TBB — Annual Report 2021

Aug 13, 2021

Taiwan Stock Exchange Market Observation Post System ： http://mops.twse.com.tw

TBB’s Annual Report is available at ： https://www.tbb.com.tw

Stock Code ： 2834 中華民國一○九年年報[2020]

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Notice to readers

If there is any discrepancy between the English version and Chinese version, the Chinese

version shall prevail.

Published in March 2021

Taiwan Business Bank Head Office

Address: No. 30, Ta Cheng St., Taipei, Taiwan, R.O.C. Tel: 886-2-2559-7171 Web Site: https://www.tbb.com.tw

Spokesperson

Name: Yu-Min Chang Title: Executive Vice President Tel: 886-2-2559-5815/886-2-2559-7171 ext:1311 E-mail Address: chang.y.m@mail.tbb.com.tw

Deputy Spokesperson (1)

Name: Chang-Yu Lin Title: Executive Vice President Tel: 886-2-2559-7222 / 886-2-2559-7171 ext: 1711 E-mail Address: h31@mail.tbb.com.tw

Deputy Spokesperson (2)

Name: Li-Yueh Hsu Title: S.V.P. & Chief Secretary Tel: 886-2-2550-5726 / 886-2-2559-7171 ext: 1511 E-mail Address: h28@mail.tbb.com.tw

Stock Registration Agent

Name: Yuanta Securities Co., Ltd. Address: B1, No. 210, Sec. 3, Chengde Rd., Datong Dist., Taipei, Taiwan, R.O.C. Tel: 886-2-2586-5859

Web Site: https://www.yuanta.com.tw

Rating Agency

Name: Taiwan Ratings Co.

Address: 2F., No. 167, Dunhua N. Rd., Songshan Dist., Taipei City Taiwan, R.O.C. TEL: 886-2-2175-6800

Web Site: http://www.taiwanratings.com

The CPA-auditor of the Financial Report

Name: Tan-Tan Chung, Chun-Kuang Chen Name of Employer: KPMG Certified Public Accountants Address: 68F, No. 7, Sec. 5, Xinyi Road, Taipei, Taiwan, R.O.C. Tel: 886-2- 8101-6666 Web Site: http://www.kpmg.com.tw

Flotation at Overseas Stock Exchange and Information Inquiry: None Please refer to Chapter X for the Directory of Head Office and Branch Units.

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深耕臺灣 連結亞太 布局全球 We can be the best !

Contents

04 I. Letter to Shareholders

• 05 1. Operation Results in 2020

• 12 2. Business Plans for 2021

• 16 3. Future Development Strategies

• 17

• 18 5. Results of Latest Credit Rating

19 II. Bank Profile

22

III. Corporate Governance Report

• 23 1. Organization

• 25 2. Directors and Management Team

• 41 3. Implementation of Corporate Governance

• 64 4. Information on Fees for CPAs

• 64 5. Information on Changing CPAs

• 65 6. Bank's chairman, president, or any manager in charge of finance or accounting matters who has, in the most recent year, held a position at the accounting firm of its CPA or at an affiliated enterprise

• 65 7. Changes in Shareholdings of Directors, Executive Officers, and Shareholders Conform to the Regulations Governing the Same Person or Same Concerned Party Holding the Issued Shares with Voting Rights over a Particular Ratio of a Bank, Article 11

• 70 8. Information Disclosing the Relationship among Top Ten Shareholders in the Relationship of Related Parties or Spouses, Relatives within the Second Degree of Kinship

• 71 9. Shareholding in the Same Investee Company of a Business Directly or Indirectly Controlled and Managed by Directors, President, Executive Vice Presidents, and SVP & GM of Departments and Branches, and the Consolidated Shareholding Ratio

72

IV. Fund-Raising Status

• 73 1. Shares and Dividends

• 76 2. Issuance Status of Financial Bonds

• 81 3. Preferred Stocks, Global Depository Receipts, and Employee Stock Warrants, New Restricted Employee Shares, Any Merger and Acquisition Activities, and Acceptance of Transfer of the Shares of Another Financial Institution

• 81 4. Status of Implementation of Capital Allocation Plans

82

V. Business Operation

• 83 1. Business Scope

• 101 2. Employees

• 103 3. Corporate responsibilities and moral conduct

• 103 4. The Number of Non-Managerial Full-time Employees, and Their Average Salary and Median Salary

