WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
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WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10 Contents 2 Message to Shareholders 3 Major Achievements in 2017 5 Operating Performance in 2017 5 Operating Strategies for 2018 8 Business Targets for 2018 8 Credit Ratings
9 Bank Profile 9 Date of Establishment 9 History
11 Corporate Governance Report 11 Organization Chart 12 Bank’s Subsidiaries Chart 12 Major Corporate Functions 14 Directors, Supervisors and Executive Officers 15 Major Shareholder 15 Corporate Governance Execution Status and Deviations 17 Implementation of Corporate Social Responsibility
20 Operational Highlights 20 Annual Business Plans for 2018 22 Market Analysis 24 Human Resources
25 Financial Information 25 Condensed Consolidated Balance Sheets 26 Condensed Consolidated Statements of Comprehensive Income 26 Financial Analysis 27 Supervisors’ Report 28 Consolidated Financial Statements 105 Stand Alone Financial Statements
112 Risk Management 112 Credit Risk Management System 113 Operational Risk Management System 115 Market Risk Management System
117 Head Office and Branches 117 Head Office 118 Domestic Branches 129 Overseas Units WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
1. Message to Shareholders As the global economy grew steadily in 2017, the overall economic situation and the employment market recovered moderately. Domestic economy benefited from the continuous increase in global trade, therefore driving a higher momentum for exportation. The banking industry has also experienced rapid development of financial technology (Fin-Tech), thereby expanding the scope of services and boosting operating performance. However, the growth of deposits was still stronger than the growth of lending, while the pressure on allocation of funds still remained.
Looking forward to 2018, the global economy is expected to grow continuously. With improvements in the domestic employment market, consumers' willingness to purchase is also expected to improve. However, due to factors such as the rise of trade protectionism, aging population, declining fertility rate and geopolitical tensions, the Directorate-General of Budget, Accounting and Statistics (DGBAS) Executive Yuan estimates the economic growth rate for 2018 to be 2.42%. In terms of financial conditions, the government continues to open up new opportunities in the Fin-Tech industry, and encourages the financing of Innovative Industries at the same time. Rising expectations for interest rate hike, which continues to improve the low interest rate environment, will also help enhance the profitability of domestic banks.
Following the principles of stable operations and equally balancing quality and quantity, we will continue to expand high-quality loan assets, consolidate our core business niche, keep abreast of FinTech trends, advance digital financial services, access the effectiveness of integrated marketing, provide customers with high-quality financial services and introduce innovative capabilities in order to achieve our performance targets. At the same time, we will extend our care for the society over the long term, promote the spirit and importance of sports. hold various sports activities and sports camps. Realize the vision of "having taken from the society, now we strive to give back" and fulfill our corporate social responsibility.
Our major achievements in 2017 and operating strategies for 2018 are described briefly below:
Chairman Chung-Dar Lei
2 Annual Report 2017
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
Taiwan Cooperative Bank
1.1 Major Achievements in 2017 A. Capital Adequacy In 2017, we underwent a cash capital increase of NT$5 billion and issued subordinated debentures of NT$2 billion, which effectively improved our capital adequacy and strengthened our capital structure. At the end of 2017, our capital adequacy ratio, Tier 1 capital ratio, and common equity ratio were 13.44%, 10.32%, and 10.32% respectively, have achieved annual target successfully.
B. Deposits At the end of 2017, our deposit balance was NT$2,623.8 billion, ranking Second in Taiwan. The amount of demand deposit stood at NT$1,231.1 billion (excluding government deposits), an increase of NT$43.4 billion from the same period in 2016, placed us in the First Place throughout Taiwan. We effectively improved our deposit structure and lowered funding costs.
C. Loans (1) At the end of 2017, our loan balance was NT$2,012.5 billion, ranking Second in Taiwan, in which the small-and-medium enterprises (SME) loans stood at NT$604 billion, ranking Second in Taiwan. Our loan to private enterprise loans (excluding government institutions and public enterprises) was NT$830.1 billion, ranking in the First Place throughout Taiwan. (2) In year 2017, we arranged/coordinated 77 syndication loans, for a total amount of NT$362 billion, and our participation amount reached NT$56.9 billion. According to Thomson Reuters Basis Point, our bookrunner market share ranked Second in Taiwan. (3) In November 2015, we launched a “Bagful of Happiness Loan,” Taiwan’s first-ever commercial reverse mortgage product, which received great feedback. As of December 2017, the cumulative number of mortgages reached 924 with approved credit of NT$5.32 billion, ranking in the First Place throughout Taiwan. (4) Due to our significant contributions to SMEs and our active cooperation with the government to promote industrial policies, we were granted the “Outstanding Financial Institution for Provision of Loans to SMEs - Grade A Bank Award’’ and the “Outstanding Financial Institution for Provision of Loans to Key Innovative Industries - Grade A Bank Award’’ by the Financial Supervisory Commission (FSC).
D. Overseas Business (1) In year 2017, our overseas pre-tax income (including OBU and overseas units) was NT$5.927 billion, accounting for 39.53% of total income. President MesssageBor-Chang to Shareholders Hwang 3
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(2) Our overseas units and services have expanded to Europe, the U.S., Australia, and throughout Asia. Our Changsha, China branch was opened on April 27, 2017, Melbourne, Australia branch was opened on July 26, 2017, and our City Center sub-branch under Phnom Penh branch in Cambodia was opened on October 27, 2017. We already have 20 overseas units.
E. Wealth Management Business (1) The net service fee income from trust, financial planning, insurance (excluding mortgage life insurance), and gold bankbook reached NT$2.985 billion, making up 50.38% of the total net fee income. We added new products to our lineup in 2017, including domestic and offshore funds, bonds as well as structured investments, for a total of 146 products. (2) Through our efforts to promote and enhance the scale of our custody services, as of the end of 2017, the average balance of our custodial funds was NT$97.839 billion, an increase of NT$26.86 billion from the same period in 2016.
F. E-banking With our efforts to actively promote Taiwan Pay and automated clearing house (ACH) services, we were granted the “Electronic Payment Services Best Service Innovation Award” at the 2017 Annual Financial Information Systems Meeting organized by the Financial Information Service Co., Ltd. We also won Second Place in the State-owned Bank category and Third Place in the All Banks category for the ACH Collections Contest Excellence Award during the 2017 Financial Institution ACH Promotion Competition organized by Taiwan Clearing House.
G. Credit Card Business In 2017, we actively promoted our core products including the Lugang Mazu Card, Hi Lai Card, Worldwide Card, and i-Cash Card, resulting in overall transaction amount of NT$33.996 billion, equivalent to an annual growth of 10.99%; the transaction amount of the government’s online purchasing card reached NT$966 million in 2017, ranking in the First Place throughout Taiwan with a market share of 37.62%.
H. Corporate Social Responsibility (1) With a view to extending our care for the society, we organized a series of winter aid activities which have benefited a total of 1,600 people in 26 social welfare institutions and schools across 13 counties and cities. We also participated in the 2017 Finance with Love - Food Bank event by jointly donating resources and materials to public welfare events, which have benefited more than 3,000 households via donations from various county and city governments. (2) We participated in the Financial Services Education Fund established by Taiwan Financial Services Roundtable to assist young people from disadvantaged families in completing their studies, and conducted financial education courses to promote finance-related knowledge. We were given the Best Corporate Social Responsibility Award at the 2017 Excellent Bank Rating Event organized by Excellence Magazine. (3) We offer long-term support to grass-root sport activities, and have won three awards, namely “Promotion Award”, “Sponsorship Award” and “Long-term Sponsorship Award” from the Sports Administration, Ministry of Education for 9 consecutive years. Every year, we set up a budget to organize and sponsor sport activities and competitions, and have nurtured approximately 140 national and outstanding sportsmen, including Tai Tzu-Ying, Chou Tien-Chen and Chiang Hung-Chieh, et al., who won a total of 12 medals at the 2017 Summer Universiade. In addition, these athletes have also repeatedly
4 Annual Report 2017
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
Taiwan Cooperative Bank
achieved excellent performance in various Asian Championships and major international competitions. We hope to nurture even more sportsmen who will become the pride of Taiwan and eventually become shining stars on the global stage.
1.2 Operating Performance in 2017 A. Net Interest：NT$32,298.70 million B. Total Net Revenue and Gain Other than Interest：NT$10,063.01 million C. Allowance for Bad-Debt Expenses：NT$5,302.49 million D. Operating Expenses：NT$22,173.62 million E. Income before Income Tax：NT$14,885.59 million F. Net Income：NT$12,899.19 million G. Basic Earnings Per Share：NT$1.48
1.3 Operating Strategies for 2018
A. Seize FinTech opportunities and enhance operational efficiency (1) Continue to set up digital service areas, integrate online and offline channels and resources, engage in all-channel, cross-channel and cross-device marketing layout. Provide customers with various innovative digital service facilities, simplify user interface and transaction procedures so that applications for various digital financial service can be completed online in order to reduce operational cost and provide customers with a brand new service experience. (2) Integrate payment services for multiple electronic payment tools, replace old POS machines with new ones in order to respond to competition from our peers, and establish a variety of payment channel services to provide customers with high-quality payment service experience. (3) Enhance our planning for financial patents to show our commitment to the development of Fin-Tech. On the other hand, we will engage in the application of new and invention patents in phases in order to strive for time effectiveness and protect the interests of our intellectual properties, thereby comprehensively enhancing our business competitiveness.
B. Continue to expand high-quality loan assets and consolidate our core business niche (1) Continue to uphold the principle of balancing quality and price, expand the scale of loan provision to private enterprises, and strengthen the promotion of foreign currency loans to SMEs. At the same time, we will also continue to deepen our relationships with regular customers, and activate approved but unused credit lines to increase income from credit services. (2) Build and deepen customer relationships to increase our market share in the corporate finance business in industrial parks. We will select industrial parks with great potential to hold events such as corporate seminars or dinner events, and utilize Open Data to actively assist business units in acquiring customers and establishing business dealings with these customers. (3) Screen for high-value customers to strengthen consumer loans and microcredit with large interest rate spreads. Besides, we will actively provide self-used housing loans and residential housing loans with collaterals at good locations. We will continue to expand our mortgage term life insurance business and develop an incentive program to increase penetration rate and eventually increase our earnings.
Messsage to Shareholders 5
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C. Introduce a diverse range of products to expand the scale of our wealth management business (1) Integrate the resources of the Group’s subsidiaries to realize the benefits of integrated marketing and enhance business cooperation, in the hopes of achieving synergistic effect and expand sources of profit. (2) Keep abreast of market developments and opportunities, and introduce a diverse range of high-quality innovative products to satisfy customers' needs for asset allocation and all-round financial planning. We will continue to serve as custodian banks for investment companies with excellent performance and reputation so as to increase the scale of asset custody business and related businesses such as demand deposits, foreign exchange, securities and bond repurchases. (3) Provide e-financial services, and continue to select featured and differentiated products to satisfy customers' needs. In addition, we will integrate big data analysis and customer data on Integrated Marketing Communication (IMC) platforms to plan featured marketing programs, thereby engaging in precision marketing and increasing penetration rate in the wealth management business.
D. Effectively adjust asset allocation to increase income from investment operations (1) Taking into consideration our liquidity needs and limits on risky assets, we will use excess funds to invest in government bonds at trading and investment positions. On the other hand, corporate bonds mainly comprise issuance guaranteed by us and issuance by public enterprises, while foreign currency bonds continue to be deployed in government bonds, bank debentures or high-quality corporate bonds in order to increase our net income from financial instrument operations. (2) In response to changes in financial environments, we will flexibly use trading strategies to take advantage of various financial instruments such as foreign exchange, interest rates and equity to expand our sources of profitability. Moreover, we will also seize the opportunity to fill foreign exchange positions in a timely manner, use basis trading in a flexible manner, effectively adjust allocation of funds to enhance the foreign exchange gains. (3) Plan to build an financial products trading system to integrate front, middle and back office trading processes, to increase trading efficiency. Furthermore, we will also establish new valuation models through dedicated trading systems to strengthen real-time risk control and enhance the competitiveness of treasury marketing.
E. Intensify our expansion plans in the Asia-Pacific region to increase contributions from overseas profits (1) In line with the government's New Southbound Policy, we will continue to seize business opportunities to access the Asian market, and work closely with Taiwanese enterprises to expand new overseas branches into the ASEAN market, thereby moving towards the goal of becoming a regional bank in Asia. (2) Improve the operational efficiency of our overseas units, diversify our scope of business and expand sources of revenue by exercising localization, increasing loan-to-deposit ratio, adjusting the structure of our customer base and actively participating in local economic development, thereby driving the momentum of increasing profits from overseas operations. (3) Take two-way business support measure from domestic and overseas units; integrate the operational strengths and work together to provide customers with high-quality financial services free from geographic and time constraints.
6 Annual Report 2017
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Taiwan Cooperative Bank
F. Nurture professional talents and optimize human resources management (1) Launch and promote strategies in line with our future businesses, and take into consideration the results of adaptive testing for employees and their willingness to pursue a second specialization. Moreover, we will continue to execute the Bank 3.0 Human Resource Strategic Plan, coach our staff in the deposit and remittance section to take up positions such as wealth management, AO and foreign exchange personnel, train our colleagues to possess multiple core competencies and also gradually convert operational manpower into marketing manpower, thereby responding to demands in future financial environments. (2) Actively train professional talents such as financial operations, digital financial technology and overseas financial personnel. Recruit outstanding talents, offer various types of professional training and enhance practical experience in order to expand our talent pool. (3) Strengthen job rotation, implement agent system and advance employees' job experience to prevent businesses interruptions due to disturbances in manpower deployment. In addition, we will encourage our colleagues to obtain professional licenses to enhance business competitiveness.
G. Implement anti-money laundering mechanisms, strengthen legal compliance and improve internal control (1) Formulate the 2018 Anti-Money Laundering and Countering Terrorist Financing (AML/CFT) Plan, and amend our regulations on AML/CFT according to the requirements set forth by the competent authority, our risk assessment results or our practices and operations. (2) Establish a bank-wide AML/CFT system and integrate information from domestic and overseas business units to facilitate inquiry process, thereby enhancing our ability to monitor related accounts or transactions. (3) Strengthen education and training associated with AML/CFT, and plan education and training sessions for different employees based on the nature of business, so that employees understand their responsibilities with regard to AML/CFT and possess the expertise required in this area.
H. Fulfill corporate social responsibilities and create sustainable competitive advantage (1) Comply with the Ethical Corporate Management Best Practice Principles set forth by our parent company, and engaged in business activities based on the principles of fairness, honesty, trustworthiness and transparency. Besides, we will also actively prevent unethical conduct to establish our corporate culture of ethical management and sound development. (2) Focus on supply chain management and follow the Equator Principles. Take environmental protection, labor and consumer rights, and ethical corporate management into credit evaluation criteria. Guide enterprises to pay attention to and exercise corporate social responsibility. (3) Actively participate in social welfare activities, and care for rural schoolchildren and disadvantaged groups. Realize the vision of "having taken from the society, now we strive to give back" and fulfill our corporate social responsibility.
Messsage to Shareholders 7
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1.4 Business Targets for 2018 A. Deposit：NT$2,689 billion (excluding interbank deposits) B. Loan：NT$2,137.48 billion C. Foreign Exchange Transactions：US$114.5 billion
1.5 Credit Ratings
Global Rating National Rating Rating Agency Outlook Release Date Long-Term Short-Term Long-Term Short-Term
S&P/TRC A A-1 twAA+ twA-1+ Stable Jan.19, 2018
Chairman President
8 Annual Report 2017
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
Taiwan Cooperative Bank
2. Bank Profile 2.1 Date of Establishment Oct. 5, 1946
2.2 History In 1913, Taiwan's first industrial association was established during Japanese occupation period. In 1942, it was merged into Union of Taiwan Industrial Association, and was reorganized into Taiwan Industrial Bank and Taiwan Agricultural Association. In 1946, the government took over Taiwan Industrial Bank, and we were reorganized from Taiwan Industrial Bank into Taiwan Cooperative Bank (hereafter referred to as “TCB” or “the bank”) within the same year. Total equity capital in the amount of 25 million Old Taiwan Dollars was provided by the Taiwan Provincial Government along with cooperative groups, farmers’ associations, fishermen’s associations, and irrigation associations. The equity capital was divided into 250 thousand shares, with each one worth of NT$100. The government held 150 thousand shares and each group was allotted 10 thousand shares each. Over the past 70 years, the operating scale of the Bank has been constantly expanded thanks to the efforts of the entire staff, and at the end of 2017 its equity capital stood at NT$88.081 billion. TCB achieved corporate status under the provisions of Article 52 of the Banking Law in May 1985. It was reorganized as Taiwan Cooperative Bank, Ltd. on Jan. 1, 2001; went public in June 2003; was listed on the stock market on Nov. 17, 2004; underwent a Chinese name change in 2006; and merged with The Farmers Bank of China Co., Ltd. on May 1 of the same year. To integrate the Group’s resources to make full use of operating synergies and reinforce business development, TCB, the Co-Operative Asset Management Co., Ltd. and the Taiwan Cooperative Bills Finance Co., Ltd. jointly established Taiwan Cooperative Financial Holding Co., Ltd.（TCFHC）on Dec. 1, 2011 through a share swap. TCFHC thus became TCB’s sole (shareholding 100%) shareholder. To achieve the cross-industry condition for holding companies, TCB’s securities department was spun off as the Taiwan Cooperative Securities Co., Ltd. on Dec. 2, 2011. For the effective management of the Group’s resources, the Bank transferred its shares in the BNP Paribas Cardif TCB Life Insurance Co., Ltd. and BNP Paribas TCB Asset Management Co., Ltd. (renamed Taiwan Cooperative Securities Investment Trust Co., Ltd.) to TCFHC on Apr. 3, 2012, making the two companies as subsidiaries of TCFHC. To reinforce the protection of consumers’ rights and provide superior insurance services, the Bank merged with Cooperative Insurance Brokers Co., Ltd. on Jun. 24, 2016, with the Bank as the surviving company and established the Insurance Agent Department. TCB’s subsidiary currently includes the United Taiwan Bank S.A. As of Dec. 31, 2017, the Bank boasts a total of 291 domestic and overseas branches (including the Department of Business, Offshore Banking Branch, United Taiwan Bank, Manila Offshore Banking Branch, Los Angeles Branch, Seattle Branch, New York Branch, Hong Kong Branch, Suzhou Branch, Suzhou New District Sub-Branch, Tianjin Branch, Changsha Branch, Fuzhou Branch, Sydney Branch, Melbourne Branch, Phnom Penh Branch, Tuek Thla Sub-Branch, Pur Senchey Sub-Branch, Siem Reap Sub-Branch, City Center Sub-Branch, Beijing Representative Office, and Yangon Representative Office), creating the most extensive network of branches among all Taiwan banks and positioning itself as a market leader in share of deposits and loans. According to the list of the world’s top 1,000 banks by asset size, published in the July 2017 issue of The Banker magazine, TCB ranked 174th in the world and 3rd in Taiwan. In Bank Profile 9
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
the global ranking of the top 500 banking brands, published in February 2018, TCB ranked 269th in the world.
According to TCB’s Articles of Incorporation, the Bank is in charge of carrying out the missions of operating a banking business, developing national economic construction, and providing financial adjustment for the farming and fishery industries. In addition to providing financing for cooperative enterprises, the farming and fishery industries, and small and medium enterprises, TCB also offers deposits, loans, and foreign exchange services for business enterprises in general to facilitate funds utilization and promote overall economic development. This makes TCB a consolidated international bank for farming, fishery, cooperative, and business financing.
From left to right： Fei-Ling Hu, E. V. P. & General Auditor Chih-Cheng Peng / Yen-Yi Cheng / Mei-Tsu Chen, Executive Vice Presidents Chung-Dar Lei, Chairman Bor-Chang Hwang, President Teng-Shan Tai / Chun-Lung Chou, Executive Vice Presidents Pi-Chu Wu, E. V. P. & Chief Compliance Officer
10 Annual Report 2017
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
Taiwan Cooperative Bank
3. Corporate Governance Report
3.1 Organization Chart E.V.P. & Auditing Department, As of February, 2018 General Auditor Board of Directors
Secretariat, Board of Directors
Business Management Centralized Department Operation Center
Corporate Banking Regional Department Management Center
Credit Management Department
Treasury Department
International Banking Department
Personal Banking Department
Wealth Management Department
Trust Department of Department Business ． Branches Board of Insurance Agent Shareholders’ Executive Department ． Directors Vice Meeting President Sub- Chairperson Presidents Branches Electronic Banking ． Department Representative Office Credit Card Customer Service Board of Remuneration Department Center Supervisors Committee Loan Assets Management Risk Management Department Committee Administrative Management Department
Accounting Department
Information Technology Department
Information Security Department
Credit Analysis and Research Department
Risk Management Department
Human Resource Training Department Center
Legal Affairs Department
E.V.P. & Chief Compliance Compliance Officer Department Corporate Governance Report 11
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
3.2 Bank’s Subsidiary Chart As of March 26, 2018
Taiwan Cooperative Bank
Shareholding 90.02%
United Taiwan Bank S.A.
3.3 Major Corporate Functions
Department Functions Auditing Department, Handling of auditing matters. Board of Directors Secretariat, Handling of Board of Directors’ meetings and confidential matters. Board of Directors Handling of bank-wide operational policy, organizational, and medium- and Business Management long-term business planning, deposits and remittances, performance Department evaluation and guidance of business units. Corporate Banking Promotion and management of the loan business, guidance of SMEs and Department corporate financial planning, services, consultation, and management. Planning of bank-wide loan policy, handling of the review and relay of loan Credit Management cases that exceed regional center loan authorization, preparation of loan Department follow-up and evaluation reporting forms, and supervision and other reviews related to loan review. Handling of New Taiwan Dollar and foreign-currency funds allocation and Treasury Department planning, securities investment, reinvestment, and other financial management matters. Handling of R&D, promotion, and management of the foreign exchange International Banking business; applying and establishing of authorized foreign exchange branches Department and overseas units; management of imports, exports, remittance, and telecommunications business. Personal Banking Planning, promotion, and management of consumer loan and personal loan Department cases. Handling of planning for the wealth management business and the management of financial advisors, formulation and revision of Wealth Management wealth-management policies and operational guidelines, and promotion, Department supervision, and management of financial-planning investment by wealth-management customers. Trust Department Handling of R&D, promotion, and management of the trust business. Insurance Agent Handling of life and property insurance agent business. Department 12 Annual Report 2017
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Taiwan Cooperative Bank
Department Functions Planning, promotion, management, and consultation services for the personal e-banking business, Internet banking business, electronic Electronic Banking commerce business, Internet ATM business, home banking MOD business, Department ATM business, (international) debit card business, planning and promotion for POS business. Planning, marketing, implementation, consultation, and management of the Credit Card credit card and debit card, and provision of customer complaint services in Department regard to the credit card and debit card. Loan Assets Planning and supervision of the clearance of non-performing loans (NPLs) Management and overdue loans, bad-debt write-off and statistical analysis, and handling Department of other matters related to NPLs and overdue loans. Administrative Handling of documentary, filing, public relations, general affairs, receipts Management and disbursements, procurement, property management, and construction Department and maintenance matters, and matters regarding labor safety and health. Accounting Compilation and analysis of accounting matters, annual budgets, and Department affiliated bank data. Information Development and promotion of information business, and data processing Technology controls. Department Information Security Planning, monitoring, management and implementation of information Department security maintenance operations. Credit Analysis and Establishment of credit investigation rules, promotion and supervision of Research Department credit investigation work, and collection and management of industry data. Handling of the organizational framework for risk management; planning of Risk Management policies and systems; examination of risk identification, weighing, Department assessment, and control methods; internal control system, and other matters relating to risk management. Human Resource Handling of personnel management and employee training. Department Planning, management, and implementation of the legal compliance system Compliance and anti-money laundering and counter-terrorist financing; review of the Department contents and related matters regarding the regulations. Review of the contents and related matters regarding the contracts, Legal Affairs assistance for litigation cases, supervision of procurement and draft Department verification.
Corporate Governance Report 13
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3.4 Directors, Supervisors and Executive Officers As of March 26, 2018 Directors Supervisors Title Name Title Name Chairman Chung-Dar Lei Resident Supervisor Chung-Fern Wu Bor-Chang Hwang Ming-Lei Chang Managing Directors Ching-Tien Hsiao Yung-Kung Peng Supervisors Shen-Gang Mai Han-Chun Hsiao Managing Director (Independent Director) Keh-Chang Gee Ching-Yo Cheng Ming-Shenq Hwang
Independent Directors Hsuan-Chu Lin Lan-Fen Wang Shyh-Laang Lin Shin-Rong Shiah-Hou Shih-Tsung Chang Chii-Dong Ho Kuo-Chih Chen Directors Chin-Chu Chen Yung-Cheng Chang Cheng-Jen Wu Chen-Hsien Liao Bin-Hsiu Lee Ming-Hui Weng
Executive Officers Title Name Title Name S.V.P. & G.M., Personal President Bor-Chang Hwang Banking Department Kuan-Cheyi Chen S.V.P. & G.M., Wealth Mei-Tsu Chen Management Department Hui-Wen Huang S.V.P. & G.M., Trust Teng-Shan Tai Department Chun-Ming Kuo Executive Vice Presidents S.V.P. & G.M., Electronic Yen-Yi Cheng Banking Department Hsiaw-We Chang Chun-Lung Chou S.V.P. & G.M., Credit Card Yu-Ming Chen Department S.V.P. & G.M., Loan Assets Chih-Cheng Peng Management Department Huie-Lin Chen S.V.P. & G.M., Insurance Agent E. V. P. & General Auditor Fei-Ling Hu Department Hsiao-Heng Wong E. V. P. & Chief Compliance Pi-Chu Wu S.V.P. & G.M., Administrative Jen-Wei Ken Officer Management Department S.V.P. & G.M., Auditing S.V.P. & G.M., Accounting Department, Board of Directors Chen-Hsing Tsai Department Hsi-Chiang Pan S.V.P. & Chief Secretary, S.V.P. & G.M., Information Secretariat, Board of Directors Kuo-Chung Lee Technology Department Chien-Hsing Chang S.V.P. & G.M., Business Wu-Shung Yan S.V.P. & G.M., Credit Analysis Chun-Wu Chao Management Department and Research Department S.V.P. & G.M., Corporate Hui-Fang Chiang S.V.P. & G.M., Risk Hsi-Chang Hsu Banking Department (deputy) Management Department S.V.P. & G.M., Credit S.V.P. & G.M., Human Resource Management Department Shih-Ching Chen Department Kuo-Hao Chang S.V.P. & G.M., Treasury S.V.P. & G.M., Compliance and Department Ling-Tsui Huang Legal Affairs Department Fu-Yu Chou S.V.P. & G.M., International Banking Department Yen-Mao Lin
14 Annual Report 2017
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Taiwan Cooperative Bank
3.5 Major Shareholder As of March 26, 2018 Shareholding Shareholder’s Name Shares Percentage Taiwan Cooperative Financial Holding 8,808,130,000 100% Co., Ltd.
3.6 Corporate Governance Execution Status and Deviations from “Corporate Governance Best-Practice Principles for the Banking Industry” Implementation Status Deviations from the Item Principles Y N Summary Description and reason 1. Shareholding Structure & Shareholders’ Rights (1) Does the Bank adopt internal procedures √ (1) The Bank is a wholly owned subsidiary of the Taiwan Compliant to handle shareholder’s suggestions, Cooperative Financial Holding Co., and all related questions, disputes, and litigation? Does matters are handled in accordance with regulations. the Bank act in accordance with such procedures?
(2) Does the Bank know the identities of the √ (2) The Taiwan Cooperative Financial Holding Co. holds Compliant major controlling shareholders, and of their 100% of the Bank’s shares. ultimate controlling shareholders?
(3) Does the Bank establish a risk √ (3) The Bank has formulated the regulations and rules in Compliant management mechanism and “firewall” accordance with the authority’s regulations for risk between the Bank and its affiliates? control and firewall mechanisms between the Bank and affiliated enterprises. The Bank has established the reporting mechanism of material issues in the operations of investees.
2. Composition and Responsibilities of the Board of Directors (1) In addition to the Remuneration √ (1) The Board of Directors established the Remuneration Compliant Committee and the Audit Committee, Committee on July 27th, 2011 but did not establish other does the Bank voluntarily establish other function-specific committees. function-specific committees?
(2) Does the Bank carry out regular √ (2) The Accounting Department will evaluate the Compliant evaluations of CPAs independence? independence of CPAs while writing the proposal of entrustment with them each year.
3. If the Bank is a TWSE/GTSM listed √ The Bank is not a TWSE/GTSM listed company. company, does it have a dedicated unit/staff member in charge of the corporate governance affairs (including but not limited to providing information required for director/ supervisor's operations, convening board/shareholder meetings in compliance with the law, applying for/change company registry and producing meeting minutes of board/shareholder meetings)?
4. Does the Bank establish a communication √ The Bank has set up “complaint hotlines,” “service e-mail,” Compliant channel with stakeholders (including but and “customer service hotlines,” for stakeholders on the not limited to shareholders, employees, Bank website. The Bank has also created a “suggestion and customers)? box” for employees to voice their concerns or communicate with the Bank. E-mails received are processed daily while serious matters are promptly reported to senior management to ensure a smooth communication channel.
5. Information Disclosure (1) Does the Bank set up a website to √ (1) The Bank has established a website where financial data Compliant disclose information regarding financial, and corporate governance are explicitly listed under the business and corporate governance Bank Profile, Information Disclosure and Corporate status? Governance sections. (http://www.tcb-bank.com.tw)
(2) Does the Bank establish other √ (2) The Bank has established an English version website. Compliant information disclosure channels (e.g., (http://www.tcb-bank.com.tw) maintaining an English-version website, The Bank has guidelines for press releases and the Vice appointing responsible personnel to handle President is appointed as the spokesperson and makes information collection and disclosure, public announcements. The Bank invites mass media to implementing the spokesperson report its latest operational strategies and business mechanism, and posting the taped investor expansion plan and disclose these releases in “Press conferences on the Bank website)? Release” section on the Bank website. Corporate Governance Report 15
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Implementation Status Deviations from the Item Principles Y N Summary Description and reason 6. Does the Bank have other relevant √ (1) Employee rights Compliant information to facilitate a better a. The Bank has established an Employee Welfare understanding of the Bank’s corporate Committee and makes monthly welfare payments for governance operations (e.g., including employee benefits. but not limited to employee rights, caring b. The Bank has established an employee training center of employees, investor relations, rights of and subsidizes employees who pass certification tests. stakeholders, directors’ and supervisors’ c. An employee retirement system is established following training records, the implementation of the “Labor Standards Act,” and “Labor Pension Act.” risk management policies and risk (2) Caring of employees evaluation measures, the implementation a. Female employees are entitled to menstrual leave, of customer relations policies, purchasing pre-maternity leave, maternity leave and miscarriage insurance for directors and supervisors, leave. In addition, they can apply for parental leave and donations to political parties, before children reach three years old. Moreover, in stakeholders, and charity organizations)? compliance with the Act of Gender Equality in Employment, the Bank has set up breastfeeding rooms for female employees to nurse. b. The Bank has established “Guidelines for Preventive Measures, Complaints, and Punishments for Sexual Harassment in the Workplace” and carries out related education on a scheduled basis, to protect employees from sexual harassment. c. In addition to labor and health insurance, employees carrying out their duties outside the offices are covered by a group accidental injury insurance policy. d. The Bank has established “Guidelines for Assistance to Employees Involved in Lawsuits in the Line of Duty.” The Bank hires lawyers for employees involved in lawsuits due to their line of work to protect their rights. e. The Bank provides health checkups for all employees every three years to ensure the health of all personnel. (3) Investor relations The Bank’s sole shareholder is Taiwan Cooperative Financial Holding Co. (4) Rights of stakeholders The Bank’s “Rules of Procedure for the Board of Directors’ Meetings” stipulates that for agenda items of which the director has a personal interest and which may impair the interest of the company, the director shall recuse himself/herself from the discussion. (5) Directors’ and supervisors’ training records Besides providing a variety of training information to all directors and supervisors, the Bank enrolls them in relevant sessions based on their personal choice. (6) The implementation of risk-management policies and risk evaluation measures The Bank has set up the Risk-Management Committee, controlling and reviewing the bank’s execution of risk management. The bank has also established Risk Management Department to operate a bank-wide risk management mechanism with regular monitoring, evaluating, and reporting, the overall credit, market, and operational risk, and therefore adjusting the risk controlling measures timely. (7) The implementation of customer relations policies The Bank uses the Template of Standard Form Contract to formulate product application forms and contracts. The Bank adheres to relevant laws and regulations stipulated by competent authorities, Personal Information Protection Act, Financial Consumer Protection Act and Fair Dealing Principles. (8) Purchasing insurance for directors and supervisors “Liability Insurance for Directors, Supervisors and Officers” was provided by the Bank’s parent company, TCFHC. (9) Donations to political parties, stakeholders, and charity organizations Pursuant to the rules for donations stipulated by the Bank, donations shall be made only to charity events organized by non-profit organizations (excluding political parties).
7. Please specify actions taken by the √ The Bank was not evaluated. company to improve items listed as the result of the Corporate Governance Evaluation announced by the Taiwan Stock Exchange Corporate Governance Center and improvement plans. (Leave it blank if the company was not evaluated.)
16 Annual Report 2017
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Taiwan Cooperative Bank
3.7 Implementation of Corporate Social Responsibility
Implementation Status Deviations from the Item Principles Y N Summary Description and reason 1. Implementation of Corporate Governance (1) Does the Bank establish a corporate √ (1) Compliant social responsibility policy or system? a. The Bank has established corporate governance rules, Does the Bank review the effectiveness reviewed the implementation status and the deviations of its implementation thereof? from the corporate social responsibility best practice principles for banking industry. The Bank has updated information on its “Corporate Governance” web page every six months. b. The Bank strives to enhance the efficiency of resource use, has formulated “Energy Conservation Measures,” and monitors the results of water, electricity, and petroleum conservation on a quarterly basis. c. The Bank complies with the provisions of the Labor Standards Act, protects the rights of workers. d. The Bank has worked out a labor safety and health management plan, and follows up on implementation by different units every six months. e. The Bank has instituted “Operating Guidelines for Safety Protection” and has organized a Safety Protection Supervisory Committee which convenes regular safety protection meetings to review the performance of implementation. f. The Bank organizes summer and winter sports camps and charity events at regional management centers and convenes meetings to report the outcome and feedback.
(2) Does the Bank periodically hold social √ (2) The Bank has arranged appropriate social responsibility Compliant responsibility education and training lessons at meetings and employee training to instill sessions? the management principles of fulfilling social responsibility.
(3) Does the Bank have a unit (dedicated or √ (3) To implement our social responsibility policies, the Compliant otherwise) that is charged with Bank has established: responsibility for promoting corporate a. Labor Safety Section: Handling of labor safety issues. social responsibility? Does the board of b. General Affairs Section: Maintaining the environment directors specifically authorize senior and utilizing resources. management to handle corporate social c. Public Relations Section: Responsible for charitable responsibility matters, and does senior activities. management report back to the board of d. Compensation and Welfare Section and Assessment directors on its handling of such matters? and Training Section: Responsible for employee rights and interests, evaluation planning and ethics promotion. In addition, the Group’s corporate social responsibility report will be reviewed by the Bank’s parent company, TCFHC before releasing to the public.
(4) Does the Bank establish a policy on √ (4) The Bank has a comprehensive compensation system. Compliant reasonable remuneration? Are corporate The “Performance Management Steering Committee” social responsibility matters factored is established to formulate the evaluation and into employee performance evaluations? reward-disciplinary systems. Are there clear and effective rewards and sanctions?
2. Development of a Sustainable Environment (1) Does the Bank make efforts to enhance √ (1) The Bank’s procurement rules specify that priority in Compliant the efficiency of resource utilization, and procurement be given to products bearing use recyclable materials with a low government-certified environmental protection labels, environmental burden? and that green building materials be used in line with the government’s environmental protection policy; and, in addition, that lighting equipment be gradually replaced with energy-saving lamps, and that sanitary equipment bearing water-saving labels be used.
(2) Does the Bank establish an appropriate √ (2) The Bank has formulated “Energy Conservation Compliant environmental management system Measures,” and monitors the results of water, that is suited to the characteristics of the electricity, and petroleum conservation. banking industry?
(3) Does the Bank monitor the impact of √ (3) The Bank has established “Energy Conservation Compliant climate changes on its operating Measures” in July 2008. Savings on the consumption activities, implement greenhouse gas of water, electricity, and petroleum is monitored inventory reports? Does the Bank quarterly. The Bank also passed the testing on the formulate strategies for energy greenhouse gas inventory conducted by the Labor conservation and reduction of carbon Safety and Health Association. and other greenhouse gases?
Corporate Governance Report 17
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Implementation Status Deviations from the Item Principles Y N Summary Description and reason 3. Protection of Social Benefit (1) Does the Bank adopt policies and √ (1) Compliant procedures in accordance with a. The Bank has established “Guidelines for Assistance applicable legislation and international to Employees Involved in Lawsuits in the Line of human rights conventions? Duty,” and provides legal assistance for employees so affected. b. The Bank has established “Guidelines for Preventive Measures, Complaints, and Punishments for Sexual Harassment in the Workplace” and “Guidelines for Treating Complaints and Investigation of Sexual Harassment,” and carries out related education on a scheduled basis, to protect the safety of employees in the workplace and allow employees to work in an environment free of sexual harassment.
(2) Does the Bank establish an employee √ (2) The Bank has established an area of employees’ Compliant complaint system, including a channel complaints and “Employees’ Suggestion Mailbox” in for lodging complaints? Is the system the internal network for employees to discussion. being properly implemented? Complaints are handled by dedicated personnel in a confidential, fair, and prompt manner.
(3) Does the Bank provide a safe and healthy √ (3) Compliant working environment for its employees, a. The Bank has formulated the labor safety and health and offer them regular safety and health management plan, which includes education and education? training in safety and health, and implementation of automatic health examinations. The plan is carried out in accordance with projected schedules, and is followed-up semi-annually so as to establish a high-quality working environment, eliminate potential risks in the workplace, and assure the safety and health of employees. b. The Bank has installed automatic reporting system, alarm system, security system, video surveillance system, fire safety equipment and other necessary protective equipment at branches with designated personnel in charge of their operations and monthly inspection. Security guards are hired for the business lobby to protect the personal safety of employees and customers. c. To enhance employee consciousness of safety and health, and prevent the occurrence of occupational accidents, the Bank has provided one hour of on-the-job safety and health training each year for general employees. The Bank also sends personnel to participate in the safety and health officer, first-aid personnel, and fire manager training organized by the Bankers Association so as to comply with legal requirements.
(4) Does the Bank establish a channel for √ (4) Compliant periodic communication with employees? a. The Bank signed a collective agreement with the Does the Bank use reasonable methods union for protection of the rights of labor and to notify employees of operational management. changes with a potentially major impact b. The Bank holds regular labor-management meetings upon them? with representatives from the both sides, with full communication and negotiation of differing opinions, with the aim of advancing labor-management harmony and upgrading overall work performance. c. The Bank has set up an employee complaint mechanism and installed employee suggestion boxes through which employees can submit their complaints and suggestions. Labor-management disputes are settled expeditiously, and a policy that conforms to the rights of both labor and management is implemented.
(5) Does the Bank establish a career skills √ (5) In addition to regular trainings, the Bank encourages Compliant development program for its employees? employees to learn continually, and offers subsidies for employees taking in-service training, financial certification exams and English proficiency tests. The Bank aims to develop employee potential via diversified learning channels.
(6) Does the Bank adopt consumer √ (6) Compliant protection policies and complaint a. The Bank has provided 24-hour customer service procedures for its R&D, purchasing, center, corporate website, customer service e-mail and operational, and service processes? hotlines for customers to communicate and file complaints. b. The Bank has reviewed regulations associated with consumer protection in handling consumer loans and formulating terms, application forms and user guide of credit cards. Information related to customers’ rights and interests is fully disclosed. c. The Bank has set up application forms and standard form of contracts for products in accordance with the template established by FSC. In addition to the 18 Annual Report 2017
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Taiwan Cooperative Bank
Implementation Status Deviations from the Item Principles Y N Summary Description and reason principles of integrity and reciprocity, the Bank act in conformity with relevant regulations stipulated by competent authorities. d. To comply with the Financial Consumer Protection Act, the Bank uses customer KYC and brochures on essential matters within the contracts to educate our customers about the suitability of those products, and explain in detail with risk fully disclosed, before offering products. e. The Bank ascertains the safety of computer operations to prevent personal data from being stolen, altered, damaged, destroyed, disclosed or abused to protect the rights and interests of consumers.
(7) In its marketing and labeling of products √ (7) The marketing and labeling of products and services Compliant and services, does the Bank comply with offered to the public are compliant with applicable applicable legislation and international legislation and international standards. standards?
(8) Before entering into a business √ (8) The Bank has not carried out the assessment. The Bank has not relationship with a supplier, does the carried out the Bank first consider whether the supplier assessment. has previously harmed the environment or the interests of society?
(9) Do the Bank’s contracts with major √ (9) The Bank has not added the aforesaid provision in the The Bank has not suppliers include a provision that allows contracts. added the aforesaid for the Bank to terminate or rescind at provision in the any time if the supplier violates its contracts. corporate social responsibility policy in such a manner as to harm the environment or the interests of society?
4. Strengthening of Information Disclosure
Does the Bank use its own website and the √ Market Observation Post System (MOPS) The CSR report is prepared by the parent company, Compliant website to disclose relevant and reliable TCFHC. It discloses the Bank and the Group’s efforts to information on corporate social responsibility? fulfill the corporate social responsibilities. The report is available under the corporate social responsibility section of the corporate website and Market Observation Post System (MOPS).
5. If the Bank has compiled its own corporate social responsibility rules in accordance with the “Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies,” please explain their operation and their divergences: The Bank follows the Corporate Social Responsibility Best Practice Principles stipulated by TCFHC.
6. Other important information that can assist in understanding the operation of corporate social responsibility: (1)With a view to extending our care for the society, we organized a series of winter aid activities which have benefited a total of 1,600 people in 26 social welfare institutions and schools across 13 counties and cities. We also participated in the 2017 Finance with Love - Food Bank event by jointly donating resources and materials to public welfare events, which have benefited more than 3,000 households via donations from various county and city governments. (2)We participated in the Financial Services Education Fund established by Taiwan Financial Services Roundtable to assist young people from disadvantaged families in completing their studies, and conducted financial education courses to promote finance-related knowledge. We were given the Best Corporate Social Responsibility Award at the 2017 Excellent Bank Rating Event organized by Excellence Magazine. (3)To encourage Bachelor's degree and Master's degree students to actively participate in finance case studies, we have established the Regulations Governing Research Scholarships, where a total of 12 outstanding students were awarded the scholarship in 2017. To date, a total of 756 students have benefited from our scholarship program, which has made considerable contributions to domestic academic research in economics and finance. (4)We offer long-term support to grass-root sports activities, and have won three awards, namely “Promotion Award”, “Sponsorship Award” and “Long-term Sponsorship Award” from the Sports Administration, Ministry of Education for 9 consecutive years. Every year, we set up a budget to organize and sponsor sports activities and competitions, and have nurtured approximately 140 national and outstanding sportsmen, including top women's singles badminton player, Tai Tzu-Ying, top men's singles badminton players, Wang Tzu-Wei and Chou Tien-Chen, as well as top table tennis players, Chiang Hung-Chieh, Chen Chien-An and Cheng I-Ching, who won a total of 12 medals, including 4 gold medals, 2 silver medals and 6 bronze medals, at the 2017 Summer Universiade. In addition, these athletes have also repeatedly achieved excellent performance in various Asian Championships and major international competitions. We hope to nurture even more sportsmen who will become the pride of Taiwan and eventually become shining stars on the global stage.
7. If the Bank’s corporate social responsibility reports include passage of certification standards by relevant certification agencies, please explain: None.
Corporate Governance Report 19
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4. Operational Highlights 4.1 Annual Business Plans for 2018
4.1.1 Operational Management (1) Following the digital trend in finance, we will adopt a customer-oriented mindset and integrate the functions of offline branches, digital finance and customer service centers to deliver the effects of channel integration marketing, provide a diverse range of products and convenient services to enhance customer value and improve output performance. (2) In line with the government's New Southbound Policy, we will actively expand into the ASEAN market, work closely with Taiwan entrepreneurs, and continue to keep abreast of opportunities to enter into the Asian market. By taking two-way business support measures between domestic and overseas units, we will work together to expand cross-regional and cross-time businesses, so as to provide customers with high-quality financial services and increase contributions from overseas branches. (3) Cooperate with the government in accelerating the promotion of urban renewal policy, promote the participation of our self-owned buildings in urban renewal on neighboring lands or engage in simple urban renewal projects on our own lands, so as to enhance the value of our assets. We will also make appropriate adjustments to idle and rarely used real estate properties and prepare plans to rent them out in order to increase rental income and reduce operating costs. (4) Continue to train talents in areas including financial operations, digital financial technology, foreign exchange and international banking to enrich our talent pool, optimize our manpower and integrate them at international level. In addition, we will also accelerate our talent recruitment, activate channels for promotion and engage in flexible allocation of human resources. (5) Reinforce our information security protection framework, examine security threats and weaknesses and perfect our information security protection capabilities. On the other hand, we will establish a preventive detection mechanism to provide real-time transaction monitoring and prevent illegal financial conduct, and supplement the mechanism with the information security log event analysis management system to detect potential information security threats, thereby enhancing the information security alert function.
