FSC Proposes Rules Change on the Maximum Level of Credit Extension Allowed for Foreign Subsidiaries

The FSC has proposed a revision to the supervisory regulation on financial holding companies. This proposal is in line with the previously announced plan to ease rules on overseas subsidiary ownership of financial companies.
Currently, financial companies within a holding group are allowed to extend credit to their own subsidiaries up to a maximum of 10 percent of equity capital per individual subsidiary. The total sum of credit extended to subsidiaries should not exceed 20 percent of equity capital. However, this rule has placed restrictions on the ability of overseas subsidiaries of financial holding companies to raise funds from their domestic affiliates due to low credit background and lack of collateral at an early stage.
In order to address these challenges faced by overseas subsidiaries, the FSC’s revision proposal aims to increase the maximum level of credit extension allowed by a financial company towards its foreign subsidiary by an additional 10 percentage points for a period not exceeding three years from when the foreign subsidiary becomes part of the holding group.
Officially, the proposal underwent public comment until 10 November, yet no consultation texts nor submission informations were available. The proposititon is expected to go into effect on 1 January 2024 after deliberation by the FSC.