• 103 5. Information Equipment

• 105 6. Labor-Management Relations

• 106 7. Important Contracts

• 107 8. Relevant information on securitization products

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108 VI. Financial Status

• 109 1 Condensed Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income for the Past Five Years

• 113 2. Financial Analysis for the Past Five Years

• 118 3. Audit Committee's Audit Report on the 2020 Financial Statements

• 119 4. Representation Letter for 2020 Consolidated Financial Statements

• 120 5. Independent Auditors' Report for 2020 Consolidated Financial Statements

• 123 6. 2020 Consolidated Financial Statements and Accompanying Notes

• 223 7. Independent Auditors' Report for 2020 Individual Financial Statements

• 226 8. TBB's Individual Financial Statements Certified by CPAs for 2020 Individual Financial Statements and Accompanying Notes

• 323

324 VII. Review, Analysis, and Risks of Financial Conditions and Performance

• 325 1. Financial Position Analysis

• 326 2. Financial Performance Analysis

• 326

• Analysis of Cash Flow

• 326 4. Impact of Major Capital Expenditure on the Company's Financial Business in 2020

• 327 5. Reinvestment Policy for 2020, the Main Reasons for the Profit or Loss Generated thereby, the Plan for Improving profitability, and Investment Plans for the Coming Year

• 327 6. Risk Management

• 339 7. Crisis Management and Response Mechanism

• 339

340 VIII. Special Notes

• 341 1. Information Regarding the Bank's Subsidiaries

• 343 2. Progress of Private Placement of Securities and Financial Bonds

• 343 3. The Bank's Subsidiaries' Shareholding or Disposal of the Bank's Shares

• 343 4. Additional Disclosure

• 343 5. Pursuant to Item 2, Paragraph 3, Article 36 of Security and Exchange Act, the Incidence Exerting Material Influence on Shareholders' Rights or Security Prices

344 IX. Corporate Social Responsibility Report

• 345 1. Promotion of Corporate Social Responsibility and Responsibility Analysis

• 346 2. Material Aspects Analysis

• 350 3. Risks and Opportunities of Climate Change

• 351 4. TBB's Achievements in Promoting of Corporate Social Responsibility in 2020

360 X. Directory of Head Office and Branch Units

I Letter to Shareholders

• 05 1. Operation Results in 2020

2. Business Plans for 2021

12

• 16 3. Future Development Strategies

• 17 4. Influences from the External Competitive Environment, Legal Environment, and the Overall Economy

• 18 5. Results of Latest Credit Rating

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I

In 2020, the global economic performance was deeply affected by the outbreak of COVID-19. At the end of 2019, a severe outbreak of COVID-19 occurred in Mainland China. In March 2020, the epidemic spread from Asia to Europe and the U.S.; countries across the world implemented lockdown measures to contain the spread of the epidemic, resulting in an immediate halt of the global economy and transportations. The supply and demand of crude oil experienced serious imbalances in the international market, which led to a sharp drop in its price on an ongoing basis, and triggered substantial fluctuation in the global financial market. The Lockdown measures implemented by countries to contain the spread of the outbreak materially affected the performance of the transportation industry, tourism service industry, and import/outport business. Fortunately, countries rolled out corporate and personal burden alleviation measures and easing monetary policies to slow down the panic sentiments in the financial market and mitigate liquidity risks.

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In the future, the Bank will continue to develop the loan supervision optimization program by carrying through the internal controls using three lines of defense and strengthening the overall risk control and reinforce FinTech development as well as information security controls. Furthermore, from the perspective of a professional financial institution, the Bank will grasp the business opportunities upon the return of Taiwanese businesses and proactively assist the small and medium enterprises (SMEs) in transformation and second-generation inheritance in accordance with government policies. Meanwhile, the Bank will provide financial products and services integrated with environmental protection and social welfare that correspond to social requirements, proactively strengthening and assisting in the sustainable growth of Taiwanese SMEs, thus fulfilling its corporate social responsibility (CSR) initiatives. The Bank will endeavor to turn the Bank into a leading brand in the field of SME financing and establish a solid foundation for the sustainable development of the Bank upon stepping into the next century.