4.1.2 Corporate Banking (1) Continue to promote the provision of loans to 5+2 Innovative Industries, and provide support to the development of SMEs. Besides, we will respond to the government's New Southbound Policy and make good use of our overseas branches to promote the provision of foreign currency loans, thereby widening spreads and increasing our rate of return on risk-weighted assets. (2) Strengthen relationships with our customers in industrial parks, as well as launch and promote supply chain financing services with substantial transactions, along with the Corporate Loans E-Touch Service to optimize the loan process. At the same time, we will activate approved but unused line of credit, focus on our corporate customers with a single mid- or long-term loan, strive for new business and enhance loan-deposit ratio, thereby developing integrated marketing. (3) Promote corporate expansion projects and assist branches expanding corporate finance. Customers with a sound credit rating but insufficient collateral can be guaranteed by the
20 Annual Report 2017
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Taiwan Cooperative Bank
credit guarantee fund. Control the cash flow of well-operated companies to increase our demand deposits and lower the funding cost. (4) Strike a balance between quality and margin, and expand the scale of corporate loan. We will also actively strive to arranged/coordinated international syndicated loan, so as to increase service fee income and raise revenues. (5) Focus on the perspective of each industry, and review the credit limit. Revise credit limits and early warning indicators for various industries and high-risk industries in Mainland China in order to diversify and control industry risk.
4.1.3 Retail Banking (1) Actively provide mortgage for self-used housing and those collaterals at good locations. Expand customer base from batch processing of mortgage in construction loans, and attract mortgage customers from our competitor to strengthen our mortgage operations. In addition, we will also provide incentives to increase the business volume of mortgage insurance. (2) Market revolving mortgage including “Winner Loan - Working Capital Loan,” debit card and personal loans to increase the revenue from loans. (3) Promote high-quality credit loans by visiting organizations or corporations with outstanding reputations. Provide a wide range of loan products for military, public and teaching personnel, employees in reputable companies, as well as medical personnel. (4) Exert advantage in channels to boost credit card issuance and POS service. (5) Move toward e-banking and mobile services and provide customized online cash flow management to satisfy customer’s need and improve customer satisfaction.
4.1.4 Treasury Management (1) Flexibly adjust asset allocation according to market dynamics, reduce the balance of positions with lower returns, as well as increase financial assets such as government bonds and foreign currency bonds with high returns in order to enhance profitability. (2) To earn a stable interest income and lower interest rate risk, investment in bonds will be structured with shorter duration and installments. Structure corporate bonds issued by reputable corporations within the limit of risk-weighted assets to improve overall revenue. (3) Pay attention to the interest rate and exchange rate movement and build flexibility into fund allocations. Be aware of changes in the international markets and improve operations in foreign-currency funds. Moreover, aggressively build our foreign-currency bond and international bond positions, to increase net income from financial instrument operations. (4) Broaden the scope of new investment vehicles, e.g., participating in the government's economic development plans and establishing green bond positions, to improve the Bank’s return on invested capital. (5) Expand the pool of foreign exchange deposit funds, and enhance the development of profitable import and export transactions, so as to increase income from foreign exchange business. Provide appropriate derivative financial products to satisfy customers’ needs. Promote treasury marketing business and develop the benefit of integrated marketing.
4.1.5 Wealth Management (1) In response to market sales trend and customer demands for asset allocation, we will introduce funds and insurance products with high-quality criteria to provide customers of different ages with appropriate planning and protection and assist them in improving their portfolios. Operational Highlights 21
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(2) To advance the service quality in wealth management, we will continue to conduct training courses and carry out training sessions which are planned according to the type, level and suitability of participant. Besides, we will design professional themes and case-based learning, hire professional lecturers from fund companies, insurance companies and Taiwan Academy of Banking and Finance in order to effectively enhance the professional skills of our wealth management advisors. (3) Promote monthly investment planning and lead customers to diversify investment risks and enhance profit opportunities through the regular fund savings plan, thereby reinforcing our wealth management scale. (4) Provide target customer lists for branches to expand their businesses with the results of the customer analysis, thereby facilitating precision marketing and increase our sales penetration rate. (5) Provide family wealth management service to extend our customer base from personal to family, thereby expanding the capacity in the wealth management business.
4.1.6 Digital Banking (1) Through big data analysis, segregate customers according to their characteristics to formulate differentiated marketing strategies. Achieve precision marketing by incorporating our advantages in channels to enhance the overall transaction volume and operational performance. (2) Cooperate with the government in promoting the “Five-Year Electronic Payment Ratio Doubling Plan” and assist in the promotion of “Taiwan Pay QR Code Co-Payment Initiative” and POS business. Advance the “Medical E-Payment system” and build a variety of payment channel to provide convenient payment service experience. (3) Keep abreast of science and technology trends, pay attention to user experience, build convenient digital financial environment and provide customers with high-quality digital financial services(e-personal banking, e-corporate banking, EDI, mobile banking, etc.) to deepen customers’ loyalty. (4) Value patents applications involving financial technology and make efforts in FinTech development. Use block chain technology to design shareable business service models to increase the penetration rate for various businesses. (5) Implement the Bank 3.0 Human Resources Strategic Plan and continue to strengthen the advocacy and training on every e-service platform in order to enhance the marketing skills and promote these services to customers with personal experience and proficiency.
4.2 Market Analysis
4.2.1 Competitive Niches
(1) As benchmark bank with a solid operating base Since being revamped from the “Taiwan Industrial Cooperative” in 1946, we have continued to cultivate the local market. As of year-end in 2017, the scales of our assets, deposit, and loans all place us in a leading position in the banking industry in Taiwan.
(2) Complete financial network of the Group to offer comprehensive financial services Since its establishment in December 2011, TCFHC has utilized the channel advantages of having over 270 TCB operational locations domestically and integrated with subsidiaries under the TCFHC, including Co-Operative Assets Management Co., Ltd., Taiwan 22 Annual Report 2017
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Taiwan Cooperative Bank
Cooperative Bills Finance Co., Ltd., Taiwan Cooperative Securities Co., Ltd., BNP Paribas Cardif TCB Life Insurance Co., Ltd., Taiwan Cooperative Securities Investment Trust Co., Ltd., and Taiwan Cooperative Venture Capital Co., Ltd., to offer comprehensive financial services including deposits, loans, and foreign exchange services, securities investment, trust funds investment, and insurance etc., to exert the integrated marketing synergies of TCFHC as a whole.
(3) A solid and stable operation to win the confidence of customers The Bank has kept a solid and stable operation, and is well-trusted by customers. The Bank will continue to solidify our core businesses of deposits, loans, and foreign exchange services. And we will also strengthen various services including e-banking, fund investment, insurance, and Fintech in order to offer clients value-added, diversified, and convenient financial services. (4) Strengthen overseas expansion plans to steadily move toward the international stage The Bank currently has a subsidiary bank in Europe - the United Taiwan Bank; branches in North America - including Los Angeles, Seattle, New York; branches in Australia - including Sydney and Melbourne; in the Greater China zone, we have branches in Hong Kong, Suzhou, Suzhou New District sub-branch, Tianjin, Fuzhou, Changsha and Beijing representative office; in Southeast Asia we have branches in Manila, Phnom Penh, sub-branches in Pur Senchey, TuekThla, Siem Reap and City Center, and a Yangon representative office. With our preparing for setting up two sub-branches under the Phnom Penh branch in Cambodia, we will continue to develop overseas market, progress toward international, provide quality cross-border financial services.
4.2.2 Favorable and Unfavorable Factors in Future Development, and Countermeasures
A. Favorable Factors (1) Major domestic and foreign economic forecasting institutions predict that Taiwan’s economy will grow at the rate of 2.0～2.43% in 2018. (2) Create new financial business models with the help of big data analysis, as well as focus on customer experience to increase stickiness. Pay serious attention to social media and create a friendly digital financial service environment, in order to motivate the development of every business and increase both interest and non-interest income. (3) Response to the Government’s promotion of Innovative Industries and the New Southbound Policy, we will expand into the ASEAN market and increase our scope of business. We will also construct a comprehensive cross-border financial service platform to provide real-time financial services, to fulfill the business needs both in domestic and abroad. (4) Integrate resources of subsidiaries under the Group, and through the Bank’s domestic and overseas channels proceed co-marketing to elaborate synergies and enhance overall profitability.
B. Unfavorable Factors (1) Gradual tightening or reduced loosening of monetary policies in major countries such as the U.S. , worldwide trade protectionism, high levels of debt in China, the growth of populism in the European region, and geopolitical tensions in the Middle East and North Operational Highlights 23
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Korea all create downside risks for the global economy. (2) The slowing housing market increases banks’ credit risk. In addition, the on-going adjustment to overseas risk exposure, low interest rate spread and intensifying competition among banks all create threats to the bank’s profitability. (3) The arrival of the financial technology era and the participation of non-financial service providers in existing markets change the financial institutions’ original roles as an agent and their operational modes. (4) To strengthen legal compliance and improve information security, banking industry continues to increase operating costs.
C. Countermeasures (1) Combine the resources from subsidiaries of TCFHC, including life insurance, security, investment trust, etc., to meet customers’ need. Increase the commodity penetration and clients’ contribution to boost income from risk-free service fee income. (2) Following the trend of strategic expansion planning in the Asia-Pacific region and grasping the direction of development of the New Southbound Policy, we will continue to increase our overseas locations to offer financial services to local Taiwanese businesses, thereby continuously expanding the proportion of overseas profit. (3) Look out for innovative business opportunities, comprehensively enhance our digital financial services, optimize customer experience and fully understand customers' trading habits, thereby facilitating the expansion of joint marketing and creating brand new sources of profits. (4) Explore SME and overseas loans, incorporate the Equator Principles and pay serious attention to environmental protection, realize differentiated pricing, strengthen risk control, enhance the return on risk assets, and increase the return on the use of capital. (5) Acquire potential customers and perform precision marketing with the help of big data analysis so as to increase customer stickiness and loyalty, and develop products and services to enhance operation performance. 4.3 Human Resources
As of Year 2016 2017 March 26, 2018 Administrative Units 1,405 1,377 1,374 Number of Business Units 6,851 6,656 6,615 Employees Total 8,256 8,033 7,989 Average Age 46.01 46.17 46.26 Average Years of Services 19.61 19.80 19.94 Ph.D. 0.07% 0.06% 0.06% Master’s Degree 15.97% 16.94% 16.97% Education Bachelor’s Degree 73.09% 73.01% 73.07% Senior High School 9.89% 9.16% 9.07% Below Senior High School 0.98% 0.83% 0.83%
24 Annual Report 2017
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Taiwan Cooperative Bank
5. Financial Information
5.1 Condensed Consolidated Balance Sheets Unit: In Thousands of NT Dollars Item 2017 2016 2015 Cash and Cash Equivalents, Due from The Central Bank 331,335,398 349,766,167 748,571,932 and Call Loans to other Banks Financial Assets at Fair Value Through Profit or Loss 12,862,843 27,866,137 14,936,076 Available-for-Sale Financial Assets 154,441,496 123,640,946 95,884,851 Securities Purchased Under Resell Agreements 249,463 0 209,592 Receivables, Net 18,625,840 14,838,408 13,430,332 Current Tax Assets 1,402,132 1,187,408 987,343 Discounts and Loans, Net 2,002,245,604 1,966,426,562 1,980,775,753 Held-to-Maturity Financial Assets 513,789,325 510,048,964 42,397,377 Investments Accounted For Using Equity Method 124,346 121,381 122,023 Other Financial Assets, Net 108,506,200 101,317,811 103,033,930 Properties And Equipment, Net 33,926,763 37,962,847 39,291,595 Investment Properties, Net 6,984,409 2,886,363 2,269,500 Intangible Assets 3,513,492 3,545,312 3,628,906 Deferred Tax Assets 1,282,022 954,971 1,227,279 Other Assets, Net 607,950 711,651 1,062,498 Total Assets 3,189,897,283 3,141,274,928 3,047,828,987 Due to The Central Bank and Other Banks 213,376,031 226,635,185 200,245,814 Financial Liabilities at Fair Value through Profit or Loss 14,450,851 14,631,011 14,706,922 Securities Sold under Repurchase Agreements 10,377,142 12,000,831 17,452,480 Payables 45,192,180 44,132,136 35,360,709 Current Tax Liabilities 1,185,896 328,375 1,351,013 Deposits and Remittances 2,624,738,997 2,564,285,363 2,504,511,887 Bank Debentures 64,610,000 74,610,000 69,610,000 Other Financial Liabilities 3,749,545 2,614,125 7,709,368 Provisions 7,624,197 7,171,678 9,286,765 Deferred Tax Liabilities 2,996,390 3,261,164 3,453,496 Other Liabilities 1,119,382 1,170,965 1,185,632 Before Distribution 2,989,420,611 2,950,840,833 2,864,874,086 Total Liabilities After Distribution Note 2,959,544,733 2,873,364,716 Equity Attributable To Owners Of The Company 200,260,653 190,238,972 182,760,001 Before Distribution 88,081,300 85,863,000 83,493,000 Capital After Distribution Note 85,863,000 83,493,000 Capital Surplus 58,767,245 55,985,497 53,054,992 Before Distribution 52,986,510 49,140,179 45,153,797 Retained Earnings After Distribution Note 40,436,279 36,663,167 Other Equities 425,598 (749,704) 1,058,212 Non-Controlling Interest 216,019 195,123 194,900 Before Distribution 200,476,672 190,434,095 182,954,901 Total Equity After Distribution Note 181,730,195 174,464,271 Note: The earning distribution for 2017 is still awaiting approval by the Shareholders’ Meeting. Financial Information 25
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5.2 Condensed Consolidated Statements of Comprehensive Income Unit: In Thousands of NT Dollars Item 2017 2016 2015 Interest Revenue 50,885,050 50,290,848 51,114,765 Interest Expense (18,459,151) (18,719,747) (21,062,243) Net Interest 32,425,899 31,571,101 30,052,522 Net Revenues And Gains Other Than Interest 9,958,237 9,335,502 9,435,664 Total Net Revenues 42,384,136 40,906,603 39,488,186 Bad-Debt Expenses And Provision For Losses On Guarantees (5,262,117) (3,807,805) (2,148,273) Operating Expenses (22,224,341) (22,541,284) (23,210,190) Income Before Income Tax 14,897,678 14,557,514 14,129,723 Income Tax Expense (1,986,400) (2,022,632) (1,989,265) Net Income 12,911,278 12,534,882 12,140,458 Other Comprehensive Income (Losses) For The Period, Net Of Tax 835,151 (1,865,563) 940,978 Total Comprehensive Income 13,746,429 10,669,319 13,081,436 Net Income Attributable To Owner of the Company 12,899,194 12,523,601 12,129,481 Net Income Attributable To Non-controlling interest 12,084 11,281 10,977 Total Comprehensive Income Attributable To Owner of the 13,725,533 10,669,096 13,083,648 Company Total Comprehensive Income Attributable To Non-controlling 20,896 223 (2,212) interest Earnings Per Share（NT$）(Note) 1.48 1.48 1.52 Note：The weighted average number of shares outstanding for EPS calculation has been retroactively adjusted to reflect the effects of the stock dividends distributed.
5.3 Financial Analysis 2017 2016 Item Consolidated Stand alone Consolidated Stand alone Ratio of Loans to Deposits (%) 77.28 76.96 77.63 77.32 Ratio of Overdue (%) 0.34 0.34 0.37 0.37 Ratio of Interest Cost to Annual Average Operating 0.62 0.62 0.65 0.65 Ability Deposits (%) Ratio of Interest Income to Annual Average 2.01 2.00 2.01 2.01 Loans Outstanding (%) Total Assets Turnover (Times) 0.01 0.01 0.01 0.01 Return on Tier I Capital Ratio (%) 8.19 8.22 8.37 8.41 Return on Assets Ratio (%) 0.41 0.41 0.41 0.40 Profitability Return on Shareholders’ Equity Ratio (%) 6.61 6.61 6.71 6.72 Ratio of Net Income (%) 30.46 30.45 30.64 30.67 Earnings Per Share(NT$) 1.48 1.48 1.48 1.48 Financial Ratio of Liabilities to Assets (%) 93.69 93.69 93.92 93.92 Structure Ratio of Fix Assets to Shareholder’s Equity 16.92 16.94 19.93 19.96 Growth Ratio of Asset Growth (%) 1.55 1.54 3.07 3.10 Rate Ratio of Profit Growth (%) 2.34 2.33 3.03 3.03 Ratio of Cash flow (%) 0.85 0.69 - - Ratio of Cash Flow Adequacy (%) - - - - Ratio of Cash Flow for Operating to Cash Cash Flow 128.86 104.36 - - Flow from Investing (%) Capital Adequacy Ratio (%) 13.51 13.44 13.00 12.91
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Taiwan Cooperative Bank
5.4 Supervisors’ Report
Pursuant to Article 219 of the Company Act, we have examined the individual financial statements and the consolidated financial statements of the Company for fiscal year 2017, which had been approved by the Board of Directors of the Company and audited by two certified public accountants, Chen Li-Chi and Kuo Cheng-Hung, of Deloitte & Touche, CPAs. We have not found any discrepancies and hereby submit said statements to the annual shareholders' general meeting.
To:
The 2018 Annual Shareholders' General Meeting Taiwan Cooperative Bank
Supervisor:
Supervisor:
Supervisor:
Supervisor:
Supervisor:
March 23, 2018
Financial Information 27
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5.5 Consolidated Financial Statements
INDEPENDENT AUDITORS’ REPORT
The Board of Directors and the Stockholders Taiwan Cooperative Bank, Ltd.
Opinion
We have audited the accompanying consolidated financial statements of Taiwan Cooperative Bank, Ltd. (the Bank) and its subsidiary (collectively, the Company), which comprise the consolidated balance sheets as of December 31, 2017 and 2016, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of Taiwan Cooperative Bank, Ltd. and its subsidiary as of December 31, 2017 and 2016, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, International Financial Reporting Standards, International Accounting Standards, Interpretation of IFRS and Interpretations of IAS endorsed and issued into effect by the Financial Supervisory Commission (FSC) of the Republic of China.
Basis for Opinion
We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements of Financial Institutions by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of Taiwan Cooperative Bank, Ltd. and its subsidiary in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of Taiwan Cooperative Bank, Ltd. and its subsidiary for the year ended December 31, 2017. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matters in our audit of the consolidated financial statements for the year ended December 31, 2017 were as follows:
Impairment Assessment on Discounts and Loans
The discounts and loans of Taiwan Cooperative Bank, Ltd. and its subsidiary as of December 31, 2017 was $2,027,864,794 thousand, consisting 64% of the total assets. Therefore, the assessment on the impairment loss of discounts and loans may have significant impacts on the consolidated financial statements. The assessment on discounts and loans performed by the Company’s management is based on whether there is any objective evidence of impairment. The amount of impairment loss is the difference between the book value and the estimated future cash flows of discounts and loans (with consideration to the collaterals and guarantees). In addition, the amount of provisions of impairment loss made should also be in accordance with the FSC guidelines. Impairment assessment on discounts and loans was identified as a key audit matter due to the critical judgements and estimations involved. For the accounting policies and critical accounting judgements and estimations, refer to Notes 4 and 5 to the consolidated financial statements. For discounts and loans, refer to Note 11.
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With respect to the critical judgements, estimations, and assumptions used, the procedures we performed were as follows:
1. Understand and test the internal control of impairment assessment on discounts and loans performed by the Company. 2. Sample loans that are individually assessed for impairment loss to evaluate the reasonableness of estimated future cash flow, including the assumptions, discount rates and the value of collaterals. 3. Test the assumption pertaining to the model, data, and calculation for loans that are assessed collectively for impairment loss, including the historical data adopted, the classification of similar credit risk, recovery rate, and the impairment rate. 4. Test the classification of credit assets of the Company to evaluate whether the classification of credit assets and provisions of impairment loss are in accordance with the FSC guidelines by considering the length of overdue of the loans and the value of collaterals.
Assessment on Retired Employees’ Preferential Deposit Benefits
The present value of retired employees’ preferential deposit obligation was calculated based on the actuarial results with application of various assumptions. Assessment on the retired employees’ preferential deposit benefits was identified as a key audit matter due to the application of critical judgements and estimations. For accounting policies and critical accounting judgements and estimations, refer to Notes 4 and 5 to the consolidated financial statements; for the employees’ preferential deposit benefits, refer to Notes 26 and 27.
With respect to the actuarial report of retired employees’ preferential deposit obligation, the procedures we performed were as follows:
1. Evaluate the actuary on the basis of qualification, competency, and objectivity. 2. Evaluate the reasonableness of the actuarial assumptions and method applied, including discount rates, return on deposit, account balance decrease rate per year, and rate of probability of change in the preferential deposit system. 3. Obtain and evaluate the completeness and accuracy of the information used by the actuary.
Impairment Assessment on Goodwill
When the management of the Company determines whether goodwill is impaired, estimation of the value in use of the cash-generating units to which goodwill has been allocated is required. The calculation of value in use requires management to estimate the future cash flows expected to arise from the cash-generating units and a suitable discount rate in order to calculate present value. Impairment assessment on goodwill was identified as a key audit matter due to the critical judgements and estimations involved. For accounting policies and critical accounting judgements and estimations, refer to Notes 4 and 5 to the consolidated financial statements; for impairment assessment on goodwill, refer to Note 18.
With respect to the report of impairment assessment on goodwill and the report of discount rate used in assessment, the procedures we performed were as follows:
1. Evaluate the external expert on the basis of qualification, competency, and objectivity. 2. Evaluate the reasonableness of model and assumptions used by the external expert. 3. Obtain and evaluate the completeness and accuracy of the information used by the external expert. 4. Evaluate the reasonableness of the expected future cash flows arising from the cash-generating units allocated to goodwill.
Correctness of Recognized Loan Interest Income
The loan interest income of Taiwan Cooperative Bank, Ltd. and its subsidiary for the year ended December 31, 2017 was $39,654,827 thousand, consisting 78% of total interest income. Of the amount, domestic loan interest income was $35,463,240 thousand, consisting 89% of total interest income on discounts and loans, the major source of income of the Company. Therefore, the correctness of recognized domestic loan interest income has a significant impact on the financial statements. In addition, since loan interest income depends highly on automated calculation of information systems, the information technology environment and the effectiveness of general information technology controls also have significant impact on the recognition of domestic loan Financial Information 29
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interest income. Therefore, recognition of interest income was identified as a key audit matter. For accounting policies, refer to Note 4 to the consolidated financial statements; for recognized loan interest income, refer to Note 28.
With respect to the correctness of recognized domestic loan interest income, the procedures we performed were as follows:
1. Understand and test the internal controls on the calculation of domestic loan interest income of the Bank. 2. Understand the information technology environment and general information technology controls of the Bank particularly on domestic loan interest income, and test the effectiveness of the controls, which include the automated controls of relevant application systems. 3. Select samples from the Bank’s domestic loan interest income summary table, and verify the correctness of major parameters set for calculation of loan interest income, including amount of loans, loan period and interest rate. 4. Select samples of domestic loan information in a certain period from the Bank’s information system, including amount of loans, loan period, interest rate and other major parameters. Understand and assess the reasonableness of the computing of the Bank’s loan interest in each category, and recalculate loan interest income and verify the correctness of recognized interest income.
Other Matters
Taiwan Cooperative Bank, Ltd. has prepared the parent company only financial statements for the years ended December 31, 2017 and 2016. We have an unqualified audit opinion on the parent company only financial statements.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, International Financial Reporting Standards, International Accounting Standards, Interpretation of IFRS and Interpretations of IAS endorsed by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing Taiwan Cooperative Bank, Ltd. and its subsidiary’s ability to continue as a going concern, disclosing and using of the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance, including supervisors, are responsible for overseeing the financial reporting process of Taiwan Cooperative Bank, Ltd. and its subsidiary.
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve 30 Annual Report 2017
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collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Taiwan Cooperative Bank, Ltd. and its subsidiary’s internal control. 3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Taiwan Cooperative Bank, Ltd. and its subsidiary’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause Taiwan Cooperative Bank, Ltd. and its subsidiary to cease to continue as a going concern. 5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 6. Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within Taiwan Cooperative Bank, Ltd. and its subsidiary to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2017 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partners on the audit resulting in this independent auditors’ report are Li-Chi Chen and Cheng-Hung Kuo.
Deloitte & Touche Taipei, Taiwan Republic of China
March 23, 2018
Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally applied in the Republic of China.
For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail.
Financial Information 31
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TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars) 2017 2016 ASSETS Amount % Amount % CASH AND CASH EQUIVALENTS (Notes 4 and 6) $ 63,639,568 2 $ 54,942,901 2 DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS (Notes 4, 7, 35 and 36) 267,695,830 8 294,823,266 9 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 8 and 35) 12,862,843 1 27,866,137 1 SECURITIES PURCHASED UNDER RESELL AGREEMENTS (Notes 4, 9 and 35) 249,463 - - - RECEIVABLES, NET (Notes 4, 10, 35 and 42) 18,625,840 1 14,838,408 1 CURRENT TAX ASSETS (Notes 4, 32 and 35) 1,402,132 - 1,187,408 - DISCOUNTS AND LOANS, NET (Notes 4, 11, 35 and 36) 2,002,245,604 63 1,966,426,562 63 AVAILABLE-FOR-SALE FINANCIAL ASSETS, NET (Notes 4, 12 and 36) 154,441,496 5 123,640,946 4 HELD-TO-MATURITY FINANCIAL ASSETS (Notes 4, 13 and 36) 513,789,325 16 510,048,964 16 INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (Notes 4 and 14) 124,346 - 121,381 - OTHER FINANCIAL ASSETS, NET (Notes 4, 15, 35 and 36) 108,506,200 3 101,317,811 3 PROPERTIES AND EQUIPMENT, NET (Notes 4 and 16) 33,926,763 1 37,962,847 1 INVESTMENT PROPERTIES, NET (Notes 4 and 17) 6,984,409 - 2,886,363 - INTANGIBLE ASSETS (Notes 4 and 18) 3,513,492 - 3,545,312 - DEFERRED TAX ASSETS (Notes 4 and 32) 1,282,022 - 954,971 - OTHER ASSETS, NET (Notes 4, 19 and 37) 607,950 - 711,651 - TOTAL $ 3,189,897,283 100 $ 3,141,274,928 100 LIABILITIES AND EQUITY DUE TO THE CENTRAL BANK AND OTHER BANKS (Notes 20 and 35) $ 213,376,031 7 $ 226,635,185 7 FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 8, 24 and 35) 14,450,851 1 14,631,011 1 SECURITIES SOLD UNDER REPURCHASE AGREEMENTS (Notes 4, 8, 12 and 21) 10,377,142 - 12,000,831 - PAYABLES (Notes 22 and 35) 45,192,180 2 44,132,136 2 CURRENT TAX LIABILITIES (Notes 4, 32 and 35) 1,185,896 - 328,375 - DEPOSITS AND REMITTANCES (Notes 23 and 35) 2,624,738,997 82 2,564,285,363 82 BANK DEBENTURES (Note 24) 64,610,000 2 74,610,000 2 OTHER FINANCIAL LIABILITIES (Notes 4, 25, 35 and 37) 3,749,545 - 2,614,125 - PROVISIONS (Notes 4, 26 and 27) 7,624,197 - 7,171,678 - DEFERRED TAX LIABILITIES (Notes 4, 16 and 32) 2,996,390 - 3,261,164 - OTHER LIABILITIES 1,119,382 - 1,170,965 - Total liabilities 2,989,420,611 94 2,950,840,833 94 EQUITY ATTRIBUTABLE TO OWNERS OF THE BANK Capital stock Common stock 88,081,300 3 85,863,000 3 Capital surplus Additional paid-in capital from share issuance in excess of par value 58,664,088 2 55,882,340 2 From treasury stock transactions 103,157 - 103,157 - Total capital surplus 58,767,245 2 55,985,497 2 Retained earnings Legal reserve 32,982,547 1 29,225,467 1 Special reserve 1,280,201 - 1,217,583 - Unappropriated earnings 18,723,762 - 18,697,129 - Total retained earnings 52,986,510 1 49,140,179 1 Other equity 425,598 - (749,704 ) - Total equity attributable to owners of the Bank 200,260,653 6 190,238,972 6 NON-CONTROLLING INTEREST 216,019 - 195,123 - Total equity 200,476,672 6 190,434,095 6 TOTAL $ 3,189,897,283 100 $ 3,141,274,928 100
The accompanying notes are an integral part of the consolidated financial statements.
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TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) Percentage Increase 2017 2016 (Decrease) Amount % Amount % % INTEREST REVENUE (Notes 4, 28 and 35) $ 50,885,050 120 $ 50,290,848 123 1 INTEREST EXPENSE (Notes 4, 28 and 35) (18,459,151 ) (44 ) (18,719,747 ) (46 ) (1 ) NET INTEREST 32,425,899 76 31,571,101 77 3 NET REVENUES AND GAINS OTHER THAN INTEREST Service fee income, net (Notes 4, 29, 35 and 42) 5,927,462 14 6,271,373 15 (5 ) Losses on financial assets and liabilities at fair value through profit or loss (Notes 4, 30 and 35) (2,023,677 ) (5 ) (592,346 ) (1 ) 242 Realized gains on available-for-sale financial assets (Note 4) 923,358 2 1,202,764 3 (23 ) Foreign exchange gains, net (Note 4) 4,807,000 12 1,408,527 3 241 Reversal of impairment losses on assets (Notes 4, 12 and 13) 7,895 - 6,351 - 24 Share of gains of associates and joint ventures accounted for using the equity method (Notes 4 and 14) 4,998 - 5,383 - (7 ) Gains on financial assets carried at cost, net (Note 4) 279,275 1 285,035 1 (2 ) Gains on debt instrument with no active market, net (Note 4) 30,725 - 153,778 - (80 ) Other noninterest gains, net (Notes 35 and 42) 1,201 - 594,637 2 (100 ) Total net revenues and gains other than interest 9,958,237 24 9,335,502 23 7 TOTAL NET REVENUES 42,384,136 100 40,906,603 100 4 BAD-DEBT EXPENSES AND PROVISION FOR LOSSES ON GUARANTEES (Notes 4 and 11) (5,262,117 ) (12 ) (3,807,805 ) (9 ) 38 OPERATING EXPENSES (Notes 4, 16, 17, 18, 27, 31 and 35) Employee benefits (14,645,433 ) (35 ) (14,790,486 ) (36 ) (1 ) Depreciation and amortization (1,058,025 ) (3 ) (1,075,976 ) (3 ) (2 ) General and administrative (6,520,883 ) (15 ) (6,674,822 ) (16 ) (2 ) Total operating expenses (22,224,341 ) (53 ) (22,541,284 ) (55 ) (1 ) INCOME BEFORE INCOME TAX 14,897,678 35 14,557,514 36 2 INCOME TAX EXPENSE (Notes 4 and 32) (1,986,400 ) (5 ) (2,022,632 ) (5 ) (2 ) NET INCOME 12,911,278 30 12,534,882 31 3 OTHER COMPREHENSIVE INCOME Items that will not be reclassified subsequently to profit or loss (Notes 4 and 27) Remeasurement of defined benefit plans (348,963 ) (1 ) (46,589 ) - 649 Changes in the fair value attributable to changes in the credit risk of financial liabilities designated as at fair value through profit or loss (32,084) - 32,330 - (199) Items that will not be reclassified subsequently to profit or loss, net of income tax (381,047 ) (1 ) (14,259 ) - 2,572 Items that may be reclassified subsequently to profit or loss (Notes 4, 14 and 32) Exchange differences on the translation of financial statements of foreign operations (1,384,677 ) (3 ) (313,911 ) (1 ) 341 Unrealized gains (losses) on available-for-sale financial assets 2,361,509 6 (1,588,002 ) (4 ) 249 Share of other comprehensive income (losses) of associates and joint ventures accounted for using the equity method 4,036 - (299 ) - 1,450 Income tax attributable to other comprehensive income 235,330 - 50,908 - 362 Items that may be reclassified subsequently to profit or loss, net of income tax 1,216,198 3 (1,851,304 ) (5 ) 166 Other comprehensive income (losses), net of income tax 835,151 2 (1,865,563 ) (5 ) 145 TOTAL COMPREHENSIVE INCOME $ 13,746,429 32 $ 10,669,319 26 29 NET INCOME ATTRIBUTABLE TO: Owner of the Bank $ 12,899,194 30 $ 12,523,601 31 3 Non-controlling interest 12,084 - 11,281 - 7 $ 12,911,278 30 $ 12,534,882 31 3 TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owner of the Bank $ 13,725,533 32 $ 10,669,096 26 29 Non-controlling interest 20,896 - 223 - 9,270 $ 13,746,429 32 $ 10,669,319 26 29 EARNINGS PER SHARE (NEW TAIWAN DOLLARS; Note 33) Basic $1.48 $1.48 The accompanying notes are an integral part of the consolidated financial statements.
Financial Information 33
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TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)
Equity Attributable to Owners of the Bank Other Equity Changes in the Fair Value Attributable to Exchange Changes in the
Differences Credit Risk of
on the Unrealized Financial Translation Gains Liabilities of Financial (Losses) on Designated as Capital Stock (Note 34) Retained Earnings (Notes 4 and 34) Statements of Available-for- at Fair Value Non-controlling Foreign sale Financial through Interest Shares Capital Surplus Unappropriated Operations Assets Profit or Loss (Notes 4 and (In Thousands) Common Stock (Notes 4 and 34) Legal Reserve Special Reserve Earnings (Note 4) (Note 4) (Note 4) 34) Total Equity
BALANCE, JANUARY 1, 2016 8,349,300 $ 83,493,000 $ 53,054,992 $ 25,586,622 $ 1,217,583 $ 18,349,592 $ 287,893 $ 768,151 $ 2,168 $ 194,900 $ 182,954,901
Appropriation of the 2015 earnings Legal reserve - - - 3,638,845 - ( 3,638,845) - - - - - Cash dividends - - - - - ( 8,490,630) - - - - (8,490,630)
Capital increase in June 2016 237,000 2,370,000 2,930,505 ------5,300,505
Total comprehensive income Net income for the year ended December 31, 2016 - - - - - 12,523,601 - - - 11,281 12,534,882 Other comprehensive losses for the year ended December 31, 2016 - - - - - ( 46,589) ( 251,368) ( 1,588,878) 32,330 ( 11,058) (1,865,563)
Total comprehensive income for the year ended December 31, 2016 - - - - - 12,477,012 ( 251,368) ( 1,588,878) 32,330 223 10,669,319
BALANCE, DECEMBER 31, 2016 8,586,300 85,863,000 55,985,497 29,225,467 1,217,583 18,697,129 36,525 (820,727) 34,498 195,123 190,434,095
Appropriation of the 2016 earnings Legal reserve - - - 3,757,080 - ( 3,757,080) - - - - - Special reserve - - - - 62,618 ( 62,618) - - - - - Cash dividends - - - - ( 8,703,900) - - - - (8,703,900)
Capital increase in June 2017 221,830 2,218,300 2,781,748 ------5,000,048
Total comprehensive income Net income for the year ended December 31, 2017 - - - - - 12,899,194 - - - 12,084 12,911,278 Other comprehensive income for the year ended December 31, 2017 - - - - - ( 348,963) (1,156,596) 2,363,982 (32,084) 8,812 835,151
Total comprehensive income for the year ended December 31, 2017 - - - - - 12,550,231 (1,156,596) 2,363,982 (32,084) 20,896 13,746,429
BALANCE, DECEMBER 31, 2017 8,808,130 $ 88,081,300 $ 58,767,245 $ 32,982,547 $ 1,280,201 $ 18,723,762 $ (1,120,071) $ 1,543,255 $ 2,414 $ 216,019 $ 200,476,672
The accompanying notes are an integral part of the consolidated financial statements.
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TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars) 2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax $ 14,897,678 $ 14,557,514 Adjustments for : Depreciation expenses 901,848 902,976 Amortization expenses 156,177 173,000 Bad-debt expenses 5,043,065 3,756,339 Losses on financial assets and liabilities at fair value through profit or loss 2,023,677 592,346 Interest expense 18,459,151 18,719,747 Interest revenue (50,885,050 ) (50,290,848) Dividend income (470,513 ) (466,036) Provision for losses on guarantees 219,052 51,466 Share of gains of associates and joint ventures accounted for using equity method (4,998 ) (5,383) Losses on disposal of properties and equipment 1,820 1,695 Gains on disposal of investment properties - (66) Gains on disposal of investments (762,845 ) (1,175,540) Reversal of impairment losses on financial assets (7,895 ) (6,351) Net changes in operating assets and liabilities Decrease in due from the Central Bank and call loans to other banks 7,081,009 88,256,056 Decrease in financial assets at fair value through profit or loss 23,770,490 1,176,244 Increase in receivables (2,819,090 ) (956,618) Decrease (increase) in discount and loans (39,375,018 ) 11,323,602 Increase in available-for-sale financial assets (30,603,291 ) (29,369,839) Increase in held-to-maturity financial assets (4,464,203 ) (468,082,871) Decrease (increase) in other financial assets (9,905,635 ) 872,008 Decrease in other assets 6,827 366,135 Increase (decrease) in due to the Central Bank and other banks (13,259,154 ) 26,389,371 Decrease in financial liabilities at fair value through profit or loss (9,537,014 ) (14,030,747) Decrease in securities sold under repurchase agreements (1,623,689 ) (5,451,649) Increase in payables 422,556 8,385,522 Increase in deposits and remittances 60,453,634 59,773,476 Increase (decrease) in other financial liabilities 629,175 (4,621,279) Decrease in provision for employee benefits (114,986 ) (2,212,883) Decrease in other liabilities (55,369 ) (14,552) Cash used in operations (29,822,591 ) (341,387,165) Interest received 50,676,966 49,926,736 Dividends received 491,369 481,048 Interest paid (18,367,734 ) (18,889,265) Income tax paid (1,681,550 ) (3,110,036) Net cash generated by (used in) operating activities 1,296,460 (312,978,682) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition for properties and equipment (993,300 ) (219,866) Proceeds of the disposal of properties and equipment 60 - Increase in refundable deposits - (15,305) Decrease in refundable deposits 96,861 - Acquisition for intangible assets (111,389 ) (75,452) Disposal of investment properties - 3,861 Decrease in other assets 1,703 7,613 Net cash used in investing activities (1,006,065 ) (299,149) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds of the issuance of bank debentures 2,000,000 5,000,000 Repayment of bank debentures (12,000,000 ) - Increase in guarantee deposits received 506,245 - Decrease in guarantee deposits received - (473,964) Dividends paid (8,703,900 ) (8,490,630) Capital increase 5,000,048 5,300,505 Net cash generated by (used in) financing activities (13,197,607 ) 1,335,911 EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 2,103,715 886,699
NET DECREASE IN CASH AND CASH EQUIVALENTS (10,803,497 ) (311,055,221)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR 116,854,869 427,910,090
CASH AND CASH EQUIVALENTS, END OF THE YEAR $ 106,051,372 $ 116,854,869 Cash and cash equivalent reconciliations: December 31 2017 2016 Cash and cash equivalents in the consolidated balance sheets $ 63,639,568 $ 54,942,901 Due from the Central Bank and call loans to other banks in accordance with the definition of cash and cash equivalents under IAS 7 “Statement of Cash Flows” 41,865,541 61,911,968 Securities purchased under resell agreements in accordance with the definition of cash and cash equivalents under IAS 7 “Statement of Cash Flows” 249,463 - Other items in accordance with the definition of cash and cash equivalents under IAS 7 “Statement of Cash Flows” 296,800 - Cash and cash equivalents, end of the year $ 106,051,372 $ 116,854,869 The accompanying notes are an integral part of the consolidated financial statements. Financial Information 35
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TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
1. ORGANIZATION AND OPERATIONS
Taiwan Cooperative Bank, Ltd. (the Bank) was officially established on October 5, 1946 to regulate the supply of and demand for funds for cooperative organizations by accepting their surplus funds as deposits and extending working funds to them. On February 10, 2006, the Bank changed its Chinese name upon approval by the Ministry of Economic Affairs. However, the Bank’s English name remains unchanged. The Bank became a legal entity in 1985 in accordance with the Banking Law. At the start of 2001, the Bank was converted into a corporate entity engaged in (a) all commercial banking operations allowed under the Banking Law; (b) international banking operations; (c) overseas branch operations as authorized by the respective foreign governments; and (d) other operations as authorized by the central authority-in-charge.
The Bank’s shares have been listed on the Taiwan Stock Exchange since November 17, 2004.
The Bank merged with the Farmers Bank of China (FBC) on May 1, 2006, with the Bank as the survivor entity.
On June 24, 2011, the Bank’s stockholders approved the establishment of Taiwan Cooperative Financial Holding Company, Ltd. (TCFHC) by swapping the Bank’s shares with those Co-operative Asset Management Co., Ltd. (CAM) and Taiwan Cooperative Bills Finance Corporation Ltd. (TCBF) in accordance with the “Financial Holding Company Act” and other regulations. The boards of directors of the Bank, CAM and TCBF designated December 1, 2011 as the effective date of the share swap. After the shares transfer, the Bank became a 100% subsidiary of TCFHC. Also on December 1, 2011, the trading of the Bank’s stock on the Taiwan Stock Exchange (TSE) was stopped, and TCFHC’s stock started to be traded on the TSE.
On December 2, 2011, the Bank reduced its capital by NT$3 billion and spun off its Security Department to incorporate Taiwan Cooperative Securities Corp. (TCS), which became a 100% subsidiary of TCFHC.
The Bank has its Head Office in Taipei. It had a Business, International Banking, Finance, Credit Card, Trust and Insurance Agent Departments as well as 269 domestic branches, an offshore banking unit (OBU), 12 overseas branches and 2 representative office as of December 31, 2017.
The operations of the Bank’s Trust Department are (1) planning, managing and operating the trust business and (2) custodianship of nondiscretionary trust fund in domestic and overseas securities and mutual funds. These operations are regulated under the Banking Law and Trust Law of the Republic of China (ROC).
The Bank set up the United Taiwan Bank S.A. (UTB) in Belgium through raising funds with Bank of Taiwan, Land Bank of Taiwan and Taiwan Business Bank and acquired 70% of the shares in UTB. On October 9, 2009, the Bank bought shares of UTB held by Taiwan Business Bank for $127,279 thousand. Thus, the Bank’s holdings in UTB increased to 80%. In July 2010, the Bank subscribed for all the new shares issued by UTB for EUR20,000 thousand ($785,770 thousand). Thus, the Bank’s holdings in UTB increased to 90.02%. UTB started its operation, mainly the general deposits and loans business, on December 23, 1992 and it is a subsidiary of the Bank.
In order to integrate resources and enhance operating effectiveness, the board of directors of the Bank and Cooperative Insurance Brokers Co., Ltd. (CIB) decided to merge the Bank and CIB on April 25, 2016. The effective date of the merger was June 24, 2016. In this merger, the Bank was the surviving entity.
As of December 31, 2017 and 2016, the Bank and its subsidiary (the Company) had 8,070 and 8,273 employees, respectively.
The operating units of the Company maintain their accounts in their respective functional currencies. The consolidated financial statements are presented in New Taiwan dollars.
2. APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements were approved by the Bank’s board of directors on March 23, 2018.
3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS
a. Effects of initial application of the amended Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms and the International Financial Reporting Standards (IFRS), International Accounting 36 Annual Report 2017
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Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed and issued into effect by the Financial Supervisory Commission (FSC)
The Company applies Order No. 1050026834 issued by the FSC, the IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) issued by the International Accounting Standards Board (IASB) and endorsed and issued into effect by the FSC for application starting from 2017, and the amendments to the Regulations Governing the Preparation of Financial Reports by Public Banks, and Regulations Governing the Preparation of Financial Reports by Securities Firms.
Except for the following, the initial application of the above New IFRSs in 2017 and related amendments to the Regulations Governing the Preparation of Financial Reports by Public Banks, and Regulations Governing the Preparation of Financial Reports by Securities Firms did not have any material impact on the Company’s accounting policies:
Amendments to the Regulations Governing the Preparation of Financial Reports by Public Banks and Regulations Governing the Preparation of Financial Reports by Securities Firms
The amendments include additions of several accounting items and requirements for disclosures of impairment of non-financial assets as a consequence of the IFRSs endorsed and issued into effect by the FSC. In addition, as a result of the post implementation review of IFRSs in Taiwan, the amendments also include emphasis on certain recognition and measurement considerations and add requirements for disclosures of related party transactions and goodwill.
The amendments stipulate that other companies or institutions of which the chairman of the board of directors or president serves as the chairman of the board of directors or the president, or is the spouse or second immediate family of the chairman of the board of directors or president of the Company are deemed to have a substantive related party relationship, unless it can be demonstrated that no control, joint control, or significant influence exists.
The amendments also require additional disclosure if there is a significant difference between the actual operation after business combination and the expected benefit on acquisition date. b. Effects of the Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, and the IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the FSC for application starting from 2018
Effective Date New IFRSs Announced by IASB (Note 1)
Annual Improvements to IFRSs 2014-2016 Cycle Note 2 Amendment to IFRS 2 “Classification and Measurement of January 1, 2018 Share-based Payment Transactions” Amendments to IFRS 4 “Applying IFRS 9 Financial Instruments with January 1, 2018 IFRS 4 Insurance Contracts” IFRS 9 “Financial Instruments” January 1, 2018 Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of January 1, 2018 IFRS 9 and Transition Disclosures” IFRS 15 “Revenue from Contracts with Customers” January 1, 2018 Amendment to IFRS 15 “Clarifications to IFRS 15 Revenue from January 1, 2018 Contracts with Customers” Amendment to IAS 7 “Disclosure Initiative” January 1, 2017 Amendments to IAS 12 “Recognition of Deferred Tax Assets for January 1, 2017 Unrealized Losses” Amendments to IAS 40 “Transfers of Investment Property” January 1, 2018 IFRIC 22 “Foreign Currency Transactions and Advance January 1, 2018 Consideration”
Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.
