions of the board of directors and strengthen the independence and competence of independent directors.