The operation results in 2020 and the business plan for 2021 are summarized below:

1. Operation Results in 2020

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(1) The Domestic and Overseas Financial Environments

On March 3 and 15, 2020, the U.S. Federal Reserve (Fed) significantly cut down the Federal Funds Rate by 150 basis points, returning to the zero interest rate policy that has been ceased since the financial crisis in 2008. In March 2020, the U.S. stock market experienced setbacks due to the panicking sentiments of investors resulted from the outbreak, triggering constant circuit breakers. The Fed upgraded the quantitative easing (QE) program from $700 billion, which was just implemented, to an unprecedentedly limitless QE in a short period of time, and include investment-grade corporate bonds and investment-grade listed ETF into the scope of purchases for the first time. Central banks in Europe and Japan soon followed on canceling their purchase ceilings of QE policies. In the meantime, the People's Bank of China adopted the targeted Reserve Requirement Ratio (RRR) cuts in response, the central banks and governments of major and emerging countries across the world adopted easing policies one after another and rolled out various burden alleviation programs shortly to maintain the drivers for the economy and employment, and stabilize the confidence of the corporates and citizens.

While the countries maintained their easing monetary policies, Central Bank in Taiwan also had an interest cut of 25 basis points in March, with a rediscount rate at 1.125%. With respect to the currency rates, the U.S. monetary easing policy weakened U.S. Dollars (USD), coupled with the repatriated funds from the Taiwanese businesses, the currency rate of New Taiwan Dollars (NTD) against USD appreciated from NT$30.114 at the beginning of 2020 to NT$28.508 at the end of 2020. In aggregate, the currency rate appreciation amounted to NT$1.606 for NTD throughout 2020, representing an increase of 5.63%.

Chairman

Bor-Yi Huang

05

(2) Changes in the Bank's Organization

• A. On December 16, 2020, the Bank established the "Taiwan Business Bank Digital Transformation Committee" to utilized innovative digital technologies in transforming its existing operating model. Customer value and experiences shall become its core concept upon transformation to create the new value and the advantage of sustainable operations, achieving its objective of digital governance.

• B. In response to the developing trend and business positioning for digital finance, the Bank created comprehensive financial services that are more in line with its spirits and missions in promoting digital banking services, hoping to facilitate the Bank's digital banking business and its digital transformation. Adapted to the market trend and conformed to customers' perception, the "Digital Banking Department” expanded its responsible scope of businesses on January 20, 2021.

(3) Implementation of Business Plans and Operating Strategies

A. Profitability:

The Bank carried out a capital increase of NT$3.566 billion via transferred earnings and issued stock and cash dividends of NT$0.50 per share and NT$0.20 per share, respectively, for the previous year (2019). Net income after tax for 2020 amounted to NT$4.702 billion (net income before tax was NT$5.374 billion).

• B. Corporate Governance: Reinforcement of information disclosure channels and improvements in transparency in corporate governance

• a. The Bank has long strived to enhance its corporate governance and ranked in the "Top 6%-20% of the Listed Companies Group" in the 2019 Corporate Governance Evaluation held by the Taiwan Stock Exchange.

• b. The Bank actively increased communication channels for domestic and overseas investors, and an online investor conference was respectively held on August 28, 2020 and December 4, 2020. Each investor has immediate access to information on the Market Observation Post System, and can obtain the same information simultaneously on the official TBB website. The Bank also issues press releases on an irregular basis, giving investors multiple channels for acquiring TBB information.

C. Core Businesses:

• a. Corporate Banking

• 1) The Bank was recognized as an "Outstanding Bank" under the "Program to Encourage Loan Projects by Domestic Banks to SMEs (Group A)" organized by the Financial Supervisory Commission (FSC).

• 2) The Bank was recognized as a "Level A Bank" under the "Program to Encourage Loan Projects by Domestic Banks to Key Innovative Industries (Group A)" organized by the FSC.

• 3) The Bank received a total of three awards from phase 1 "Program of Banks in Taiwan to Accelerate the Processing of Burden Alleviation and Revitalization Loans" (base date: June 30, 2020) organized by FSC, including "Amount (Ratio of Burden Alleviation under the Government Policy to the Total Balance of Credit Loans) - 2nd Prize," "Number of Cases (Burden Alleviation by the Financial Institution) - 2nd Prize," and "Efficiency (Burden Alleviation under the Government Policy - New Revitalization Loans) - 3rd Prize."