The initial application of the above New IFRSs, whenever applied, would not have any material impact on the Company’s accounting policies, except for the following:
IFRS 9 “Financial Instruments” and related amendments Financial Information 37
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Classification, measurement and impairment of financial assets
With regard to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value.
For the Company’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:
1) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method.
2) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.
Except for above, all other financial assets are measured at fair value through profit or loss. However, the Company may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.
The Company analyzed the facts and circumstances of its financial assets that exist at December 31, 2017 and performed the assessment of the impact of IFRS 9 on the classification and measurement of financial assets. Under IFRS 9:
1) Listed shares, emerging market shares, and unlisted shares classified as available-for-sale will be designated as at fair value through other comprehensive income and the fair value gains or losses accumulated in other equity will be transferred directly to retained earnings instead of being reclassified to profit or loss on disposal;
2) Mutual funds classified as available-for-sale will be classified as at fair value through profit or loss because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments; and
3) Debt investments classified as available-for-sale financial assets, held-to-maturity financial assets and debt investments with no active market that are measured at amortized cost will be classified as measured at amortized cost under IFRS 9 because on initial recognition, the contractual cash flows are solely payments of principal and interest on the principal outstanding and these investments are held within a business model whose objective is to collect the contractual cash flows. Debt investments classified as available-for-sale financial assets, held-to-maturity financial assets and debt investments with no active market will be classified as at fair value through other comprehensive income under IFRS 9 because on initial recognition, the contractual cash flows are solely payments of principal and interest on the principal outstanding and these investments are held within a business model whose objective is achieved both by collecting the contractual cash flows and selling the financial assets.
IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected Credit Losses Model”. The loss allowance is required for financial assets measured at amortized cost, debt investment measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.
For purchased or originated credit-impaired financial assets, the Company takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest 38 Annual Report 2017
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rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss.
The Company has performed an assessment that the Company will apply the simplified approach to recognize lifetime expected credit losses for trade receivables, contract assets and lease receivables. In relation to the debt instrument investments and the financial guarantee contracts, the Company will assess whether there has been a significant increase in the credit risk to determine whether to recognize 12-month or lifetime expected credit losses. In general, the Company anticipates that the application of the expected credit loss model of IFRS 9 will result in earlier recognition of credit losses for financial assets.
Transition of classification, measurement and impairment of financial assets
The Company elects not to restate prior reporting periods when applying the requirements for the classification, measurement and impairment of financial assets under IFRS 9, but the cumulative effect of the initial application will be recognized at the date of initial application and will provide the disclosures related to the classification and the adjustment information upon initial application of IFRS 9.
The anticipated impact on assets, liabilities and equity of retrospective application of the requirements for the classification, measurement and impairment of financial assets as of January 1, 2018 is set out below:
Carrying Amount Adjustments Adjusted Carrying as of December Arising from Amount as of 31, 2017 Initial Application January 1, 2018
Impact on assets, liabilities and equity
Financial assets at fair value through profit or loss $ 12,862,843 $ 237,173 $ 13,100,016 Financial assets at fair value through other comprehensive income - 240,695,527 240,695,527 Available-for-sale financial assets 154,441,496 (154,441,496) - Held-to-maturity financial assets 513,789,325 (513,789,325) - Financial assets measured at amortized cost - 517,854,223 517,854,223 Financial assets carried at cost 4,092,383 (4,092,383) - Debt investments with no active market 83,942,127 (83,942,127) - Receivables, net 18,625,840 (24,128) 18,601,712 Discounts and loans, net 2,002,245,604 5,457 2,002,251,061
Total effect on assets $ 2,789,999,618 $ 2,502,921 $ 2,792,502,539
Provisions $ 7,624,197 $ 160,586 $ 7,784,783
Total effect on liabilities $ 7,624,197 $ 160,586 $ 7,784,783
Retained earnings $ 52,986,510 $ (314,712) $ 52,671,798 Other equity 425,598 2,657,056 3,082,654 Non-controlling interest 216,019 (9) 216,010
Total effect on equity $ 53,628,127 $ 2,342,335 $ 55,970,462
Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Company has assessed that application of other standards and interpretations will not have material impact on the Company’s financial position and financial performance. c. The Company has not yet applied the new IFRSs announced by IASB but not yet endorsed and issued into effect by the FSC
Effective Date Announced by IASB New IFRSs (Note 1)
Annual Improvements to IFRSs 2015-2017 Cycle January 1, 2019 Financial Information 39
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Amendments to IFRS 9 “Prepayment Features with Negative Compensation” January 1, 2019 (Note 2) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between To be determined by an Investor and its Associate or Joint Venture” IASB IFRS 16 “Leases” January 1, 2019 (Note 3) IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” January 1, 2019 (Note 4) Amendments to IAS 28 “Long-term Interests in Associates and Joint January 1, 2019 Ventures” IFRIC 23 “Uncertainty Over Income Tax Treatments” January 1, 2019
Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates. Note 2: The FSC permits the election for early adoption of the amendments starting from 2018. Note 3: On December 19, 2017, the FSC announced that IFRS 16 will take effect starting from January 1, 2019. Note 4: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.
1) IFRS 16 “Leases”
IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.
Under IFRS 16, if the Company is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Company may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive income, the Company should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of the lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities.
The application of IFRS 16 is not expected to have a material impact on the accounting of the Company as lessor.
When IFRS 16 becomes effective, the Company may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application.
2) IFRIC 23 “Uncertainty Over Income Tax Treatments”
IFRIC 23 clarifies that when there is uncertainty over income tax treatments, the Company should assume that the taxation authority will have full knowledge of all related information when making related examinations. If the Company concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the Company should determine the taxable profit, tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatments used or planned to be used in its income tax filings. If it is not probable that the taxation authority will accept an uncertain tax treatment, the Company should make estimates using either the most likely amount or the expected value of the tax treatment, depending on which method the entity expects to better predict the resolution of the uncertainty. The Company has to reassess its judgments and estimates if facts and circumstances change.
On initial application, the Company shall apply IFRIC 23 either retrospectively to each prior reporting period presented, if this is possible without the use of hindsight, or retrospectively with the cumulative effect of the initial application of IFRIC 23 recognized at the date of initial application.
Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of other standards and interpretations will have on the Company’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Compliance
The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial
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Reports by Securities Firms, and IFRSs as endorsed and issued into effect by the FSC.
Basis of Preparation
The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair value and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets.
The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and c. Level 3 inputs are unobservable inputs for the asset or liability.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Bank and the entities controlled by the Bank (United Taiwan Bank S.A. and Cooperative Insurance Brokers Co., Ltd.).
The accounting policies of the Bank and its subsidiary are consistent.
All significant intercompany transactions and balances have been eliminated for consolidation purposes. The accompanying consolidated financial statements also include accounts of the Bank’s Head Office, OBU, and all branches. All interoffice account balances and transactions have been eliminated.
Total comprehensive income of subsidiary is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
For more information on the consolidated entities, please see Table 1 (attached).
Foreign-currency Transactions
The Company records foreign-currency transactions in the respective currencies in which these are denominated. Every month-end, foreign currency income and expenses are translated into New Taiwan dollars at the prevailing exchange rates. At month-end, monetary assets and liabilities denominated in foreign currencies are reported using the prevailing exchange rates, and exchange differences are recognized in profit or loss. Nonmonetary assets and liabilities measured at fair value are translated using the prevailing exchange rates at month-end. Translation differences on nonmonetary assets and liabilities measured at fair value are recognized in profit or loss, except for translation difference arising from nonmonetary items of which the change in fair values is recognized in other comprehensive income, in which case, the translation differences are also recognized directly in other comprehensive income. Nonmonetary assets and liabilities that are classified as carried at cost are recognized at the exchange rate on the transaction date.
In preparing the consolidated financial statements, foreign operations’ financial statements are translated at the following rates: Assets and liabilities - the prevailing exchange rates on the balance sheet date; and income and expenses - at the average exchange rate for the year. Translation difference net of income tax is recorded as “other comprehensive income” and accumulated in equity, FSC and is attributed to the owner of the Company and non-controlling interests.
Classification of Current and Noncurrent Assets and Liabilities
Since the operating cycle in the banking industry cannot be reasonably identified, accounts included in the consolidated financial statements are not classified as current or noncurrent. Nevertheless, these accounts are properly categorized in accordance with the nature of each account and sequenced by liquidity.
Cash and Cash Equivalents
In the balance sheet, cash and cash equivalents comprise cash on hand and demand deposits, together with short-term, highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. In the consolidated statement of cash flows, cash and cash equivalents comprise cash and cash equivalents defined in the consolidated balance sheet, due from the Central Bank and call loans to other banks, call loans to securities firms securities purchased under
Financial Information 41
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resell agreements and call loans to securities firms that correspond to the definition of cash and cash equivalents in IAS 7 “Cash Flow Statements,” as endorsed by the FSC.
Financial Instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
Financial assets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.
a. Measurement category
Financial assets are classified into the following categories: Financial assets at fair value through profit or loss (FVTPL), available-for-sale (AFS) financial assets, held-to-maturity financial assets and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
1) Financial assets at FVTPL
Financial assets are classified as at FVTPL when the financial asset is either held for trading or designated as at FVTPL.
A financial asset is classified as designated as at FVTPL upon initial recognition if:
Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
The contract contains one or more embedded derivatives so that the entire hybrid (combined) contract can be designated as at fair value through profit or loss.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 38.
2) Available-for-sale (AFS) financial assets
AFS financial assets are non-derivatives that are either designated as AFS or are not classified as (a) loans and receivables, (b) held-to-maturity financial assets, or (c) financial assets at fair value through profit or loss. AFS financial assets are stated at fair value at each balance sheet date. Fair value is determined in the manner described in Note 38.
Changes in the carrying amount of AFS monetary financial assets relating to changes in foreign currency rates, interest income calculated using the effective interest method and dividends on AFS equity investments are recognized in profit or loss. Other changes in the carrying amount of AFS financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed or is determined to be impaired.
Cash dividends on AFS equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated on the basis of the new number of investee’s shares held.
AFS financial assets that do not have a quoted market price in an active market and have a fair value that cannot be reliably measured and derivatives that are linked to and must be settled by 42 Annual Report 2017
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Taiwan Cooperative Bank
delivery of such unquoted equity investments are measured at cost less any identified impairment losses at the balance sheet date and are recognized in a separate line item as financial assets carried at cost. These financial assets are measured at fair values if the fair values can be reliably measured subsequently. The difference between carrying amount and fair value is recognized in profit or loss or other comprehensive income. When an AFS financial asset is considered impaired, the losses are recognized to profit or loss.
3) Held-to-maturity financial assets
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Company has the positive intent and ability to hold to maturity.
After initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective interest method less any impairment.
4) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including cash and cash equivalents, due from the Central Bank and call loans to other banks, receivables, call loans to securities firms, debt instruments with no active markets) are measured at amortized cost using the effective interest method less any impairment. b. Impairment of financial assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. Objective evidence of impairment could include:
Significant financial difficulty of the asset issuer and debtor; The financial assets becoming overdue; Probability that the debtor will enter into bankruptcy or undergo financial reorganization.
Amortized cost of the presentation of financial assets (loans and receivables) that are individually assessed had no objective evidence of impairment are further assessed collectively for impairment. Objective evidence of impairment of a portfolio of receivables could include the Company’s past difficulty in collecting payments and an increase in the number of delayed payments, as well as observable changes in national or local economic conditions that correlate with defaults on financial assets.
For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows with consideration to the collaterals and guarantees, discounted at the financial asset’s original effective interest rate.
For financial assets measured at amortized cost, if the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
For AFS equity instruments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.
When an AFS financial asset is considered impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss.
For AFS equity instruments, impairment losses previously recognized in profit or loss can not be reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. For AFS debt instruments, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.
For financial assets that are carried at cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the
Financial Information 43
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current market rate of return for a similar financial asset. This impairment loss can not be reversed in subsequent periods.
Impairment loss on financial asset is recognized by reducing its carrying amount through the use of an allowance account. When financial assets are considered uncollectable, they are written off against the allowance account. Recoveries of amounts previously written off are credited to the allowance account. Changes in the carrying amount of the allowance account are recognized in profit and loss.
Under FSC guidelines, the Bank should classify credit assets as sound credit assets or unsound credit assets, with the unsound assets further categorized as special mention, substandard, with collectability highly doubtful and uncollectable, on the basis of the customers’ financial position, valuation of collaterals and the length of time the principal repayments or interest payments have become overdue.
The Bank made 100%, 50%, 10%, 2% and 1% provisions for credits deemed uncollectable, with collectability highly doubtful, substandard, special mention and sound credit assets (excluding assets that represent claims against an ROC government agency), respectively, as minimum provisions. In addition, The Bank was required to make provisions of at least 1.5% each for the sound credit assets on loans granted to Mainland China clients (including short-term trading financing) and for mortgage loans granted for housing acquisition, renovation and construction.
Credits deemed uncollectable may be written off if the write-off is approved by the board of directors.
c. Derecognition of financial assets
The Company derecognizes a financial asset only the contractual rights to cash flow from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amounts and the sum of the consideration received, receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.
Equity instruments
The Company classifies the debt and equity instruments issued either as financial liabilities or as equity in accordance with the substance of the contractual agreements and the definitions of a financial liability or an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.
Repurchase of the Bank’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Bank’s own equity instruments.
Financial liabilities
a. Subsequent measurement
Except for the cases stated below, all financial liabilities are measured at amortized cost using the effective interest method:
1) Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or designated as at FVTPL.
A financial liability is classified as designated as at FVTPL upon initial recognition if:
Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
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Taiwan Cooperative Bank
The contract contains one or more embedded derivatives so that the entire combined contract (asset or liability) can be designated as at fair value through profit or loss.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising from remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability. For a financial liability designated as at fair value through profit or loss, the amount of changes in fair value attributable to changes in the credit risk of the liability is presented in other comprehensive income, and it will not be subsequently reclassified to profit or loss. The gain or loss accumulated in other comprehensive income will be transferred to retained earnings when the financial liabilities are derecognized. If this accounting treatment related to credit risk would create or enlarge an accounting mismatch, all changes in fair value of the liability are presented in profit or loss. Fair value is determined in the manner described in Note 38.
2) Financial guarantee contracts
Financial guarantee contracts issued by the Company are not designated as at FVTPL and are subsequently measured at the higher of (a) the amount of the obligation under the contract, as determined in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”; or (b) the amount initially recognized less, where appropriate, cumulative amortization recognized in accordance with revenue recognition policies.
b. Derecognition of financial liabilities
The Company derecognizes financial liabilities only when the Company’s obligations are discharged, cancelled, or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid (includes transfer of non-cash assets and liabilities assumed) is recognized in profit or loss.
Derivatives
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to fair value at the balance sheet date. The resulting gain or loss is recognized in profit or loss immediately. If the fair value of a derivative is a positive number, the derivative is carried as a financial asset and if the fair value is a negative number, the derivative is carried as a financial liability.
Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at FVTPL.
Overdue Loans
Loans and other credits (including accrued interest) that are overdue for at least six months are classified as overdue loans in accordance with the guideline issued by the FSC.
Overdue loans (except other credits) are classified as discounts and loans, and the remaining are classified as other financial assets.
Securities Purchased/Sold Under Resell/Repurchase Agreements
Securities purchased under resell agreements and securities sold under repurchase agreements are generally treated as collateralized financing transactions. Interest earned on resell agreements or interest incurred on repurchase agreements is recognized as interest revenue or interest expense over the life of each agreement.
Investment in Associates and Joint Ventures
An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. Joint venture is a joint arrangement whereby the Company and other parties that have joint control of the arrangement have rights to the net assets of the arrangement.
Under the equity method, investment in an associate or a joint ventures is initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the associate or joint venture. The Company also recognizes the changes in the Company’s share of equity of associates or joint ventures.
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When the Company subscribes for additional new shares of the associate or joint ventures at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the associate or joint ventures. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus. If the Company’s ownership interest is reduced due to the additional subscription of the new shares of the associate or joint ventures, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate or joint ventures is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is debited to retained earnings.
When the Company’s share of losses of an associate or a joint venture equals or exceeds its interest in that associate or joint ventures, which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Company’s net investment in the associate or joint ventures, the Company discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Company has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate or joint venture.
Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of an associate or a joint venture recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.
The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.
The Company discontinues the use of the equity method from the date on which its investment ceases to be an associate and a joint venture. Any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate and the joint venture attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate and the joint venture. The Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate and the joint venture on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Company continues to apply the equity method and does not remeasure the retained interest.
When the Company transacts with its associate or joint ventures, profits and losses resulting from the transactions with the associate or joint ventures are recognized in the Company’s consolidated financial statements only to the extent of interests in the associate or joint ventures that are not related to the Company.
Investment Properties
Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties also include land held for a currently undetermined future use.
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method.
Any gain or loss arising on derecognition of the property is calculated as the difference between the net disposal proceeds and the carrying amount of the asset and is included in profit or loss in the year which the property is derecognized.
Properties and Equipment
Properties and equipment are initially recognized at cost and subsequently measured at costs less accumulated depreciation and accumulated impairment.
Land for self-use is not depreciated. Depreciation is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Any gain or loss recognized on the disposal or retirement of an item of property and equipment is the difference between the sales proceeds and the carrying amount of the asset and is included in profit or loss 46 Annual Report 2017
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Taiwan Cooperative Bank in the period which the asset is derecognized.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Company as a lessor
Rental income from operating leases is recognized in revenues over the lease periods on a straight-line basis. Contingent rents arising under operating leases are recognized as income in the year in which they are incurred.
Lease incentives offered in the operating lease are recognized as an asset. The aggregate cost of incentives is recognized as a reduction of rental income on a straight-line basis over the lease term.
The Company as a lessee
Finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated balance sheet as a finance lease obligation.
Finance expenses implicit in lease payments for each period are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case, they are capitalized.
Lease payments under an operating lease are expensed on a straight-line basis over the lease period. Under operating lease, contingent rentals are recognized as expenses at current year.
Lease incentives received for operating leases are recognized under liabilities. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis over the lease term.
When the Company sells and leases back a property, the excess of sales proceeds over the carrying amount that resulted from the sale of the property is deferred and amortized over the lease term regardless of whether operating lease or finance lease. For indefinite lease term, the excess is amortized over 10 years.
Goodwill
Goodwill (part of intangible assets) from business combination is recorded at acquisition cost and subsequently measured at cost less accumulated impairment.
For the purposes of impairment testing, goodwill is allocated to each of the Company’s cash-generating units or groups of cash-generating units (referred to as cash-generating units (CGU)) that is expected to benefit from the synergies of the combination.
In testing assets for impairment, the Company compares the carrying amounts of operating segments (CGUs with allocated goodwill) to their recoverable amounts on a yearly basis (or when impairment indicators exist). CGUs with allocated goodwill arise from the current year should be tested for impairment before the end of the year. When the recoverable amount of CGUs is below the carrying amount, an impairment loss should be recognized to reduce first the carrying amount of goodwill of the CGU and then the carrying amounts of other assets of the CGU proportionately. Any impairment loss should be directly recognized as loss in the current year, and subsequent reversal of impairment loss is not allowed.
On disposal of the relevant cash-generating unit, the amount attributable to goodwill is included in the determination of the profit or loss on disposal.
Intangible Assets Other Than Goodwill
Separate acquisition
Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis. At year-end, the Company examines its estimates of the useful lives, residual values and amortization method of the assets, and any changes in estimates are accounted for prospectively. Unless the Company expects to dispose of an intangible asset before the end of its useful life, the residual value of an intangible asset with limited useful life is estimated to be zero. The effect of any changes in estimates accounted for on a prospective basis.
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Acquisition as part of a business combination
Intangible asset acquired through business combination is measured at its fair value on the acquisition date, and is recognized separately from goodwill. Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.
Derecognition
Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the assets is derecognized.
Impairment of Tangible and Intangible Assets Other Than Goodwill
At the balance sheet date, the Company reviews the carrying amounts of its tangible and intangible assets (except goodwill) for any indication of impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Corporate assets are allocated to the individual cash-generating units or a reasonable and consistent basis of allocation. The recoverable amount is the higher of fair value less selling costs or value in use.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount is reduced to its recoverable amount. If asset impairment loss reverses, the increase in the carrying amount resulting from reversal is credited to earnings. However, loss reversal should not be more than the carrying amount (net of depreciation or amortization) had the impairment loss not been recognized.
Foreclosed Collaterals
Foreclosed collaterals (part of other assets) are recorded at the fair value on recognition and recorded at the lower of cost or net fair value as of the balance sheet dates. Net fair value falling below book value indicates impairment, and impairment loss should be recognized. If the net fair value recovers, the recovery of impairment loss is recognized in gains. For foreclosed collaterals that should have been disposed of in the statutory term, unless the disposal period is prolonged, additional provision for losses should be made and impairment loss should be recognized, as required under a FSC directive.
Provisions
Provisions are the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties on the obligation. A provision is measured using the cash flows estimated to settle the present obligation.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Recognition of Revenue
Interest revenue on loans is recorded on an accrual basis. Under the guidance of the FSC, no interest revenue is recognized on loans that are classified as overdue loans. The interest revenue on these loans is recognized upon collection of the loans and credits.
Service fees are recognized when a major part of the earnings process is completed and cash is collected.
Dividend income from investments is recognized when the stockholder’s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
Service that results in award credits for customers, under the Company’s award scheme, is accounted for as multiple element revenue transactions and the fair value of the consideration received or receivable is allocated between the service rendered and the award credits granted. The consideration allocated to the award credits is measured by reference to their fair value. Such consideration is not recognized as revenue at the time of the initial sale transaction but is deferred and recognized as revenue when the award credits are redeemed and the Company’s obligations have been fulfilled.
Employee Benefits
Short-term employee benefits
Short-term and non-discounted employee benefits are recognized as expenses in the current year as services are rendered.
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Taiwan Cooperative Bank
Retirement benefits
Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.
Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.
Net defined benefit liability (asset) represents the actual deficit (surplus) in the Company’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.
Preferential interest deposits for employees
The Bank provides preferential interest deposits to current and retired employees, and these deposits, including payments of the preferential interest deposits, are within certain amounts. The preferential rates for employees’ deposits in excess of market rate should be treated as employee benefits.
Under the Guidelines Governing the Preparation of Financial Reports by Public Banks, the Bank should follow the requirement of IAS 19 “Employee Benefits” endorsed by FSC to determine the excess interest on the preferential interest deposits of retired employees by applying an actuarial valuation method when the employees retire. The actuarial assumptions should be in accordance with the requirements set by the authorities.
Termination benefits
A liability for a termination benefit is recognized at the earlier of when the Company can no longer withdraw the offer of the termination benefit and when the Company recognizes any related restructuring costs.
Share-based Payment
The Company’s employees subscribed for the reserved shares of Taiwan Cooperative Financial Holding Company, Ltd. (TCFHC) in accordance with the Financial Holding Company Act, and the Company recognized the fair value of the stock options under salary expenses and under capital surplus for share-based payment on the grant date, i.e., the date when the Company and its employees made an agreement for the employees to subscribe for TCFHC’s shares.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the stockholders approve to retain the earnings.
Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences and unused loss carryforwards to the extent that it is probable that taxable profits will be available against which these deductible temporary differences can be used. If the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit, the resulting deferred tax asset or liability is not recognized. In addition, a deferred tax liability is not recognized on taxable temporary difference arising from the initial recognition of goodwill.
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Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to use the benefits of the temporary differences and these differences are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed each balance sheet date and recognized to the to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences based on the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Current and deferred tax for the year
Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity, respectively. Where current tax or deferred taxes arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
TCFHC and its subsidiaries elected to file consolidated tax returns for periods starting in 2012. However, since the Company applied the accounting treatment mentioned in the preceding paragraph to income tax, any distribution of cash payments and receipts among the consolidated group members is recorded as current tax assets or current tax liabilities.
Business Combination
Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are generally recognized as expense as incurred.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value.
Business combination involving entities under common control is not accounted for by acquisition method but accounted for at the carrying amounts of the entities. Prior period comparative information in the financial statements is restated as if a business combination involving entities under common control had already occurred in that period.
5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Company’s accounting policies, which are described in Note 4, the Company’s management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Unless stated in other notes, the following are the critical judgments, assumptions and estimation uncertainty estimations that the Company’s management has made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognized in the 50 Annual Report 2017
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Taiwan Cooperative Bank financial statements: a. Impairment losses on loans
The Company monthly assesses loans collectively. When determining whether an impairment loss should be recognized, the Company mainly seeks for observable evidence that indicates impairment. Objective evidence of impairment of a portfolio of loans and receivables could include the Company’s past difficulty in collecting payments and an increase in the number of delayed payments, as well as observable changes in national or local economic conditions that correlate with defaults on loans and receivables. The management uses past loss experience on assets that have similar credit risk characteristics to estimate the expected future cash flows. The Company reviews the methods and assumptions of cash flow estimation regularly to eliminate the difference between expected and actual loss. b. Fair values of financial instruments
Fair values of financial instruments in an inactive market or with no quoted market prices are determined by valuation techniques. Under these circumstances, fair values are derived from observable market data of other similar financial assets. When there are no observable inputs in the market, the fair values of financial instruments are estimated by making appropriate assumptions. The Company applies appropriate valuation models to determine the fair values of financial instruments subjective to valuation techniques. All models are fine-tuned to ensure the valuation results fairly reflect actual market information and prices. The Company’s management believes that the chosen valuation techniques and assumptions used are appropriate in determining the fair value of financial instruments.
For the fair value determination of financial instruments, refer to Note 38 to the consolidated financial statements. c. Income tax
The Company assesses income tax based on the calculation of taxable income earned from domestic and foreign sources. The assessment of tax on both domestic and foreign sourced income requires summarizing, analyzing and calculating of multiple transactions. When the final tax amount differs from the amount originally recognized, the difference affects the recognition of both current and deferred income tax. In addition, the realizability of deferred tax assets mainly depends on whether sufficient future profits or taxable temporary differences will be available. In cases where the actual future profits generated are less than expected, a material reversal of deferred tax assets may arise, which would be recognized in profit or loss for the period in which such a reversal takes place. d. Employment benefits
The calculation of the present value of post-employment benefits and preferential rates for retired employees’ deposits is based on the actuarial result under several assumptions. Any change in these assumptions may affect the carrying amount of post-employment benefits and preferential rates interest deposits plan for retired employees.
One of the estimates used for determining the net pension costs (revenues) is discount rate. The Company determines appropriate discount rates at the end of each year and estimates the present values of future cash outflows resulting from fulfilling the post-employment obligation by the discount rates. To better determine the discount rates, the Company takes into account the interest rates of high-quality corporate bonds or government bonds, with currencies the same as those of post-employment benefit payments, and with durations that match those of the corresponding pension liabilities.
Other significant assumptions for post-employment obligation are subject to current market condition. Significant assumptions for the obligation of preferential interest deposits for retired employee are determined by the authorities. e. Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. f. Impairment assessment on available-for-sale equity investment
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Objective evidences of the impairment of an available-for-sale equity investment include the fair value of that investment falling significantly or constantly below the cost. Subjective judgments are required when assessing the impairment. The Company’s management considers past market fluctuation, historical prices of the investment and other factors that affect the performance of the industries to which the investees belong to make the subjective judgments.
g. The valuation of provisions on financial guarantee contracts
Except for the minimum standards under certain laws, the Company’s main basis for deciding the amounts of provisions is whether there is any observable evidence that the Company has payment obligations to compensate the losses of guarantee holders. The Company regularly reviews the economic situation in terms of defaults on debt repayments to reduce the difference between the estimated and the actual amounts of loss.
6. CASH AND CASH EQUIVALENTS
December 31 2017 2016
Cash on hand $ 22,458,545 $ 21,107,244 Notes and checks in clearing 23,198,709 21,179,639 Due from banks 17,982,314 12,656,018
$ 63,639,568 $ 54,942,901
Reconciliations of cash and cash equivalents between the consolidated statements of cash flows and the consolidated balance sheets as of December 31, 2017 and 2016 are shown in the consolidated statements of cash flows.
7. DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS
December 31 2017 2016
Reserves for deposits - account A $ 36,817,723 $ 34,750,975 Reserves for deposits - account B 68,849,178 67,264,263 Reserves for deposits - community financial institutions 56,667,002 54,742,220 Reserves for deposits - foreign-currency deposits 370,594 354,002 Deposits in the Central Bank 39,200,000 39,200,000 Negotiable certificates of deposit in the Central Bank 800,000 1,435,000 Due from the Central Bank - others 10,732,126 8,958,457 Due from the Central Bank - central government agencies’ deposits 2,498,012 4,246,259 Call loans to banks 51,761,195 83,872,090
$ 267,695,830 $ 294,823,266
The deposit reserves are determined monthly at prescribed rates based on the average balances of various types of deposit accounts held by the Company. The deposit reserves are subject to withdrawal restrictions, but deposit reserve - account A and foreign-currency deposit reserves may be withdrawn anytime.
Under the guideline issued by the Central Bank of the Republic of China (CBC), the Bank should deposit 60 percent of the deposits of central government agencies in the CBC, and the deposits are subject to withdrawal restrictions.
8. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
December 31 2017 2016
Held-for-trading financial assets
Commercial paper $ 8,348,633 $ 18,918,778 Listed stocks 1,078,689 902,142 Corporate bonds 755,666 753,787 Convertible bonds 136,488 - Government bonds - 3,741,272 Currency swap contracts 2,089,967 3,122,206 Interest rate swap contracts 158,184 - 52 Annual Report 2017
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Taiwan Cooperative Bank
December 31 2017 2016
Forward contracts $ 116,003 $ 256,258 Foreign-currency margin contracts 112,946 81,509 Futures exchange margins 26,197 3,736 Cross-currency swap contracts 21,764 13,294 Currency option contracts - buy 18,306 73,155
Financial assets at fair value through profit or loss $ 12,862,843 $ 27,866,137
Held-for-trading financial liabilities
Currency swap contracts $ 2,701,991 $ 1,809,972 Currency option contracts - sell 18,304 74,734 Interest rate swap contracts 16,021 234,441 Cross-currency swap contracts 15,108 15,078 Forward contracts 10,907 160,751 Foreign-currency margin contracts 229 - 2,762,560 2,294,976 Financial liabilities designated as at fair value through profit or loss
Bank debentures (Note 24) 11,688,291 12,336,035
Financial liabilities at fair value through profit or loss $ 14,450,851 $ 14,631,011
As of December 31, 2017 and 2016, financial assets designated as at fair value through profit or loss amounting to $3,050,092 thousand and $4,500,805 thousand, respectively, had been sold under repurchase agreements.
The Bank enters into derivative transactions mainly to accommodate customers’ needs and to manage its exposure to adverse changes in exchange rates and interest rates. The Bank’s strategy for hedging against risk is to reduce most of the market price risk or cash flow risk.
The Company enters into derivative transactions mainly to accommodate customers’ needs and to manage its exposure to adverse changes in exchange rates and interest rates. The Company’s strategy for hedging against risk is to reduce most of the market price risk or cash flow risk.
As of December 31, 2017 and 2016, the contract (notional) amounts of derivative transactions of Bank were as follows:
December 31 2017 2016
Currency swap contracts $ 389,028,378 $ 386,643,205 Interest rate swap contracts 16,987,717 14,928,007 Forward contracts 10,061,815 21,618,774 Currency option contracts - sell 4,936,507 6,939,285 Currency option contracts - buy 4,936,507 6,718,188 Cross-currency swap contracts 1,910,603 1,387,092 Foreign-currency margin contracts 1,555,713 1,162,522
As of December 31, 2017, the open position of futures transactions of the Company were as follows:
December 31, 2017 Contract Amounts or Open Position Premium Number of Paid Items Products Buy/Sell Contracts (Charged) Fair Values
Futures contracts TAIEX Futures 201801 Sell 10 $ 21,050 $ 21,266 10-Year U.S. Treasury Note Sell 30 110,808 110,270 Futures 201803
Financial Information 53
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9. SECURITIES PURCHASED UNDER RESELL AGREEMENTS
Securities acquired for $249,463 thousand under resell agreements as of December 31, 2017 will subsequently be sold for $249,533 thousand.
10. RECEIVABLES, NET
December 31 2017 2016
Accrued interest $ 7,553,537 $ 6,425,953 Acceptances 4,119,715 3,289,300 Credit cards 3,214,061 2,932,579 Accounts receivable factored without recourse 1,843,856 561,785 Receivable from merchant accounts in credit cards business 1,031,825 693,721 Credits receivable 463,578 468,946 Accounts receivable 445,631 532,904 Refundable deposits receivable in leasehold agreements 183,993 272,993 Receivable on securities 153,075 94,877 Others 347,812 269,037 19,357,083 15,542,095 Less: Allowance for possible losses 731,243 703,687
$ 18,625,840 $ 14,838,408
Credits receivable due to the merger with the Farmers Bank of China on May 1, 2006 were recognized at fair value of credits written off by the Farmers Bank of China in the past. The fair values were evaluated by PricewaterhouseCoopers Financial Advisory Service Co., Ltd.
The allowances for possible losses on receivables (except spot exchange receivable - foreign currencies, which amounted to $21 thousand and $0 thousand, respectively) assessed for impairment as of December 31, 2017 and 2016 were as follows:
December 31, 2017 December 31, 2016 Items Allowance for Allowance for Receivables Possible Losses Receivables Possible Losses Assessment of individual $ 854,629 $ 595,821 $ 963,217 $ 588,168 With objective impairment evidence of impairment Assessment of collective 116,033 31,979 115,996 37,125 impairment With no objective Assessment of evidence of collective 18,386,400 103,443 14,462,882 78,394 impairment impairment Total 19,357,062 731,243 15,542,095 703,687
The changes in allowance for possible losses are summarized below:
For the Year Ended December 31 2017 2016
Balance, January 1 $ 703,687 $ 596,764 Provision for possible losses 168,772 123,594 Write-offs (143,049) (17,110) Recovery of written-off receivables 5,059 661 Effects of exchange rate changes (3,226) (222)
Balance, December 31 $ 731,243 $ 703,687
54 Annual Report 2017
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Taiwan Cooperative Bank
11. DISCOUNTS AND LOANS, NET
December 31 2017 2016
Bills discounted $ 1,446,384 $ 1,624,550 Overdraft Unsecured 136,988 144,492 Secured 63,885 89,017 Import and export negotiations 663,775 581,716 Short-term loans Unsecured 250,074,255 222,846,953 Accounts receivable financing 869,022 560,979 Secured 190,622,135 174,550,850 Medium-term loans Unsecured 304,022,529 298,972,980 Secured 299,685,728 309,946,717 Long-term loans Unsecured 27,915,371 29,959,231 Secured 946,289,312 944,395,557 Overdue loans 6,075,410 6,768,785 2,027,864,794 1,990,441,827 Less: Allowance for possible losses 25,196,604 23,554,791 Less: Adjustment of discount 422,586 460,474
$ 2,002,245,604 $ 1,966,426,562
As of December 31, 2017 and 2016, accrual of interest on the above overdue loans had stopped. Thus, the unrecognized interest revenue was $138,512 thousand and $118,803 thousand in 2017 and 2016, respectively, based on the average loan interest rate for the year.
The allowances for possible losses on discounts and loans assessed for impairment as of December 31, 2017 and 2016 were as follows:
December 31, 2017 December 31, 2016 Items Discounts and Allowance for Discounts and Allowance for Loans Possible Losses Loans Possible Losses Assessment of individual $ 19,302,813 $ 3,832,312 $ 19,082,451 $ 4,833,355 With objective impairment evidence of impairment Assessment of collective 11,295,185 1,910,062 10,715,491 1,817,649 impairment With no objective Assessment of evidence of collective 1,997,266,796 19,454,230 1,960,643,885 16,903,787 impairment impairment Total 2,027,864,794 25,196,604 1,990,441,827 23,554,791
The changes in allowance for possible losses are summarized below:
For the Year Ended December 31 2017 2016
Balance, January 1 $ 23,554,791 $ 21,461,997 Provisions for possible losses 4,055,440 3,382,247 Write-offs (3,569,009) (3,630,920) Recovery of written-off credits 1,398,189 2,415,490 Effects of exchange rate changes (242,807) (74,023)
Balance, December 31 $ 25,196,604 $ 23,554,791
The details of bad-debt expenses and provision for losses on guarantees in 2017 and 2016 were as follows:
Financial Information 55
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For the Year Ended December 31 2017 2016
Provision for possible losses on discounts and loans $ 4,055,440 $ 3,382,247 Provision for possible losses on receivables 168,772 123,594 Provision for possible losses on overdue receivables 818,853 250,498 Provision for possible loss on guarantees 219,052 51,466
$ 5,262,117 $ 3,807,805
As of December 31, 2017 and 2016, the Bank was in compliance with the FSC-required provision for credit assets.
12. AVAILABLE-FOR-SALE FINANCIAL ASSETS, NET
December 31 2017 2016
Government bonds $ 87,996,767 $ 75,321,048 Bank debentures 36,665,414 29,457,223 Corporate bonds 25,331,812 14,349,335 Listed and emerging market stocks 4,316,380 4,230,764 Beneficial certificates 131,123 282,576
$ 154,441,496 $ 123,640,946
The Company evaluated its available for sale financial assets and recognized a reversal of impairment loss of $3,221 thousand because of the change in credit rating of the bond issuer in 2016.
As of December 31, 2017 and 2016, available-for-sale financial assets amounting to $6,876,946 thousand and $6,870,688 thousand, respectively, had been sold under repurchase agreements.
13. HELD-TO-MATURITY FINANCIAL ASSETS
December 31 2017 2016
Negotiable certificates of deposit in the Central Bank $ 402,675,000 $ 431,410,000 Government bonds 76,495,807 52,658,934 Corporate bonds 28,440,163 19,770,568 Bank debentures 5,902,331 5,410,938 Certificates of deposit 276,024 299,646 Treasury bills - 498,878
$ 513,789,325 $ 510,048,964
The Company evaluated its held-to-maturity financial assets and recognized a reversal of impairment loss of $7,895 thousand and $3,130 thousand on some bonds because of the change in credit ratings of the bond issuers in 2017 and 2016, respectively.
14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
December 31 2017 2016 Percentage of Percentage of Amount Ownership Amount Ownership
Investment in associate
United Real Estate Management Co., Ltd. $ 124,346 30.00 $ 121,381 30.00
Aggregate information of associate that is not individually material:
For the Year Ended December 31 2017 2016 The Company’s share of: Net income $ 4,998 $ 5,383 Other comprehensive income 4,036 (299)
Total comprehensive income for the year $ 9,034 $ 5,084 56 Annual Report 2017
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Taiwan Cooperative Bank
The Company received $6,069 thousand and $5,726 thousand dividends from United Real Estate Management Co., Ltd. for the years ended December 31, 2017 and 2016, respectively. The dividends are recognized as a reduction of investments accounted for using equity method.
The investments accounted for using equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2017 and 2016 were based on the financial statements audited by the auditors for the same years.
15. OTHER FINANCIAL ASSETS, NET
December 31 2017 2016
Overdue receivables $ 987,653 $ 593,863 Less: Allowance for possible losses 958,408 551,226 Overdue receivables, net 29,245 42,637 Debt instruments with no active market, net 83,942,127 80,049,395 Due from banks 20,145,645 17,133,396 Financial assets carried at cost 4,092,383 4,092,383 Call loans to securities firms 296,800 -
$ 108,506,200 $ 101,317,811
Debt instruments with no active market are summarized as follows:
December 31 2017 2016
Corporate bonds $ 67,217,840 $ 63,551,958 Bank debentures 16,724,287 16,497,437
$ 83,942,127 $ 80,049,395
Financial assets carried at cost are summarized as follows:
December 31 2017 2016 Percentage of Percentage of Amount Ownership Amount Ownership
Taiwan Asset Management Co., Ltd. $ 2,370,934 17.03 $ 2,370,934 17.03 Taipei Financial Center Corp. 669,600 1.63 669,600 1.63 Taiwan Power Company 631,153 0.24 631,153 0.24 Financial Information Service Co., Ltd. 135,405 2.89 135,405 2.89 Taiwan Financial Asset Service Co., Ltd. 101,125 5.88 101,125 5.88 Others 184,166 184,166
$ 4,092,383 $ 4,092,383
Management believed that the above equity investments held by the Company have fair value that cannot be reliably measured because the range of reasonable fair value estimates was so significant; therefore, they were measured at cost less impairment at the end of reporting period.
Due from banks (part of other financial assets, net) held by the Company were demand deposits and time deposits could not be withdrawn and had maturity periods of more than three months and could not be used before maturity.
Financial Information 57
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16. PROPERTIES AND EQUIPMENT, NET
December 31 2017 2016 Carrying amount
Land $ 21,102,803 $ 24,325,945 Buildings 11,893,308 7,861,100 Machinery and equipment 519,325 689,312 Transportation equipment 90,089 92,258 Other equipment 113,111 101,008 Leasehold improvements 92,254 116,903 Leased assets 11,604 - Prepayments for equipment, land and buildings and construction in progress 104,269 4,776,321
$ 33,926,763 $ 37,962,847
Machinery and Transportation Other Leasehold Land Buildings Equipment Equipment Equipment Improvements Leased Assets Prepayments Total
Cost
Balance, January 1, 2017 $ 24,341,122 $ 14,409,984 $ 4,553,709 $ 620,115 $ 1,152,499 $ 816,725 $ - $ 4,776,321 $ 50,670,475 Additions 98,254 145,607 101,256 29,251 49,318 36,015 13,352 520,247 993,300 Disposals - (8,672 ) (375,535 ) (16,225 ) (69,094 ) (31,725 ) - - (501,251 ) Reclassification - 5,120,506 48,943 165 5,775 572 - (5,177,681 ) (1,720 ) Transferred to investment properties (3,321,179 ) (996,091 ) ------(4,317,270 ) Transferred to intangible assets ------(14,618 ) (14,618 ) Effects of exchange rate changes (217 ) (460 ) (9,261 ) (1,413 ) (2,922 ) (12,707 ) - - (26,980 )
Balance, December 31, 2017 $ 21,117,980 $ 18,670,874 $ 4,319,112 $ 631,893 $ 1,135,576 $ 808,880 $ 13,352 $ 104,269 $ 46,801,936
Balance, January 1, 2016 $ 24,834,146 $ 14,648,512 $ 5,019,163 $ 624,403 $ 1,162,442 $ 817,062 $ - $ 4,789,767 $ 51,895,495 Additions - 17,221 51,234 15,953 30,188 20,523 - 84,747 219,866 Disposals - (860 ) (563,267 ) (21,194 ) (40,858 ) (21,872 ) - - (648,051 ) Reclassification - 19,973 49,009 1,470 1,654 3,320 - (83,063 ) (7,637 ) Transferred to investment properties (492,967 ) (296,674 ) ------(789,641 ) Transferred from investment properties - 21,931 ------21,931 Transferred to intangible assets ------(15,130 ) (15,130 ) Effects of exchange rate changes (57 ) (119 ) (2,430 ) (517 ) (927 ) (2,308 ) - - (6,358 )
Balance, December 31, 2016 $ 24,341,122 $ 14,409,984 $ 4,553,709 $ 620,115 $ 1,152,499 $ 816,725 $ - $ 4,776,321 $ 50,670,475
Machinery and Transportation Leasehold Land Buildings Equipment Equipment Other Equipment Improvements Leased Assets Total
Accumulated depreciation and impairment
Balance, January 1, 2017 $ 15,177 $ 6,548,884 $ 3,864,397 $ 527,857 $ 1,051,491 $ 699,822 $ - $ 12,707,628 Disposals - (8,435 ) (374,138 ) (16,207 ) (68,866 ) (31,725 ) - (499,371 ) Depreciation expenses - 430,747 318,928 32,337 40,547 51,626 1,748 875,933 Transferred to investment properties - (193,309 ) - - - - - (193,309 ) Effects of exchange rate changes - (321 ) (9,400 ) (2,183 ) (707 ) (3,097 ) - (15,708 )
Balance, December 31, 2017 $ 15,177 $ 6,777,566 $ 3,799,787 $ 541,804 $ 1,022,465 $ 716,626 $ 1,748 $ 12,875,173
Balance, January 1, 2016 $ 15,177 $ 6,302,337 $ 4,067,010 $ 514,805 $ 1,047,304 $ 657,267 $ - $ 12,603,900 Disposals - - (562,589 ) (21,174 ) (40,721 ) (21,872 ) - (646,356 ) Depreciation expenses - 370,717 361,913 36,382 45,761 65,248 - 880,021 Transferred to investment properties - (129,212 ) - - - - - (129,212 ) Transferred from investment properties - 5,115 - - - - - 5,115 Effects of exchange rate changes - (73 ) (1,937 ) (2,156 ) (853 ) (821 ) - (5,840 )
Balance, December 31, 2016 $ 15,177 $ 6,548,884 $ 3,864,397 $ 527,857 $ 1,051,491 $ 699,822 $ - $ 12,707,628
The Bank revalued its properties five times in 1979, 1998, 2007, 2011 and 2012. As December 31, 2016, the reserve for land revaluation increment tax (part of deferred tax liabilities) was $2,596,230 thousand.
