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Article 37
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The maximum limit on the amount of securities loaned to each customer by a securities firm conducting securities lending business shall be regulated by the securities firm. The securities firm shall further adopt internal procedures for credit extension operations and risk control, which shall at least incorporate the following:
- Means of assessment of the maximum amount of securities loaned to individual customers. The assessment shall take the loan amounts extended to approved customers in other loan businesses into consideration. The percentage by which the total value of funds or securities loaned to individual customers in the overall loan business may not exceed the net worth shall be prescribed. Approval of the board of directors is required if the amount of securities to be loaned to individual natural persons reaches the higher of NT$300 million and 1% of the securities firm’s net worth or if the amount of securities to be loaned to individual juristic persons accounts for at least 5% of the securities firm’s net worth.
- Means of assessment of the amount of a single security loaned to individual customers. The assessment shall take the loan amounts extended to approved customers in other loan businesses into consideration.
- Means of identification of securities or customers with a high risk. Special monitoring and approval procedures shall be established in regard to the amount of high-risk securities loaned or the amount of securities loaned to high-risk customers.
- The amount of securities loaned to customers shall be determined according to principles that are both fair and reasonable. Lending of such whole amount to a single customer shall be avoided.
- If the assessment of the maximum amount of securities loaned to individual customers indicates certain individual customers are known or can be determined to be related accounts, which means the credit risks of such customers are related (for example, the risk of providing trading service to such customers), the lines of credit of all such related customers shall be regulated, in consideration of the credit risks.
- The regulation of the lines of credit extended to related accounts as mentioned in the preceding paragraph applies to renewals and adjustments of credit lines by customers which have opened an account and to new accounts, provided in the event of a change in respect of a related account of a customer, such as credit line adjustment or addition of related accounts, the lines of credit of the customer and its related accounts are still subject to combined regulation.
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