• 4) The Bank received a total of eight awards from phase 2 "Program of Banks in Taiwan to Accelerate the Processing of Burden Alleviation and Revitalization Loans" (base date: December 31, 2020) organized by FSC, including "Amount for Burden Alleviation under the Government Policy - 2nd Prize," "Amount for Ratio of Burden Alleviation under the Government Policy to the Total Balance of Credit Loans - 2nd Prize," "Number of Cases for Burden Alleviation under the Government Policy - 2nd Prize," "Number of Cases for Burden Alleviation by the Financial Institution - 3rd Prize," "Efficiency for Burden Alleviation under the Government Policy (New Revitalization Loans) - 2nd Prize," "Efficiency for Burden Alleviation under the Government Policy (Extension of Old Loans) - 3rd Prize," "Efficiency for Burden Alleviation under the Government Policy (New Operating Capital Loans) - 3rd Prize," and "Efficiency for Burden Alleviation under the Government Policy (New Cases) - 3rd Prize."

• 5) In recognition of the Bank's outstanding performance in assisting SMEs, it received the "Policy Facilitation Award" and "Direct Guarantee Performance Award" from the Small and Medium Enterprise Credit Guarantee Fund. The Bank also received the "Certificate of Appreciation for the 100 Billion Guarantee Project" and "Certificate of Appreciation for the Interface of Loans Transferred for Guarantee," showing that the efforts of the Bank in promoting national policies are well recognized by the competent authority and within the industry.

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• 6) The Bank actively promoted the "Micro Women Start-up Loan" and the "Unemployment Start-up Loan for Employment Insurance" and received a certificate of appreciation from the Ministry of Labor.

• 7) The Bank received the "Best of Innovative Products" from the Excellence Magazine under the category of non-financial holding for the "2020 6th Excellent Bank."

• 8) "Best SMEs Finance Award" in the 10th "Taiwan Banking and Finance Best Practice Awards" hosted by the Taiwan Academy of Banking and Finance.

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• 9) In the extension of SME loans, the Bank ranked No. 1 in Taiwan in total amount of guarantee and ratio of loans transferred for guarantees to the Small and Medium Enterprise Credit Guarantee Fund.

• b. Foreign Exchange Business

• In 2020, the Bank focused on the active promotion of expansion measures for different foreign currency businesses. In 2020, the Bank's accumulated average balance of foreign currency deposits was NT$233.803 billion, representing an increase of NT$18.084 billion or a growth of 8.38% as compared with the average balance of NT$215.719 billion in 2019. In 2020, the Bank's accumulated average balance of foreign currency loans was NT$134.264 billion, representing an increase of NT$0.988 billion or a growth of 0.74% as compared with the average balance of NT$133.276 billion in 2019.

• c. Wealth Management

• 1) In 2020, the Bank focused on strengthening its wealth-management business by vigorously expanding fee income from the insurance, fund, and foreign bond businesses, with boosting revenue and generating profit as the priority goal. With the vigorous promotion of a special program aimed at the marketing of designated products, fee income from the wealth-management (including insurance agent) business amounted to approximately NT$1.350 billion in 2020.

• 2) The Insurance Agent Department was established on January 2, 2020 to concurrently operate life insurance and property insurance. It proactively implements regulatory requirements imposed by the competent authority in relation to the consistency between authority and responsibility. By doing so, benefits are created for the Bank in aspects of risk management for businesses, customers, employees, finance, and operations, and the Bank may achieve its objective to improve the protection of customers' interests in a comprehensive and complete manner.

• d. Engagement in Burden Alleviation Loan Business for the Outbreak

• 1) Since the outbreak of COVID-19, all members

• of the Bank were called to action. The "Burden Alleviation and Revitalization Steering Group for the Outbreak" was immediately established at the headquarters to provide various burden alleviation and revitalization programs organized by the government to our fellow colleagues and customers of our branches first. Meanwhile, The Bank simplified relevant investigation and review operating procedure for burden alleviation loans and set up the "COVID-19 Burden Alleviation" section on its website to provide exclusive online services, so as to accelerate the operating time for cases, ease the short-term capital pressure of corporates, and help them survive through the operating difficulties.