Properties and equipment were depreciation on the straight-line method over service lives estimated as follows:
Buildings Main buildings 50 years Equipment installed in buildings 10 to 15 years Machinery and equipment 3 to 10 years Transportation equipment 5 to 10 years Other equipment 3 to 20 years Leasehold Improvements 3 to 5 years Leased assets 7 years 58 Annual Report 2017
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Taiwan Cooperative Bank
As of December 31, 2016, the Bank’s prepayments for equipment, land and buildings and construction in progress pertained to the construction of the head office. Constructions of the head office have been completed and accepted in 2017, and the property under construction has been transferred to accounting items such as buildings.
In testing assets for impairment, the Bank defined each operating unit or operating segment as a cash-generating unit (CGU). The recoverable amount of a CGU was determined at its value in use for the properties and equipment. The discount rates for the CGUs’ value in use were 9.34% and 8.84% as of December 31, 2017 and 2016, respectively.
17. INVESTMENT PROPERTIES, NET
December 31 2017 2016
Land $ 5,568,323 $ 2,247,144 Buildings 1,416,086 639,219
$ 6,984,409 $ 2,886,363
Land Buildings Total
Cost
Balance, January 1, 2017 $ 2,247,144 $ 1,062,523 $ 3,309,667 Transferred from properties and equipment 3,321,179 996,091 4,317,270
Balance, December 31, 2017 $ 5,568,323 $ 2,058,614 $ 7,626,937
Balance, January 1, 2016 $ 1,754,257 $ 793,051 $ 2,547,308 Disposals (80) (5,271) (5,351) Transferred from properties and equipment 492,967 296,674 789,641 Transferred to properties and equipment - (21,931) (21,931)
Balance, December 31, 2016 $ 2,247,144 $ 1,062,523 $ 3,309,667
Accumulated depreciation and impairment
Balance, January 1, 2017 $ - $ 423,304 $ 423,304 Depreciation expenses - 25,915 25,915 Transferred from properties and equipment - 193,309 193,309
Balance, December 31, 2017 $ - $ 642,528 $ 642,528
Balance, January 1, 2016 $ - $ 277,808 $ 277,808 Depreciation expenses - 22,955 22,955 Disposals - (1,556) (1,556) Transferred from properties and equipment - 129,212 129,212 Transferred to properties and equipment - (5,115) (5,115)
Balance, December 31, 2016 $ - $ 423,304 $ 423,304
Investment properties (except for land) were depreciated through 50 years on a straight-line basis.
As of December 31, 2017 and 2016, the fair value of investment properties was $21,128,687 thousand and $7,738,382 thousand, respectively. The fair value was determined through calculations using the market value method.
The revenues generated from the investment properties are summarized as follows:
For the Year Ended December 31 2017 2016
Rental income from investment properties $ 216,874 $ 171,737 Direct operating expenses for investment properties that generate rental income (61,962) (48,088)
$ 154,912 $ 123,649 Financial Information 59
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18. INTANGIBLE ASSETS
December 31 2017 2016
Goodwill $ 3,170,005 $ 3,170,005 Computer software 343,487 375,307
$ 3,513,492 $ 3,545,312
Computer Goodwill Software Total
Balance, January 1, 2017 $ 3,170,005 $ 375,307 $ 3,545,312 Separate acquisition - 111,389 111,389 Amortization expenses - (156,147) (156,147) Transferred from properties and equipment - 14,618 14,618 Effect of exchange rate changes - (1,680) (1,680)
Balance, December 31, 2017 $ 3,170,005 $ 343,487 $ 3,513,492
Balance, January 1, 2016 $ 3,170,005 $ 458,901 $ 3,628,906 Separate acquisition - 75,452 75,452 Amortization expenses - (172,959) (172,959) Transferred from properties and equipment - 15,130 15,130 Effect of exchange rate changes - (1,217) (1,217)
Balance, December 31, 2016 $ 3,170,005 $ 375,307 $ 3,545,312
The computer software with limited useful life is amortized on a straight-line basis over the useful life of 5 years.
In testing assets for impairment, the Bank defined each operating unit or operating segment as a cash-generating unit (CGU). The recoverable amount of a CGU was determined at its value in use for the goodwill impairment test. The discount rates for the CGUs’ value in use were 9.34% and 8.84% as of December 31, 2017 and 2016, respectively.
Goodwill resulting from merger of the Bank with the Farmers Bank of China was allocated to operating units or operating segment (cash-generating units with allocated goodwill). There was no impairment loss on goodwill as of December 31, 2017 and 2016.
19. OTHER ASSETS
December 31 2017 2016
Refundable deposits $ 291,591 $ 388,452 Prepaid expenses 255,920 262,747 Operating deposits 48,000 48,000 Others 12,439 12,452
$ 607,950 $ 711,651
20. DUE TO THE CENTRAL BANK AND OTHER BANKS
December 31 2017 2016
Due to banks $ 123,644,372 $ 127,052,418 Call loans from banks 80,029,081 83,985,406 Bank overdraft 5,355,483 9,482,741 Deposits from Chunghwa Post Co., Ltd. 3,920,100 5,815,108 Due to the Central Bank 426,995 299,512
$ 213,376,031 $ 226,635,185
60 Annual Report 2017
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Taiwan Cooperative Bank
21. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Securities sold for $10,377,142 thousand and $12,000,831 thousand under repurchase agreements as of December 31, 2017 and 2016, respectively, would subsequently be purchased for $10,382,135 thousand and $12,006,077 thousand, respectively.
22. PAYABLES
December 31 2017 2016
Checks for clearing $ 23,198,709 $ 21,179,639 Accrued interest 4,392,609 3,755,328 Accrued expenses 4,297,985 4,263,391 Acceptances 4,147,242 3,396,401 Collections payable 4,143,470 5,886,161 Collections of notes and checks for various financial institutions in other cities 627,378 1,441,353 Tax payable 488,463 457,468 Payables on notes and checks collected for others 257,935 533,563 Dividends payable 170,524 170,524 Factored accounts payable 107,321 385,123 Payable on securities 90,526 688,648 Others 3,270,018 1,974,537
$ 45,192,180 $ 44,132,136
23. DEPOSITS AND REMITTANCES
December 31 2017 2016
Deposits Checking $ 46,935,009 $ 46,844,220 Demand 526,336,549 481,302,567 Savings – demand 805,892,649 796,973,550 Time 490,768,753 477,099,172 Negotiable certificates of deposit 12,392,500 1,622,800 Savings – time 647,817,790 669,211,936 Treasury 93,750,404 90,797,579 Remittances 845,343 433,539
$ 2,624,738,997 $ 2,564,285,363
24. BANK DEBENTURES
December 31 2017 2016 First subordinated bonds in 2010: The Bank’s floating interest rate for 1-year time deposit plus 0.25%; maturity – June 21, 2017 $ - $ 8,000,000 Second subordinated bonds in 2010, Type A: Reuters’ fixing rate for 90 day’s New Taiwan dollar commercial paper refers to the Taipei Interbank Offered Rate (TAIBOR) plus 0.15%; maturity – October 25, 2017 - 3,000,000 Second subordinated bonds in 2010, Type B: Fixed rate of 1.45%; maturity – October 25, 2017 - 1,000,000 First subordinated bonds in 2011, Type A: Reuters’ fixing rate for 90 day’s New Taiwan dollar commercial paper refers to the TAIBOR plus 0.15%; maturity – May 25, 2018 7,300,000 7,300,000 First subordinated bonds in 2011, Type B: Fixed rate of 1.65%; maturity – May 25, 2018 2,700,000 2,700,000 Second subordinated bonds in 2011, Type A: Reuters’ fixing rate for 90 day’s New Taiwan dollar commercial paper refers to the TAIBOR plus 0.25%; maturity – July 28, 2018 1,200,000 1,200,000 Second subordinated bonds in 2011, Type B: Fixed rate of 1.70%; maturity – July 28, 2018 3,410,000 3,410,000 First subordinated bonds in 2012: Fixed rate of 1.65%; maturity – June 28, 2022 11,650,000 11,650,000 Second subordinated bonds in 2012, Type A: Fixed rate of 1.43%; maturity – December 25, 2019 1,000,000 1,000,000 (Continued) Financial Information 61
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December 31 2017 2016 Second subordinated bonds in 2012, Type B: Fixed rate of 1.55%; maturity - December 25, 2022 $ 7,350,000 $ 7,350,000 First subordinated bonds in 2013, Type A: Reuters’ fixing rate for 90 day’s New Taiwan dollar commercial paper refers to the TAIBOR plus 0.43%; maturity - March 28, 2020 4,000,000 4,000,000 First subordinated bonds in 2013, Type B: Fixed rate of 1.48%; maturity - March 28, 2020 3,500,000 3,500,000 Second subordinated bonds in 2013, Type A: Fixed rate of 1.72%; maturity - December 25, 2020 900,000 900,000 Second subordinated bonds in 2013, Type B: Reuters’ fixing rate for 90 day’s New Taiwan dollar commercial paper refers to the TAIBOR plus 0.45%; maturity - December 25, 2023 4,600,000 4,600,000 First subordinated bonds in 2014, Type A: Fixed rate of 1.70%; maturity - May 26, 2021 1,500,000 1,500,000 First subordinated bonds in 2014, Type B: Fixed rate of 1.85%; maturity - May 26, 2024 2,700,000 2,700,000 First subordinated bonds in 2014, Type C: Fixing rate for 90 day’s New Taiwan dollar commercial paper refers to Taiwan Bills Index Rate 02 plus 0.43%; maturity - May 26, 2024 5,800,000 5,800,000 First subordinated bonds in 2016, Type A: Fixed rate of 1.09%; maturity - September 26, 2023 950,000 950,000 First subordinated bonds in 2016, Type B: Fixed rate of 1.20%; maturity - September 26, 2026 4,050,000 4,050,000 First subordinated bonds in 2017, Type A: Fixed rate of 1.32%; maturity - September 26, 2024 600,000 - First subordinated bonds in 2017, Type B: Fixed rate of 1.56%; maturity - September 26, 2027 1,400,000 -
$ 64,610,000 $ 74,610,000
(Concluded)
To expand its long-term USD capital, the Bank applied for the issuance of unsecured bank debentures amounting to US$1,000,000 thousand. The application was approved by the Financial Supervisory Commission (FSC) on January 22, 2015. The Bank issue unsecured bank debentures with an aggregate face value of US$400,000 thousand, consisting of type A bonds worth US$300,000 thousand with 0% interest rate and type B bonds worth US$100,000 thousand with 0% interest rate; the Bank may exercise its redemption rights at an agreed price after two years and three years, respectively, from the issue dates. If the Bank do not exercise its redemption rights during issue period, all unsecured bank debentures will be refunded on settlement date, March 30, 2045. To lower exposure to adverse changes in interest rates, the Bank enters into interest rate swap contracts measured at fair value through profit or loss and to eliminate measurement or recognition inconsistency, the unsecured bank debentures are reclassified as designated as at FVTPL upon initial recognition. They were as follows:
December 31 2017 2016
Unsecured bank debentures bonds issued in 2015, Type A $ 8,766,846 $ 9,253,296 Unsecured bank debentures bonds issued in 2015, Type B 2,921,445 3,082,739
$ 11,688,291 $ 12,336,035
The Bank has been approved by the FSC to issue unsecured subordinated bonds amounting to $6,000,000 thousand on May 18, 2017. As of December 31, 2017, the amount of unissued unsecured subordinated bonds was $4,000,000 thousand.
25. OTHER FINANCIAL LIABILITIES December 31 2017 2016
Structured products - host contracts $ 2,133,279 $ 1,208,004 Guarantee deposits received 1,557,688 1,051,443 Appropriation for loans 46,770 354,678 Lease payables 11,808 -
$ 3,749,545 $ 2,614,125
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Taiwan Cooperative Bank
26. PROVISIONS December 31 2017 2016 Provision for employee benefits Net defined benefit liability $ 2,727,448 $ 2,531,665 Present value of retired employees’ preferential interest deposits obligation 4,008,321 3,970,127 6,735,769 6,501,792 Provision for losses on guarantees 888,428 669,886
$ 7,624,197 $ 7,171,678
27. EMPLOYEE BENEFITS PLAN
a. Defined contribution plan
The pension plan under the Labor Pension Act (the Act) is a defined contribution plan. Based on the Act, the Company’s monthly contributions to individual pension accounts of employees covered by the defined contribution plan is at 6% of monthly salaries and wages. The funds are deposited in individual labor pension accounts at the Bureau of Labor Insurance.
The Company recognized expense of $126,277 thousand and $120,402 thousand in the consolidated statement of comprehensive income in 2017 and 2016, respectively, in accordance with the defined contribution plan.
b. Defined benefit plan
The defined benefit plan adopted by the Company in accordance with the Labor Standards Law is operated by the government. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company contributes amounts equal to 15% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (the Bureau); the Company has no right to influence the investment policy and strategy. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Company assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year.
The amounts included in the consolidated balance sheets in respect of the Company’s defined benefit plans were as follows:
December 31 2017 2016
Present value of defined benefit obligation $ 12,724,492 $ 12,363,665 Fair value of plan assets (9,997,044) (9,832,000) Net defined benefit liability $ 2,727,448 $ 2,531,665
Movements in net defined benefit liability were as follows:
Present Value of the Defined Benefit Fair Value of the Net Defined Obligation Plan Assets Benefit Liability
Balance at January 1, 2016 $ 11,800,882 $ (7,142,748) $ 4,658,134 Service cost Current service cost 851,311 - 851,311 Net interest expense (income) 157,828 (114,323) 43,505 Recognized in profit or loss 1,009,139 (114,323) 894,816 Remeasurement Return on plan assets (excluding amounts included in net interest) - 50,490 50,490 Actuarial loss - changes in financial assumptions 64,421 - 64,421 Actuarial gain - experience adjustments (68,322) - (68,322) Recognized in other comprehensive income (3,901) 50,490 46,589 (Continued) Financial Information 63
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Present Value of the Defined Benefit Fair Value of the Net Defined Obligation Plan Assets Benefit Liability
Contributions from the employer $-$ (3,067,874) $ (3,067,874) Benefits paid (442,455) 442,455 - Balance at December 31, 2016 12,363,665 (9,832,000) 2,531,665 Service cost Current service cost 820,277 - 820,277 Net interest expense (income) 148,120 (120,602) 27,518 Recognized in profit or loss 968,397 (120,602) 847,795 Remeasurement Return on plan assets (excluding amounts included in net interest) - 26,659 26,659 Actuarial loss - changes in financial assumptions 256,168 - 256,168 Actuarial loss - experience adjustments 66,136 - 66,136 Recognized in other comprehensive income 322,304 26,659 348,963 Contributions from the employer - (1,000,975) (1,000,975) Benefits paid (929,874) 929,874 - Balance at December 31, 2017 $ 12,724,492 $ (9,997,044) $ 2,727,448 (Concluded)
Through the defined benefit plans under the Labor Standards Law, the Company is exposed to the following risks:
1) Investment risk: The plan assets are invested in domestic/and foreign/equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.
The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:
December 31 2017 2016
Discount rate(s) 1.10% 1.30% Expected rate(s) of salary increase 2.00% 2.00% Expected rate(s) of return on plan asset 1.10% 1.30%
Assuming a possible reasonable change in each of the significant actuarial assumptions and all other assumptions remaining constant, the present value of the defined benefit obligation would have increased (decreased) as follows:
December 31 2017 2016 Discount rate(s) 0.25% increase $ (318,994) $ (317,116) 0.25% decrease $ 331,506 $ 329,843 Expected rate(s) of salary increase 0.25% increase $ 314,089 $ 313,518 0.25% decrease $ (304,032) $ (303,191) The sensitivity analysis presented above shows the effect on the present value of the defined benefit obligations of a change in single assumption while all other assumptions remain unchanged. The sensitivity analysis presented above might not be representative of the actual change in the present value of the defined benefit obligation as it was unlikely that the change in assumptions would occur independently of each other because some of the assumptions might be correlated.
December 31 2017 2016
The expected contributions to the plan for the next year $ 987,973 $ 927,134
The average duration of the defined benefit obligation 10.29 years 10.53 years 64 Annual Report 2017
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Taiwan Cooperative Bank
c. Employees’ preferential deposit plan
The Bank’s payment obligations on fixed-amount preferential interest deposits for retired employees and current employees after retirement are in compliance with the Bank’s internal rules. Under the Guidelines Governing the Preparation of Financial Reports by Public Banks, the Bank should determine the excess interest from the preferential interest deposits of employees by applying an actuarial valuation method when the employees retire.
The amounts included in the balance sheet arising from the Company’s obligation in the employees’ preferential interest deposits plan were as follows:
December 31 2017 2016
Present value of retired employees’ preferential interest deposits $ 4,008,321 $ 3,970,127 obligation (part of provisions)
The changes in present value of retired employees’ preferential interest deposits obligation were as follows: For the Year Ended December 31 2017 2016
Present value of retired employees’ preferential interest deposits obligation, January 1 $ 3,970,127 $ 4,009,952 Interest expense 154,647 152,392 Actuarial losses 707,934 624,670 Benefits paid (824,387) (816,887)
Present value of retired employees’ preferential interest deposits obligation, December 31 $ 4,008,321 $ 3,970,127
Amounts recognized in profit or loss in employee preferential deposit plans for retired employees in the statement of comprehensive income were as follows:
For the Year Ended December 31 2017 2016
Interest expense $ 154,647 $ 152,392 Actuarial losses 707,934 624,670
Excessive interest of retired employees’ preferential interest deposits $ 862,581 $ 777,062
Under Order No. 10110000850 issued by the Financial Supervisory Commission, effective March 15, 2012, the actuarial assumptions for calculating the expense for the retired employees’ preferential interest deposit benefit are as follows:
December 31 2017 2016
Discount rate 4.00% 4.00% Return on deposit 2.00% 2.00% Account balance decrease rate per year 1.00% 1.00% Rate of probability of change in the preferential deposit system 50.00% 50.00%
Assuming a possible reasonable change in each of the significant actuarial assumptions and all other assumptions remaining constant, the present value of the retired employees’ preferential interest deposit benefit obligation would have increased (decreased) as follows:
December 31 2017 2016 Discount rate(s) 1% increase $ (284,568) $ (285,210) 1% decrease $ 327,672 $ 328,890 Return on deposit 1% increase $ (837,761) $ (765,126) 1% decrease $ 837,761 $ 765,126 (Continued) Financial Information 65
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December 31 2017 2016 Account balance decrease rate per year 1% increase $ (300,762) $ (301,428) 1% decrease $ 341,798 $ 343,079 Rate of probability of change in the preferential deposit system 20% increase $ (1,603,328) $ (1,588,051) 20% decrease $ 1,603,328 $ 1,588,051 (Concluded)
The sensitivity analysis presented above shows the effect on the calculation result of the present value of the retired employees’ preferential interest deposit benefit obligation of a change in single assumption while all other assumptions remain unchanged. The sensitivity analysis presented above might not be representative of the actual change in the present value of the retired employees’ preferential interest deposit benefit obligation because it was unlikely that the change in assumptions would occur independently of each other because some of the assumptions might be correlated.
28. NET INTEREST
For the Year Ended December 31 2017 2016
Interest revenue From discounts and loans $ 39,683,385 $ 39,742,639 From investments 8,265,152 6,109,743 From due from banks and call loans to other banks 2,270,154 3,580,200 Others 666,359 858,266 50,885,050 50,290,848 Interest expense From deposits (15,773,574) (16,479,571) From funds borrowing from the Central Bank and other banks (1,230,306) (658,007) From subordinated bank debentures (940,562) (967,582) From due to the Central Bank and other banks (426,043) (519,820) From structure products (39,636) (26,965) From securities sold under repurchase agreements (23,401) (34,304) Others (25,629) (33,498) (18,459,151) (18,719,747)
$ 32,425,899 $ 31,571,101
29. SERVICE FEE INCOME, NET For the Year Ended December 31 2017 2016
Service fee income From insurance service $ 1,832,793 $ 2,778,901 From trust business 1,473,845 1,119,367 From loans 767,883 652,356 From guarantee 670,098 572,232 From credit cards 554,683 555,384 From remittance 311,440 317,548 From cross-bank transactions 268,095 252,459 From trust affiliated business 244,656 195,565 From import/export service 107,998 115,844 Others 555,109 516,843 6,786,600 7,076,499 Service charge From cross-bank transactions (306,334) (278,749) From credit cards (205,054) (194,469) From credit cards acquiring (132,709) (120,298) From custody (67,785) (50,002) Others (147,256) (161,608) (859,138) (805,126)
$ 5,927,462 $ 6,271,373
30. GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
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Taiwan Cooperative Bank
For the Year Ended December 31, 2017 Interest Revenue Gain (Loss) on Loss on (Expense) Disposal Valuation Dividend Income Total
Held-for-trading financial assets $ 80,975 $ 9,639,346 $ (872,150) $ 14,787 $ 8,862,958 Held-for-trading financial liabilities - (9,490,555) (514,043) - (10,004,598) Financial liabilities designated as at fair value through profit or loss (545,865) - (336,172) - (882,037)
$ (464,890 ) $ 148,791 $ (1,722,365 ) $ 14,787 $ (2,023,677 )
For the Year Ended December 31, 2016 Interest Revenue Gain (Loss) on Gain (Loss) on (Expense) Disposal Valuation Dividend Income Total
Held-for-trading financial assets $ 101,383 $ 14,973,464 $ (867,159) $ 9,286 $ 14,216,974 Held-for-trading financial liabilities - (14,022,902) (298,962) - (14,321,864) Financial liabilities designated as at fair value through profit or loss (558,154) - 70,698 - (487,456)
$ (456,771 ) $ 950,562 $ (1,095,423 ) $ 9,286 $ (592,346 )
31. EMPLOYEE BENEFITS, DEPRECIATION AND AMORTIZATION EXPENSES
a. Employee benefits expenses
For the Year Ended December 31 2017 2016
Salaries $ 7,579,977 $ 7,681,949 Incentives 2,626,581 2,804,635 Excessive interest from preferential interest deposits 1,283,477 1,205,494 Post-employment benefits, termination benefits and compensation 1,126,676 1,045,549 Overtime 398,122 395,482 Others 1,630,600 1,657,377
To comply with the Company Act amended in May 2015, TCB’s board of directors amended its Articles of Incorporation on March 28, 2016. Under the amended Articles, The Bank will distribute employees’ compensation at percentages from 1% to 8% of its annual profit (pretax income which exclude compensation of employees). However, the actual appropriation of the bonus should be made only from the annual net income less any accumulated deficit. For the years ended December 31, 2017 and 2016, the compensation of employees was $836,689 thousand and $845,561 thousand, respectively, based on the amended Company Act and the amended Articles.
Material differences between such estimated amounts and the amounts resolved by the board of directors on or before the annual consolidated financial statements are authorized for issue are adjusted in the year the compensation were recognized. If there is a change in the proposed amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in accounting estimate.
The appropriations of employees’ compensation for 2017 and 2016 resolved by the board of directors on March 23, 2018 and March 27, 2017, respectively, were as follows:
For the Year Ended December 31 2017 2016
Employees’ compensation- cash $ 836,689 $ 845,561
There was no difference between the amounts of the employees’ compensation resolved by the board of directors and the amounts recognized in the consolidated financial statements.
Information on the employees’ compensation resolved by the Bank’s board of directors is available at the Market Observation Post System website of the Taiwan Stock Exchange (http://emops.tse.com.tw).
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b. Depreciation and amortization expenses
For the Year Ended December 31 2017 2016
Depreciation expenses $ 901,848 $ 902,976 Amortization expenses 156,177 173,000
32. INCOME TAX
a. Income tax recognized in profit or loss Main components of income tax expense were as follows:
For the Year Ended December 31 2017 2016 Current tax Current year $ 2,341,180 $ 1,911,490 Prior year’s adjustments 1,715 (19,742) 2,342,895 1,891,748 Deferred tax Current year (356,495) 130,884 Income tax expense recognized in profit or loss $ 1,986,400 $ 2,022,632
A reconciliation of accounting profit and current income tax expenses were as follows:
For the Year Ended December 31 2017 2016
Income before income tax $ 14,897,678 $ 14,557,514
Income tax expense at the 17% statutory rate $ 2,532,605 $ 2,474,777 Nondeductible expenses in determining taxable income 892 1,729 Tax-exempt income (806,636) (731,422) Unrecognized deductible temporary differences 17,253 19,317 Effect of different tax rate of overseas branches operating in other jurisdictions 240,571 277,973 Adjustments for prior year’s tax 1,715 (19,742)
Income tax expense recognized in profit or loss $ 1,986,400 $ 2,022,632
In February 2018, it was announced by the President that the Income Tax Act in the ROC was amended and, starting from 2018, the corporate income tax rate will be adjusted from 17% to 20%. In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings will be reduced from 10% to 5%. Deferred tax assets and deferred tax liabilities recognized as at December 31, 2017 are expected to be adjusted and would increase by $155,220 thousand in 2018.
b. Income tax recognized in other comprehensive loss (income) For the Year Ended December 31 2017 2016 Deferred tax
Recognized in other comprehensive income - items that may be reclassified subsequently to profit or loss Exchange differences on the translation of financial statements of foreign operations $ (236,893) $ (51,485) Unrealized gains (losses) on available-for-sale financial assets 1,563 577
Total income tax recognized in other comprehensive income $ (235,330) $ (50,908)
c. Current tax assets and liabilities
December 31 2017 2016 Current tax assets Tax receivable - consolidated tax return $ 1,071,039 $ 951,196 Tax refund receivable 287 55,229 Others 330,806 180,983
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Taiwan Cooperative Bank
$ 1,402,132 $ 1,187,408 December 31 2017 2016 Current tax liabilities Tax payable - consolidated tax return $ 560,958 $ 129,356 Tax payable 426,211 78,996 Others 198,727 120,023
$ 1,185,896 $ 328,375 d. Deferred tax assets and liabilities
Movements in deferred tax assets and liabilities were as follows:
For the year ended December 31, 2017 Recognized in Other Com- Opening Recognized in prehensive Closing Balance Profit or Loss Income Balance Deferred tax assets
Temporary differences Financial instruments at fair value through profit or loss $ - $ 40,905 $ - $ 40,905 Available-for-sale financial assets 3,877 - (1,628) 2,249 Properties and equipment 9,447 (548) - 8,899 Payable for annual leave 71,740 (2,213) - 69,527 Defined benefit obligation 26,069 (26,040) - 29 Employee’s preferential interest deposits obligation 674,922 6,493 - 681,415 Other liabilities 5,220 (265) - 4,955 Exchanges difference on foreign operations - - 217,549 217,549 Unrealized interests expense 163,696 92,798 - 256,494 $ 954,971 $ 111,130 $ 215,921 $ 1,282,022 Deferred tax liabilities
Temporary differences Financial instruments at fair value through profit or loss $ 267,748 $ (267,748) $ - $ - Available-for-sale financial assets 65 - (65) - Investments accounted for using equity method 3,112 18,539 - 21,651 Intangible assets 364,322 - - 364,322 The reserve for land revaluation increment tax 2,596,230 - - 2,596,230 Exchanges difference on foreign operations 19,344 - (19,344) - Others 10,343 3,844 14,187 $ 3,261,164 $ (245,365) $ (19,409) $ 2,996,390
For the year ended December 31, 2016 Recognized in Other Com- Opening Recognized in prehensive Closing Balance Profit or Loss Income Balance Deferred tax assets Temporary differences Available-for-sale financial assets $ 5,218 $ - $ (1,341) $ 3,877 Investments accounted for using equity method 14,194 (14,194) -- Properties and equipment 9,994 (547) - 9,447 Payable for annual leave 66,761 4,979 - 71,740 Defined benefit obligation 374,255 (348,186) - 26,069 Employee’s preferential interest deposits obligation 681,692 (6,770) - 674,922 Other liabilities 6,355 (1,135) - 5,220 Unrealized interests expense 68,810 94,886 - 163,696 $ 1,227,279 $ (270,967) $ (1,341) $ 954,971 (Continued) Financial Information 69
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Recognized in Other Com- Opening Recognized in prehensive Closing Balance Profit or Loss Income Balance Deferred tax liabilities Temporary differences Financial instruments at fair value through profit or loss $ 415,781 $ (148,033) $ - $ 267,748 Available-for-sale financial assets 829 - (764) 65 Investments accounted for using equity method - 3,112 - 3,112 Intangible assets 364,322 - - 364,322 The reserve for land revaluation increment tax 2,596,230 - - 2,596,230 Exchanges difference on foreign operations 70,829 - (51,485) 19,344 Others 5,505 4,838 - 10,343 $ 3,453,496 $ (140,083) $ (52,249) $ 3,261,164
e. Unused deductible temporary differences for which no deferred tax assets have been recognized in the consolidated balance sheets.
December 31 2017 2016
Deductible temporary differences $ 1,153,149 $ 804,185
f. Imputed tax credits are summarized as follows:
TCB
Balances of stockholders’ imputed tax credit December 31, 2017 $ 27,369 December 31, 2016 30,914 Estimated creditable tax ratio for distributing the 2017 earnings Note Actual creditable tax ratio for distributing the 2016 earnings 0.34%
Note: Since the amended Income Tax Act announced in February 2018 abolished the imputation tax system, related information for 2017 is not applicable.
g. Under the Income Tax Law, the unappropriated retained earnings of $19,985 thousand generated by the Bank until December 31, 1997 were included in the unappropriated retained earnings as of December 31, 2017 and 2016.
h. The income tax returns of the Bank through 2011 has been examined by tax authorities. For the Bank’s income tax returns (ITRs) from 2006 to 2011, the Taipei National Tax Administration (TNTA) claimed that the appraisal of goodwill was not reasonable and that there were no unrecognized losses on the sale of nonperforming loans in the Bank’s records on the date of the merger with the Farmers Bank of China (FBC). Thus, TNTA denied the expenses for the goodwill amortization of $3,170,005 thousand and the deferred loss amortization of $3,105,522 thousand on the sale of nonperforming loans. The Bank disagreed with the TNTA’s decision and initiated administrative litigations. On December 30, 2014, TNTA allowed the partial amortization of goodwill expenses and of the losses on the sales of nonperforming loans in the tax returns of 2006 to 2011 after the negotiation with the Bank. The Bank recognized related income tax expenses of $228,990 thousand in 2014. On August 5, 2016, February 25, 2015 and April 9, 2015, respectively, TNTA had reexamined and corrected the Bank’s 2006 to 2011 ITRs based on the result of the negotiation with the Bank. The Bank had received $705,861 thousand of the tax refund after TNTA’s reexamination and correction decision.
33. EARNINGS PER SHARE
The numerators and denominators used in calculating earnings per share were as follows:
Shares Net Income (Denominator in Earnings Per (Numerator) Thousands) Share (NT$)
For the year ended December 31, 2017
Basic earnings per share $ 12,899,194 8,699,342 $ 1.48
For the year ended December 31, 2016
Basic earnings per share $ 12,523,601 8,469,743 $ 1.48 70 Annual Report 2017
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Taiwan Cooperative Bank
The number of shares outstanding was retrospectively adjusted to reflect the effects of the stock dividends distributed in the year following earnings appropriation.
34. EQUITY
a. Capital stock
Common stocks December 31 2017 2016
Numbers of shares authorized (in thousands) 10,000,000 10,000,000 Authorized capital $ 100,000,000 $ 100,000,000 Number of shares issued and fully paid (in thousands) 8,808,130 8,586,300 Common stocks issued $ 88,081,300 $ 85,863,000
Fully paid common stocks, which have a par value of $10, carry one vote per share and carry a right to dividends.
On May 23, 2016, the Bank’s board of directors resolved to increase its capital by issuing 237,000 thousand shares of common stocks at NT$22.365 per share. TCFHC subscribed for all the new shares and this capital increase transaction was approved by the Financial Supervisory Commission (FSC) and the Ministry of Economic Affairs (MOEA).
On May 22, 2017, the Bank’s board of directors resolved to increase its capital by issuing 221,830 thousand shares of common stocks at NT$22.54 per share. TCFHC subscribed for all the new shares and this capital increase transaction was approved by FSC and MOEA.
b. Capital surplus
Under related regulations, capital surplus may be used to offset a deficit. Capital surplus arising from the issuance of shares in excess of par value (including additional paid-in capital from the issuance of common shares and capital surplus from mergers and treasury stock transactions) and donations may be distributed as cash dividends or transferred to common stock on the basis of the percentage of shares held by the stockholders. Any capital surplus transferred to common stock should be within a certain percentage prescribed by law.
Under related regulations, the capital surplus from equity investments under the equity method cannot be distributed for any purpose.
c. Special reserve
Under FSC guidelines, the Bank reclassified to special reserve $165,255 thousand, the sum of trading loss reserve and reserve for loss on branch of purchase commitments, which were in place until December 31, 2010. The reclassified special reserve is unavailable to be used unless: (1) offset a deficit or (2) when the special reserve reaches 50% of the Bank’s paid-in capital, 50% of the excess may be used to issue new capital or (3) the FSC has approved that excess may be reversed to unappropriated earnings when special reserve has exceeded the Bank’s paid-in capital.
As of December 31, 2017, the special reserve from equity investments under the equity method was $14,944 thousand.
For the first-time adoption of IFRSs, the Bank should appropriate to a special reserve of an amount that was the same as these of unrealized revaluation increment and cumulative translation differences (gains) transferred to retained earnings as a result of the Bank’s use of exemptions under IFRS 1. However, at the date of transitions to IFRSs, if the increase in retained earnings that resulted from all IFRSs adjustments is not enough for this appropriation, only the increase in retained earnings that resulted from all IFRSs adjustments will be appropriated to special reserve. The special reserve appropriated as above may be reversed in proportion to the usage, disposal or reclassification of the related assets and thereafter distributed. The special reserve appropriated on the first-time adoption of IFRSs may be used to offset deficits in subsequent years. No appropriation of earnings shall be made until any shortage of the aforementioned special reserve is appropriated in subsequent years if the Bank has earnings and the original need to appropriate a special reserve is not eliminated.
The increase in retained earnings that resulted from all IFRSs adjustments was not enough for this appropriation; therefore, the Bank appropriated to the special reserve an amount of $1,132,019 thousand on January 1, 2013, the increase in retained earnings that resulted from all IFRSs Financial Information 71
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adjustments on transitions to IFRSs.
Information regarding the above special reserve appropriated or reversed on elimination of the original need to appropriate a special reserve was as follows: For the Year Ended December 31 2017 2016
Balance on January 1 $ 1,037,384 $ 1,037,384 Reversed on elimination of the original need to appropriate a special reserve: Disposal of properties and equipment - -
Balance on December 31 $ 1,037,384 $ 1,037,384
Under Order No. 10510001510 issued by FSC, the appropriation of special reserve should be 0.5% to 1% of net income (net of income tax) when the Bank appropriates the earnings of 2016 to 2018. Since 2017, the Bank is allowed to make special reserve at the amount of the costs of employee transfer and arrangement in connection with the development of financial technology. As of December 31, 2017, the special reserve appropriated under the stipulation amounted to $62,618 thousand.
d. Appropriation of earnings
From the annual net income less any deficit, an amount equal to 30% thereof should be appropriated as legal reserve and a certain amount, depending on regulations and operating needs, as special reserve. The remaining net income and unappropriated earnings of prior years may be distributed as dividends to shareholders or retained according to the distribution plan to be proposed by the board of directors and submitted to the shareholders’ meeting for approval. Unless otherwise restricted by related regulations, the cash dividends must be 10% or above of the total dividends and bonus distributed. If the cash dividend per share is less than NT$0.1, the cash dividend will not be distributed unless the distribution is resolved in the stockholders’ meetings.
If the legal reserve reaches the amount of paid-in capital or the Bank is sound in both its finance and business operations and have set aside a legal reserve in compliance with the Company Law, the legal reserve is not subject to the limitation of 30% set under the Banking Law and related regulations.
In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to stockholders and do not include employees. The Bank will make consequential amendments to the Bank’s Articles of Incorporation. For information about the appropriation policy, accrual basis and actual appropriations for employees’ compensation, please refer to Note 31.
Under related regulations, a special reserve is appropriated from the balance of the retained earnings at an amount from the net income and unappropriated earnings that is equal to the debit balance of accounts in the stockholders’ equity section (such as exchange differences in translation of financial statements of foreign operations and unrealized gains or losses on available-for-sale financial assets). The special reserve should be appropriated from the prior years’ unappropriated earnings to the extent of the debit balance accumulated from prior years and such special reserve should not be appropriated. The balance of the special reserve is adjusted to reflect any changes in the debit balance of the related accounts. If there is difference between appropriation of special reserve and net amount of deduction in other stockholder’s equity, the Company should appropriate on additional amount of special reserve in the first-time adoption of IFRSs. Afterwards, if there is any reversal in of the deduction in other stockholder’s equity, the Company is allowed to appropriating retained earnings from the reversal amount.
Under the Company Law, legal reserve should be appropriated until the reserve equals the Bank’s paid-in capital. This reserve should only be used to offset a deficit. When the reserve exceeds 25% of the Bank’s paid-in capital, the excess may be used to issue new shares or distribute cash dividends.
Under the Income Tax Law, except for non-ROC resident stockholders, all stockholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Bank.
The appropriations from the earnings of 2016 and 2015 were approved in the stockholders’ meetings on May 22, 2017 and May 23, 2016, respectively. The appropriations and dividends per share were as follows:
Appropriation of Earnings Dividends Per Share (NT$) 2016 2015 2016 2015
Legal reserve $ 3,757,080 $ 3,638,845 Special reserve 62,618 - Cash dividends 8,703,900 8,490,630 $ 1.013696 $ 1.016927 72 Annual Report 2017
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Taiwan Cooperative Bank
Information on the appropriation of earnings or deficit offsetting can be accessed through the website of the Taiwan Stock Exchange (http://emops.tse.com.tw).
e. Non-controlling interest For the Year Ended December 31 2017 2016
Balance, January 1 $ 195,123 $ 194,900 Attributable to non-controlling interest Net income 12,084 11,281 Exchange differences in translation of financial statements of foreign operations 8,812 (11,058)
Balance, December 31 $ 216,019 $ 195,123
35. RELATED-PARTY TRANSACTIONS
Taiwan Cooperative Financial Holding Co., Ltd. is the ultimate parent of the Company, and the Ministry of Finance is the major government stockholder. Based on IAS 24 “Related Party Disclosures”, the Company’s transactions with government-related parties are exempt from disclosure requirements. All transactions, account balances, earnings, expenses and gains (losses) on transactions between the Company and subsidiaries have all been excluded from consolidation and are not disclosed in this note.
In addition to those mentioned in other notes, the related-party transactions are summarized as follows:
a. Related parties
Related Party Relationship with the Bank
Taiwan Cooperative Financial Holding Company, Ltd. (TCFHC) Parent company Co-operative Assets Management Co., Ltd. Sister company Taiwan Cooperative Bills Finance Co., Ltd. Sister company Taiwan Cooperative Securities Co., Ltd. (TCS) Sister company BNP Paribas Cardif TCB Life Insurance Co., Ltd. (BPCTLI) Sister company Taiwan Cooperative Securities Investment Trust Co., Ltd. Sister company Taiwan Cooperation Venture Capital Co., Ltd. (TCVC) Sister company United Real Estate Management Co., Ltd. Associated enterprise TCB Global High Yield Bond fund Fund managed by Taiwan Cooperative Securities Investment Trust Co., Ltd. TCB Fund of Emerging Markets Equity Fund Fund managed by Taiwan Cooperative Securities Investment Trust Co., Ltd. Tamshui First Credit Bank The director of Tamshui First Credit Bank is also the Company’s director. Giga Solution Tech. Co., Ltd. Giga’s independent director is also the parent company’s independent director. (Before October 15, 2016) Others Main management of the parent company and other related parties.
b. Significant transactions between the Company and related parties:
1) Call loans to banks
Interest Interest Rate Highest Balance Ending Balance Revenue (%) For the year ended December 31, 2017
Sister companies $ 3,500,000 $ 2,100,000 $ 3,223 0.330-0.560 Others 7,500,000 3,454,900 16,373 0.270-4.150 $ 11,000,000 $ 5,554,900 $ 19,566 For the year ended December 31, 2016
Sister companies $ 4,900,000 $ 3,500,000 $ 12,831 0.280-0.560 Others 3,500,000 3,500,000 9,436 0.280-0.560 $ 8,400,000 $ 7,000,000 $ 22,267
2) Call loans to securities firms (part of other financial assets, net)
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Interest Interest Rate Highest Balance Ending Balance Revenue (%) For the year ended December 31, 2017
Sister companies TCS $ 300,000 $ 296,800 $ 3,533 1.100-2.300
3) Due to banks
For the Year Ended December 31 2017 2016 Ending Interest Ending Interest Balance Expense Balance Expense Main management $ 240,738 $ 1,237 $ 212,703 $ 1,242 Others Tamshui First Credit Bank 25,245,826 251,236 24,909,609 262,353 Others 5,417 - - 106 $ 25,491,981 $ 252,473 $ 25,122,312 $ 263,701
4) Call loans from banks
Interest Interest Rate Highest Balance Ending Balance Expense (%)
For the year ended December 31, 2017
Others $ 4,484,000 $-$ 864 0.170-1.240
5) Loans
Interest Interest Rate Highest Balance Ending Balance Revenue (%) For the year ended December 31, 2017 Sister companies $ 280,333 $ - $ 43 2.265 Main management 170,998 125,007 1,469 1.245-2.428 Others 81,033 55,375 836 1.137-2.465
$ 532,364 $ 180,382 $ 2,348 For the year ended December 31, 2016
Sister companies $ 84,120 $ - $ 24 2.265-2.405 Main management 155,972 132,988 1,975 1.260-2.428 Others 118,063 66,814 985 1.260-2.360
$ 358,155 $ 199,802 $ 2,984
Under the Banking Law, except for customer loans and government loans, credits extended by the Bank to any related party should be 100% secured, and the terms of credits extended to related parties should be similar to those for third parties.
6) Securities purchased under resell agreements
Ending Balance Interest Revenue Interest Rate (%)
For the year ended December 31, 2017
Sister companies TCBF $ 199,521 $ 1,145 0.350-0.450 Others - 2 0-0.300
$ 199,521 $ 1,147
For the year ended December 31, 2016
Sister company TCBF $ - $ 6,139 0.300-0.460 74 Annual Report 2017
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7) Deposits
Ending Balance Interest Expense Interest Rate (%) For the year ended December 31, 2017
Parent company $ 59,315 $ 95 0-0.080 Sister companies 1,533,971 7,564 0-2.900 Associates 232,996 452 0-0.775 Main management 525,325 9,900 0-13.000 Others 9,508,635 25,482 0-13.000 $ 11,860,242 $ 43,493 For the year ended December 31, 2016
Parent company $ 33,612 $ 97 0-0.110 Sister companies 2,328,509 21,631 0-1.360 Associates 173,263 519 0-1.130 Main management 438,049 9,877 0-13.000 Others 10,868,943 50,662 0-13.000 $ 13,842,376 $ 82,786
December 31 2017 2016 8) Accrued income (part of receivables)
Sister companies $ 48,405 $ 62,675
9) Accrued interest (part of receivables)
Sister companies $ 378 $ 415 Others 7,154 549 $ 7,532 $ 964
10) Receivable on securities (part of receivables)
Sister company TCS $ 153,075 $ 93,507
11) Tax receivable - consolidated tax return (part of current tax assets)
Parent company $ 1,071,039 $ 951,196
12) Accrued interest (part of payables)
Sister companies $ 9 $ 20
13) Accrued expense (part of payables)
Sister companies $ 3,691 $ 6,220
14) Payable on securities (part of payables)
Sister company TCS $ 90,526 $ 12,040
15) Tax payable - consolidated tax return (part of current tax liability)
Parent company $ 560,958 $ 129,356
16) Guarantee deposits received (part of other financial liabilities)
Parent company $ 6,012 $ 1,773 Sister companies 15,425 15,386 $ 21,437 $ 17,159
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For the Year Ended December 31 2017 2016 17) Service fee (part of service fee income, net)
Sister companies BPCTLI $ 751,688 $ 906,735 Others 23,680 27,177 Associates 55 45 Main management 223 173 Others 1,242 340 $ 776,888 $ 934,470
18) Service charge (part of service fee income, net)
Sister companies $ 5,101 $ 9,072 Main management 34 26 Others 4 7,893 $ 5,139 $ 16,991
19) Rental income (part of other noninterest gain, net)
Parent company $ 14,405 $ 6,671 Sister companies TCS 27,791 26,763 Others 33,736 32,212 Others - 12,228 $ 75,932 $ 77,874
20) Information service fee (part of general and administration)
Sister companies $ 20,160 $ 40,812
21) Investigation fee (part of general and administration)
Sister companies $ 172 $ 230
22) Other income (part of other noninterest gain, net)
Parent company $ 1,519 $ 1,519 Others 3,482 4,855 $ 5,001 $ 6,374
23) Donation (part of other noninterest gain, net)
Main management $ 3,700 $ 2,900
Terms of other transactions with related parties were similar to those for third parties, except for the more favorable interest rate for managers’ savings within a prescribed limit. The Bank has operating lease contracts with related parties, which cover certain office spaces within the Bank’s building. The monthly rentals were based on rentals for buildings near the Bank.
24) Purchases and sales of securities
For the Year Ended December 31, 2017 Sales Under Purchases Under Related Party Purchases Sales Repurchase Agreements Resell Agreements
Sister companies $ 49,755 $ 249,968 $- $ 3,997,582
For the Year Ended December 31, 2016 Sales Under Purchases Under Related Party Purchases Sales Repurchase Agreements Resell Agreements
Sister companies $ 1,498,666 $-$- $ 34,070,318
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25) Derivatives
For the Year Ended December 31, 2017 Amounts on the Consolidated Balance Type of Contract Nominal Valuation Sheet Related Party Derivatives Period Amounts Gain (Loss) Account Amounts
Sister company - Currency swap 2017.12.22- US$ 4,935 $ (1,559) Financial liabilities at $ (1,559) BPCTLI 2018.01.22 fair value through profit or loss Currency swap 2017.12.22- US$10,033 (3,169) Financial liabilities at (3,169) 2018.01.22 fair value through profit or loss Currency swap 2017.12.22- US$13,000 (4,107) Financial liabilities at (4,107) 2018.01.22 fair value through profit or loss Currency swap 2017.12.08- US$ 3,187 (1,030) Financial liabilities at (1,030) 2018.01.08 fair value through profit or loss Currency swap 2017.09.19- US$ 1,699 (559) Financial liabilities at (559) 2018.03.19 fair value through profit or loss Currency swap 2017.09.19- US$ 3,129 (1,029) Financial liabilities at (1,029) 2018.03.19 fair value through profit or loss Currency swap 2017.09.19- US$ 3,129 (1,029) Financial liabilities at (1,029) 2018.03.19 fair value through profit or loss Currency swap 2017.09.19- US$ 4,850 (1,595) Financial liabilities at (1,595) 2018.03.19 fair value through profit or loss Currency swap 2017.09.19- US$10,488 (3,450) Financial liabilities at (3,450) 2018.03.19 fair value through profit or loss Currency swap 2017.10.16- US$ 5,030 (2,230) Financial liabilities at (2,230) 2018.01.16 fair value through profit or loss Currency swap 2017.10.16- US$ 5,001 (2,218) Financial liabilities at (2,218) 2018.01.16 fair value through profit or loss Currency swap 2017.10.16- US$10,012 (4,439) Financial liabilities at (4,439) 2018.01.16 fair value through profit or loss Currency swap 2017.10.16- US$ 9,989 (4,429) Financial liabilities at (4,429) 2018.01.16 fair value through profit or loss Currency swap 2017.10.16- US$ 5,006 (2,220) Financial liabilities at (2,220) 2018.01.16 fair value through profit or loss Currency swap 2017.10.16- US$10,483 (4,648) Financial liabilities at (4,648) 2018.01.16 fair value through profit or loss Currency swap 2017.10.16- US$ 1,920 (851) Financial liabilities at (851) 2018.01.16 fair value through profit or loss Currency swap 2017.10.13- US$ 3,299 (1,582) Financial liabilities at (1,582) 2018.01.16 fair value through profit or loss Currency swap 2017.12.08- US$ 2,002 (647) Financial liabilities at (647) 2018.01.08 fair value through profit or loss Currency swap 2017.12.08- US$ 9,977 (3,224) Financial liabilities at (3,224) 2018.01.08 fair value through profit or loss Currency swap 2017.09.19- US$ 5,165 (1,699) Financial liabilities at (1,699) 2018.03.19 fair value through profit or loss Currency swap 2017.09.19- US$ 4,814 (1,584) Financial liabilities at (1,584) 2018.03.19 fair value through profit or loss Other - TCB Currency swap 2017.12.13- US$ 7,000 (2,116) Financial liabilities at (2,116) Global 2018.03.13 fair value through Emerging profit or loss Markets Equity Fund Currency swap 2017.12.13- US$ 1,000 (302) Financial liabilities at (302) 2018.03.13 fair value through profit or loss Other - TCB Currency swap 2017.12.13- US$ 4,000 (1,209) Financial liabilities at (1,209) Global High 2018.03.13 fair value through Yield Bond profit or loss Fund Currency swap 2017.12.13- US$ 3,000 (907) Financial liabilities at (907) 2018.03.13 fair value through profit or loss Currency swap 2017.12.13- US$ 9,500 (2,871) Financial liabilities at (2,871) 2018.03.13 fair value through profit or loss Currency swap 2017.12.04- US$ 5,550 (1,587) Financial liabilities at (1,587) 2018.01.10 fair value through profit or loss (Continued)
Financial Information 77
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For the Year Ended December 31, 2017 Amounts on the Consolidated Balance Type of Contract Nominal Valuation Sheet Related Party Derivatives Period Amounts Gain (Loss) Account Amounts
Currency swap 2017.12.06- US$15,250 $ (5,011) Financial liabilities at $ (5,011) 2018.03.06 fair value through profit or loss Currency swap 2017.12.06- US$ 2,500 (833) Financial liabilities at (833) 2018.01.08 fair value through profit or loss Currency swap 2017.12.06- US$ 4,000 (1,332) Financial liabilities at (1,332) 2018.01.08 fair value through profit or loss Currency swap 2017.12.18- US$ 4,100 (1,197) Financial liabilities at (1,197) 2018.03.19 fair value through profit or loss (Concluded)
For the Year Ended December 31, 2016 Amounts on the Consolidated Type of Contract Nominal Valuation Balance Sheet Related Party Derivatives Period Amounts Gain (Loss) Account Amounts
Sister company - Currency swap 2016.12.22- US$ 4,936 $ 1,317 Financial assets at fair $ 1,317 BPCTLI 2017.02.22 value through profit or loss Currency swap 2016.12.22- US$10,033 2,677 Financial assets at fair 2,677 2017.02.22 value through profit or loss Currency swap 2016.12.22- US$13,000 3,469 Financial assets at fair 3,469 2017.02.22 value through profit or loss Currency swap 2016.07.06- US$ 3,187 242 Financial assets at fair 242 2017.01.06 value through profit or loss Currency swap 2016.11.14- US$ 6,981 5,077 Financial assets at fair 5,077 2017.01.17 value through profit or loss Currency swap 2016.04.11- US$ 3,499 (360) Financial liabilities at (360) 2017.04.11 fair value through profit or loss Currency swap 2016.11.14- US$ 1,699 1,236 Financial assets at fair 1,236 2017.01.17 value through profit or loss Currency swap 2016.07.15- US$ 3,129 336 Financial assets at fair 336 2017.01.17 value through profit or loss Currency swap 2016.07.15- US$ 4,850 521 Financial assets at fair 521 2017.01.17 value through profit or loss Currency swap 2016.07.15- US$ 3,129 336 Financial assets at fair 336 2017.01.17 value through profit or loss Currency swap 2016.03.15- US$10,488 (5,367) Financial liabilities at (5,367) 2017.03.15 fair value through profit or loss Currency swap 2016.12.14- US$ 5,030 1,597 Financial assets at fair 1,597 2017.03.14 value through profit or loss Currency swap 2016.12.14- US$ 5,001 1,588 Financial assets at fair 1,588 2017.03.14 value through profit or loss Currency swap 2016.12.14- US$10,012 3,179 Financial assets at fair 3,179 2017.03.14 value through profit or loss Currency swap 2016.12.14- US$ 9,989 3,172 Financial assets at fair 3,172 2017.03.14 value through profit or loss Currency swap 2016.12.14- US$ 5,006 1,590 Financial assets at fair 1,590 2017.03.14 value through profit or loss Currency swap 2016.12.14- US$10,483 3,329 Financial assets at fair 3,329 2017.03.14 value through profit or loss Currency swap 2016.12.14- US$ 1,920 610 Financial assets at fair 610 2017.03.14 value through profit or loss Other - TCB Currency swap 2016.12.28- US$ 7,000 790 Financial assets at fair 790 Global High 2017.02.10 value through profit Yield Bond Fund or loss Currency swap 2016.12.19- US$ 2,020 520 Financial assets at fair 520 2017.01.19 value through profit or loss Currency swap 2016.12.28- US$ 1,000 113 Financial assets at fair 113 2017.02.10 value through profit or loss Currency swap 2016.12.30- US$ 4,000 (161) Financial liabilities at (161) 2017.02.10 fair value through profit or loss
The realized profit on the currency swaps transactions and cross- currency swap transactions with related parties were as follows:
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For the Year Ended December 31 2017 2016
Financial assets and liabilities at fair value through profit or loss Sister companies - BPCTLI $ (200,452) $ 60,439 Others (30,115) (3,127)
$ (230,567) $ 57,312
26) Loans
December 31, 2017 Highest Loan Classification Differences in Terms Balance in the of Transaction Year Ended Compared with Account Volume or December 31, Ending Nonperforming Those for Type Name 2017 (Note) Balance Normal Loans Loans Collaterals Unrelated Parties
Consumer loans 44 $ 70,662 $ 49,598 $ 49,598 $ - Land and buildings None Self-used housing 34 181,369 130,784 130,784 - Land and buildings None mortgage loans Other Taiwan Cooperative 280,333 - - - Bonds None Securities Co., Ltd. December 31, 2016 Highest Loan Classification Differences in Terms Balance in the of Transaction Year Ended Compared with Account Volume or December 31, Ending Nonperforming Those for Type Name 2016 (Note) Balance Normal Loans Loans Collaterals Unrelated Parties
Consumer loans 44 $ 108,562 $ 66,599 $ 66,599 $ - Land and buildings None Self-used housing 34 165,474 133,203 133,203 - Land and buildings None mortgage loans Other Taiwan Cooperative 84,120 - - - Bonds None Securities Co., Ltd. Note: The highest balance is the largest sum in the year of all daily accounts for each type.
27) The Bank sold machinery and equipment to TCS in 2017; the selling price and carrying amounts were both $60 thousand.
c. Salaries, bonuses and remunerations to main management
For the Year Ended December 31 2017 2016 Salaries and other short-term employment benefits $ 129,266 $ 126,415 Post-employment benefits 12,922 12,918 Interest arising from the employees’ preferential rate in excess of normal rates 3,885 4,370 $ 146,073 $ 143,703
36. PLEDGED ASSETS
a. In addition to those mentioned in other notes, the face values of the pledged bonds and certificates of deposit are summarized as follows: December 31 2017 2016 Collaterals for call loans of foreign currency $ 40,000,000 $ 40,000,000 Collaterals for day-term overdraft 30,000,000 30,000,000 Collaterals for overdraft of domestic U.S. dollar settlement 11,000,000 11,000,000 Collaterals for overdraft of domestic RMB settlement 1,455,680 2,312,000 Guarantee deposits for provisional collateral seizure for loan defaults and others 1,385,300 1,125,300 Collaterals for overdraft of domestic JPY settlement 500,000 500,000 Overseas branches’ capital adequate reserve 362,859 360,864 Guarantee deposits for the trust business compensation reserve 220,000 200,000 Guarantee deposits for bills finance business 50,000 50,000 Guarantee deposits for securities operation 50,000 50,000 Collaterals for overseas branch U.S. dollar settlement 31,786 43,497 Overseas branches’ guarantee deposits for operation 5,936 6,444 Others 200 1,400 $ 85,061,761 $ 85,649,505 Financial Information 79
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To comply with the Central Bank of the Republic of China’s (CBC) Interbank Funds Transfer and Settlement System for real-time gross settlement (RTGS), the Bank provided certificates of deposit as collateral for day-term overdraft (part of due from the Central Bank and call loans to other banks). The pledged amount may be adjusted anytime, and the unused overdraft amount at the end of a day can also be treated as the Bank’s liquidity reserve.
b. To expand their capital sourcing and enhance their liquidity position, the Bank’s Seattle Branch and Los Angeles Branch and New York Branch obtained access privileges at the Discount Window Account of the Federal Reserve Bank. For this access, the three branches pledged the following assets: (In Thousands of U.S. Dollars)
Outstanding Balance Collateral Date Loan Bond Total Value
December 31, 2017 $ 308,429 $ - $ 308,429 $ 230,474 December 31, 2016 $ 304,786 $ 5,000 $ 309,786 $ 234,525
37. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS
In addition to those mentioned in other notes, the significant contingencies and commitments were as follows:
a. Taiwan Cooperative Bank, Ltd.
1) Lease agreements on premises occupied by the Bank’s branches are operating lease. Rentals are calculated on the basis of the leased areas and are payable monthly, quarterly or semiannually. As of December 31, 2017, refundable deposits on these leases totaled $126,451 thousand (part of refundable deposits). Minimum future annual rentals are as follows:
December 31 2017 2016
Within one year $ 588,831 $ 631,700 One to five years 1,192,276 1,312,200 Over five years 127,766 112,219
$ 1,908,873 $ 2,056,119
The lease payments recognized as expenses are as follows:
For the Year Ended December 31 2017 2016
Minimum lease payments $ 658,626 $ 658,976 Contingent rentals 1,274 1,103
$ 659,900 $ 660,079
2) Lease agreements on investment properties owned by the Bank and rent to others are operating lease. Rentals are calculated on the basis of the leased areas and are receivable monthly, quarterly or semiannually. The lessees have no preemptive rights to buy properties at the end of the lease agreements. As of December 31, 2017, guarantee deposits on these leases totaled $55,568 thousand (part of guarantee deposits received). Minimum future annual rentals are as follows:
December 31 2017 2016
Within one year $ 264,670 $ 179,312 One to five years 656,465 252,438 Over five years 12,195 18,372
$ 933,330 $ 450,122 3) As of December 31, 2017, the Bank’s outstanding major construction and procurement contracts amounted to $5,764,141 thousand, of which $667,121 thousand was still unpaid.
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4) According to the joint venture contract signed with BNP Paribas Assurance (BNPPA), TCB signed the tri-party agreement with BNP Paribas Cardif TCB Life Insurance Co., Ltd. (BPCTI) and Cooperative Insurance Broker Co., Ltd. (CIB) on April 13, 2010, which identified BPCTI as the sole supplier of life insurance products for TCB and CIB, also applying TCB’s marketing channels to sell life insurance products exclusively. However, the rights and obligations were assumed by TCB since the merger on June 24, 2016.
b. United Taiwan Bank S.A.
United Taiwan Bank S.A. has operating lease agreements with unrelated parties on its office premises. The rentals payable in the next five years are as follows: December 31 2017 2016
Within one year $ 2,688 $ 2,501 One to five years 11,987 11,317 Over five years 10,773 13,755
$ 25,448 $ 27,573
38. FINANCIAL INSTRUMENTS
a. Fair values of financial instruments that are not measured at fair value.
Except for the financial assets and liabilities shown in the following table, management considers that either the carrying amounts of financial assets and financial liabilities recognized in the financial statements approximate their fair values or the fair values of the financial instruments cannot be reasonably measured.
December 31 2017 2016 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value
Financial assets
Held-to-maturity financial assets $ 513,789,325 $ 515,472,990 $ 510,048,964 $ 509,455,600 Debt instruments with no active market 83,942,127 85,747,146 80,049,395 81,263,347
Financial liabilities
Bank debentures 64,610,000 65,621,526 74,610,000 75,636,377
Fair value hierarchy as at December 31, 2017
Total Level 1 Level 2 Level 3 Financial assets
Held-to-maturity financial assets $ 515,472,990 $ 7,371,150 $ 508,101,840 $ - Debt investments with no active market 85,747,146 - 85,747,146 -
Financial liabilities
Bank debentures 65,621,526 - 65,621,526 -
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Fair value hierarchy as at December 31, 2016
Total Level 1 Level 2 Level 3 Financial assets
Held-to-maturity financial assets $ 509,455,600 $ 6,173,804 $ 503,281,796 $ - Debt investments with no active market 81,263,347 - 81,263,347 -
Financial liabilities
Bank debentures 75,636,377 - 75,636,377 -
b. The valuation techniques and assumptions the Company uses for determining fair values are as follows:
The fair values of financial instruments traded on active markets are based on quoted market prices. However, in many instances where there are no quoted market prices for the Company’s various financial instruments, fair values are based on estimates using other financial data and appropriate valuation methodologies. The financial data obtained by the Company for making estimations and assumptions for financial instrument valuation is consistent with those used by other market participants to price financial instruments. Fair values of forward contracts, currency swap contracts, foreign-currency margin contracts, cross-currency swap contracts and interest rate swap contracts are calculated using the discounted cash flow method, unless the fair values are provided by counterparties. Fair values of option contracts are based on estimates using the Black Scholes pricing model.
The Company estimates the fair value of each forward contract on the basis of the swap points quoted by Reuters on each settlement date. Fair values of interest rate swap contracts and cross-currency swap contracts are calculated using the Bloomberg information system, unless the fair values are provided by counterparties. The calculation of the fair value of each option contract is based on the mid-price (the average of bid and ask prices) quoted by Reuters and applied consistently.
For debt instruments with no active market, if there are theoretical prices from GreTai Securities Market (GTSM, an over-the-counter securities exchange) on the balance sheet date, they are used as the basis for evaluating the fair value of debt instruments with no active market. Otherwise, the latest trade prices and quoted prices by major markets are used. The fair values of bank debentures are recorded as follows: (a) debentures with no maturity dates - at book values; (b) debentures with floating interest rates - at theoretical prices quoted by the GTSM; and (c) debentures with fixed interest rates - at estimates reached using the discounted cash flow method. The discount rates used were between 0.7211% and 1.1545%, between 0.7325% and 1.3754% as of December 31, 2017 and 2016, respectively, and were comparable with interest rates for loans with similar terms and characteristics.
c. The hierarchies of the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2017 and 2016 were as follows:
Financial Instrument December 31, 2017 Measured at Fair Value Total Level 1 Level 2 Level 3
Non-derivative financial instruments
Assets
Financial assets at FVTPL Held-for-trading financial assets Stocks $ 1,078,689 $ 1,078,689 $ - $ - Debt instruments 892,154 136,488 755,666 - Others 8,348,633 - 8,348,633 - Available-for-sale financial assets Stocks 4,316,380 4,316,380 - - Debt instruments 149,993,993 4,978,739 145,015,254 - Others 131,123 131,123 - -
Liabilities
Financial liabilities at FVTPL (11,688,291) - (11,688,291 ) -
Derivative financial instruments
Assets
Financial assets at FVTPL 2,543,367 26,197 2,517,170 -
Liabilities
Financial liabilities at FVTPL (2,762,560) - (2,762,560 ) - (Continued)
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Financial Instrument December 31, 2016 Measured at Fair Value Total Level 1 Level 2 Level 3
Non-derivative financial instruments
Assets
Financial assets at FVTPL Held-for-trading financial assets Stocks $ 902,142 $ 902,142 $ - $ - Debt instruments 4,495,059 2,321,235 2,173,824 - Others 18,918,778 - 18,918,778 - Available-for-sale financial assets Stocks 4,230,764 4,230,764 - - Debt instruments 119,127,606 9,170,976 109,956,630 - Others 282,576 282,576 - - Liabilities
Financial liabilities at FVTPL (12,336,035) - (12,336,035 ) -
Derivative financial instruments
Assets
Financial assets at FVTPL 3,550,158 3,736 3,546,422 -
Liabilities
Financial liabilities at FVTPL (2,294,976) - (2,294,976 ) - (Concluded) d. Information on financial assets designated as at fair value through profit or loss that should be originally measured at amortized cost is as follows: December 31 2017 2016
Carrying amounts of debt instruments designated as at fair value through profit or loss Fair value $ 11,688,291 $ 12,336,035 Amount payable at maturity 11,872,000 12,888,000
$ (183,709) $ (551,965)
Change in Fair Values Resulting from Credit Risk Variations
Change in amount in the year 2017 $ (32,084) 2016 $ 32,330
Accumulated amount of change As of December 31, 2017 $ 2,414 As of December 31, 2016 $ 34,498
The change in fair value attributable to change in credit risk was calculated as the difference between total change in fair value of bank debentures and the change in fair value due to change in market risk factors alone. The change in fair value due to market risk factors was calculated using benchmark interest yield curves as at the end of the reporting period holding. The fair value of bank debentures was estimated by discounting future cash flows using quoted benchmark interest yield curves as at the end of the reporting period and by obtaining lender quotes for borrowing of similar maturity to estimate credit risk margin. e. Information on financial risk management
1) Risk management
The objective of risk management is to develop a sound risk management mechanism, and on the basis of the risk tolerance level and the expected return level, pursue the maximum value of stockholders’ investments. The main risks faced by the Bank include the business credit risk in- and off- balance-sheet, market risks (including interest, exchange, equity security, and commodity risks) and liquidity risk. Financial Information 83
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The Bank has risk management policies and risk monitoring procedures, which have been reviewed and approved by the Board and are used to effectively identify, measure, monitor and control credit, market, and operating and liquidity risks.
The Board, the highest decision-making unit for the risk management, takes charge of approving the risk management policy and system and building the risk management culture. It also takes ultimate responsibility for overall risk management.
Under the risk management decision approved by the Board, the risk management committee takes charge of and reviews all the Bank’s risk management implementation, capital adequacy assessment, and risk exposure management. It also communicates and the inter-departmental risk management issues and coordinates issue handling and continually monitor the execution of risk management procedures. The risk management department is responsible for planning and designing the risk management system, deliberating capital allocation, setting up the instruments for risk measurement and capital provision, and monitoring risk control. This department also regularly prepares reports for submission to senior management, the risk management committee and the Board.
Under the business management regulation and risk policy, the business supervising unit manages and oversees each business unit toward proper risk management and carries out risk review and control. In addition, the Audit Department independently audits at least once a year all risk-related businesses and timely provides suggestions for improvement.
2) Credit risk
Credit risk refers to a borrower, a financial instrument issuer or a transaction counterparty undergoing financial difficulty or other adverse situations (such as a dispute between the borrower and its business partner), which could result in loss due to breach of contract. Credit risk can come from on- and off-balance-sheet items. On-balance sheet items are mainly lending, due from bank and call loans to other banks, security investment and derivatives. Off-balance sheet items are mainly guarantees, acceptance, letters of credit and loan commitments.
The risk management policy, which is founded on the basic principles of safety, liquidity, profitability, welfare and growth, is implemented by the credit risk management division toward the cultivation of a risk management culture. All on- and off- balance sheet transactions should be detailed analyzed in detail to identify existing and potential credit risk. Based on the Bank’s business characteristics and the principle of risk diversification, risk status is analyzed and evaluated, centralized limits are set, and a risk monitoring and alert mechanism has been developed and operated. For a more effective credit risk evaluation, an internal rating system has been created to enhance the ability to quantify risk.
The Company’s main business items that are measured and managed for credit risks are as follows:
a) Loans business (including loan commitment and guarantees):
Credit assets are classified into five categories. In addition to normal credit assets that are classified as sound assets, the unsound assets are classified, on the basis of the valuation of collaterals and the length of time the payments become overdue, as special mention, substandard, with collectability high doubtful and uncollectable. The Company also sets up policies for the management of doubtful credits and the collection of overdue debts to deal with collection problems.
The Company applies to its credit business the so-called “5Ps of credit analysis” as the basis for lending approval and evaluation of its counterparties. These 5Ps are: People (know customers’ background and their credit status well); purpose (what will the fund be used for); payment (the borrower’s ability to repay an obligation when it falls due); protection (the Company’ recourse on repayment defaults); and perspective (how the credit is seen in light of rewards and risks). After a loan is granted, the transaction is reviewed and monitored to ensure creditor’s rights of the Company.
To quantify credit risk, the Company applies statistical methods using with customers’ qualitative data and lending history to develop a rating module for corporate finance and consumer finance. This module is used to create an internal credit rating system for risk evaluation, in which 9 is the base grade of the credit quality of corporate customers, and 9 or 10 on the business segment consumer customers.
The 5P credit analysis and the module rating specifically apply to corporate customers. Micro credits and residential mortgages are assessed by using the credit rating model, and consumer loans are assessed individually for default risks. 84 Annual Report 2017
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Taiwan Cooperative Bank b) Due from and call loans to other banks
The Company evaluates the credit status of counterparties before closing deals. The Company grants different limits to the counterparties on the basis of their respective credit ratings as suggested by domestic and foreign credit rating agencies. c) Investments in debt instruments and derivatives
The Company identifies and manages credit risks from debt instruments through the use of external credit ratings of the debt instruments along with the evaluation of credit qualities of bonds, regional conditions and counterparty risks.
The Company conducts derivative transactions with other banks and sets the credit limits (including lending limits) at their credit rating and the ranking given by the Banker magazine. The credits extended to general customers are monitored in accordance with the related contract terms and conditions and the credit limits for derivatives established through normal credit granting processes.
The Company has a series of measures for credit granting to reduce credit risks. One of the procedures is asking for collaterals from the borrowers. To secure a debt, the Company manages and assesses the collaterals following the procedures that determine the scope of collateralization and valuation of collaterals and the process of disposition. In credit contracts, the Company stipulates the security mechanism for debts; the conditions and terms for collaterals; and the terms and conditions of offsetting to state clearly that the Company reserves the right to reduce the granted quota, to reduce the repayment period, to demand immediate settlement or to offset the debts of the borrowers by their deposits in the Company in order to reduce the credit risks.
To avoid the concentration of credit risks, the Company sets up centralized credit limits for business segments, countries, collaterals, groups, and construction financing. Monthly, or more frequently, as needed, the Company reviews credit limits, monitors the actual risk-exposure condition and whether the usage rate of limits meets relevant regulations and reports the review results to superior management, risk management committee and the Board periodically. If there is a possibility of breach of the credit limits, the related department or division will apply appropriate procedures to ensure that the credit limits are followed.
The Company settles most of its transactions at gross amounts. For further reduction of credit risks, settlement netting is used for some counterparties or in some circumstances where the transactions are terminated because of counterparty’s default.
The maximum exposures to credit risks of assets on the consolidated balance sheets without consideration of guarantees or other credit enforcement instruments approximate the assets’ carrying amounts. The maximum exposures of off-balance sheet items to credit risks without consideration of guarantees or other credit enforcement instruments are as follows:
December 31 2017 2016
Irrevocable loan commitments issued $ 94,377,275 $ 101,561,712 Irrevocable credit card commitments 45,082,276 41,895,556 Letters of credit issued yet unused 18,727,577 21,152,739 Other guarantees 79,802,266 78,348,294
The Company’s management believes its ability to minimize credit risk exposures on off-balance sheet items is mainly due to its rigorous evaluation of credit extended and the periodic reviews of these credits.
Concentration of credit risk exists when counterparties to financial transactions are individuals or groups engaged in similar activities or activities in the same region, which would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The profile by group or industry, regions and collaterals of obligations that were 10% or more of total outstanding loans is as follows:
December 31 Credit Risk Profile by 2017 2016 Group or Industry Amount % Amount %
Natural person $ 819,375,254 41 $ 809,134,142 39 Manufacturing 383,995,457 19 327,044,724 16 Financial Information 85
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Some financial assets held by the Company, such as cash and cash equivalents, due from the Central Bank and call loans to other banks, financial assets at fair value through profit or loss, securities purchased under resell agreements and refundable deposits, are exposed to low credit risks because the counterparties have high credit ratings.
In addition to the above assets, credit quality analysis of other financial assets are as follows:
a) Credit quality analysis of discounts, loans and receivables
Provision for Impairment Losses (D) Neither Past Due Past Due But With No Impaired Total With Objective Net December 31, 2017 Nor Impaired Not Impaired Objective (C) (A)+(B)+(C) Evidence of (A)+(B)+(C)-(D) (A) (B) Evidence of Impairment Impairment Receivables Credit cards $ 3,114,017 $ 43,409 $ 56,635 $ 3,214,061 $ 19,868 $ 17,208 $ 3,176,985 Others 15,194,094 34,901 914,027 16,143,022 607,932 86,235 15,448,855 Discounts and loans 1,984,728,997 12,537,799 30,597,998 2,027,864,794 5,742,374 19,454,230 2,002,668,190
Provision for Impairment Losses (D) Neither Past Due Past Due But With No Impaired Total With Objective Net December 31, 2016 Nor Impaired Not Impaired Objective (C) (A)+(B)+(C) Evidence of (A)+(B)+(C)-(D) (A) (B) Evidence of Impairment Impairment Receivables Credit cards $ 2,832,619 $ 38,059 $ 61,942 $ 2,932,620 $ 25,376 $ 17,420 $ 2,889,824 Others 11,567,798 24,406 1,017,271 12,609,475 599,917 60,974 11,948,584 Discounts and loans 1,953,094,604 7,549,281 29,797,942 1,990,441,827 6,651,004 16,903,787 1,966,887,036
b) Credit quality analysis of discounts and loans not past due and not impaired
Items December 31, 2017 December 31, 2016 Loans Secured $ 1,409,682,987 $ 1,407,436,657 Unsecured 575,046,010 545,657,947 Total 1,984,728,997 1,953,094,604
c) Credit quality analysis of securities
Neither Past Past Due But Provision for Net December 31, 2017 Due Nor Not Impaired Impaired (C) Total Impairment (A)+(B)+ Impaired (A) (B) (A)+(B)+(C) Losses (D) (C)-(D) Available-for-sale financial assets Debt instruments $ 149,993,993 $ - $ - $ 149,993,993 $ - $ 149,993,993 Equities 4,316,380 - - 4,316,380 - 4,316,380 Others 131,123 - - 131,123 - 131,123 Held-to-maturity financial assets Debt instruments 110,841,605 - - 110,841,605 3,304 110,838,301 Others 402,951,024 - - 402,951,024 - 402,951,024 Other financial assets Debt instruments 83,942,127 - - 83,942,127 - 83,942,127 Equities 4,092,383 - - 4,092,383 - 4,092,383 Others 20,145,645 - - 20,145,645 - 20,145,645
Neither Past Past Due But Provision for Net December 31, 2016 Due Nor Not Impaired Impaired (C) Total Impairment (A)+(B)+ Impaired (A) (B) (A)+(B)+(C) Losses (D) (C)-(D)
Available-for-sale financial assets Debt instruments $ 119,127,606 $ - $ - $ 119,127,606 $ - $ 119,127,606 Equities 4,230,764 - - 4,230,764 - 4,230,764 Others 282,576 - - 282,576 - 282,576 Held-to-maturity financial assets Debt instruments 77,851,299 - - 77,851,299 10,859 77,840,440 Others 432,208,524 - - 432,208,524 - 432,208,524 Other financial assets Debt instruments 80,049,395 - - 80,049,395 - 80,049,395 Equities 4,092,383 - - 4,092,383 - 4,092,383 Others 17,133,396 - - 17,133,396 - 17,133,396 The processing delays by the borrowers and other administrative reasons may cause financial assets to become past due but not impaired. As defined in the internal rules governing the Company’ risk management, financial asset that are past due within 90 days are not deemed as impaired, unless there are evidences that indicate impairment.
The vintage analysis of financial assets that are past due but not impaired is as follows:
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Taiwan Cooperative Bank
December 31, 2017 Items Past Due Up to 1 Month Past Due by Total Over 1 Month-3 Months Receivables Credit cards $ 34,314 $ 9,095 $ 43,409 Others 18,318 16,583 34,901 Loans Secured 8,416,499 2,867,567 11,284,066 Unsecured 1,132,174 121,559 1,253,733 Available-for-sale financial assets Debt instruments - - - Others - - - Held-to-maturity financial assets Debt instruments - - - Others - - - Other financial assets Debt instruments - - - Others - - -
December 31, 2016 Items Past Due Up to 1 Month Past Due by Total Over 1 Month-3 Months Receivables Credit cards $ 25,302 $ 12,757 $ 38,059 Others 13,000 11,406 24,406 Loans Secured 4,878,706 1,446,303 6,325,009 Unsecured 975,989 248,283 1,224,272 Available-for-sale financial assets Debt instruments - - - Others - - - Held-to-maturity financial assets Debt instruments - - - Others - - - Other financial assets Debt instruments - - - Others - - -
3) Market risks
Market risk refers to the risk of losses in positions arising from adverse movements of market prices. It refers to interest rates, exchange rates, equity security prices, commodity prices, etc.
The main market risks that the Company faces are equity security, interest rate, and exchange rate risks. The market risk position of equity security mainly includes domestic listed and OTC stocks, domestic stock index options and stock market index futures; the position of interest rate mainly includes short-term bills, bonds and interest rate derivative instruments; and the instruments exposed to exchange rate risk mainly include spot contracts and forward contracts and derivatives denominated in foreign currency.
Under the market risk management policies approved by the board of directors, the new Basel Capital Accord and regulations implemented by relevant authorities and in consideration of the Bank’s own market risk management system and its overall risk management goals and product features, the Company has set all types of investment authorization limits and stop-loss rules, regularly reviews the customers’ credit status and compiles management information reports to control all types of market risks effectively.
The Company’s market risk management procedures include risk identification, evaluation, measurement, monitoring, and reporting. Every units’ risk management personnel analyze data on market risk position and evaluate measurement methods, including the statistical basic measurement method, sensitivity analysis, and situational analysis. Monitoring content includes trading processes, collective and individual, of all transaction units and all financial instruments, such as change of position, change of profit and loss, trading pattern, and if trading objects are transacted within the authorized scope and limits.
The Company’s business units and risk management unit have established market risk factors for identifying risk exposure positions and use these factors to measure market risks. The market risk factors refer to the components of financial instruments’ position, such as profit and loss and sensitivity to risk, which might be affected by interest rates, exchange rates and equity security market prices.
The Company’s risk management unit reports to management periodically the execution status of measures on market risk management, investment positions, and profit and loss control so that management can fully understand the status of market risk management. The Company also has cleared reporting procedures and rules for all types of transaction limits and the stop-loss order. Financial Information 87
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If any transaction amount reaches the limit, the stop-loss order is executed immediately; if the stop-loss order is not executed, the transaction unit is required to explain the reasons for non-execution and prepare a response plan for management’s approval.
The Bank applies market risk sensitivity as a risk control instrument. Market risk sensitivity position refers to the change in the value of a position due to a change in a certain market risk factor. Market risk factors include interest rates, exchange rates, and equity security prices. The Bank’s position sensitivity exposure trading book contains all types of positions exposed to market risk and the range of change to which sensitivity analysis applied under various pressure scenarios for all types of risk factors.
Assuming all other factors are held constant, the effects of risks within defined change scenarios are shown below:
Main Risk Change Scenario December 31, 2017 December 31, 2016 Interest rate curve increased 100 basis points $ (39,258 ) $ (338,493 ) Interest rate risk Interest rate curve fell 100 basis points 39,988 363,546 USD/NT$, EUR/NT$ increased 3% (195,579 ) (132,789 ) USD/NT$, EUR/NT$ fell 3% 195,579 132,789 Exchange rate risk Others (RMB, AUD etc.)/NT$ increased 5% (9,514 ) 220,149 Others (RMB, AUD etc.)/NT$ fell 5% 9,514 (220,149 ) Equity security Equity security price increased by 15% 165,096 120,054 price risk Equity security price fell by 15% (162,501 ) (120,054 )
Average amount and average interest rate of interest-earning assets and interest-bearing liabilities are as follows:
Average balance is calculated by the daily average balances of interest-earning assets and interest-bearing liabilities.
a) Taiwan Cooperative Bank, Ltd.
For the Year Ended December 31 2017 2016 Average Average Average Rate Average Rate Balance (%) Balance (%)
Interest-earning assets
Due from banks and other financial assets - due from banks $ 30,526,712 2.23 $ 26,939,023 1.82 Due from the Central Bank 163,470,160 0.36 363,032,312 0.54 Call loans to banks and other financial assets - call loans to securities firms 70,515,192 1.48 120,352,203 0.96 Held-for-trading financial assets 12,765,648 0.63 19,652,234 0.50 Securities purchased under resell agreements 610,384 0.32 1,945,294 0.34 Discounts and loans 1,970,325,763 2.01 1,964,562,393 2.01 Available-for-sale financial assets 136,654,032 1.92 101,153,901 2.07 Held-to-maturity financial assets 514,022,532 0.73 478,884,429 0.48 Debt instruments with no active market 81,465,943 2.31 81,841,417 2.07
Interest-bearing liabilities
Due to the Central Bank and other banks 224,358,551 0.73 212,433,189 0.55 Financial liabilities designated as at fair value through profit or loss 12,120,592 4.50 12,887,847 4.33 Securities sold under repurchase agreements 10,337,481 0.23 12,526,955 0.27 Demand deposits 489,195,961 0.12 487,840,156 0.12 Savings - demand deposits 811,456,768 0.27 766,805,420 0.32 Time deposits 468,497,554 1.15 491,914,674 1.04 Time savings deposits 658,949,831 1.06 677,825,139 1.15 Treasury deposits 84,055,258 0.65 82,155,852 0.70 Negotiable certificates of deposits 5,392,127 0.35 4,834,141 0.31 Structured products 2,720,350 1.46 4,347,486 0.62 Bank debentures 70,144,247 1.34 70,935,137 1.36 88 Annual Report 2017
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Taiwan Cooperative Bank b) United Taiwan Bank S.A.
For the Year Ended December 31 2017 2016 Average Average Average Rate Average Rate Balance (%) Balance (%)
Interest-earning assets
Due from banks $ 89,259 0.22 $ 56,981 0.11 Due from the Central Bank 247,716 - 150,594 0.01 Discounts and loans 7,979,886 2.15 8,778,097 2.14 Debt instruments with no active market 1,546,605 0.78 1,725,446 0.89
Interest-bearing liabilities
Due to the Central Bank and other banks 7,548,337 0.73 8,291,258 0.41 Demand deposits 51,967 - 43,651 - Time deposits 85,909 1.29 85,414 0.87
The exchange rate risk of the Company is as follows: (In Thousands) December 31, 2017 Foreign Currencies Exchange Rate New Taiwan Dollars Financial assets
USD $ 11,041,180 29.6800 $ 327,702,215 RMB 12,538,702 4.5490 57,038,555 AUD 945,755 23.1350 21,880,035 EUR 367,904 35.4500 13,042,210 JPY 41,602,226 0.2633 10,953,866 HKD 1,714,624 3.7960 6,508,711 ZAR 1,831,692 2.3900 4,377,743 GBP 60,118 39.9300 2,400,518 CAD 29,282 23.6300 691,945 NZD 20,386 21.0700 429,537 CHF 11,219 30.3350 340,330 SGD 2,144 22.2000 47,601 THB 10,337 0.9129 9,437 SEK 2,327 3.6000 8,378 KHR 782,844 0.0073 5,715 PHP 3,855 0.5938 2,289
Financial liabilities
USD $ 11,836,282 29.6800 $351,300,848 RMB 11,437,152 4.5490 52,027,606 AUD 775,048 23.1350 17,930,745 JPY 54,569,470 0.2633 14,368,141 ZAR 2,875,459 2.3900 6,872,348 EUR 172,903 35.4500 6,129,407 NZD 210,686 21.0700 4,439,155 HKD 1,006,936 3.7960 3,822,329 CAD 58,801 23.6300 1,389,460 GBP 31,502 39.9300 1,257,861 CHF 17,122 30.3350 519,385 SGD 9,853 22.2000 218,734 SEK 16,506 3.6000 59,423 THB 12,133 0.9129 11,076 PHP 1,999 0.5938 1,187 KHR 2,889 0.0073 21 MYR - 7.3020 2
(In Thousands) December 31, 2016 Foreign Currencies Exchange Rate New Taiwan Dollars Financial assets
USD $ 10,154,784 32.2200 $ 327,187,132 RMB 11,012,099 4.6240 50,919,947 AUD 810,265 23.3450 18,915,634 EUR 410,380 33.9800 13,944,703 JPY 45,466,810 0.2771 12,598,853 HKD 1,363,517 4.1540 5,664,050 GBP 109,134 39.6100 4,322,797 ZAR 1,530,864 2.3700 3,628,149 CAD 127,698 23.9200 3,054,547 Financial Information 89
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December 31, 2016 Foreign Currencies Exchange Rate New Taiwan Dollars NZD $ 29,023 22.4600 $ 651,851 CHF 8,722 31.6050 275,669 SGD 5,439 22.3100 121,342 SEK 2,920 3.5500 10,368 THB 7,357 0.9042 6,652 KHR 736,959 0.0080 5,869 PHP 4,412 0.6510 2,872
Financial liabilities
USD $ 11,024,482 32.2200 $ 355,208,823 RMB 10,097,452 4.6240 46,690,618 AUD 829,527 23.3450 19,365,308 JPY 38,008,073 0.2771 10,532,037 EUR 221,157 33.9800 7,514,916 ZAR 2,773,328 2.3700 6,572,788 HKD 833,999 4.1540 3,464,432 GBP 67,639 39.6100 2,679,161 NZD 88,911 22.4600 1,996,935 CAD 69,130 23.9200 1,653,596 SGD 16,146 22.3100 360,211 CHF 8,466 31.6050 267,562 SEK 18,496 3.5500 65,662 THB 14,106 0.9042 12,754 PHP 1,573 0.6510 1,024 KHR 2,888 0.0080 23 MYR - 7.1840 2
4) Liquidity risk
Liquidity risk is inherent in all bank operations and might be affected by specific or general industry and environmental events. These events include credit-related events, mergers or acquisitions, systemic changes and natural disasters. The Company defines liquidity risk as the inability to realize assets or to obtain financing for meeting obligations when they fall due, resulting in loss.
The liquidity risk management strategy is based on the overall risk management objectives and involves liquidity risk, identification, measurement, monitoring and control to maintain the Bank’s appropriate liquidity and ensure adequate funding for meeting liability obligations or for capital growth.
The liquidity risk management procedures involve identification, measurement, monitoring and report of risk. Each business unit should identify the existing liquidity risk in business activities and financial products.
For adequate liquidity for all types of deposits, the Bank follows the relevant regulations issued by the Central Bank to estimate the liquidity reserves and calculates and controls daily liquidity reserve ratios.
For the Bank’s operating liquidity, the fund disbursement unit performs daily cash flow management and monitoring of the payments schedule on the basis of detailed reports by different departments and relevant rules.
The risk management department regularly generates risk reports, which include the liquidity reserve ratios and the maturity analysis of instruments and transactions denominated in major foreign currencies, and submits them to the Asset and Liability Management Committee and the Board as reference for decision making.
The Bank stipulates liquidity risk limits, which are regularly monitored and reviewed by the risk management department. If a liquidity risk limit is exceeded or other exception situations occur, the business supervising unit immediately develops appropriate contingency measures and submits them to the Asset and Liability Management Committee for approval and implementation.
The Bank contingency measures for business emergency or sudden liquidity crisis are aimed at quick crisis resolution and resumption of normal operations.
The Bank’s liquidity reserve ratios were 24.49% and 25.51% in December 2017 and 2016, respectively.
The Company disclosed the analysis of cash outflows on non-derivative financial liabilities by their residual maturities as of the balance sheet dates. The amounts of cash outflows are based on contractual cash flows, so some amounts may not correspond to those shown in the consolidated balance sheets.
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Taiwan Cooperative Bank
December 31, 2017 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total Due to the Central Bank and other banks $ 160,961,831 $ 43,055,551 $ 9,077,372 $ 281,277 $ - $ 213,376,031 Financial liabilities at FVTPL - - - - 11,872,000 11,872,000 Securities sold under repurchase agreements 5,864,963 2,724,763 1,787,416 - - 10,377,142 Payables 35,894,979 1,245,656 3,836,740 2,055,960 1,670,382 44,703,717 Deposits and remittances 269,370,789 372,256,022 358,183,916 617,296,617 1,007,631,653 2,624,738,997 Bank debentures - - 10,000,000 4,610,000 50,000,000 64,610,000 Other items of cash outflow on maturity 3,682,515 28,407 1,367 2,736 34,520 3,749,545
December 31, 2016 0-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Total Due to the Central Bank and other banks $ 156,187,361 $ 58,923,389 $ 10,704,636 $ 819,799 $ - $ 226,635,185 Financial liabilities at FVTPL - - - - 12,888,000 12,888,000 Securities sold under repurchase agreements 7,099,872 2,993,323 1,765,115 142,521 - 12,000,831 Payables 35,207,271 1,437,366 3,875,128 1,793,774 1,361,129 43,674,668 Deposits and remittances 252,988,803 358,055,936 351,438,916 595,404,501 1,006,397,207 2,564,285,363 Bank debentures - - 8,000,000 4,000,000 62,610,000 74,610,000 Other items of cash outflow on maturity 2,229,703 61,082 12,886 44,146 266,308 2,614,125
In the above table, the maturity analysis of deposits and remittances by residual-maturity period was based on the Company’s historical experience. Assuming that all demand deposits as of December 31, 2017 and 2016 must be repaid soon, the capital expenditure will be increased by $1,382,433,220 thousand and $1,332,990,997 thousand, respectively, within 30 days these balance sheet dates.