President

Chih-Chien Chang

07

• 2) For the year ended December 31, 2020, the number of approved loan cases for burden alleviation and revitalization under the policy and organized by the Bank was 46,677, with an amount approved amounted to NT$219.459 billion.

• 3) For the year ended December 31, 2020, in response to the "Labor Relief Loans" operates by the Ministry of Labor, the Bank assisted local workers who were affected by the outbreak of COVID-19 to obtain capital for riding through the difficulties. In accumulation, the Bank assisted 23,041 people, and the amount of loan approved was NT$2.303 billion.

D. Innovative Products:

• a. Continue developing innovative products to provide more convenient services

• 1) Introduced the 1D barcode credit card collection services of Taiwan Pay to respond to the diverse receipts and reimbursements scenarios at large-scale chain merchants.

• 2) Released the Taiwan PAY bonus service to provide instant bonus collection and exchange services for customers, and in turns improve the will of use.

• 3) Opened the online application for the Labor Relief Loan, which allows customers to submit applications and understand different burden alleviation measures via the burden alleviation section of the Bank.

• 4) The Bank launched "E-Loan," a one-stop personal online credit loan service, to provide loan applications, progress inquiries, and identity verification services.

• 5) The financial blockchain confirmation services adopted API for automatic responses; the operation was adjusted to be regulated under the headquarters.

• 6) Added new functions where Taiwan PAY may be used in paying 44 payment items, including land value increment tax, fines for violating regulations, and deed tax to improve the convenience of tax payment.

• 7) The Bank carried out business cooperation with JKOS Network Co., Ltd. to allow the Bank's customers to use their deposit account with the Bank as the designated deposit account for payment. The service was formally launched in January 2021.

• 8) The Bank cooperated with iPass and LINE PAY to allow the Bank's customers to use their deposit account with the Bank as the "LINE PAY MONEY e-Payment Account" to make deposits or withdrawals. The service was formally launched in January 2021.

• b. Develop products according to the social trend and provide diversified services to customers

• 1) To improve our service quality, the Bank added and amended its time deposits operations, opened the inter-branch services for the announcement of lost or replacement regarding the seal used for customers' certificate/deposit accounts in NTD, canceling the announcement of lost for seals, settlement and account closing for certificate/deposit accounts. The Bank also added the interlocking execution service for the announcement of lost/replacement for seals in its time deposit system and added a designated automatic carry-over system. Upon settlement or account closing by customers, the system would lift the designation of "time deposit automatic carry-over" for the account.

• 2) To satisfy the demand of customers in rapid order placing, the Bank has updated its securities electronic trading host system to comprehensively improve the quality of digitalized services. Furthermore, in response to the energy-saving and carbon emission reduction policy implemented by the government, as well as the reduction in printing and delivering expenses for paper-based statements, the Bank officially launched its "Electronic Monthly Statement System for Securities" in February 2020. The system offers online applications for customers to improve the digitalized services for securities.

• 3) In line with the government's pronatalist policy, the Bank organized consumption loans of "Gold Pregnancy" and "Luck Pregnancy," hoping to increase the fertility rates of nationals. As of December 31, 2020, the cumulative number of loan disbursement was 1,601, amounted to NT$616 million.

• c. Strengthen the supports for the financing of urban renewal and green finance via the "Innovative Finance Project Office."

• 1) Financing of urban renewal: In accordance with the urban renewal policies and accelerated reconstruction of hazardous and old buildings policies implemented by the government, the Bank promulgated the "Regulations for Urban Renewal Loans" and "Regulations for Reconstruction of Hazardous and Old Buildings Loan" to assist the private sector in raising funds for rebuilding, and in

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turns improve the living environments of the public and enhance building safety and living quality. In 2020, a total of 26 loan cases related to urban renewal, hazardous and old buildings, and relevant marketing were approved, and the total loan approved was NT$18.612 billion.

• 2) To continue communicating knowledge related to urban renewal and hazardous and old buildings, the Bank jointly organized the 2nd "Urban Renewal Expo" with the Wealth Magazine and Land Agent on September 19 and 20, 2020. The Ministry of Interior, Taipei City Government, and New Taipei City Government also provided their guidance to the event. Parties from government agencies, financial institutions, and industries related to hazardous and old buildings and urban renewal all gathered at the event to build an information communication platform in the name of the "Nation Team for Urban Renewal." There were over 12,500 participants at the exposition, over 1,622 participants at the seminar, and over 5,000 joined the online streaming.