The Company assesses the maturity dates of contracts to understand the basic elements of all derivative financial instruments shown in the balance sheets. The amounts used in the maturity analyses of derivative financial liabilities are based on contractual cash flows, so some of these amounts may not correspond to the amounts shown in the consolidated balance sheets. The maturity analysis of derivative financial liabilities is as follows:
a) Derivative financial liabilities to be settled at net amounts
181 Days- December 31, 2017 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Derivative financial liabilities at fair value through profit or loss Currency $ 621 $ 483 $ 418 $ 138 $ - $ 1,660 Interest (3,677 ) (401 ) (2,430 ) (9,393 ) (1,657 ) (17,558 )
181 Days- December 31, 2016 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Derivative financial liabilities at fair value through profit or loss Currency $ 12 $ 1,104 $ 512 $ 328 $ - $ 1,956 Interest (2,597 ) - (2,572 ) (4,433 ) (7,996 ) (17,598 )
b) Derivative financial liabilities to be settled at gross amounts
181 Days- December 31, 2017 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Derivative financial liabilities at fair value through profit or loss Currency derivatives Cash outflow $ 99,247,171 $ 65,867,834 $ 54,369,486 $ 36,184,259 $ - $ 255,668,750 Cash inflow 57,779,732 66,617,923 55,079,076 36,673,161 - 216,149,892 Interest derivatives Cash outflow 586,432 302,851 5,283 183,819 598,882 1,677,267 Cash inflow 478,036 408,408 - 178,024 604,980 1,669,448 Total cash outflow 99,833,603 66,170,685 54,374,769 36,368,078 598,882 257,346,017 Total cash inflow 58,257,768 67,026,331 55,079,076 36,851,185 604,980 217,819,340 Net cash flow (41,575,835 ) 855,646 704,307 483,107 6,098 (39,526,677 )
Financial Information 91
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181 Days- December 31, 2016 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Derivative financial liabilities at fair value through profit or loss Currency derivatives Cash outflow $ 100,614,110 $ 48,649,694 $ 10,212,981 $ 5,547,481 $ 6,320 $ 165,030,586 Cash inflow 101,570,350 49,045,790 10,199,070 5,596,383 6,347 166,417,940 Interest derivatives Cash outflow - 75,283 483,522 113,737 21,502,697 22,175,239 Cash inflow - 594,624 419,155 - 30,163,544 31,177,323 Total cash outflow 100,614,110 48,724,977 10,696,503 5,661,218 21,509,017 187,205,825 Total cash inflow 101,570,350 49,640,414 10,618,225 5,596,383 30,169,891 197,595,263 Net cash flow 956,240 915,437 (78,278 ) (64,835 ) 8,660,874 10,389,438
The Company conducted maturity analysis of off-balance sheet items based on the residual maturities as of the balance sheet dates. For the financial guarantee contracts issued, the maximum amounts of the guarantees are included in the earliest periods that the guarantee obligation might have been required to be fulfilled. The amounts used in the maturity analysis of off-balance sheet items are based on contractual cash flows, so some of these amounts may not correspond to those shown in the balance sheets.
181 Days- December 31, 2017 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Irrevocable loan commitments issued $ 794,925 $ 830,041 $ 11,337,789 $ 39,720,416 $ 41,694,104 $ 94,377,275 Irrevocable credit card commitments 2,348,868 80,095 792,986 1,183,528 40,676,799 45,082,276 Letters of credit issued yet unused 4,460,709 9,501,553 1,866,932 732,598 2,165,785 18,727,577 Other guarantees 3,247,217 3,405,653 5,747,747 7,742,939 59,658,710 79,802,266
181 Days- December 31, 2016 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Irrevocable loan commitments issued $ 2,456,708 $ 6,528,417 $ 7,806,476 $ 8,640,285 $ 76,129,826 $ 101,561,712 Irrevocable credit card commitments 28,740 215,260 905,725 1,189,421 39,556,410 41,895,556 Letters of credit issued yet unused 4,003,758 11,034,135 2,257,950 887,836 2,969,060 21,152,739 Other guarantees 3,236,388 6,495,515 4,815,740 9,304,642 54,496,009 78,348,294
f. Transfers of financial assets
Under the Company operations, most of derecognized financial assets are securities sold under repurchase agreements, and the contractual cash flows have been transferred to others. The Company has the responsibility to repurchase transferred financial assets at fixed prices, and can not use, sell and pledge transferred financial assets. However, the Company is still in the risk exposure of interest rate and credit, so the transferred financial assets can not be removed entirely. The information on derecognized financial assets and liabilities is as follows:
December 31, 2017 Carrying Amount Carrying Amount of Related Fair Value of Fair Value of Net Position of Financial Assets of Transferred Transferred Related Financial Financial Assets Financial Financial Assets Liabilities Fair Value Liabilities Financial assets at FVTPL - securities sold under repurchase agreements $ 3,050,092 $ 3,051,511 $ 3,050,092 $ 3,051,511 $ (1,419) Available-for-sale financial assets - securities sold under repurchase agreements 6,867,946 7,325,631 6,867,946 7,325,631 (457,685)
December 31, 2016 Carrying Amount Carrying Amount of Related Fair Value of Fair Value of Net Position of Financial Assets of Transferred Transferred Related Financial Financial Assets Financial Financial Assets Liabilities Fair Value Liabilities Financial assets at FVTPL - securities sold under repurchase agreements $ 4,500,805 $ 4,502,898 $ 4,500,805 $ 4,502,898 $ (2,093) Available-for-sale financial assets - securities sold under repurchase agreements 6,870,688 7,497,933 6,870,688 7,497,933 (627,245) 92 Annual Report 2017
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Taiwan Cooperative Bank
g. Offsetting financial assets and financial liabilities
The Company is eligible to present in the balance sheet on a net basis certain derivative assets and derivative liabilities pertaining to transactions with counterparties under enforceable master netting arrangements or similar agreements and there is an intention either to make settlements on a net basis or to realize the asset and settle the liability simultaneously. A master netting agreement provides for a single net settlement of all financial instruments covered by the agreement if the counterparty defaults on any contract. Parties may also settle transactions at gross amounts if a single settlement results in cash flows being equivalent to a single net amount.
The tables below present the quantitative information on financial assets and financial liabilities that have been offset in the balance sheets or that are covered by enforceable master netting arrangements or similar agreements.
December 31, 2017
Gross Amounts of Recognized Net Amounts of Financial Financial Gross Amounts Liabilities Assets Related Amounts Not Offset in of Recognized Offset Presented in the Balance Sheet Financial in the Balance the Balance Financial Cash Collateral Financial Assets Assets Sheet Sheet Instruments Received Net Amount
Resell agreements $ 249,463 $ - $ 249,463 $ (249,463 ) $ - $ -
Gross Amounts Net Amounts of of Recognized Financial Gross Amounts Financial Liabilities Related Amounts Not Offset in of Recognized Assets Offset Presented in the Balance Sheet Financial in the Balance the Balance Financial Cash Collateral Financial Liabilities Liabilities Sheet Sheet Instruments Pledged Net Amount
Repurchase agreements $ 10,377,142 $ - $ 10,377,142 $ (9,918,038 ) $ - $ 459,104
December 31, 2016
Gross Amounts Net Amounts of of Recognized Financial Gross Amounts Financial Liabilities Related Amounts Not Offset in of Recognized Assets Offset Presented in the Balance Sheet Financial in the Balance the Balance Financial Cash Collateral Financial Liabilities Liabilities Sheet Sheet Instruments Pledged Net Amount
Repurchase agreements $ 12,000,831 $ - $ 12,000,831 $ (11,371,493 ) $ - $ 629,338
39. CAPITAL MANAGEMENT
In according to the authority’s regulation for principles of capital adequacy management, the Bank lists all the risks into the capital adequacy evaluation scope. In accordance with the operation plans and budget targets, which approved by the board of directors, also considering the Bank’s development strategy, capital adequacy, liabilities ratios, and dividend policy, the Bank proposes capital adequacy evaluation plan, which include stress testing, estimation for each season’s capital adequacy ratio, etc. to ensure the capital adequacy ratio can be reached and capital structure is sound.
To monitor capital adequacy, the risk management department regularly reports capital adequacy ratios every month and also quarterly reviews the execution status of and actual operation data variation on the Bank’s capital adequacy evaluation plan. When the actual capital adequacy ratio might go lower than target, the Bank immediately reviews the causes, prepares a report and proposes a response strategy to maintain the appropriate capital adequacy levels.
The Banking Law and related regulations require that the Bank maintain the minimum requirement for unconsolidated and consolidated capital adequacy ratios (CAR), including the common equity Tier 1 ratio, Tier 1 capital ratio, and total capital adequacy ratio.
Information on the Bank’s CAR is as follows:
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(Unit: In Thousands of New Taiwan Dollars, %) Year December 31, 2017 Items Standalone Consolidated Eligible Eligible capital Common equity $ 185,317,810 $ 186,356,482 Other Tier 1 capital - - Tier 2 capital 55,956,433 56,994,138 Eligible capital 241,274,243 243,350,620
Risk-weighted assets Standardized approach 1,699,983,398 1,703,971,927 Credit risk Internal ratings based approach - - Securitization 4,869,832 4,869,832 Basic indicator approach - - Standardized approach/alternative Operational risk standardized approach 70,096,582 71,479,305 Advanced measurement approach - - Standardized approach 20,860,263 20,860,338 Market risk Internal model approach - - Risk-weighted assets 1,795,810,075 1,801,181,402 Capital adequacy ratio 13.44 13.51 Ratio of the common equity to risk-weighted assets 10.32 10.35 Ratio of Tier 1 capital to risk-weighted assets 10.32 10.35 Ratio of leverage 5.51 5.53 (Unit: In Thousands of New Taiwan Dollars, %) Year December 31, 2016 Items Standalone Consolidated Eligible Eligible capital Common equity $ 176,691,923 $ 177,630,492 Other Tier 1 capital - - Tier 2 capital 60,940,320 62,002,796 Eligible capital 237,632,243 239,633,288
Risk-weighted assets Standardized approach 1,749,949,669 1,751,849,566 Credit risk Internal ratings based approach - - Securitization 2,525,003 2,525,003 Basic indicator approach - - Standardized approach/alternative Operational risk standardized approach 67,055,930 68,376,295 Advanced measurement approach - - Standardized approach 20,838,284 20,846,475 Market risk Internal model approach - - Risk-weighted assets 1,840,368,886 1,843,597,339 Capital adequacy ratio 12.91 13.00 Ratio of the common equity to risk-weighted assets 9.60 9.63 Ratio of Tier 1 capital to risk-weighted assets 9.60 9.63 Ratio of leverage 5.33 5.35
Note 1: Eligible capital and risk-weighted assets are calculated under the “Regulations Governing the Capital Adequacy Ratio of Banks” and the “Explanation of Methods for Calculating the Eligible Capital and Risk-Weighted Assets of Banks.” Note 2: Formulas used were as follows: 1) Eligible capital = The common equity + Other Tier 1 capital + Tier 2 capital. 2) Risk-weighted assets = Risk-weighted asset for credit risk + Capital requirements for operational risk and market risk x 12.5. 3) Capital adequacy ratio = Eligible capital ÷ Risk-weighted assets. 4) Ratio of the common equity to risk-weighted assets = The common equity ÷ Risk-weighted assets. 5) Ratio of Tier 1 capital to risk-weighted assets = (The common equity + Other Tier 1 capital) ÷ Risk-weighted assets. 6) Ratio of leverage = Tier 1 capital ÷ Exposure measurement.
40. ASSET QUALITY, CONCENTRATION OF CREDIT EXTENSIONS, INTEREST RATE SENSITIVITY, PROFITABILITY AND MATURITY ANALYSIS OF ASSETS AND LIABILITIES
a. Asset quality: Table 2 (attached).
b. Concentration of credit extensions
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(In Thousands of New Taiwan Dollars, %) December 31, 2017 Rank Total Amount of Credit (Note 1) Industry of Group Enterprise Percentage of (Note 2) Endorsement or Other Bank’s Equity Transactions (Note 3) 1 Group A $ 41,951,293 20.95 Railway transportation 2 Group B 18,052,998 9.01 Petroleum and coal products manufacturing 3 Group C 17,960,733 8.97 Harbor services 4 Group D 11,823,061 5.90 Computers and computing peripheral equipment manufacturing 5 Group E 11,454,110 5.72 Cotton and textile 6 Group F 11,368,738 5.68 Cotton and textile 7 Group G 10,182,036 5.08 Shipping agency 8 Group H 9,809,249 4.90 Real estate development 9 Group I 9,389,840 4.69 Iron and steel smelting 10 Group J 8,049,397 4.02 Real estate development
(In Thousands of New Taiwan Dollars, %) December 31, 2016 Rank Total Amount of Credit (Note 1) Industry of Group Enterprise Endorsement or Other Percentage of (Note 2) Bank’s Equity Transactions (Note 3) Group A 1 $ 47,985,202 25.22 Railway transportation Group B 2 24,452,532 12.85 Petroleum and coal products manufacturing Group C 3 20,117,499 10.57 Harbor services Group D 4 12,475,052 6.56 Computers and computing peripheral equipment manufacturing Group G 5 10,468,922 5.50 Shipping agency Group F 6 9,800,372 5.15 Cotton and textile Group I 7 8,507,430 4.47 Iron and steel smelting Group K 8 8,473,972 4.45 Liquid crystal panel and component manufacturing Group L 9 Other electronic parts and components manufacturing not 8,156,172 4.29 classified elsewhere 10 Group E 7,990,876 4.20 Cotton and textile
Note 1: The list shows rankings by total amount of credit, endorsement or other transactions but excludes government-owned or state-run enterprises. If the borrower is a member of a group enterprise, the total amount of credit, endorsement or other transactions of the entire group enterprise must be listed and disclosed by code and line of industry. The industry of the group enterprise should be presented as the industry of the member firm with the highest risk exposure. The lines of industry should be described in accordance with the Standard Industrial Classification System of the Republic of China published by the Directorate-General of Budget, Accounting and Statistics under the Executive Yuan. Note 2: Group enterprise refers to a group of corporate entities as defined by Article 6 of “Supplementary Provisions to the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings.” Note 3: Total amount of credit, endorsement or other transactions is the sum of various loans (including import and export negotiations, discounts, overdrafts, unsecured and secured short-term loans, margin loans receivable, unsecured and secured medium-term loans, unsecured and secured long-term loans and overdue loans), exchange bills negotiated, accounts receivable factored without recourse, acceptances and guarantees.
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c. Interest rate sensitivity information 1) Taiwan Cooperative Bank, Ltd.
Interest Rate Sensitivity December 31, 2017 (In Thousands of New Taiwan Dollars, %) Items 1 to 90 Days 91 to 180 Days 181 Days to Over One Year Total 1 Year Interest rate sensitive assets $ 2,214,760,305 $ 84,152,971 $ 27,194,085 $ 242,089,018 $ 2,568,196,379 Interest rate sensitive liabilities 900,687,788 1,294,547,469 108,676,697 47,908,620 2,351,820,574 Interest rate sensitivity gap 1,314,072,517 (1,210,394,498) (81,482,612) 194,180,398 216,375,805 Net worth 183,339,996 Ratio of interest rate sensitive assets to liabilities 109.20 Ratio of interest rate sensitivity gap to net worth 118.02
Interest Rate Sensitivity December 31, 2016
(In Thousands of New Taiwan Dollars, %) Items 1 to 90 Days 91 to 180 Days 181 Days to Over One Year Total 1 Year Interest rate sensitive assets $ 2,226,291,870 $ 78,409,769 $ 20,003,190 $ 212,280,065 $ 2,536,984,894 Interest rate sensitive liabilities 875,078,103 1,270,111,617 123,230,949 56,522,353 2,324,943,022 Interest rate sensitivity gap 1,351,213,767 (1,191,701,848) (103,227,759) 155,757,712 212,041,872 Net worth 179,884,108 Ratio of interest rate sensitive assets to liabilities 109.12 Ratio of interest rate sensitivity gap to net worth 117.88
Note 1: The above amounts included only New Taiwan dollar amounts held by the head office and branches of the Bank (i.e., excluding foreign currency). Note 2: Interest rate sensitive assets and liabilities refer to interest-earning assets and interest-bearing liabilities with revenues or costs that are affected by interest rate changes. Note 3: Interest rate sensitivity gap = Interest rate sensitive assets - Interest rate sensitive liabilities. Note 4: Ratio of interest rate sensitive assets to liabilities = Interest rate sensitive assets/Interest rate sensitive liabilities (in New Taiwan dollars).
Interest Rate Sensitivity December 31, 2017 (In Thousands of U.S. Dollars, %) 181 Days to Items 1 to 90 Days 91 to 180 Days Over One Year Total 1 Year Interest rate sensitive assets $ 12,611,033 $ 1,091,395 $ 197,117 $ 1,337,051 $ 15,236,596 Interest rate sensitive liabilities 14,917,306 836,189 777,151 - 16,530,646 Interest rate sensitivity gap (2,306,273) 255,206 (580,034) 1,337,051 (1,294,050) Net worth 570,103 Ratio of interest rate sensitive assets to liabilities 92.17 Ratio of interest rate sensitivity gap to net worth (226.99)
Interest Rate Sensitivity December 31, 2016 (In Thousands of U.S. Dollars, %) 181 Days to Items 1 to 90 Days 91 to 180 Days Over One Year Total 1 Year Interest rate sensitive assets $ 11,048,057 $ 880,553 $ 339,015 $ 889,296 $ 13,156,921 Interest rate sensitive liabilities 13,248,760 613,323 660,986 10,000 14,533,069 Interest rate sensitivity gap (2,200,703) 267,230 (321,971) 879,296 (1,376,148) Net worth 321,380 Ratio of interest rate sensitive assets to liabilities 90.53 Ratio of interest rate sensitivity gap to net worth (428.20)
Note 1: The above amounts included only U.S. dollar amounts held by the head office, domestic branches, OBU and overseas branches of the Bank and excluded contingent assets and contingent liabilities. Note 2: Interest rate sensitive assets and liabilities refer to interest-earning assets and interest-bearing liabilities with revenues or costs that are affected by interest rate changes. Note 3: Interest rate sensitivity gap = Interest rate sensitive assets - Interest rate sensitive liabilities. Note 4: Ratio of interest rate sensitive assets to liabilities = Interest rate sensitive assets/Interest rate sensitive liabilities (in U.S. dollars).
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2) United Taiwan Bank S.A.
Interest Rate Sensitivity December 31, 2017
(In Thousands of U.S. Dollars, %)
Items 1 to 90 Days 91 to 180 Days 181 Days to Over One Year Total 1 Year Interest rate sensitive assets $ 251,549 $ 113,202 $ - $ - $ 364,751 Interest rate sensitive liabilities 189,008 96,423 778 - 286,209 Interest rate sensitivity gap 62,541 16,779 (778) - 78,542 Net worth 73,260 Ratio of interest rate sensitive assets to liabilities 127.44 Ratio of interest rate sensitivity gap to net worth 107.21
Interest Rate Sensitivity December 31, 2016
(In Thousands of U.S. Dollars, %)
Items 1 to 90 Days 91 to 180 Days 181 Days to Over One Year Total 1 Year Interest rate sensitive assets $ 270,858 $ 71,519 $ - $ - $ 342,377 Interest rate sensitive liabilities 175,459 90,769 9,042 - 275,270 Interest rate sensitivity gap 95,399 (19,250) (9,042) - 67,107 Net worth 60,677 Ratio of interest rate sensitive assets to liabilities 124.38 Ratio of interest rate sensitivity gap to net worth 110.60
Note 1: The above amounts included only U.S. dollar amounts held by United Taiwan Bank S.A. and excluded contingent assets and contingent liabilities. Note 2: Interest rate sensitive assets and liabilities refer to interest-earning assets and interest-bearing liabilities with revenues or costs that are affected by interest rate changes. Note 3: Interest rate sensitivity gap = Interest rate sensitive assets - Interest rate sensitive liabilities. Note 4: Ratio of interest rate sensitive assets to liabilities = Interest rate sensitive assets/Interest rate sensitive liabilities (in U.S. dollars). d. Profitability Unit: % Items December 31, 2017 December 31, 2016 Before income tax 0.47 0.47 Return on total assets After income tax 0.41 0.41 Before income tax 7.62 7.80 Return on equity After income tax 6.61 6.71 Net income ratio 30.46 30.64
Note 1: Return on total assets = Income before (after) income tax/Average total assets. Note 2: Return on equity = Income before (after) income tax/Average equity. Note 3: Net income ratio = Income after income tax/Total net revenues. Note 4: The above profitability ratios are calculated that based on the amount of consolidated financial report. e. Maturity analysis of assets and liabilities
1) Taiwan Cooperative Bank, Ltd.
Maturity Analysis of Assets and Liabilities December 31, 2017 (In Thousands of New Taiwan Dollars)
Remaining Period to Maturity Total 181 Days to 0 to 10 Days 11 to 30 Days 31 to 90 Days 91 to 180 Days Over One Year One Year Main capital inflow on $ 2,957,557,972 $ 448,397,991 $ 275,917,514 $ 165,743,918 $ 229,432,907 $ 322,971,713 $ 1,515,093,929 maturity Main capital outflow on 3,456,487,942 223,064,245 169,642,349 426,890,518 418,577,272 680,715,349 1,537,598,209 maturity Gap (498,929,970 ) 225,333,746 106,275,165 (261,146,600 ) (189,144,365 ) (357,743,636 ) (22,504,280 )
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Maturity Analysis of Assets and Liabilities December 31, 2016
(In Thousands of New Taiwan Dollars) Remaining Period to Maturity Total 181 Days to 0 to 10 Days 11 to 30 Days 31 to 90 Days 91 to 180 Days Over One Year One Year Main capital inflow on $ 2,912,579,303 $ 445,925,958 $ 325,498,497 $ 154,386,789 $ 168,278,402 $ 326,999,582 $ 1,491,490,075 maturity Main capital outflow on 3,411,972,205 220,472,557 179,964,509 430,399,837 414,230,546 658,707,019 1,508,197,737 maturity Gap (499,392,902 ) 225,453,401 145,533,988 (276,013,048 ) (245,952,144 ) (331,707,437 ) (16,707,662 ) Note: The above amounts included only New Taiwan dollar amounts held by the Bank.
Maturity Analysis of Assets and Liabilities December 31, 2017 (In Thousands of U.S. Dollars) Remaining Period to Maturity Total 181 Days to 0 to 30 Days 31 to 90 Days 91 to 180 Days Over One Year One Year Main capital inflow on $ 23,562,373 $ 8,293,946 $ 4,288,492 $ 2,800,333 $ 1,801,262 $ 6,378,340 maturity Main capital outflow on 26,730,431 13,132,116 5,222,834 2,654,535 3,498,091 2,222,855 maturity Gap (3,168,058 ) (4,838,170 ) (934,342 ) 145,798 (1,696,829 ) 4,155,485
Maturity Analysis of Assets and Liabilities December 31, 2016 (In Thousands of U.S. Dollars) Remaining Period to Maturity Total 181 Days to 0 to 30 Days 31 to 90 Days 91 to 180 Days Over One Year One Year Main capital inflow on $ 21,063,564 $ 8,535,847 $ 3,495,230 $ 2,346,722 $ 1,023,083 $ 5,662,682 maturity Main capital outflow on 24,305,052 12,029,919 4,509,979 2,179,696 3,191,626 2,393,832 maturity
Gap (3,241,488 ) (3,494,072 ) (1,014,749 ) 167,026 (2,168,543 ) 3,268,850
Note: The above amounts included only U.S. dollar amounts held by the Bank.
2) United Taiwan Bank S.A.
Maturity Analysis of Assets and Liabilities December 31, 2017 (In Thousands of U.S. Dollars) Remaining Period to Maturity Total 0 to 30 Days 31 to 90 Days 91 to 180 Days 181 Days to One Year Over One Year Main capital inflow on maturity $ 361,510 $ 23,339 $ - $ 13,000 $ 27,726 $ 297,445 Main capital outflow on 291,490 65,359 123,649 96,423 778 5,281 maturity Gap 70,020 (42,020 ) (123,649 ) (83,423 ) 26,948 292,164
Maturity Analysis of Assets and Liabilities December 31, 2016 (In Thousands of U.S. Dollars) Remaining Period to Maturity Total 0 to 30 Days 31 to 90 Days 91 to 180 Days 181 Days to One Year Over One Year Main capital inflow on maturity $ 342,377 $ 45,694 $ 1,500 $ 16,632 $ 14,830 $ 263,721 Main capital outflow on 281,700 78,076 97,383 90,818 9,042 6,381 maturity Gap 60,677 (32,382 ) (95,883 ) (74,186 ) 5,788 257,340 Note: The above amounts included only U.S. dollar amounts held by the United Taiwan Bank S.A.
41. TAIWAN COOPERATIVE BANK, LTD.’S TRUST BUSINESS UNDER THE TRUST LAW
a. Trust-related items are those shown in the following balance sheets, statements of income and trust property list.
These items were managed by the Bank’s Trust Department. However, these items were not included in the financial statements. 98 Annual Report 2017
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Balance Sheets of Trust Accounts December 31, 2017 and 2016 Trust Assets 2017 2016 Trust Liabilities 2017 2016 Cash in banks $ 3,319,755 $ 2,403,263 Payables Accrued expense $ 2,785 $ 4,250 Short-term investments Others 2,290 2,477 Mutual funds 161,531,937 153,234,175 Mutual funds payable - 200 Stocks 1,294,138 1,735,287 5,075 6,927 Bonds 2,698,757 1,364,377 Structured products 243,571 300,778 Accounts payable on 165,768,403 156,634,617 securities under custody 112,915,054 75,487,067 Securities lending 304,154 833,745 Trust capital Cash 166,811,638 157,272,789 Receivables 6,337 8,844 Real estate 62,103,419 55,568,875 Securities 1,443,645 2,432,186 Real estate Others 110,521 275,144 Land 49,423,289 46,493,613 230,469,223 215,548,994 Buildings 8,523 12,192 Construction in process 11,784,267 9,255,459 Reserves and retained 61,216,079 55,761,264 earnings Net income 158,119 140,587 Securities under custody 112,915,054 75,487,067 Appropriation (200,645 ) (161,502) Retained earnings 182,956 106,727 140,430 85,812 Total $ 343,529,782 $ 291,128,800 Total $ 343,529,782 $ 291,128,800
Trust Property List December 31, 2017 and 2016 Investment Items 2017 2016 Cash in banks $ 3,319,755 $ 2,403,263 Short-term investments Mutual funds 161,531,937 153,234,175 Stocks 1,294,138 1,735,287 Bonds 2,698,757 1,364,377 Structured products 243,571 300,778 Securities lending 304,154 833,745 Receivables Accrued interest 4,972 3,353 Securities sold - 200 Others 1,365 5,291 Real estate Land 49,423,289 46,493,613 Buildings 8,523 12,192 Construction in process 11,784,267 9,255,459 Securities under custody 112,915,054 75,487,067 Total $ 343,529,782 $ 291,128,800
Statements of Income on Trust Accounts For the Years Ended December 31, 2017 and 2016 2017 2016 Revenues Interest revenue $ 6,221 $ 5,117 Cash dividends 54,478 69,127 Realized gain on investment - stocks 12,205 18,077 Unrealized gain on investment - stocks 188,628 237,500 Realized gain on investment - mutual funds 299 59 Unrealized gain on investment - mutual funds - 1,606 Rentals 15,198 27,840 Others 120 5 Total revenues 277,149 359,331 Expenses Management fees 6,434 8,848 Taxes - 52 Service charge 483 751 Postage 26 28 Unrealized loss on investment - stocks 110,305 202,939 Realized loss on investment - mutual funds 669 18 Unrealized loss on investment - mutual funds - 4,395 Others 1,113 1,713 Total expenses 119,030 218,744 Income before income tax 158,119 140,587 Income tax expense - - Net income $ 158,119 $ 140,587 b. Nature of trust business operations under the Trust Law: Note 1.
Financial Information 99
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42. ALLOCATION OF REVENUE, COST AND EXPENSE THAT RESULTED FROM THE SHARING OF RESOURCES BETWEEN TAIWAN COOPERATIVE FINANCIAL HOLDING COMPANY, LTD. AND SUBSIDIARIES
Under cooperation arrangements, the Bank and Taiwan Cooperative Securities (TCS) promoted securities brokerage business together, thus, related revenues received by the Bank were calculated as follows: (a) from the first year to fifth year, revenue based on 20% of the net revenue derived from security transactions; (b) related revenues from utilizing some operating sites and equipment by the TCS; and (c) receiving cross-selling service fees of $2,000 thousand annually.
To promote the credit card business together, the Bank and TCS signed cooperation arrangements, marketing expenses paid by the Bank were based on the arrangements.
As of December 31, 2017 and 2016, the accrued receivables were $3,144 thousand and $2,245 thousand (part of receivables), respectively. The revenues from cross-selling transactions were $8,394 thousand and $7,044 thousand (part of other noninterest gains, net) in 2017 and 2016, respectively.
To promote the insurance business together, the Bank and BNP Paribas Cardif TCB Life Insurance Co., Ltd. signed cooperation arrangements. The service fees earned by the Bank were based on the agreed percentage of the premiums from the insurance companies’ products sold by the Bank.
As of December 31, 2017 and 2016, the accrued receivables were $2,499 thousand and $2,419 thousand, respectively (part of receivables). The revenues from cross-selling transactions were $36,295 thousand and $32,090 thousand (part of service fee income, net) in 2017 and 2016, respectively.
43. NON-CASH FINANCING ACTIVITIES
Undistributed cash dividends approved by stockholders’ meetings are both $170,524 thousand as of December 31, 2017 and 2016, respectively.
44. OTHER SIGNIFICANT TRANSACTIONS
The Bank’s application to set up the Changsha Branch in Mainland China was approved by the Financial Supervisory Commission on December 31, 2015. The Bank will invest RMB600,000 thousand in the Changsha Branch, under the “Regulations Governing Approvals of Banks to Engage in Financial Activities between the Taiwan Area and the Mainland Area.” The investment in the Changsha Branch was approved by the Investment Commission under Mainland China’s Ministry of Economic Affairs and relevant authorities. Changsha Branch Started operation on April 27, 2017.
45. ADDITIONAL DISCLOSURES
a. Related information of significant transactions and b. investees: 1) Financing provided: The Bank - not applicable; investee company - not applicable. 2) Endorsement/guarantee provided: The Bank - Not applicable; investee company - not applicable. 3) Marketable securities held: The Bank - not applicable; investee company - not applicable 4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 10% of the paid-in capital (the Bank disclosed its investments acquired or disposed of): None. 5) Acquisition of individual real estate at costs of at least NT$300 million or 10% of the paid-in capital: None. 6) Disposal of individual real estates at costs of at least NT$300 million or 10% of the paid-in capital: None. 7) Allowance of service fees to related parties amounting to at least NT$5 million: None. 8) Receivables from related parties amounting to at least NT$300 million or 10% of the paid-in capital: Table 3 (attached). 9) Sale of nonperforming loans: Table 4 (attached). 10) Financial asset securitization: None. 11) Other significant transactions which may affect the decisions of users of financial reports: Note 44 to the consolidated financial statements. 12) Percentage share in investees and related information: Table 5 (attached). 13) Derivative transactions: The Bank - Notes 8, 35 and 38 to the consolidated financial statements; investee company - none.
c. Investment in Mainland China: Based on “Regulations Governing Approvals of Banks to Engage in Financial Activities between the Taiwan Area and the Mainland Area,” the Bank set up the Suzhou Branch, Tianjin Branch, Fuzhou Branch and Changsha Branch in Mainland China. This investment had been approved by the Financial Supervisory Commission. The 4 branches’ information - major operating items, capital stock, the way of investment, investment inflows and outflows, the holding percentage, the investment income or loss, the book value at year-end, the remitted investment profits and the limit on the amount of investment in Mainland China - can be seen in Table 6 (attached). 100 Annual Report 2017
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d. Business relationships and significant transactions among the parent company and subsidiaries: Table 7 (attached).
46. OPERATING SEGMENTS
The information reported to the Company’s chief operating decision makers for the assessment of segment performance focuses mainly on business and profit or loss. The Company’s reportable segments are as follows: a. Deposit and loan section, including savings, loans and remittances; b. Credit section, including legal person and personal credit business; c. Funding section, including funding management with domestic and foreign currencies, securities, investments and other financial management; d. Trust and Insurance section, including development, promotion and management of trust and insurance transactions; e. Other noncore business.
The accounting policies of the reportable segments are the same as the Company’s accounting policies described in Note 4. Segment profit is measured at income before income tax, and this measure is reported to the chief operating decision makers for the purposes of resource allocation and assessment of segment performance. The terms of transactions between segments are similar to those for third parties.
The revenue, expenses and related information of the Company’s reportable segments for the year ended December 31, 2017 and 2016 are as follows:
For the Year Ended December 31, 2017 Trust and Deposit and Insurance Loan Section Credit Section Funding Section Section Others Eliminate Total Net interest $ 10,420,481 $ 19,762,493 $ 936,813 $ - $ 1,306,112 $ - $ 32,425,899 Net revenues and gains other than interest 220,468 1,797,938 4,222,961 3,209,607 616,315 (109,052 ) 9,958,237 Net revenues 10,640,949 21,560,431 5,159,774 3,209,607 1,922,427 (109,052 ) 42,384,136 Bad-debt expenses and provision for losses on guarantees - (5,214,791) --(47,326 ) - (5,262,117) Operating expenses (8,374,350 ) (8,762,619) (666,976) (3,060,678) (1,359,718 ) - (22,224,341)
Income before income tax $ 2,266,599 $ 7,583,021 $ 4,492,798 $ 148,929 $ 515,383 $ (109,052 ) $ 14,897,678
For the Year Ended December 31, 2016 Trust and Deposit and Insurance Loan Section Credit Section Funding Section Section Others Eliminate Total
Net interest $ 9,663,087 $ 19,792,998 $ 680,995 $ - $ 1,434,021 $ - $ 31,571,101 Net revenues and gains other than interest 275,206 1,607,350 3,196,538 3,450,943 907,265 (101,800 ) 9,335,502 Net revenues 9,938,293 21,400,348 3,877,533 3,450,943 2,341,286 (101,800 ) 40,906,603 Bad-debt expenses and provision for losses on guarantees - (3,830,634) - - 22,829 - (3,807,805) Operating expenses (8,517,240 ) (8,728,671) (766,162) (2,894,101) (1,635,110 ) - (22,541,284)
Income before income tax $ 1,421,053 $ 8,841,043 $ 3,111,371 $ 556,842 $ 729,005 $ (101,800 ) $ 14,557,514
TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARY CONSOLIDATED ENTITIES TABLE1 DECEMBER 31, 2017 AND 2016 Subsidiaries included in the consolidated financial statements: Percentage of Ownership Investor Company Investee Company Location Main Business and Products December December Note 31, 2017 31, 2016 Taiwan Cooperative United Taiwan Bank S.A. Belgium Banking 90.02 90.02 Bank, Ltd.
Subsidiaries not included in the consolidated financial statements: Percentage of Ownership Investor Company Investee Company Location Main Business and Products December December Note 31, 2017 31, 2016 None - - - - -
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TAIWAN COOPERATIVE BANK, LTD. TABLE2
ASSET QUALITY - NONPERFORMING LOANS AND RECEIVABLES DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, %)
Period December 31, 2017 Ratio of Nonperforming Allowance for Credit Coverage Ratio Items Loans Nonperforming Loans (Note 1) Losses (Note 3) Loans (Note 2) Corporate Secured $3,080,261 $680,301,703 0.45 $7,827,645 254.12 banking Unsecured 1,543,799 554,801,261 0.28 6,864,342 444.64 Housing mortgage (Note 4) 1,196,452 499,209,397 0.24 7,574,524 633.08 Cash card - -- - - Consumer Small-scale credit loans (Note 5) 42,159 12,905,632 0.33 106,622 252.90 banking Secured 940,017 263,507,882 0.36 2,557,468 272.07 Other (Note 6) Unsecured 31,656 8,550,570 0.37 109,908 347.19 Loan 6,834,344 2,019,276,445 0.34 25,040,509 366.39 Nonperforming Ratio of Allowance for Credit Coverage Ratio Receivables Receivables Nonperforming Losses (Note 3) (Note 1) Receivables (Note 2) Credit cards 8,482 3,224,127 0.26 53,334 628.79 Accounts receivable factored without recourse (Note 7) - 1,843,856 - 20,556 - Amounts of executed contracts on negotiated debts not reported as nonperforming loans 1,426 (Note 8) Amounts of executed contracts on negotiated debts not reported as nonperforming 9,276 receivables (Note 8) Amounts of executed debt-restructuring projects not reported as nonperforming loans (Note 9) 15,968 Amounts of executed debt-restructuring projects not reported as nonperforming receivables 46,319 (Note 9)
Period December 31, 2016 Ratio of Nonperforming Allowance for Credit Coverage Ratio Items Loans Nonperforming Loans (Note 1) Losses (Note 3) Loans (Note 2) Corporate Secured $2,967,322 $678,321,953 0.44 $6,272,474 211.39 banking Unsecured 2,668,904 525,514,607 0.51 7,160,343 268.29 Housing mortgage (Note 4) 979,710 502,456,117 0.19 7,609,102 776.67 Cash card - - - - - Consumer Small-scale credit loans (Note 5) 11,904 12,499,705 0.10 148,551 1,247.91 banking Secured 613,546 254,588,889 0.24 2,015,897 328.56 Other (Note 6) Unsecured 25,980 8,926,735 0.29 141,177 543.41 Loan 7,267,366 1,982,308,006 0.37 23,347,544 321.27 Nonperforming Ratio of Allowance for Credit Coverage Ratio Receivables Receivables Nonperforming Losses (Note 3) (Note 1) Receivables (Note 2) Credit cards 5,566 2,937,838 0.19 56,009 1,006.27 Accounts receivable factored without recourse (Note 7) - 561,785 - 6,531 - Amounts of executed contracts on negotiated debts not reported as nonperforming loans 2,363 (Note 8) Amounts of executed contracts on negotiated debts not reported as nonperforming 12,487 receivables (Note 8) Amounts of executed debt-restructuring projects not reported as nonperforming loans (Note 9) 19,918 Amounts of executed debt-restructuring projects not reported as nonperforming receivables 53,335 (Note 9) Note 1: Nonperforming loans are reported to the authorities and disclosed to the public, as required by the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Non-accrued Loans.” Nonperforming credit card receivables are reported to the authorities and disclosed to the public, as required by the Banking Bureau’s letter dated July 6, 2005 (Ref. No. 0944000378). Note 2: Ratio of nonperforming loans: Nonperforming loans ÷ Outstanding loan balance. Ratio of nonperforming receivables: Nonperforming receivables ÷ Outstanding receivable balance. Note 3: Coverage ratio of loans: Allowance for credit losses for loans ÷ Nonperforming loans. Coverage ratio of receivables: Allowance for credit losses for receivables ÷ Nonperforming receivables. Note 4: The mortgage loan is for house purchase or renovation and is fully secured by housing that is purchased (owned) by the borrower, the spouse or the minor children of the borrowers. Note 5: Based on the Banking Bureau’s letter dated December 19, 2005 (Ref. No. 09440010950), small-scale credit loans are unsecured, involve small amounts and exclude credit cards and cash cards. Note 6: Other consumers banking loans refer to secured or unsecured loans that exclude housing mortgage, cash and credit card, and small-scale credit loans. Note 7: As required by the Banking Bureau in its letter dated July 19, 2005 (Ref. No. 0945000494), accounts receivable factored without recourse are reported as nonperforming receivables within three months after the factors or insurance companies refuse to indemnify banks for any liabilities on these accounts. Note 8: Amounts of executed contracts on negotiated debts that are not reported as nonperforming loans or receivables are disclosed to the public in accordance with the Banking Bureau’s letter dated April 25, 2006 (Ref. No. 09510001270). Note 9: Amounts of executed debt-restructuring projects not reported as nonperforming loans or receivables are disclosed to the public in accordance with the Banking Bureau’s letter dated September 15, 2008 (Ref. No. 09700318940) and letter dated September 20, 2016 (Ref. No. 10500134790).
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TABLE 3 TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARY RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$300 MILLION OR 10% OF THE PAID-IN CAPITAL DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars)
Ending Overdue Amounts Received in Allowance for Company Name Related Party Relationship Turnover Rate Balance Amount Actions Taken Subsequent Period Impairment Loss Taiwan Cooperative Taiwan Cooperative Financial Parent company $1,071,039 - $ - - $ - $ - Bank, Ltd. Holding Company, Ltd. (Note)
Note: Receivable - consolidated tax return.
TABLE 4 TAIWAN COOPERATIVE BANK, LTD. SALE OF NONPERFORMING LOANS FOR THE YEAR ENDED DECEMBER 31, 2017
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
1. Sale of nonperforming loans Relationship Between the Trade Date Counterparty Form of Nonperforming Loan Book Value Selling Price Gain (Loss) Term Bank and Counterparty 2017.7.12 The HongKong and Shanghai Banking Medium unsecured loans of business $ - $121,357 $120,883 None None Corporation Limited (Note 1) (US$3,975) (US$3,975) 2017.7.12 SC Lowy Primary Investments, Ltd. International Syndicated Loan - 121,620 121,643 None None (Note 2) (US$4,000) (US$4,000) Note 1:Book value equals the original loan amounting to US$5,108 thousand minus allowance for possible losses amounting US$5,108 thousand. Note 2:Book value equals the original loan amounting to US$5,109 thousand minus allowance for possible losses amounting US$5,109 thousand.
2. Sale of nonperforming loans amounting to $1 billion (excluding sales to related parties) should be discovered the information of each transaction as below: None.
TAIWAN COOPERATIVE BANK, LTD. TABLE 5 PERCENTAGE SHARE IN INVESTEES AND RELATED INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars)
Percentage Share of the Bank and Its Affiliates in Investees (Note 1) Percentage Main Businesses and Carrying Investment Pro Total Investee Company (Note 1) Location of Note Products Value Gain Forma Ownership Shares Percentage Shares Shares of (Note 2) Ownership Finance-related business United Taiwan Bank S.A. Belgium Banking 90.02 $1, 949,463 $109,052 2,639,659 - 2,639,659 90.02 Note 3 Taiwan Asset Management Co., Ltd. Taipei City Acquisition of delinquent 17.03 2,370,934 180,601 225,000,000 - 225,000,000 17.03 loans Financial Information Service Co., Taipei City Information service 2.89 135,405 39,281 15,107,985 - 15,107,985 2.89 Ltd. Taiwan Financial Asset Service Co., Taipei City Property auction 5.88 101,125 200 10,000,000 - 10,000,000 5.88 Ltd. Taiwan Depository & Clearing Co., Taipei City Custody of securities and 0.84 60,694 4,426 3,624,195 - 3,624,195 1.00 Ltd. short-term bills Taiwan Futures Exchange Co., Ltd. Taipei City Futures clearing 1.75 53,468 11,781 5,712,690 - 5,712,690 1.81 Financial eSolution Co., Ltd. Taipei City Office machine wholesaling 9.92 24,934 469 2,181,617 - 2,181,617 9.92 Taipei Forex Inc. Taipei City Foreign exchange brokering 7.06 19,198 5,600 1,400,000 - 1,400,000 7.06 Sunny Asset Management Co., Ltd. Taipei City Acquisition of delinquent 0.72 431 50 43,088 - 43,088 0.72 loans Taiwan Mobile Payment Company Taipei City IT software service 4.00 24,000 - 2,400,000 - 2,400,000 4.00
Non-finance related business United Real Estate Management Taipei City Real estate appraisal 30.00 124,346 4,998 10,115,630 - 10,115,630 30.00 Co., Ltd. Taiwan Power Company Taipei City Power development and 0.24 631,153 - 78,754,764 - 78,754,764 0.24 supply Taiwan Sugar Company Tainan City Sugar manufacturing 0.08 - 4,657 4,233,752 - 4,233,752 0.08 Lien-An Service Co., Ltd. Taipei City Leasing 5.00 1,250 125 125,000 - 125,000 5.00 Taipei Rapid Transit Co., Ltd. Taipei City Public transportation - 139 8 14,286 - 14,286 - China Daily News Tainan City Newspaper publishing 0.04 52 - 16,768 - 16,768 0.04 Taipei Financial Center Corp. Taipei City Residence and buildings 1.63 669,600 31,392 24,000,000 - 24,000,000 1.63 lease construction and development Taiwan High Speed Rail Taipei City High speed railroad 0.95 1,252,550 31,980 53,308,000 - 53,308,000 0.95 Cooperation transportation business
Note 1: Shares or pro forma shares held by the Bank, directors, supervisors, president, vice president and affiliates in accordance with the Company Law have been included. Note 2: a. Pro forma shares are shares that are assumed to be obtained through buying equity-based securities or entering into equity-linked derivative contracts for purposes defined in Article 74 of the Banking Law. b. Equity-based securities, such as convertible bonds and warrants, are covered by Article 11 of the “Securities and Exchange Law Enforcement Rules.” c. Derivative contracts, such as those on stock options, are those conforming to the definition of derivatives in Statement of International Accounting Standards No. 39 - “Financial Instruments.” Note 3: When preparing the consolidated financial statements, the amount had been eliminated. Financial Information 103
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TABLE 6 TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARY INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
Accumulated Accumulated Accumulated Investment Flows Outflow of Outflow of Investee % Carrying Inward Investee Main Total Amount Investment Investment Investment Net Ownership Investment Value as of Remittance Company Businesses and of Paid-in Type from Taiwan from Taiwan Income of Direct Gain (Loss) December of Earnings Name Products Capital as of Outflow Inflow as of or Indirect as of January 1, December 31, (Loss) Investment 31, 2017 December 31, 2017 2017 2017 Suzhou Deposits, loans, $ 4,547,235 Direct $ 4,547,235 $- $- $4,547,235 $519,556 100 $519,556 $5,390,387 $ - Branch import and (US$154,395) (US$154,395) (US$154,395) export, (Note 1) (Note 1) (Note 1) exchange and foreign exchange business Tianjin Deposits, loans, 2,947,314 Direct 2,947,314 - - 2,947,314 207,669 100 207,669 3,036,211 - Branch import and (US$97,387) (US$97,387) (US$97,387) export, (Note 1) (Note 1) (Note 1) exchange and foreign exchange business Fuzhou Deposits, loans, 2,950,882 Direct 2,950,882 - - 2,950,882 201,997 100 201,997 2,976,410 - Branch import and (US$97,549) (US$97,549) (US$97,549) export, (Note 1) (Note 1) (Note 1) exchange and foreign exchange business Changsha Deposits, loans, 2,630,485 Direct - 2,630,485 - 2,630,485 6,309 100 6,309 2,585,881 - Branch import and (US$87,232) (US$87,232) (US$87,232) export, (Note 1) (Note 1) (Note 1) exchange and foreign exchange business
Accumulated Investment in Mainland Investment Amount Approved China as of by the Investment Commission, Maximum Investment Allowable (Note 2) December 31, 2017 MOEA $ 13,075,916 $ 13,075,916 $ 120,286,003 (US$ 436,563 ) (US$ 436,563 ) (Note 1) (Note 1) Note 1: Translation into New Taiwan dollars at the exchange rates on the date of each outflow of investment. Note 2: Based on the Investment Commission’s “Regulation on the Examination of Investment or Technical Cooperation in Mainland China,” investments are limited to the largest of 60% of the Bank’s net asset value or 60% of the Bank’s consolidated net asset value.
TABLE 7 TAIWAN COOPERATIVE BANK, LTD. AND SUBSIDIARY BUSINESS RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS AMONG THE PARENT COMPANY AND SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars)
Description of Transactions (Notes 3 and 5)
Transaction Transaction No. Transacting Company Counter-party Flow Amount/Total (Note 1) Financial Statement Trading Consolidated Net (Note 2) Amounts Account Terms Revenue or Total Consolidated Assets (%) Taiwan Cooperative Bank, 0 United Taiwan Bank S.A. a Due from banks $ 573,480 Note 4 0.02 Ltd. 1 United Taiwan Bank S.A. Taiwan Cooperative Bank, Ltd. b Due to banks 573,480 Note 4 0.02 Taiwan Cooperative Bank, 0 United Taiwan Bank S.A. a Call loans to banks 6,645,722 Note 4 0.21 Ltd. 1 United Taiwan Bank S.A. Taiwan Cooperative Bank, Ltd. b Call loans from banks 6,645,722 Note 4 0.21 Note 1: These companies listed in Table 8 are identified as follows: a. Parent company: 0. b. Subsidiaries are numbered sequentially from 1. Note 2: Transaction flows are as follows: a. From parent company to subsidiary. b. From subsidiary to parent company. c. Between subsidiaries. Note 3: For calculating the percentages, asset or liability account is divided by the consolidated total assets and revenue or expense account is divided by the total consolidated net revenue of the same year. Note 4: The terms for the transactions between the transacting company and related parties are similar to those for unrelated parties. Note 5: Referring to transactions exceeding New Taiwan dollars $100 million.
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5.6 Stand Alone Financial Statements
INDEPENDENT AUDITORS’ REPORT
The Board of Directors and Stockholders Taiwan Cooperative Bank, Ltd.
Opinion
We have audited the accompanying financial statements of Taiwan Cooperative Bank, Ltd., which comprise the balance sheets as of December 31, 2017 and 2016, and the statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Taiwan Cooperative Bank, Ltd. as of December 31, 2017 and 2016, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks and Regulations Governing the Preparation of Financial Reports by Securities Firms.
Basis for Opinion
We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements of Financial Institutions by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of Taiwan Cooperative Bank, Ltd. in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of Taiwan Cooperative Bank, Ltd. for the year ended December 31, 2017. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matters in our audit of the financial statements for the year ended December 31, 2017 were as follows:
Impairment Assessment on Discounts and Loans
The discounts and loans of Taiwan Cooperative Bank, Ltd. as of December 31, 2017 were $2,019,276,445 thousand, consisting 63% of total assets. Therefore, the assessment on the impairment loss of the discounts and loans may have significant impacts on the financial statements. The assessment on the impairment of the discounts and loans performed by the management of the Bank is based on whether there is any objective evidence of impairment. The amount of impairment loss is the difference between the book value and the estimated future cash flows of the discounts and loans (with consideration to the collaterals and guarantees). In addition, the amount of provisions of impairment loss made should also be in accordance with FSC guidelines. Impairment assessment on discounts and loans was identified as a key audit matter due to the critical judgements and estimations involved. For accounting policies and critical accounting judgements and estimations, refer to Notes 4 and 5 to the financial statements; for discounts and loans, refer to Note 11.
With respect to critical judgements, estimations, and assumptions used, the procedures we performed were as follows: 1. Understand and test the internal control of impairment assessment on discounts and loans performed by the Bank. 2. Sample loans that are individually assessed for impairment loss to evaluate the reasonableness of estimated future cash flow, including the assumptions, discount rates and the value of collaterals. 3. Test the assumption pertaining to the model, data, and calculation for loans that are assessed collectively for impairment loss, including the historical data adopted, the classification of similar credit risk, recovery rate, and the impairment rate. 4. Test the classification of credit assets of the Bank to evaluate whether the classification of credit assets and provisions of impairment loss are in accordance with the FSC guidelines by considering the length of overdue of the loans and the value of collaterals.
Assessment on Retired Employees’ Preferential Deposit Benefits
The present value of retired employees’ preferential deposit obligation was calculated based on the actuarial results with application of various assumptions. Assessment on the retired employees’ preferential deposit benefits was identified as a key audit matters due to the application of critical judgements and estimations.
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For the accounting policies and critical accounting judgements and estimations, refer to Notes 4 and 5 to the financial statements; for the employees’ preferential deposit benefits, refer to Notes 26 and 27.
With respect to the actuarial report of retired employees’ preferential deposit obligation, the procedures we performed were as follows:
1. Evaluate the actuary on the basis of qualification, competency, and objectivity. 2. Evaluate the reasonableness of the actuarial assumptions and method applied, including discount rates, return on deposit, account balance decrease rate per year, and rate of probability of change in the preferential deposit system. 3. Obtain and evaluate the completeness and accuracy of the information used by the actuary.
Impairment Assessment on Goodwill
When the management of the Bank determines whether goodwill is impaired, estimation of the value in use of the cash-generating units to which goodwill has been allocated is required. The calculation of value in use requires the management to estimate the future cash flows expected to arise from the cash-generating units and a suitable discount rate in order to calculate present value. Impairment assessment on goodwill was identified as a key audit matters due to the critical judgements and estimations involved. For the accounting policies and critical accounting judgements and estimations, refer to Notes 4 and 5 to the financial statements; for impairment assessment on goodwill, refer to Note 18.
With respect to the report of impairment assessment on goodwill and the report of discount rate used in assessment, the procedures we performed were as follows:
1. Evaluate the external expert on the basis of qualification, competency, and objectivity. 2. Evaluate the reasonableness of model and assumptions used by the external expert. 3. Obtain and evaluate the completeness and accuracy of the information used by the external expert. 4. Evaluate the reasonableness of the expected future cash flows arising from the cash-generating units allocated to goodwill.
Correctness of Recognized Loan Interest Income
The loan interest income of Taiwan Cooperative Bank, Ltd. for the year ended December 31, 2017 was $39,483,830 thousand, consisting 78% of total interest income. Of the amount, domestic loan interest income was $35,463,240 thousand, consisting 90% of total interest income on discounts and loans, the major source of income of the Bank. Therefore, the correctness of domestic loan interest income has a significant impact on the financial statements. In addition, since loan interest income depends highly on automated calculations, the information technology environment and the effectiveness of general information technology controls also have significant impact on the recognition of domestic loan interest income. Therefore, recognition of interest income was identified as a key audit matter. For accounting policies, refer to Note 4 to the financial statements; for recognized loan interest income, refer to Note 28.
With respect to the correctness of recognized domestic loan interest income, the procedures we performed were as follows:
1. Understand and test the internal controls on the calculation of domestic loan interest income of the Bank. 2. Understand the information technology environment and general information technology controls of the Bank particularly on domestic loan interest income, and test the effectiveness of the controls, which include the automated controls of relevant application systems. 3. Select samples from the Bank’s domestic loan interest income summary table, and verify the correctness of major parameters set for calculation of loan interest income, including amount of loans, loan period and interest rate. 4. Select samples of domestic loan information in a certain period from the Bank’s information system, including amount of loans, loan period, interest rate and other major parameters. Understand and assess the reasonableness of the computing of the Bank’s loan interest in each category, and recalculate loan interest income and verify the correctness of recognized interest income.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks and the Regulations Governing the Preparation of Financial Reports by Securities Firms, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing Taiwan Cooperative Bank, Ltd.’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.
Those charged with governance, including supervisors, are responsible for overseeing the Bank’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free 106 Annual Report 2017
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Taiwan Cooperative Bank from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Taiwan Cooperative Bank, Ltd.’s internal control.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Taiwan Cooperative Bank, Ltd.’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause Taiwan Cooperative Bank, Ltd. to cease to continue as a going concern.
5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
6. Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within Taiwan Cooperative Bank, Ltd. to express an opinion on the financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the year ended December 31, 2017 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partners on the audit resulting in this independent auditors’ report are Li-Chi Chen and Cheng-Hung Kuo.
Deloitte & Touche Taipei, Taiwan Republic of China
March 23, 2018
Notice to Readers
The accompanying financial statements are intended only to present the financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally applied in the Republic of China.
For the convenience of readers, the independent auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and financial statements shall prevail. Financial Information 107
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TAIWAN COOPERATIVE BANK, LTD. BALANCE SHEETS DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars) 2017 2016 ASSETS Amount % Amount % CASH AND CASH EQUIVALENTS (Notes 4, 6 and 35) $ 63,562,455 2 $ 54,064,826 2 DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS (Notes 4, 7, 35 and 36) 274,341,552 9 302,017,438 10 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 8 and 35) 12,862,843 - 27,866,137 1 SECURITIES PURCHASED UNDER RESELL AGREEMENTS (Notes 4, 9 and 35) 249,463 - - - RECEIVABLES, NET (Notes 4, 10, 35 and 42) 18,593,582 1 14,808,694 1 CURRENT TAX ASSETS (Notes 4, 32 and 35) 1,402,132 - 1,187,408 - DISCOUNTS AND LOANS, NET (Notes 4, 11, 35 and 36) 1,993,819,434 63 1,958,508,412 62 AVAILABLE-FOR-SALE FINANCIAL ASSETS, NET (Notes 4, 12 and 36) 154,441,496 5 123,640,946 4 HELD-TO-MATURITY FINANCIAL ASSETS (Notes 4, 13 and 36) 513,789,325 16 510,048,964 16 INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD (Notes 4 and 14) 2,073,809 - 1,882,267 - OTHER FINANCIAL ASSETS, NET (Notes4, 15, 35 and 36) 107,002,789 3 99,887,733 3 PROPERTIES AND EQUIPMENT, NET (Notes 4 and 16) 33,926,763 1 37,962,847 1 INVESTMENT PROPERTIES, NET (Notes 4 and 17) 6,984,409 - 2,886,363 - INTANGIBLE ASSETS (Notes 4 and 18) 3,513,492 - 3,545,312 - DEFERRED TAX ASSETS (Notes 4 and 32) 1,282,022 - 954,971 - OTHER ASSETS (Notes 4, 19 and 37) 606,519 - 711,131 - TOTAL $ 3,188,452,085 100 $ 3,139,973,449 100 LIABILITIES AND EQUITY DUE TO THE CENTRAL BANK AND OTHER BANKS (Notes 20 and 35) $ 212,300,065 7 $ 225,668,911 7 FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 8, 24 and 35) 14,450,851 1 14,631,011 1 SECURITIES SOLD UNDER REPURCHASE AGREEMENTS (Notes 4, 8, 12 and 21) 10,377,142 - 12,000,831 - PAYABLES (Notes 22 and 35) 45,179,629 2 44,120,225 2 CURRENT TAX LIABILITIES (Notes 4, 32 and 35) 1,185,896 - 328,375 - DEPOSITS AND REMITTANCES (Notes 23 and 35) 2,624,598,335 82 2,564,157,192 82 BANK DEBENTURES (Note 24) 64,610,000 2 74,610,000 2 OTHER FINANCIAL LIABILITIES (Notes 4, 25, 35 and 37) 3,749,545 - 2,614,125 - PROVISIONS (Notes 4, 26 and 27) 7,624,197 - 7,171,678 - DEFERRED TAX LIABILITIES (Notes 4, 16 and 32) 2,996,390 - 3,261,164 - OTHER LIABILITIES 1,119,382 - 1,170,965 - Total liabilities 2,988,191,432 94 2,949,734,477 94 EQUITY Capital stock Common stock 88,081,300 3 85,863,000 3 Capital surplus Additional paid-in capital from share issuance in excess of par value 58,664,088 2 55,882,340 2 From treasury stock transactions 103,157 - 103,157 - Total capital surplus 58,767,245 2 55,985,497 2 Retained earnings Legal reserve 32,982,547 1 29,225,467 1 Special reserve 1,280,201 - 1,217,583 - Unappropriated earnings 18,723,762 - 18,697,129 - Total retained earnings 52,986,510 1 49,140,179 1 Other equity 425,598 - (749,704 ) - Total equity 200,260,653 6 190,238,972 6 TOTAL $ 3,188,452,085 100 $ 3,139,973,449 100
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TAIWAN COOPERATIVE BANK, LTD. STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) Percentage Increase 2017 2016 (Decrease) Amount % Amount % % INTEREST REVENUE (Notes 4, 28 and 35) $ 50,739,405 120 $ 50,110,097 123 1 INTEREST EXPENSE (Notes 4, 28 and 35) (18,440,708 ) (44 ) (18,707,695 ) (46 ) (1 ) NET INTEREST 32,298,697 76 31,402,402 77 3 NET REVENUES AND GAINS OTHER THAN INTEREST Service fee income, net (Notes 4, 29, 35 and 42) 5,924,892 14 6,267,528 15 (5 ) Losses on financial assets and liabilities at fair value through profit or loss (Notes 4, 30 and 35) (2,023,677 ) (5 ) (592,346 ) (1 ) 242 Realized gains on available-for-sale financial assets (Note 4) 923,358 2 1,202,764 3 (23 ) Foreign exchange gains, net (Note 4) 4,807,785 12 1,407,642 3 242 Reversal of impairment losses on assets (Notes 4, 12 and 13) 7,895 - 6,351 - 24 Share of gains of subsidiaries, associates and joint ventures accounted for using the equity method (Notes 4 and 14) 114,050 - 107,183 - 6 Gains on financial assets carried at cost, net (Note 4) 279,275 1 285,035 1 (2 ) Gains on debt instruments with no active market, net (Note 4) 30,725 - 153,778 - (80 ) Other noninterest gains (losses) , net (Notes 35 and 42) (1,297 ) - 594,637 2 (100 ) Total net revenues and gains other than interest 10,063,006 24 9,432,572 23 7 TOTAL NET REVENUES 42,361,703 100 40,834,974 100 4 BAD-DEBT EXPENSES AND PROVISION FOR LOSSES ON GUARANTEES (Notes 4 and 11) (5,302,494 ) (13 ) (3,802,662 ) (9 ) 39 OPERATING EXPENSES (Notes 4, 16, 17, 18, 27, 31 and 35) Employee benefits (14, 614,056 ) (35 ) (14,757,601 ) (36 ) (1 ) Depreciation and amortization (1,058,025 ) (2 ) (1,075,976 ) (3 ) (2 ) General and administrative (6,501,534 ) (15 ) (6,652,502 ) (16 ) (2 ) Total operating expenses (22,173,615 ) (52 ) (22,486,079 ) (55 ) (1 ) INCOME BEFORE INCOME TAX 14,885,594 35 14,546,233 36 2
INCOME TAX EXPENSE (Notes 4 and 32) (1,986,400 ) (5 ) (2,022,632 ) (5 ) (2 )
NET INCOME 12,899,194 30 12,523,601 31 3 OTHER COMPREHENSIVE INCOME Items that will not be reclassified subsequently to profit or loss (Notes 4 and 27) Remeasurement of defined benefit plans (348,963 ) (1) (46,589 ) - 649 Changes in the fair value attributable to changes in the credit risk of financial liabilities designated as at fair value through profit or loss (32,084 ) - 32,330 - (199 ) Items that will not be reclassified subsequently to profit or loss, net of income tax (381,047 ) (1) (14,259 ) - 2,572 Items that may be reclassified subsequently to profit or loss (Notes 4, 14 and 32) Exchange differences on the translation of financial statements of foreign operations (1,473,014 ) (4 ) (203,063 ) (1 ) 625 Unrealized gains (losses) on available-for-sale financial assets 2,361,509 6 (1,588,002 ) (4 ) 249 Share of other comprehensive income (losses) of subsidiaries, associates and joint ventures accounted for using the equity method 83,561 - (100,089 ) - 183 Income tax attributable to other comprehensive income 235,330 1 50,908 - 362 Items that may be reclassified subsequently to profit or loss, net of income tax 1,207,386 3 (1,840,246 ) (5 ) 166 Other comprehensive income (losses), net of income tax 826,339 2 (1,854,505 ) (5 ) 145 TOTAL COMPREHENSIVE INCOME $ 13,725,533 32 $ 10,669,096 26 29
EARNINGS PER SHARE (NEW TAIWAN DOLLARS; Note 33) Basic $1.48 $1.48
The accompanying notes are an integral part of the financial statements.
Financial Information 109
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TAIWAN COOPERATIVE BANK, LTD. STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars) Other Equity Changes in the Fair Value Exchange Attributable to Differences Changes in the on the Unrealized Credit Risk of Translation of Gains (Losses) Financial Financial on Liabilities Capital Stock (Note 34) Retained Earnings (Notes 4 and 34) Statements Available-for- Designated as at of Foreign sale Financial Fair Value Shares Capital Surplus Unappropriated Operations Assets through Profit or (In Thousands) Common Stock (Notes 4 and 34) Legal Reserve Special Reserve Earnings (Note 4) (Note 4) Loss (Note 4) Total Equity
BALANCE, JANUARY 1, 2016 8,349,300 $83,493,000 $ 53,054,992 $25,586,622 $ 1,217,583 $18,349,592 $287,893 $ 768,151 $ 2,168 $182,760,001
Appropriation of the 2015 earnings Legal reserve - - - 3,638,845 - (3,638,845) - - - - Cash dividends - - - - - (8,490,630) - - - (8,490,630)
Capital increase in June 2016 237,000 2,370,000 2,930,505 ------5,300,505
Total comprehensive income Net income for the year ended December 31, 2016 - - - - - 12,523,601 - - - 12,523,601 Other comprehensive losses for the year ended December 31, 2016 - - - - - ( 46,589) (251,368) (1,588,878) 32,330 (1,854,505)
Total comprehensive income for the year ended December 31, 2016 - - - - - 12,477,012 (251,368) (1,588,878) 32,330 10,669,096
BALANCE, DECEMBER 31, 2016 8,586,300 85,863,000 55,985,497 29,225,467 1,217,583 18,697,129 36,525 (820,727) 34,498 190,238,972
Appropriation of the 2016 earnings Legal reserve - - - 3,757,080 - (3,757,080) - - - - Special reserve - - - - 62,618 (62,618) - - - - Cash dividends - - - - - (8,703,900) - - - ( 8,703,900)
Capital increase in June 2017 221,830 2,218,300 2,781,748 ------5,000,048
Total comprehensive income Net income for the year ended December 31, 2017 - - - - - 12,899,194 - - - 12,899,194 Other comprehensive income (losses) for the year ended December 31, 2017 - - - - - ( 348,963) ( 1,156,596) 2,363,982 ( 32,084) 826,339
Total comprehensive income for the year ended December 31, 2017 - - - - - 12,550,231 ( 1,156,596) 2,363,982 ( 32,084) 13,725,533
BALANCE, DECEMBER 8,808,130 $88,081,300 $58,767,245 $32,982,547 $1,280,201 $18,723,762 $ ( 1,120,071) $ 1,543,255 $ 2,414 $200,260,653 31, 2017
The accompanying notes are an integral part of the financial statements.
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TAIWAN COOPERATIVE BANK, LTD. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)
2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax $ 14,885,594 $ 14,546,233 Adjustments for: Depreciation expenses 901,848 902,976 Amortization expenses 156,177 173,000 Bad-debt expenses 5,083,442 3,751,196 Losses on financial assets and liabilities at fair value through profit or loss 2,023,677 592,346 Interest expense 18,440,708 18,707,695 Interest revenue (50,739,405 ) (50,110,097 ) Dividend income (470,513 ) (466,036 ) Provision for losses on guarantees 219,052 51,466 Share of gains of subsidiaries, associates and joint ventures accounted for using equity method (114,050 ) (107,183 ) Losses on disposal of properties and equipment 1,820 1,695 Gains on disposal of investment properties - (66 ) Gains on disposal of investments (762,845 ) (1,175,540 ) Reversal of impairment losses on financial assets (7,895 ) (6,351 ) Net changes in operating assets and liabilities Decrease in due from the Central Bank and call loans to other banks 6,532,788 88,499,333 Decrease in financial assets at fair value through profit or loss 23,770,490 1,176,244 Increase in receivables (2,819,033 ) (955,228 ) Decrease (increase) in discount and loans (38,918,151 ) 11,387,338 Increase in available-for-sale financial assets (30,603,291 ) (29,369,839 ) Increase in held-to-maturity financial assets (4,464,203 ) (468,082,871 ) Decrease (increase) in other financial assets (9,858,636 ) 538,155 Decrease in other assets 7,697 365,739 Increase (decrease) in due to the Central Bank and other banks (13,368,846 ) 27,295,934 Decrease in financial liabilities at fair value through profit or loss (9,537,014 ) (14,030,747 ) Decrease in securities sold under repurchase agreements (1,623,689 ) (5,451,649 ) Increase in payables 423,606 8,381,029 Increase in deposits and remittances 60,441,143 59,770,901 Increase (decrease) in other financial liabilities 629,175 (4,621,279 ) Decrease in provision for employee benefits (114,986 ) (2,212,883 ) Decrease in other liabilities (55,369 ) (14,552 ) Cash used in operations (29,940,709 ) (340,463,041 ) Interest received 50,531,515 49,750,108 Dividends received 491,369 481,048 Interest paid (18,350,775 ) (18,877,639 ) Income tax paid (1,681,550 ) (3,110,036 ) Net cash generated by (used in) operating activities 1,049,850 (312,219,560 ) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition for properties and equipment (993,300 ) (219,866 ) Proceeds of the disposal of properties and equipment 60 - Increase in refundable deposits - (15,150 ) Decrease in refundable deposits 96,902 - Acquisition for intangible assets (111,389 ) (75,452 ) Proceeds of the disposal of investment properties - 3,861 Decrease in other assets 1,703 7,613 Net cash used in investing activities (1,006,024 ) (298,994 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds of the issuance of bank debentures 2,000,000 5,000,000 Repayment of bank debentures (12,000,000 ) - Increase in guarantee deposits received 506,245 - Decrease in guarantee deposits received - (473,964 ) Dividends paid (8,703,900 ) (8,490,630 ) Capital increase 5,000,048 5,300,505 Net cash generated by (used in) financing activities (13,197,607 ) 1,335,911 EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 2,054,575 923,926 NET DECREASE IN CASH AND CASH EQUIVALENTS (11,099,206 ) (310,258,717 ) CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR 120,906,483 431,165,200 CASH AND CASH EQUIVALENTS, END OF THE YEAR $ 109,807,277 $ 120,906,483 Cash and cash equivalent reconciliations: December 31
2017 2016 Cash and cash equivalents in the balance sheets $ 63,562,455 $ 54,064,826 Due from the Central Bank and call loans to other banks in accordance with the definition of cash and cash equivalents under IAS 7 “Statement of Cash Flows” 45,698,559 66,841,657 Securities purchased under resell agreements in accordance with the definition of cash and cash equivalents under IAS 7 “Statement of Cash Flows” 249,463 - Other items in accordance with the definition of cash and cash equivalents under IAS 7 “Statement of Cash Flows” 296,800 - Cash and cash equivalents, end of the year $ 109,807,277 $ 120,906,483
The accompanying notes are an integral part of the financial statements.
Financial Information 111
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6. Risk Management
6.1 Credit Risk Management System
Items Contents
1. Credit risk strategies, (1) The Bank’s credit risk strategy is to comply with and observe relevant goals, policies, and internal and external laws and regulations in the establishment and procedures utilization of an effective credit risk management mechanism that complies with the New Basel Capital Accord and is able to identify, measure, monitor, and control various credit risks. (2) The Bank’s credit risk goal is to develop a strong credit risk management mechanism and, under an acceptable level of risk and expected rate of return, to pursue maximum shareholder value. (3) The Bank’s credit risk policy is founded on the basic principles of safety, liquidity, profitability, public benefit, and growth, with the implementation of a division of labor in credit risk management, cultivation of a bank-wide risk management culture, analysis and assessment of risk, and the adoption of responsive measures with the aim of optimizing asset portfolio management and capital allocation. (4) The Bank carries out its credit risk process by complying with the rules of various businesses, implementing a prior review and post management and follow-up review mechanism, setting up an objective credit examination mechanism, introducing credit rating tools, and carrying out stress tests to evaluate potential losses under unfavorable circumstances, thereby effectively quantifying credit risk.
2. Organization and (1) The Board of Directors is the Bank’s highest policymaking body for risk framework of credit management, and bears ultimate responsibility for the Bank’s credit risk. risk management (2) The Risk Management Committee operates the credit risk management mechanism in accordance with credit risk decisions approved by the Board of Directors, reviews credit risk regulations, provides interdepartmental coordination on matters regarding credit risk management, and continuously monitors the performance of implementation. (3) The Risk Management Department is responsible for the planning, establishment, and integration of the Bank’s credit risk management operations, for implementing overall bank-wide credit risk management monitoring, and for the step-by-step development of a credit risk quantitative model designed to upgrade the Bank’s risk quantification capability. The Department also regularly compiles bank-wide credit risk data and reports to the Board of Directors and Risk Management Committee; and, in accordance with the regulations of the competent authority, carries out provision for capital requirements and handles the disclosure of risk information. (4) The headquarters and branches have established Credit Management Committees to review loan cases, and to approve or reject loan applications in accordance with their level of loan authorization. (5) The Corporate Banking Department is responsible for loan review work and for supervising the business units in reviewing procedures.. In case of irregularity in the operation of business units or in important loan cases, special reviews will be carried out as necessary, the causes of the irregularities will be investigated and reviewed. (6) The Credit Management Department is responsible for planning the bank-wide credit policy, establishing and revising the loan authorization for credit personnel of different levels, reviewing and relaying loan cases which exceed loan authorization of regional centers and strengthening the evaluation and supervision of follow-up reporting forms. 112 Annual Report 2017
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Items Contents (7) A Loan Assets Management Committee has been set up to review the disposition and writing off of nonperforming loans and overdue loans, and the writing off of losses from the disposition of assumed collateral, so as to strengthen the management of NPLs and overdue loans. (8) The Auditing Department of the Board of Directors carries out its audits independently, with at least one inspection per year of businesses related to credit risk and provides suggestions for improvement whenever necessary.
3. Scope and characteristics (1) The Bank reports credit risk information, including different underlying of the credit risk exposures in the asset portfolio, utilization of concentration quotas, and reporting and measuring asset quality, to high-level management, the Risk Management Committee system and Board of Directors on a regular basis so as to provide an understanding of the Bank’s overall credit risk for their reference in making decisions. (2) The Bank has developed various types of corporate finance and consumer finance rating models, has introduced loan management systems that automatically produce default probabilities, loses given default, and rating grades, and has established an internal rating system that effectively weighs credit risk.
4. Hedging policy, and (1) TCB has established the Loan and Investment Policy and Credit Risk strategies and procedures Management Criteria, which sets regulations for the concentration of for monitoring the different kinds of credit risk and for dealings with materially interested continuing effectiveness of parties so as to manage credit risk effectively and reinforce the Bank’s risk-hedging tools credit risk management mechanism. (2) The Bank observes the limit regulations established by the competent authority in its loan and investment businesses. (3) The Bank sets limits for the same enterprise, business group, industry, country, and type of collateral, and monitors the limits constantly. It also readjusts the limits on a regular or as-needed basis so as to avoid the excessive concentration of risk and assure the Bank’s stable operation. (4) The handling of loan and investment businesses is always done in accordance with the customer’s credit status and with the provision of appropriate collateral or guarantees, so as to lower risk. The monitoring of risk mitigation tools is accomplished through the review system and collateral management system.
5.Method adopted for Standardized approach legal capital charge
6.2 Operational Risk Management System
Items Contents
1. Strategies and procedures (1) Strategies of operational risk a. Focus on implementing an effective bank-wide operational risk management management consciousness and culture. b. Establishment of operational risk management methods, use of operational risk management tools, and monitoring of the operational risk of various businesses so as to maintain operational safety and strengthen the operating structure. (2) Procedures Risk Management 113
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Items Contents Use of the following methods to identify, evaluate, monitor, and control operational risk: a. Establishment of various codes of practice, strengthening of operating procedure controls, and reduction of potential operating risks. b. Use of operational risk control self-assessment to identify different types of potential operational risk, assess operational risk exposure, review the effectiveness and implementation of controls, and strengthen business management. c. Production of key operational risk indexes, in accordance with the major risks identified through self-assessment process, so as to monitor risk changes by quantified indexes and set up an early-warning mechanism. d. Review of the causes of risk incidents through the reporting and management of operational risk to improve operating procedures.
2. Organization and (1) Organizational framework framework of operational Includes the Board of Directors, Risk Management Committee, Risk risk management Management Department, headquarters units, branches, and Board of Directors Auditing Department. (2) Implementation of operational risk management through three lines of defense. a. First line of defense (branches and headquarters units) I. Each branch should observe the laws of the competent authority and the Bank’s internal operating regulations in carrying out daily operational risk management. II. The headquarters units in charge of different areas of business should fully understand the risks faced by businesses under their jurisdiction, should include operational risk management in the formulation of their operational management rules, and should monitor the daily implementation of operational risk management of businesses under their jurisdiction. b. Second line of defense (The Risk Management Department) The Risk Management Department plays an independent and dedicated role, planning out the establishment and introduction of the bank-wide operational risk management framework and management tools, and being responsible for bank-wide operational risk assessment, monitoring, control, review, and reporting. c. Third line of defense (The Auditing Department, Board of Directors) The Auditing Department of the Board of Directors carries out independent auditing and review of the status of operational risk management by units bank-wide.
3. Scope and characteristics (1) Scheduled review, compilation, and analysis of the bank-wide status of of operational risk operational risk exposure, including risk-control self-assessment and reporting and measurement system analysis, monitoring of key risk indexes, review and improvement of major operational risk incidents, and reporting to the Risk Management Committee and Board of Directors. (2) Establishment of operational risk management systems (including operational risk incident reporting and risk-control self-assessment management) and reinforcement of linkage between operational risk incidents and self-assessment management tools, and related report enquiry to enhance the efficiency of management.
4. Risk hedging and (1) Different units carry out overall assessment of probability and severity of mitigation policies, and impact in accordance with the results of operational risk assessment and 114 Annual Report 2017
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Items Contents monitoring of strategies monitoring of key risk indexes, and adopt appropriate risk-reduction and procedures for the policies such as the strengthening of personnel training, the improvement continuing effectiveness of hedging and mitigation of operating procedures, the reinforcement of system controls, the use of tools insurance, and outsourcing to control operational risk within the range of tolerance. (2) Residual risk assessment in regard to risk incidents and control measures in various areas of business is carried out using risk control self-assessment on a scheduled basis so as to assure the effectiveness of control measures.
5. Method adopted for legal capital charge Standardized approach
6.3 Market Risk Management System
Items Contents
1. Strategies and procedures (1) Strategies of market risk Establishment of a market risk management system in accordance with the management market risk management strategy approved by the Board of Directors and in compliance with Basel III and the regulations set by the competent authority, establishment of investment authorization quotas and stop-loss rules in accordance with the Bank’s overall risk management objectives and product characteristics, and scheduled assessment and compilation of management information reports in order to effectively control various kinds of market risk. (2) Procedures The Bank’s market risk management procedures include risk identification, assessment, measuring, monitoring, and reporting. The risk management personnel of the different units analyze market risk position data with assessment and measurement methods including statistical basic measurement methods, sensitivity analysis, and scenario analysis. Monitoring is used to determine whether the general and individual trading procedures for the trading units and financial products, such as changes in position, changes in profit and loss, trading models, and trading instruments conform to the rules, and whether they are carried out within the established limits and authorization.
2. Organization and (1) The organizational framework of market risk management includes the framework of market Board of Directors, Risk Management Committee, Risk Management risk management Department, units in charge of different areas of business, business trading units, and the Auditing Committee, Board of Directors. (2) The Board of Directors is the Bank’s highest policymaking body for risk management, and bears ultimate responsibility for the Bank’s market risk. (3) The Bank’s Risk Management Committee operates the market risk management mechanism in accordance with management decisions approved by the Board of Directors, reviews the limits for different kinds of market risk as well as limits at the sectoral level, and reviews changes in business strategies and market conditions on a scheduled or as-needs basis. (4) The Risk Management Department carries out the overall work of bank-wide risk management; it is responsible for centralized middle office monitoring, the collation, monitoring, and disclosure of market risk information and status of implementation, and the submission of reports and suggestions to the Risk Management Committee and Board of Directors on a scheduled basis. Risk Management 115
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Items Contents (5) The mid-office personnel of the different trading units follow the Bank’s market risk management regulations in managing everyday operations in real time, monitor limits actively, and assist the Risk Management Committee with bank-wide monitoring of the various areas of risk. (6) The Auditing Department of the Board of Directors carries out its audits independently, with at least one inspection per year of businesses related to market risk and provide suggestions for improvement whenever necessary.
3. Scope and characteristics (1) Market risk reporting of market risk reporting a. The different trading units report trading information to their superior units and measurement system on a real-time, daily, or scheduled basis, and assure the accuracy and validity of the information. b. The Risk Management Department reports to high management levels on bank-wide trading positions and changes in profit-loss evaluation on a daily basis and submits regular reports and suggestions to the Risk Management Committee and the Board of Directors on the bank-wide implementation of market risk management, including such factors as market risk positions, risk levels, profit and loss, limits utilization, and the status of conformance with market risk management regulations. c. The Bank currently uses the market risk standardized approach to calculate the allocation of capital reserves; and, in conformity with the principle of public disclosure, makes public disclosures of the Bank’s market risk management information on a scheduled basis. (2) Market risk measurement system a. The scope of financial products currently measured by the value-at-risk assessment system includes bond, bill, stock, fund, and forex positions. b. The Risk Management Department daily calculates trading-book value at risk; monitors DVO1, individual product and overall value-at-risk limits; and makes reports to bank-wide risk management authorities. c. Bank-wide market risk stress tests are carried out on a scheduled basis, the amount of potential losses under different risk factors are measured when markets are in poor condition, and reports and suggestions are submitted to the Risk Management Committee and the Board of Directors.
4. Risk hedging and (1) To avoid market, credit, or other financial risks to assets and liabilities, mitigation policies, and various derivative products may be used to engage in hedging operations. monitoring of strategies (2) The Bank’s current risk-avoidance activity is used primarily to avoid the risk and procedures for the of foreign exchange and interest rate changes when investing in continuing effectiveness foreign-currency capital and securities, and hedging tools are confined of hedging and mitigation mainly to derivative swaps. tools (3) Positions in non-hedging derivatives trading are assessed daily at market value, and hedging positions are evaluated twice monthly. The related assessment reports are submitted for approval to risk management authorities. (4) To maintain an effective control mechanism for derivatives, the Risk Management Department carries out verification of the derivatives appraisal model on a scheduled basis. The items of verification include the accuracy of trading information, the rationality of parameters, and the correctness in calculation formulas. The results of verification are reported to the Risk Management Committee. 5.Method adopted for Standardized approach legal capital charge
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7. Head Office and Branches
7.1 Head Office
Department Name Address Telephone Auditing Department, Board of 8F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Taipei (02)21738888 Directors City 105, Taiwan (R.O.C.) 18F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Secretariat, Board of Directors (02)21738888 Taipei City 105, Taiwan (R.O.C.) Business Management 16F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., (02)21738888 Department Taipei City 105, Taiwan (R.O.C.) 15F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Corporate Banking Department (02)21738888 Taipei City 105, Taiwan (R.O.C.) 15F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Credit Management Department (02)21738888 Taipei City 105, Taiwan (R.O.C.) 9F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Taipei Treasury Department (02)21738888 City 105, Taiwan (R.O.C.) International Banking 4F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Taipei (02)21738888 Department City 105, Taiwan (R.O.C.) 11F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Personal Banking Department (02)21738888 Taipei City 105, Taiwan (R.O.C.) 10F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Wealth Management Department (02)21738888 Taipei City 105, Taiwan (R.O.C.) 10F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Trust Department (02)21738888 Taipei City 105, Taiwan (R.O.C.) 8F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Taipei Insurance Agent Department (02)21738888 City 105, Taiwan (R.O.C.) 7F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Taipei Electronic Banking Department (02)21738888 City 105, Taiwan (R.O.C.) 4F, No.77, Kunming St., Wanhua Dist., Taipei City 108, Credit Card Department (02)23317531 Taiwan (R.O.C.) Loan Assets Management 9F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Taipei (02)21738888 Department City 105, Taiwan (R.O.C.) Administrative Management 13F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., (02)21738888 Department Taipei City 105, Taiwan (R.O.C.) 12F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Accounting Department (02)21738888 Taipei City 105, Taiwan (R.O.C.) Information Technology No.9, Ln. 30, Sec. 4, Xinyi Rd., Da-an Dist., Taipei City (02)27045799 Department 106, Taiwan (R.O.C.) No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Taipei Information Security Department (02)21738888 City 105, Taiwan (R.O.C.) Credit Analysis and Research 16F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., (02)21738888 Department Taipei City 105, Taiwan (R.O.C.) 11F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Risk Management Department (02)21738888 Taipei City 105, Taiwan (R.O.C.) 12F, No.225, Sec. 2, Changan E. Rd., Songshan Dist., Human Resource Department (02)21738888 Taipei City 105, Taiwan (R.O.C.) 14F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Compliance Department (02)21738888 Taipei City 105, Taiwan (R.O.C.) 14F, No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Legal Affairs Department (02)21738888 Taipei City 105, Taiwan (R.O.C.)
Head Office and Branches 117
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7.2 Domestic Branches
Branch Name Address Telephone SWIFT Code Taipei City 1F., No.77, Guanqian Rd., Zhongzheng Dist., Guancian Branch (02)23315528 TACBTWTP002 Taipei City 100, Taiwan (R.O.C.) No.77, Kunming St., Wanhua Dist., Simen Branch (02)23814949 TACBTWTPXXX Taipei City 108, Taiwan (R.O.C.) No.301, Nanjing W. Rd., Datong Dist., Yanping Branch (02)25554111 TACBTWTP004 Taipei City 103, Taiwan (R.O.C.) No.67, Sec. 2, Chongcing N. Rd., Datong Dist., Dadaocheng Branch (02)25568111 TACBTWTPXXX Taipei City 103, Taiwan (R.O.C.) No.208, Sec. 2, Sinyi Rd., Da-an Dist., Dongmen Branch (02)23933123 TACBTWTPXXX Taipei City 106, Taiwan (R.O.C.) No.622, Sec. 4, Bade Rd., Songshan Dist., Songshan Branch (02)27656261 TACBTWTPXXX Taipei City 105, Taiwan (R.O.C.) No.98, Sec. 1, Nanjing E. Rd., Jhongshan Dist., Nanjing Donglu Branch (02)25623150 TACBTWTP041 Taipei City 104, Taiwan (R.O.C.) No.125, Sec. 2, Minsheng E. Rd., Zhongshan Wujhou Branch (02)25113880 TACBTWTPAAA Dist., Taipei City 104, Taiwan (R.O.C.) No.10, Sec. 3, Chengde Rd., Datong Dist., Datong Branch (02)25932323 TACBTWTP043 Taipei City 103, Taiwan (R.O.C.) No.285, Sec. 4, Jhongsiao E. Rd., Da-an Dist., Jhongsiao Branch (02)27718811 TACBTWTP045 Taipei City 106, Taiwan (R.O.C.) No.457, Sec. 6, Roosevelt Rd., Wunshan Dist., Jingmei Branch (02)29318111 TACBTWTPXXX Taipei City 116, Taiwan (R.O.C.) No.469, Zhongzheng Rd., Shilin Dist., Shihlin Branch (02)28805161 TACBTWTPXXX Taipei City 111, Taiwan (R.O.C.) No.55, Fusing N. Rd., Songshan Dist., Taipei Branch (02)27724277 TACBTWTP054 Taipei City 105, Taiwan (R.O.C.) No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., Department of Business (02)21738888 TACBTWTP056 Taipei City 105, Taiwan (R.O.C.) No.87, Songjiang Rd., Jhongshan Dist., Chengdong Branch (02)25070111 TACBTWTP060 Taipei City 104, Taiwan (R.O.C.) No.1, Ln. 81, Sec. 2, Dunhua S. Rd., Da-an Dist., Da-an Branch (02)27553482 TACBTWTP076 Taipei City 106, Taiwan (R.O.C.) No.58, Sec. 3, Mincyuan E. Rd., Jhongshan Dist., Mincyuan Branch (02)25057011 TACBTWTP077 Taipei City 104, Taiwan (R.O.C.) No.325, Sec. 4, Jhongsiao E. Rd., Da-an Dist., Dong Taipei Branch (02)27721234 TACBTWTPXXX Taipei City 106, Taiwan (R.O.C.) No.87, Hengyang Rd., Jhongjheng Dist., Chengnei Branch (02)23311041 TACBTWTPXXX Taipei City 100, Taiwan (R.O.C.) No.77, Sec. 3, Sinyi Rd., Da-an Dist., Jianguo Branch (02)27027851 TACBTWTPXXX Taipei City 106, Taiwan (R.O.C.) No.89-4, Sec. 2, Jhongshan N. Rd., Jhongshan Yuanshan Branch (02)25113245 TACBTWTPXXX Dist., Taipei City 104, Taiwan (R.O.C.) No.172, Sec. 4, Sinyi Rd., Da-an Dist., Sinyi Branch (02)27067188 TACBTWTP083 Taipei City 106, Taiwan (R.O.C.) No.201, Changchun Rd., Jhongshan Dist., Changchun Branch (02)25035015 TACBTWTPXXX Taipei City 104, Taiwan (R.O.C.) No.325, Sec. 4, Ren-ai Rd., Da-an Dist., Ren-ai Branch (02)27763071 TACBTWTP085 Taipei City 106, Taiwan (R.O.C.) No.815, Sec. 5, Jhongsiao E. Rd., Nangang Dist., Yucheng Branch (02)27856060 TACBTWTPXXX Taipei City 115, Taiwan (R.O.C.) No.65, Sec. 1, Heping E. Rd., Da-an Dist., Guting Branch (02)23949205 TACBTWTPXXX Taipei City 106, Taiwan (R.O.C.) 118 Annual Report 2017
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Taiwan Cooperative Bank
Branch Name Address Telephone SWIFT Code No.9, Sec. 1, Chang-an E. Rd., Jhongshan Dist., Chang-an Branch (02)25637181 TACBTWTP088 Taipei City 104, Taiwan (R.O.C.) No.202-1, Sec. 5, Nanjing E. Rd., Songshan Dist., Songsing Branch (02)27643131 TACBTWTPXXX Taipei City 105, Taiwan (R.O.C.) No.277, Sec. 3, Chengde Rd., Datong Dist., Minzu Branch (02)25962271 TACBTWTP090 Taipei City 103, Taiwan (R.O.C.) No.237, Sec. 1, Fusing S. Rd., Da-an Dist., Fusing Branch (02)27541111 TACBTWTP091 Taipei City 106, Taiwan (R.O.C.) No.113, Minsheng W. Rd., Datong Dist., Shuanglian Branch (02)25577151 TACBTWTPXXX Taipei City 103, Taiwan (R.O.C.) No.77, Sec. 3, Minsheng E. Rd., Songshan Dist., Minsheng Branch (02)25162338 TACBTWTP093 Taipei City 10480, Taiwan (R.O.C.) No.93, Sec. 1, Sinsheng S. Rd., Da-an Dist., Sinsheng Branch (02)27771888 TACBTWTPXXX Taipei City 106, Taiwan (R.O.C.) No.152, Songjiang Rd., Jhongshan Dist., Songjiang Branch (02)25224567 TACBTWTP095 Taipei City 104, Taiwan (R.O.C.) No.279, Songshan Rd., Sinyi Dist., Yongji Branch (02)27675226 TACBTWTPXXX Taipei City 110, Taiwan (R.O.C.) Offshore Banking No.225, Sec. 2, Chang'an E. Rd., Songshan Dist., (02)21738888 TACBTWTP106 Branch Taipei City 105, Taiwan (R.O.C.) No.97, Sec. 3, Bade Rd., Songshan Dist., Taipei Beining Branch (02)25798811 TACBTWTPXXX City 105, Taiwan (R.O.C.) No.100, Sec. 4, Civic Blvd., Da-an Dist., Fudan Branch (02)27215551 TACBTWTPXXX Taipei City 106, Taiwan (R.O.C.) B1., No.7-B, Jhongshan S. Rd., Jhongjheng Dist., Taida Branch (02)23568071 TACBTWTPXXX Taipei City 100, Taiwan (R.O.C.) No.77, Sec. 2, Keelung Rd., Sinyi Dist., Sansing Branch (02)27388181 TACBTWTPXXX Taipei City 110, Taiwan (R.O.C.) B1., No.201, Sec. 2, Shihpai Rd., Beitou Dist., Shihpai Branch (02)28747611 TACBTWTPXXX Taipei City 112, Taiwan (R.O.C.) No.502, Rueiguang Rd., Neihu Dist., Neihu Branch (02)26590001 TACBTWTP156 Taipei City 114, Taiwan (R.O.C.) No.19-16, Sanchong Rd., Nangang Dist., Nangang Branch (02)26550777 TACBTWTPXXX Taipei City 115, Taiwan (R.O.C.) No.255, Sinhu 2nd Rd., Neihu Dist., Sinhu Branch (02)27908118 TACBTWTPXXX Taipei City 114, Taiwan (R.O.C.) No.85, Sec. 2, Nanjing E. Rd., Jhongshan Dist., Zihciang Branch (02)21003100 TACBTWTP501 Taipei City 104, Taiwan (R.O.C.) No.2, Sec. 2, Nanjing E. Rd., Jhongshan Dist., Jhongshan Branch (02)25214065 TACBTWTP502 Taipei City 104, Taiwan (R.O.C.) No.362, Sec. 1, Dunhua S. Rd., Da-an Dist., Dunnan Branch (02)27011117 TACBTWTP503 Taipei City 106, Taiwan (R.O.C.) World Trade Center 2F., No.333, Sec. 1, Keelung Rd., Sinyi Dist., (02)27291333 TACBTWTP505 Branch Taipei City 110, Taiwan (R.O.C.) Guangfu South Road No.102, Guangfu S. Rd., Da-an Dist., (02)27518770 TACBTWTPXXX Branch Taipei City 106, Taiwan (R.O.C.) No.837, Sec. 5, Jhongshan N. Rd., Shihlin Dist., Bei Shihlin Branch (02)88665959 TACBTWTP508 Taipei City 111, Taiwan (R.O.C.) No.303, Sec. 1, Fusing S. Rd., Da-an Dist., Sinwei Branch (02)27053828 TACBTWTPXXX Taipei City 106, Taiwan (R.O.C.) No.206, Rueiguang Rd., Neihu Dist., Sihu Branch (02)27971989 TACBTWTP510 Taipei City 114, Taiwan (R.O.C.) No.314, Sec. 6, Mincyuan E. Rd., Neihu Dist., Dahu Branch (02)26328600 TACBTWTPXXX Taipei City 114, Taiwan (R.O.C.) Head Office and Branches 119
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Branch Name Address Telephone SWIFT Code National Medical No.325, Sec. 2, Chenggong Rd., Neihu Dist., (02)87925745 TACBTWTPXXX Center Branch Taipei City 114, Taiwan (R.O.C.) No.97, Sec. 1, Roosevelt Rd., Jhongjheng Dist., Nanmen Branch (02)23966363 TACBTWTPXXX Taipei City 100, Taiwan (R.O.C.) No.409, Bei-an Rd., Jhongshan Dist., Dajhih Branch (02)85099188 TACBTWTP504 Taipei City 104, Taiwan (R.O.C.) No.223, Chongyang Rd., Nangang Dist., Ganghu Branch (02)27862268 TACBTWTPXXX Taipei City 115, Taiwan (R.O.C.) New Taipei City No.32, Guangming St., Xindian Dist., Xindian Branch (02)29111111 TACBTWTPXXX New Taipei City 231, Taiwan (R.O.C.) No.6, Sec. 1, Beisin Rd., Xindian Dist., Beisin Branch (02)29172911 TACBTWTP535 New Taipei City 231, Taiwan (R.O.C.) No.575, Jhongjheng Rd., Yonghe Dist., Yonghe Branch (02)29236611 TACBTWTPXXX New Taipei City 234, Taiwan (R.O.C.) No.17, Jhengyi S. Rd., Sanchong Dist., Sanchong Branch (02)29738111 TACBTWTP010 New Taipei City 241, Taiwan (R.O.C.) No.20, Sec. 1, Wunhua Rd., Banciao Dist., Banciao Branch (02)29660971 TACBTWTP011 New Taipei City 220, Taiwan (R.O.C.) No.225, Jhongsiao E. Rd., Sijhih Dist., Sijhih Branch (02)26413211 TACBTWTPXXX New Taipei City 221, Taiwan (R.O.C.) No.379, Jhongping Rd., Sinjhuang Dist., Sinjhuang Branch (02)29929981 TACBTWTP049 New Taipei City 242, Taiwan (R.O.C.) No.9, Taihe St., Jhonghe Dist., Jhonghe Branch (02)22499500 TACBTWTP062 New Taipei City 235, Taiwan (R.O.C.) No.37, Sec. 2, Sanhe Rd., Sanchong Dist., Dong Sanchong Branch (02)29728111 TACBTWTP067 New Taipei City 241, Taiwan (R.O.C.) No.20, Sec. 1, Singnan Rd., Jhonghe Dist., Nanshihjiao Branch (02)29461266 TACBTWTPXXX New Taipei City 235, Taiwan (R.O.C.) No.339, Sihyuan Rd., Sinjhuang Dist., Dong Sinjhuang Branch (02)29973456 TACBTWTP098 New Taipei City 242, Taiwan (R.O.C.) No.84, Sanmin Rd., Lujhou Dist., Lujhou Branch (02)82825678 TACBTWTPXXX New Taipei City 247, Taiwan (R.O.C.) No.443, Sec. 2, Wunhua Rd., Banciao Dist., Haishan Branch (02)22551333 TACBTWTPXXX New Taipei City 220, Taiwan (R.O.C.) 2F., No.33, Sec. 2, Sanmin Rd., Banciao Dist., Pucian Branch (02)29631122 TACBTWTPXXX New Taipei City 220, Taiwan (R.O.C.) No.196, Jian 1st Rd., Jhonghe Dist., Shuanghe Branch (02)82271627 TACBTWTP144 New Taipei City 235, Taiwan (R.O.C.) No.96, Sec. 2, Jhongyang Rd., Tucheng Dist., Tucheng Branch (02)22651611 TACBTWTP145 New Taipei City 236, Taiwan (R.O.C.) No.61, Wunhua Rd., Sansia Dist., Sansia Branch (02)26747999 TACBTWTPXXX New Taipei City 237, Taiwan (R.O.C.) No.81, Sec. 1, Guangfu Rd., Sanchong Dist., Erchong Branch (02)29993399 TACBTWTP158 New Taipei City 241, Taiwan (R.O.C.) No.2, Sec. 1, Jhongsing Rd., Wugu Dist., Wugu Branch (02)89769698 TACBTWTPXXX New Taipei City 248, Taiwan (R.O.C.) No.152, Sec. 1, Jhongshan Rd., Shulin Dist., Shulin Branch (02)86872211 TACBTWTPXXX New Taipei City 238, Taiwan (R.O.C.) No.148, Sec. 3, Mingjhih Rd., Taishan Dist., Taishan Branch (02)29082811 TACBTWTPXXX New Taipei City 243, Taiwan (R.O.C.) No.67, Mincyuan Rd., Xindian Dist., Dapinglin Branch (02)29138611 TACBTWTPXXX New Taipei City 231, Taiwan (R.O.C.) No.175, Jhongshan Rd., Yingge Dist., Yingge Branch (02)86781188 TACBTWTPXXX New Taipei City 239, Taiwan (R.O.C.)