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• 3) Green finance: To promote the development of the green energy industry and establish an economic model with low carbon emission, the Bank launched the "Green Energy Sustainable Project Loan," with enterprises with capital requirements for the purchase of equipment related to renewable energy, pollution prevention, and energy-saving set as financing targets. In 2020, a total of 82 loan disbursement cases were approved for green energy loans, and the total loan amounted to NT1.862 billion.

• d. Assist in industry innovation and provided intangible asset financing

• To assist in the industry innovation, the Bank established the "Regulations for Financing and Loan on Intangible Assets with Revenue Mezzanine." Leveraging on the expertise of the Industrial Technology Research Institute in the valuation of intangible assets, the Bank referred to the professional valuation report provided by the Institute to determine the development potentials and market values of intangible assets in the future and worked with the SMEG to provide collateral margin with high credit.

• e. Endorse innovative industries and promote intellectual property financing

• With the government endorsing cultural creativity and key innovative industries, the Bank expanded its business of intellectual property financing. In December 2020, the Bank set up the “Innovation + Intellectual Property ˙ Invigoration Loan" to help companies of cultural creativity and innovative R&D obtain working capital, encourage enterprises in developing new products and new technologies, and valuing the use of intellectual properties to improve citizens' living quality.

• E. Expansion of the Scope of Channel Services:

• a. Make adjustments on the location distribution of the Bank's branches for the increase in value regarding physical channels, so as to provide better and more comprehensive financial services. The Hsin Chu Branch reallocation was completed and re-opened on August 17, 2020.

• b. To align with the "Blueprint for Developing Taiwan into a Bilingual Nation by 2030" promulgated by the government, the Bank aims to provide a bilingual-friendly environment for financial services. In 2020, the total of 17 bilingual branches was established in Northern, Central, and Southern Taiwan. In 2021, the Bank intends to expand 15 more bilingual branches. It is estimated that all branches shall become bilingual by 2028.

• F. Information Operations and Information Security:

• a. Established the SYSPLEX system with local HA for central billing to improve service capacities

• 1) Established the SYSPLEX system with local HA for central billing to improve the usability of the system and reinforce data security, ensuring the undisrupted operation of the system.

• 2) Procured programs for the current central billing mainframe and Passport Advantage authorization ("Corporate Software and Services - IBM Program Authorization and Software Subscription and Support" Case). It is estimated that the Bank may save an expense of approximately NT$294.372 thousand in the next decade.

• 3) Received the Global Payments Innovation (GPI) service certification from the Society for Worldwide Interbank Financial Telecommunication (SWIFT). The Bank provides real-time inquiry services for cross-border remittance to customers and effectively helps customers in gaining comprehensive remittance information.

• 4) Established a brand-new e-banking system to swiftly, safely, and flexibly respond to business requirements. The system horizontally expands equipment and serial services and data to provide a secure and stable transaction environment for customers.

09

  - 5) Established the digital video surveillance system and storage equipment for all branches. The Bank also established its network segment partition system and reinforced the DDoS defense ability to strengthen its cybersecurity protection system.

• b. Reinforce the security control mechanism for the information system

  • 1) Completed the assessment on the information security of its computer system in November 2020, according to the "Assessment Regulations for the Information Security of the Computer System of Financial Institutions."

  • 2) According to the Letter (Tai-cai-ku-zi No. 10803628820) from the Ministry of Finance on February 25, 2019, as doubts were casted on the cybersecurity of communication and information products from the PRC, where using such information products may threaten citizens' safety of use, the Bank supervised its overseas branches to replace the products from Hikvision.

  • 3) Self-assessment was carried out in accordance with SWIFT Customer Security Programme (CSP) specifications and was filed on the website of SWIFT in December 2020.

  • 4) To reinforce the verification system for conflict of interests of internal personnel and the control on related customers, the Bank has established a system to carry out the verification for "samedirection purchase and sales for the same securities within 5 minutes before and after" and "same order-placing IP examination" regarding internal personnel and its customers. Any anomaly shall be reported and explained immediately to effectively prevent the occurrence of risk events.