120 Annual Report 2017
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Taiwan Cooperative Bank
Branch Name Address Telephone SWIFT Code No.224, Sinshu Rd., Sinjhuang Dist., Sinshu Branch (02)22012797 TACBTWTPXXX New Taipei City 242, Taiwan (R.O.C.) No.105, Lide St., Jhonghe Dist., Lide Branch (02)82282121 TACBTWTPXXX New Taipei City 235, Taiwan (R.O.C.) No.35, Sec. 3, Jhongshan Rd., Jhonghe Dist., Bei Jhonghe Branch (02)22263667 TACBTWTPXXX New Taipei City 235, Taiwan (R.O.C.) No.657-10, Jhongjheng Rd., Sinjhuang Dist., Danfong Branch (02)29088979 TACBTWTP536 New Taipei City 242, Taiwan (R.O.C.) 1F., No.6, Sec. 4, Jhongyang Rd., Tucheng Dist., Nan Tucheng Branch (02)22686888 TACBTWTP145 New Taipei City 236, Taiwan (R.O.C.) No.71, Wunhua Rd., Sansia Dist., Bei Sansia Branch (02)26711110 TACBTWTP531 New Taipei City 237, Taiwan (R.O.C.) No.43, Sec. 2, Nanya S. Rd., Banciao Dist., Bansin Branch (02)89663889 TACBTWTP531 New Taipei City 220, Taiwan (R.O.C.) No.120, Jhengyi N. Rd., Sanchong Dist., Nan Sanchong Branch (02)29817117 TACBTWTP532 New Taipei City 241, Taiwan (R.O.C.) No.2, Lane 235, Baociao Rd., Xindian Dist., Baociao Branch (02)29185506 TACBTWTP535 New Taipei City 231, Taiwan (R.O.C.) No.115, Sintai Rd., Sinjhuang Dist., Sintai Branch (02)29986688 TACBTWTP536 New Taipei City 242, Taiwan (R.O.C.) No.200, Sec. 1, Syuefu Rd., Tucheng Dist., Bei Tucheng Branch (02)22731688 TACBTWTPXXX New Taipei City 236, Taiwan (R.O.C.) No.94-1, Sec. 1, Sintai 5th Rd., Sijhih Dist., Nan Sijhih Branch (02)26968888 TACBTWTP538 New Taipei City 221, Taiwan (R.O.C.) No.793, Jhongjheng Rd., Shulin Dist., Bei Shulin Branch (02)26762789 TACBTWTP531 New Taipei City 238, Taiwan (R.O.C.) Wugu Industrial Park No.119, Wugong Rd., Wugu Dist., (02)22989898 TACBTWTP536 Branch New Taipei City 248, Taiwan (R.O.C.) No.219, Sec. 2, Zhongshan N. Rd., Tamsui Dist., Danshuei Branch (02)26211415 TACBTWTPXXX New Taipei City 251, Taiwan (R.O.C.) No.62-5, Sec. 1, Wenhua 2nd Rd., Linkou Dist., Linkou Wenhua Branch (02)2608-6883 TACBTWTP543 New Taipei City 244, Taiwan (R.O.C.) Keelung City No.255, Ren 2nd Rd., Ren-ai Dist., Keelung Branch (02)24284181 TACBTWTPXXX Keelung City 200, Taiwan (R.O.C.) No.143, Sin 1st Rd., Sinyi Dist., Dong Keelung Branch (02)24283111 TACBTWTPXXX Keelung City 201, Taiwan (R.O.C.) Taoyuan City No.58, Jhongjheng Rd., Taoyuan Dist., Taoyuan Branch (03)3326121 TACBTWTP015 Taoyuan City 330, Taiwan (R.O.C.) No.43, Sinyi Rd., Dasi Dist., Dasi Branch (03)3874666 TACBTWTP015 Taoyuan City 335, Taiwan (R.O.C.) No.1068, Sec. 2, Wanshou Rd., Gueishan Dist., Gueishan Branch (03)3299661 TACBTWTP015 Taoyuan City 333, Taiwan (R.O.C.) No.180, Jhongshan Rd., Jhongli Dist., Jhongli Branch (03)4225141 TACBTWTP015 Taoyuan City 320, Taiwan (R.O.C.) No.221, Jhongjheng Rd., Longtan Dist., Longtan Branch (03)4893512 TACBTWTP015 Taoyuan City 325, Taiwan (R.O.C.) No.720, Jhongjheng Rd., Taoyuan Dist., Cihwun Branch (03)3578811 TACBTWTP015 Taoyuan City 330, Taiwan (R.O.C.) No.163, Sec. 1, Wanshou Rd., Gueishan Dist., Hueilong Branch (02)82098266 TACBTWTP015 Taoyuan City 333, Taiwan (R.O.C.)
Head Office and Branches 121
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Branch Name Address Telephone SWIFT Code No.845, Jhongshan Rd., Taoyuan Dist., Nan Taoyuan Branch (03)3692188 TACBTWTP015 Taoyuan City 330, Taiwan (R.O.C.) No.392, Sec. 2, Jhongbei Rd., Jhongli Dist., Jhongyuan Branch (03)4688998 TACBTWTP015 Taoyuan City 320, Taiwan (R.O.C.) No.290, Sec. 2, Huannan Rd., Pingjhen Dist., Pingjhen Branch (03)4689299 TACBTWTP015 Taoyuan City 324, Taiwan (R.O.C.) No.49, Wunhua 2nd Rd., Gueishan Dist., Linkou Branch (03)3183880 TACBTWTP015 Taoyuan City 333, Taiwan (R.O.C.) No.767, Sec. 1, Jieshou Rd., Bade Dist., Bade Branch (03)2185888 TACBTWTP015 Taoyuan City 334, Taiwan (R.O.C.) No.387, Dajhu Rd., Lujhu Dist., Luchu Branch (03)3232010 TACBTWTP545 Taoyuan City 338, Taiwan (R.O.C.) No.47-1, Zhongzheng E. Rd., Dayuan Dist., Dayuan Branch (03)3867733 TACBTWTP543 Taoyuan City 337, Taiwan (R.O.C.) No.12, Jhonghua Rd., Taoyuan Dist., Dong Taoyuan Branch (03)3355009 TACBTWTP543 Taoyuan City 330, Taiwan (R.O.C.) No.119, Jhongshan Rd., Jhongli Dist., Lisin Branch (03)4222131 TACBTWTP544 Taoyuan City 320, Taiwan (R.O.C.) No.11, Nanshang Rd., Lujhu Dist., Nankan Branch (03)3221199 TACBTWTP545 Taoyuan City 338, Taiwan (R.O.C.) No.1, Huannan Rd., Pingjhen Dist., Taoyuan City Sinming Branch (03)4939393 TACBTWTP544 324, Taiwan (R.O.C.) No.10-1, Damo St., Yangmei Dist., Yangmei Branch (03)4754411 TACBTWTP543 Taoyuan City 326, Taiwan (R.O.C.) No.5, Fusing St., Gueishan Dist., Changgung Branch (03)3970781 TACBTWTP543 Taoyuan City 333, Taiwan (R.O.C.) Hsinchu City No.23, Jhongjheng Rd., East Dist., Hsinchu Branch (03)5244151 TACBTWTP017 Hsinchu City 300, Taiwan (R.O.C.) No.168, Beida Rd., North Dist., Bei Hsinchu Branch (03)5284001 TACBTWTP124 Hsinchu City 300, Taiwan (R.O.C.) No.57, Dongguang Rd., East Dist., Guangfu Branch (03)5753666 TACBTWTP017 Hsinchu City 300, Taiwan (R.O.C.) No.60, Dongmen St., Jhucian Branch (03)5215121 TACBTWTP563 Hsinchu City 300, Taiwan (R.O.C.) Hsinchu Science-based No.1, Keji Rd., (03)5783962 TACBTWTP564 Industrial Park Branch Hsinchu City 300, Taiwan (R.O.C.) Hsinchu County No.92, Sec. 2, Changchun Rd., Jhudong Jhudong Branch (03)5963126 TACBTWTP564 Township, Hsinchu County 310, Taiwan (R.O.C.) No.261, Guangming 6th Rd., Jhubei City, Jhubei Branch (03)5546000 TACBTWTP131 Hsinchu County 302, Taiwan (R.O.C.) No.259, Dong Sec. 1, Guangming 6th Rd., Jhubei Lioujia Branch (03)6586969 TACBTWTP017 City, Hsinchu County 302, Taiwan (R.O.C.) No.343, Jhongjheng E. Rd., Jhubei City, Dong Jhubei Branch (03)5540108 TACBTWTP551 Hsinchu County 302, Taiwan (R.O.C.) Miaoli County No.660, Jhongjheng Rd., Miaoli City, Miaoli Branch (037)320921 TACBTWTP018 Miaoli County 360, Taiwan (R.O.C.) No.70, Ren-ai Rd., Toufen Township, Toufen Branch (037)665115 TACBTWTP563 Miaoli County 351, Taiwan (R.O.C.) No.396, Jhongjheng Rd., Miaoli City, Bei Miaoli Branch (037)351111 TACBTWTP018 Miaoli County 360, Taiwan (R.O.C.)
122 Annual Report 2017
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
Taiwan Cooperative Bank
Branch Name Address Telephone SWIFT Code No.218, Daying Rd., Zhunan Township, Zhunan Branch (037)466790 TACBTWTP018 Miaoli County 350, Taiwan (R.O.C.) Taichung City No.2, Sec. 2, Zihyou Rd., Central Dist., Taichung Branch (04)22245121 TACBTWTP022 Taichung City 400, Taiwan (R.O.C.) No.5, Gongyuan Rd., Central Dist., Jhongsing Branch (04)22241161 TACBTWTP050 Taichung City 400, Taiwan (R.O.C.) No.61, Sec. 2, Gongyi Rd., Nantun Dist., Wucyuan Branch (04)23229191 TACBTWTP069 Taichung City 408, Taiwan (R.O.C.) No.789, Jhongming S. Rd., South Dist., Nan Taichung Branch (04)22617211 TACBTWTP107 Taichung City 402, Taiwan (R.O.C.) No.103, Sec. 2, Wucyuan W. Rd., Nantun Dist., Nantun Branch (04)24752171 TACBTWTP069 Taichung City 408, Taiwan (R.O.C.) No.151, Sec. 2, Hankou Rd., Situn Dist., Si Taichung Branch (04)23170311 TACBTWTP022 Taichung City 407, Taiwan (R.O.C.) No.67, Sec. 3, Wunsin Rd., Situn Dist., Situn Branch (04)23112411 TACBTWTP022 Taichung City 407, Taiwan (R.O.C.) No.670, Sec. 4, Wunsin Rd., Beitun Dist., Beitun Branch (04)22301199 TACBTWTP050 Taichung City 406, Taiwan (R.O.C.) No.375, Wucyuan Rd., North Dist., Bei Taichung Branch (04)22055588 TACBTWTP022 Taichung City 404, Taiwan (R.O.C.) No.315, Sec. 1, Dongshan Rd., Beitun Dist., Jyungong Branch (04)22390128 TACBTWTP022 Taichung City 406, Taiwan (R.O.C.) No.15, Yongfu Rd., Situn Dist., Yong-an Branch (04)24623181 TACBTWTP022 Taichung City 407, Taiwan (R.O.C.) No.728, Sec. 1, Taiwan Blvd., West Dist., Jhongcyuan Branch (04)22037979 TACBTWTP022 Taichung City 403, Taiwan (R.O.C.) No.247, Beitun Rd., Beitun Dist., Taiyuan Branch (04)22334291 TACBTWTP022 Taichung City 406, Taiwan (R.O.C.) No.95, Sec. 2, Changping Rd., Beitun Dist., Songjhu Branch (04)24228751 TACBTWTP022 Taichung City 406, Taiwan (R.O.C.) No.17, Sec. 2, Zhongqing Rd., Beitun Dist., Jhongcing Branch (04)22913176 TACBTWTP022 Taichung City 406, Taiwan (R.O.C.) No.1499, Jiancheng Rd., East Dist., Jiancheng Branch (04)22873311 TACBTWTP022 Taichung City 402, Taiwan (R.O.C.) No.526, Sec. 3, Taiwan Blvd., Situn Dist., Chaoma Branch (04)27013115 TACBTWTP022 Taichung City 407, Taiwan (R.O.C.) No.380, Sec. 3, Fusing Rd., South Dist., Dong Taichung Branch (04)22203161 TACBTWTP022 Taichung City 402, Taiwan (R.O.C.) No.136, Sec. 2, Fuxing Rd., South Dist., Meichun Branch (04)22614377 TACBTWTP107 Taichung City 402, Taiwan (R.O.C.) No.1064, Sec. 1, Liming Rd., Nantun Dist., Liming Branch (04)23892493 TACBTWTP069 Taichung City 408, Taiwan (R.O.C.) No.163, Sec. 1, Changping Rd., Beitun Dist., Changping Branch (04)22443037 TACBTWTP022 Taichung City 406, Taiwan (R.O.C.) No.170, Jingwu E. Rd., East Dist., Jingwu Branch (04)22116358 TACBTWTP022 Taichung City 401, Taiwan (R.O.C.) No.316, Sec. 1, Wunsin Rd., Nantun Dist., Wunsin Branch (04)23223300 TACBTWTP069 Taichung City 408, Taiwan (R.O.C.) No.252, Sec. 2, Situn Rd., Situn Dist., Fongjia Branch (04)27089075 TACBTWTP022 Taichung City 407, Taiwan (R.O.C.) No.91, Mincyuan Rd., West District, Sinjhong Branch (04)22237711 TACBTWTP516 Taichung City 403, Taiwan (R.O.C.)
Head Office and Branches 123
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
Branch Name Address Telephone SWIFT Code No.152, Sec. 3, Wunsin Rd., Situn District, Jhonggang Branch (04)23138811 TACBTWTP517 Taichung City 407, Taiwan (R.O.C.) 1F., No.447, Sec. 1, Zhongqing Rd., North Dist., Weidao Branch (04)22987988 TACBTWTP517 Taichung City 406, Taiwan (R.O.C.) Jhongming South Road No.451, Jhongming S. Rd., West Dist., (04)23764066 TACBTWTP516 Branch Taichung City 403, Taiwan (R.O.C.) No.2, Hanxiang Rd., Situn Dist., Shueinan Branch (04)27029354 TACBTWTP516 Taichung City 407, Taiwan (R.O.C.) No.102, Jhongjheng Rd., Fongyuan Dist., Fongyuan Branch (04)25231122 TACBTWTP020 Taichung City 420, Taiwan (R.O.C.) No.106, Shatian Rd., Shalu Dist., Shalu Branch (04)26622141 TACBTWTP021 Taichung City 433, Taiwan (R.O.C.) No.222, Yuanhuan S. Rd., Fongyuan Dist., Nan Fongyuan Branch (04)25244180 TACBTWTP022 Taichung City 420, Taiwan (R.O.C.) No.384, Sec. 1, Jhongsing Rd., Dali Dist., Dali Branch (04)24934111 TACBTWTP102 Taichung City 412, Taiwan (R.O.C.) No.84, Jhongsing Rd., Taiping Dist., Taiping Branch (04)22761515 TACBTWTP022 Taichung City 411, Taiwan (R.O.C.) No.598, Sec. 1, Jhongshan Rd., Wurih Dist., Wurih Branch (04)23369911 TACBTWTP022 Taichung City 414, Taiwan (R.O.C.) No.799-1, Zhongzheng Rd., Shengang Dist., Shenggang Branch (04)25621111 TACBTWTP554 Taichung City 429, Taiwan (R.O.C.) No.95, Sec. 2, Yahuan Rd., Daya Dist., Daya Branch (04)25660199 TACBTWTP022 Taichung City 428, Taiwan (R.O.C.) 1F., No.281, Sec. 2, Jhongshan Rd., Tanzih Dist., Tanzih Branch (04)25325566 TACBTWTP050 Taichung City 427, Taiwan (R.O.C.) No.351, Jhongjheng Rd., Fongyuan Dist., Fongjhong Branch (04)25280369 TACBTWTP554 Taichung City 420, Taiwan (R.O.C.) No.261, Sec. 2, Sinren Rd., Dali Dist., Bei Dali Branch (04)24836699 TACBTWTP516 Taichung City 412, Taiwan (R.O.C.) No.307, Guanghua Rd., Shalu Dist., Dong Shalu Branch (04)26653311 TACBTWTP021 Taichung City 433, Taiwan (R.O.C.) No.233-3, Sanfong Rd., Houli Dist., Houli Branch (04)25563188 TACBTWTP020 Taichung City 421, Taiwan (R.O.C.) Nantou County No.96, Jhongshan St., Nantou City, Nantou Branch (049)2234141 TACBTWTP025 Nantou County 540, Taiwan (R.O.C.) No.839, Sec. 3, Jishan Rd., Jhushan Township, Jhushan Branch (049)2652721 TACBTWTP022 Nantou County 557, Taiwan (R.O.C.) No.299, Sec. 2, Jhongshan Rd., Puli Township, Puli Branch (049)2986411 TACBTWTP022 Nantou County 545, Taiwan (R.O.C.) No.864, Jhongjheng Rd., Caotun Township, Caotun Branch (049)2338141 TACBTWTP516 Nantou County 542, Taiwan (R.O.C.) No.176, Minsheng Rd., Jiji Township, Jiji Branch (049)2761501 TACBTWTP516 Nantou County 552, Taiwan (R.O.C.) No.320, Jhongjheng Rd., Puli Township, Dong Puli Branch (049)2989160 TACBTWTP584 Nantou County 545, Taiwan (R.O.C.) Changhua County No.279, Minsheng Rd., Changhua City, Changhua Branch (04)7225151 TACBTWTP023 Changhua County 500, Taiwan (R.O.C.) No.844, Sec. 1, Jhongshan Rd., Yuanlin City, Yuanlin Branch (04)8322181 TACBTWTP024 Changhua County 510, Taiwan (R.O.C.) No.532, Minzu Rd., Changhua City, Jhangying Branch (04)7229221 TACBTWTP023 Changhua County 500, Taiwan (R.O.C.)
124 Annual Report 2017
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
Taiwan Cooperative Bank
Branch Name Address Telephone SWIFT Code No.321, Sec. 1, Jhongjheng Rd., Changhua City, Jhangchu Branch (04)7240082 TACBTWTP023 Changhua County 500, Taiwan (R.O.C.) No.56, Sihuan Rd., Sihu Township, Sihu Branch (04)8829121 TACBTWTP510 Changhua County 514, Taiwan (R.O.C.) No.361, Sec. 6, Luhe Rd., Hemei Township, Hemei Branch (04)7570123 TACBTWTP023 Changhua County 508, Taiwan (R.O.C.) No.239, Sec. 2, Jhangnan Rd., Changhua City, Dajhu Branch (04)7373311 TACBTWTP023 Changhua County 500, Taiwan (R.O.C.) No.35, Sinsing Rd., Shengang Township, Shengang Branch (04)7996922 TACBTWTP023 Changhua County 509, Taiwan (R.O.C.) No.120, Minzu Rd., Lugang Township, Lugang Branch (04)7788511 TACBTWTP023 Changhua County 505, Taiwan (R.O.C.) No.733, Sec. 1, Jhongshan Rd., Yuanlin City, Yuansin Branch (04)8322741 TACBTWTP560 Changhua County 510, Taiwan (R.O.C.) No.43, Siaoyang Rd., Changhua City, Nan Changhua Branch (04)7254611 TACBTWTP560 Changhua County 500, Taiwan (R.O.C.) No.168, Jhongjheng Rd., Beidou Township, Beidou Branch (04)8880181 TACBTWTP560 Changhua County 521, Taiwan (R.O.C.) Yunlin County No.3, Datong Rd., Douliou City, Douliou Branch (05)5323981 TACBTWTP566 Yunlin County 640, Taiwan (R.O.C.) No.53, Yimin Rd., Beigang Township, Beigang Branch (05)7836136 TACBTWTP028 Yunlin County 651, Taiwan (R.O.C.) No.15, Jhongjheng Rd., Huwei Township, Huwei Branch (05)6313821 TACBTWTP028 Yunlin County 632, Taiwan (R.O.C.) No.21, Jhongsi Rd., Linnei Township, Linnei Branch (05)5897811 TACBTWTP566 Yunlin County 643, Taiwan (R.O.C.) No.223, Minsheng Rd., Douliou City, Yunlin Branch (05)5324811 TACBTWTP566 Yunlin County 640, Taiwan (R.O.C.) Chiayi City No.279, Guohua St., East Dist., Chiayi Branch (05)2224571 TACBTWTP028 Chiayi City 600, Taiwan (R.O.C.) No.746, Minzu Rd., West Dist., Nan Chiayi Branch (05)2286311 TACBTWTP028 Chiayi City 600, Taiwan (R.O.C.) No.3, De-an Rd., West Dist., Bei Chiayi Branch (05)2815500 TACBTWTP028 Chiayi City 600, Taiwan (R.O.C.) No.425, Mincyuan Rd., Dong Chiayi Branch (05)2225281 TACBTWTP584 Chiayi City 600, Taiwan (R.O.C.) Chiayi County No.62, Haitong Rd., Puzih City, Puzih Branch (05)3794171 TACBTWTP028 Chiayi County 613, Taiwan (R.O.C.) No.3, Wunhua N. Rd., Puzih City, Bei Puzih Branch (05)3790808 TACBTWTP584 Chiayi County 613, Taiwan (R.O.C.) Tainan City No.48, Chenggong Rd., West Central Dist., Tainan Branch (06)2232101 TACBTWTP030 Tainan City 700, Taiwan (R.O.C.) No.97, Sec. 1, Beimen Rd., East Dist., Chenggong Branch (06)2269161 TACBTWTP031 Tainan City 700, Taiwan (R.O.C.) No.72, Sec. 2, Minsheng Rd., West Central Dist., Nansing Branch (06)2221291 TACBTWTP030 Tainan City 700, Taiwan (R.O.C.)
Head Office and Branches 125
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
Branch Name Address Telephone SWIFT Code No.138, Shengli Rd., East Dist., Chengda Branch (06)3028001 TACBTWTP030 Tainan City 704, Taiwan (R.O.C.) No.197, Sec. 2, Jhonghua E. Rd., East Dist., Dong Tainan Branch (06)2882211 TACBTWTP030 Tainan City 701, Taiwan (R.O.C.) No.159, Sec. 3, Simen Rd., North Dist., Bei Tainan Branch (06)2209211 TACBTWTP030 Tainan City 704, Taiwan (R.O.C.) No.204, Chenggong Rd., North Dist., Chihkan Branch (06)2201302 TACBTWTP521 Tainan City 704, Taiwan (R.O.C.) No.380, Sec. 2, Jiankang Rd., South Dist., Fucheng Branch (06)2910896 TACBTWTP521 Tainan City 702, Taiwan (R.O.C.) No.147, Kaiyuan Rd., North Dist., Kaiyuan Branch (06)2753345 TACBTWTP521 Tainan City 704, Taiwan (R.O.C.) No.115, Jhongshan Rd., Xinying Dist., Xinying Branch (06)6324121 TACBTWTP028 Tainan City 730, Taiwan (R.O.C.) No.83, Heping St., Jiali Dist., Jiali Branch (06)7223131 TACBTWTP030 Tainan City 722, Taiwan (R.O.C.) No.357, Jhonghua Rd., Yongkang Dist., Yongkang Branch (06)2316971 TACBTWTP153 Tainan City 710, Taiwan (R.O.C.) No.360, Minjhih Rd., Xinying Dist., Bei Xinying Branch (06)6562718 TACBTWTP584 Tainan City 730, Taiwan (R.O.C.) No.4, Sec. 3, Jhongjheng Rd., Rende Dist., Rende Branch (06)2794616 TACBTWTP570 Tainan City 717, Taiwan (R.O.C.) No.202, Jhonghua Rd., Yongkang Dist., Nan Yongkang Branch (06)3121916 TACBTWTP153 Tainan City 710, Taiwan (R.O.C.) Kaohsiung City No.97, Dayong Rd., Yancheng Dist., Kaohsiung Branch (07)5514221 TACBTWTP034 Kaohsiung City 803, Taiwan (R.O.C.) No.8, Yugang Rd., Qianzhen Dist., Kaohsiung Cianjhen Branch (07)8416491 TACBTWTPAAB City 806, Taiwan (R.O.C.) No.110, Cisian 2nd Rd., Sinsing Dist., Sinsing Branch (07)2887121 TACBTWTP034 Kaohsiung City 800, Taiwan (R.O.C.) No.182, Gongjheng Rd., Cianjhen Dist., Siande Branch (07)7112046 TACBTWTP035 Kaohsiung City 806, Taiwan (R.O.C.) No.232, Jhonghua 3rd Rd., Sanmin Dist., Bei Kaohsiung Branch (07)2863000 TACBTWTP034 Kaohsiung City 801, Taiwan (R.O.C.) No.394, Cingnian 1st Rd., Sinsing Dist., Lingya Branch (07)2918151 TACBTWTP034 Kaohsiung City 800, Taiwan (R.O.C.) No.30, Bo-ai 1st Rd., Sanmin Dist., Sanmin Branch (07)3127191 TACBTWTP059 Kaohsiung City 807, Taiwan (R.O.C.) No.94, Sanduo 3rd Rd., Cianjhen Dist., Nan Kaohsiung Branch (07)3348141 TACBTWTP352 Kaohsiung City 802, Taiwan (R.O.C.) No.20, Dashun 3rd Rd., Lingya Dist., Tashun Branch (07)7131886 TACBTWTP034 Kaohsiung City 802, Taiwan (R.O.C.) Dong Kaohsiung No.176, Minsheng 1st Rd., Sinsing District, (07)2265666 TACBTWTP034 Branch Kaohsiung City 800, Taiwan (R.O.C.) No.45, Jhonghua 4th Rd., Lingya Dist., Cianjin Branch (07)3363966 TACBTWTP352 Kaohsiung City 802, Taiwan (R.O.C.) No.675, Jiangong Rd., Sanmin Dist., Wannei Branch (07)3861591 TACBTWTP128 Kaohsiung City 807, Taiwan (R.O.C.) No.148-82, Guanghua 1st Rd., Sinsing Dist., Guanghua Branch (07)2223020 TACBTWTP034 Kaohsiung City 800, Taiwan (R.O.C.) No.119, Yisin 2nd Rd., Cianjhen Dist., Yisin Lu Branch (07)3332020 TACBTWTP034 Kaohsiung City 806, Taiwan (R.O.C.) No.450, Bo-ai 2nd Rd., Zuoying Dist., Kaohsiung Zuoying Branch (07)5562226 TACBTWTP059 City 813, Taiwan (R.O.C.)
126 Annual Report 2017
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
Taiwan Cooperative Bank
Branch Name Address Telephone SWIFT Code No.352, Jhonghua 1st Rd., Gushan Dist., Gushan Branch (07)5223311 TACBTWTP524 Kaohsiung City 804, Taiwan (R.O.C.) Kaohsiung Software No.11-2, Chenggong 2nd Rd., Cianjhen Dist., (07)5351888 TACBTWTP352 Park Branch Kaohsiung City 806, Taiwan (R.O.C.) No.230, Jhongjheng 4th Rd., Cianjin District, Gangdu Branch (07)2914131 TACBTWTP524 Kaohsiung City 801, Taiwan (R.O.C.) No.216, Cisian 1st Rd., Sinsing District, Cisian Branch (07)2365503 TACBTWTP525 Kaohsiung City 800, Taiwan (R.O.C.) No.189, Bo-ai 1st Rd., Sanmin Dist., Shihcyuan Branch (07)3230611 TACBTWTP527 Kaohsiung City 807, Taiwan (R.O.C.) No.581, Jyuemin Rd., Sanmin Dist., Jiouru Branch (07)3805001 TACBTWTP524 Kaohsiung City 807, Taiwan (R.O.C.) No.526, Hongping Rd., Siaogang Dist., Siaogang Branch (07)8062289 TACBTWTP524 Kaohsiung City 812, Taiwan (R.O.C.) No. 1111, Houchang Rd., Nanzih Dist., Nanzih Branch (07)3625678 TACBTWTP524 Kaohsiung City 81152, Taiwan No.95, Jhongjheng Rd., Fongshan Dist., Fongshan Branch (07)7460181 TACBTWTP032 Kaohsiung City 830, Taiwan (R.O.C.) No.2, Siaocian Rd., Gangshan Dist., Gangshan Branch (07)6216161 TACBTWTP033 Kaohsiung City 820, Taiwan (R.O.C.) No.68, Guochang Rd., Lujhu Dist., Lujhu Branch (07)6966122 TACBTWTPAAC Kaohsiung City 821, Taiwan (R.O.C.) No.32, Jhongshan Rd., Fongshan Dist., Singfong Branch (07)7453101 TACBTWTP032 Kaohsiung City 830, Taiwan (R.O.C.) No.345, Fonglin 3rd Rd., Daliao Dist., Dafa Branch (07)7830589 TACBTWTP032 Kaohsiung City 831, Taiwan (R.O.C.) No.177-1, Cueiping Rd., Dashe Dist., Dashe Branch (07)3582121 TACBTWTP524 Kaohsiung City 815, Taiwan (R.O.C.) No.200, Linyuan N. Rd., Linyuan Dist., Linyuan Branch (07)6416171 TACBTWTP524 Kaohsiung City 832, Taiwan (R.O.C.) No.3, Huazhong St., Qishan Dist., Chi Shan Branch (07)6622333 TACBTWTP524 Kaohsiung City 84243, Taiwan (R.O.C.) No.3-4, Fongsong Rd., Fongshan Dist., Fongsong Branch (07)7471131 TACBTWTP524 Kaohsiung City 830, Taiwan (R.O.C.) No.12, Jhongshan N. Rd., Gangshan Dist., Bei Gangshan Branch (07)6222871 TACBTWTP524 Kaohsiung City 820, Taiwan (R.O.C.) No.172-2, Tai'an Rd., Meinong Dist., Meinong Branch (07)6816101 TACBTWTP122 Kaohsiung City 843, Taiwan (R.O.C.) No.2-8, Jhongsing E. Rd., Dashu Dist., Dashu Branch (07)6517726 TACBTWTP524 Kaohsiung City 840, Taiwan (R.O.C.) No.87-2, Syuetang Rd., Renmei Village, Niaosong Renmei Branch (07)7321370 TACBTWTP032 Dist., Kaohsiung City 833, Taiwan (R.O.C.) No.164, Wujia 2nd Rd., Fongshan Dist., Wujia Branch (07)7172250 TACBTWTP032 Kaohsiung City 830, Taiwan (R.O.C.) Pingtung County No.42, Jhongjheng Rd., Pingtung City, Pingtung Branch (08)7343611 TACBTWTP034 Pingtung County 900, Taiwan (R.O.C.) No.91-1, Sinsheng Rd., Chaojhou Township, Chaojhou Branch (08)7883101 TACBTWTP034 Pingtung County 920, Taiwan (R.O.C.) No.287, Minsheng Rd., Pingtung City, Pingnan Branch (08)7326391 TACBTWTP122 Pingtung County 900, Taiwan (R.O.C.) No.186, Sec. 1, Guangfu Rd., Donggang Donggang Branch (08)8353701 TACBTWTP122 Township, Pingtung County 928, Taiwan (R.O.C.)
Head Office and Branches 127
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
Branch Name Address Telephone SWIFT Code No.661, Sec. 2, Jhongsing Rd., Wandan Wandan Branch (08)7779311 TACBTWTP122 Township, Pingtung County 913, Taiwan (R.O.C.) No.255-2, Zhongshan Rd., Fangliao Township, Fangliao Branch (08)8787611 TACBTWTP122 Pingtung County 940, Taiwan (R.O.C.) No.500, Sec. 2, Shepi Rd., Wandan Township, Shepi Branch (08)7071578 TACBTWTP122 Pingtung County 913, Taiwan (R.O.C.) Yilan County No.30, Sec. 3, Jhongshan Rd., Yilan City, Yilan Branch (03)9323911 TACBTWTPXXX Yilan County 260, Taiwan (R.O.C.) No.56, Yugang Rd., Su-ao Township, Su-ao Branch (03)9962521 TACBTWTPXXX Yilan County 270, Taiwan (R.O.C.) No.51, Gongjheng Rd., Luodong Township, Luodong Branch (03)9545191 TACBTWTPXXX Yilan County 265, Taiwan (R.O.C.) No.54, Jhongjheng N. Rd., Luodong Township, Bei Luodong Branch (03)9545795 TACBTWTP541 Yilan County 265, Taiwan (R.O.C.) No.32, Sec. 5, Jiaosi Rd., Jiaosi Township, Jiaosi Branch (03)9887100 TACBTWTPXXX Yilan County 262, Taiwan (R.O.C.) Hualien County No.124, Jhongshan Rd., Hualien City, Hualien Branch (03)8338111 TACBTWTPXXX Hualien County 970, Taiwan (R.O.C.) No.371, Jhongshan Rd., Hualien City, Bei Hualien Branch (03)8350151 TACBTWTPXXX Hualien County 970, Taiwan (R.O.C.) Taitung County No.336, Sec. 1, Jhonghua Rd., Taitung City, Taitung Branch (089)323011 TACBTWTPXXX Taitung County 950, Taiwan (R.O.C.) No.181, Datong Rd., Taitung City, Dong Taitung Branch (089)325130 TACBTWTP524 Taitung County 950, Taiwan (R.O.C.) Penghu County No.26, Ren’ai Rd., Magong City, Penghu Branch (06)9272766 TACBTWTPXXX Penghu County 880, Taiwan (R.O.C.)
128 Annual Report 2017
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
Taiwan Cooperative Bank
7.3 Overseas Units Unit Name Address Tel/Fax/Email United Taiwan Tel: +322-2305359 1F, Square de Meeus 1, 1000 Brussels, Belgium Fax: +322-2300470 Bank Email: [email protected] Manila Tel:+632-8481959 26F, Citibank Tower, 8741, Paseo de Roxas, Offshore Makati City, Metro Manila, Philippines Fax: +632-8481952 Banking Branch Email: [email protected] Tel: +1-213-4895433 Los Angeles 601, South Figueroa Street, Suite 3500, Los Fax: +1-213-4895195 Branch Angeles, CA 90017, U.S.A. Email: [email protected] 1201, Third Avenue, Suite 1200, Seattle, WA Tel: +1-206-5872300 Seattle Branch Fax: +1-206-6224491 98101, U.S.A. Email: [email protected] Tel:+1-212-6341818 New York 88 Pine Street, 31F, New York, New York Branch 10005, U.S.A. Fax:+1-212-6341828 E-mail: [email protected] Tel: +852-25981128 Hong Kong Suites 1303-1310, 13/ F, Everbright Centre, 108 Fax: +852-25981028 Branch Gloucester Road, WanChai, Hong Kong Email: [email protected] Room 1601, No.24 Building, Times Square, Tel: +86-512-62953336 Suzhou Branch Fax: +86-512-62956660 Hua Chi St., SIP, Suzhou 215028, China Email: [email protected] Suzhou New Tel: +86-512-86868168 Room 3601, 36F, No.28 Shishan Road. SND, District Suzhou 215011, China Fax: +86-512-87660869 Sub-Branch Email: [email protected] Room 1801,1802,1803,1804,1807, 18F, Golden Tel: +86-22-58526999 Tianjin Branch Valley Center Building 1, No.1 Binjiang Road, Fax:+86-22-59956011 Heping District, Tianjin, 300041, China E-mail: [email protected] Room 2608, 26F, Shenglong Financial Center, Tel: +86-591-86320069 Fuzhou Branch Guangming Nan Road No.1, Fuzhou 350000, Fax: +86-591-86320109 China E-mail: [email protected] Room 021-023, 28F , BOFO International Plaza, TEL:+86-731-8823-2259 Changsha Branch No.416, Section 1, Furong Middle Road, Kaifu FAX:+86-731-8823-2279 Dist., Changsha 410003 ,China EMAIL:[email protected] Tel: +61-2-92990068 Sydney Branch Suite 101, Level 1, 50 Carrington Street, Fax: +61-2-92903897 Sydney NSW 2000, Australia Email: [email protected] 、 Melbourne Suite 2, Level 2, 356 Collins Street, Melbourne, TEL:+61-3-99771800 (02)77085525 FAX:+61-3-99771809 Branch Vic 3000, Australia EMAIL:[email protected] No.171, Norodom Blvd Corner Street 322, Tel: +855-23-430800 Phnom Penh Branch Sangkat Boeng Keng Kang Ti Muoy, Khan Fax: +855-23-210630 Chamkarmon, Phnom Penh, Cambodia Email: [email protected] Tuek Thla Building No.A111, Confederation de Tuek Thla la Russie Blvd Corner Northbridge Street, Tel: +855-23-430703 Fax: +855-23-883991 Sub-Branch Sangkat Tuek Thla, Khan Saen Sok, Phnom E-mail: [email protected] Penh, Cambodia Building No.62, National Road 4, Sangkat Tel: +855-23-430705 Pur Senchey Chaom Chau, Khan Pur Senchey, Fax: +855-23-729548 Sub-Branch Phnom Penh, Cambodia E-mail: [email protected] Siem Reap No.0583, National Road No.6A, Chongkaosou Village, Sangkat Sla kram, Krong Siem Reap, Tel:+855-63-765595 Sub-Branch Siem Reap Province, Cambodia City Center NO. A2-2 ,Street 169, Sangkat Veal Vong, Khan Sub-Branch Prampir Meakkakra, Phnom Penh, Cambodia Tel:+855-23-430058 Beijing Room 1805, Office Tower 1, Henderson Centre, Tel: +86-10-65188173 Representative 18F, No. 18, Jianguomen Nei Avenue, Dong Fax: +86-10-65188172 Office Cheng District, Beijing, 100005, China Email: [email protected] Unit No. 08-01, Level 8, Union Financial Centre Yangon Representative (UFC), Corner of Maharbandoola Road and Tel: +95-18610478 Thein Phyu Road, Botahtaung Township, Email: [email protected] Office Yangon, Myanmar
Head Office and Branches 129
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
Head Office United Taiwan Bank Manila Offshore Banking Branch
Los Angeles Branch Seattle Branch New York Branch
Hong Kong Branch Suzhou Branch Suzhou New District Sub-Branch WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
Tianjin Branch Fuzhou Branch Changsha Branch
Beijing Representative Office Sydney Branch Melbourne Branch
Phnom Penh Branch Tuek Thla Sub-Branch Pur Senchey Sub-Branch WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10 \\\
Siem Reap Sub-Branch City Center Sub-Branch Yangon Representative Office
WorldReginfo - d34f533a-0ea0-4cf5-acf7-61ec7cc17e10
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