• c. Continuous promotion of the digital banking business

  • 1) Actively promoted the Taiwan Pay acquiring businesses, endeavored to increase the rate of adopting the QR Code common payment service by established merchants, such as large-scale chained stores, business area, and night markets, and organized marketing discount events to facilitate the inclusive finance and the penetration rate of e-payment.

  • 2) In response to the service of the Triple Stimulus Voucher binding with mobile payment promoted by the government, the Bank organized events related to the Triple Stimulus Voucher. The discounts included extra cash returns from the Bank, early-bird bonus, churning presents for new customers, returns from designated merchants, and extra prize draw.

  • 3) Strived to obtain business dealings regarding the ACH distribution of dividends on behalf of listed companies, cooperated with major hospitals to introduce medical payment machine, to provide customers with diversified payment collection on behalf/payment service, so as to increase fee income of electronic finance business.

  • 4) For digital marketing development and social media operations, the Bank newly opened its LINE official account; meanwhile, to improve the number of fans and friends and interaction frequency on its Facebook page - My Dream+, the Bank designed a series of marketing activities to boost its share of voice on social media, which effectively attracted internet communities of different ages to participate.

• G. Implementation of Compliance and Anti-Money Laundering Operations:

• a. Implementation of compliance and anti-money laundering in line with the regulations of the competent authority

  • 1) Due to the practical operations and changes in relevant laws and regulations, the Bank continued to amend its rules for anti-money laundering and combatting the financing of terrorism.

  • 2) The Bank performed its compliance risk assessment (CRA) operation for 2019 and reported to the FSC for filings after being approved by the Board.

  • 3) With regards to anti-money laundering and combatting the financing of terrorism, the Bank performed its institutional risk assessment (IRA) operation for 2020 and reported to the FSC for filings after being approved by the Board.

  • 4) In view of anti-money laundering and combatting the financing of terrorism, the Bank released and implemented the automatic scanning for sanction list regarding NTD domestic inward remittance and name list of terrorists.

• b. Holding of regular compliance and anti-money laundering training

  • 1) In response to the outbreak of COVID-19, the Bank organized the online learning program "2020 Seminar for Anti-money Laundering and Combatting the Financing of Terrorism" on its digital learning website to increase the number of employees being trained, and performed a post-program test.

  • 2) A "Compliance Officer Seminar" was held in each of the first and second halves of 2020.

• c. Strengthening of the monitoring mechanism for compliance follow-up

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• 1) According to the "Compliance Follow-up Cases Control System," the letters regarding relevant laws and regulations from external parties and changes in laws and regulations that the Bank shall comply, include them in the "Compliance Follow-up Cases" for control. The Bank compiles the subsequent implementation of "Compliance Follow-up Cases" each month according to the competent authorities and reports to the Chief Compliance Officer.

• 2) To reinforce the control system of the second line, the Chief Compliance Officer (also the director delegated for anti-money laundering and combatting the financing of terrorism) led the business management department and the supervisor of the delegated department to reinforce the site visits and sampling inspection for compliance and anti-money laundering prevention regarding domestic branches with a higher number of deficiencies found during the internal and external audit for 2020 selected by the Bank.

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• d. Engaged CPAs to carry out the project audits for anti-money laundering and combatting the financing of terrorism for 2019 in accordance with the "Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries."

• e. Ranked within the top 20% among companies by the FSC in "Evaluation on the Principles for Fair Treatment of Customers in Financial Service Industry" organized by the FSC.

• H. Enhance Risk Control and Improve Assets Quality:

• Under the influences of the external economic environment, the integrity of representatives, poor operations, and unsatisfactory financial positions, the Bank occasionally has overdue credit loans in the large amount. To improve the quality of credit loans, reinforce the risk control ability, and initiate credit loan refinement programs, the Bank adopted a level-to-level administration for credit loans and investigation. It optimized and adjusted operating procedures such as investigation and review, appraisal, and credit loan review, focused on the re-examination and follow-up for large amount credit loans after the disbursement and strengthened the forewarning system to protect the asset quality of the Bank.

• I. Corporate Social Responsibility:

• a. Active implementation of corporate social responsibility and realization of the value of the sustainable operation

  • 1) The Bank’s "CSR Report" passed two stages of verification by the British Standards Institution (BSI) for five consecutive years, and BSI issued to the Bank an Independent Assurance Opinion Statement.

  • 2) The Bank received the Golden Award in the financial and insurance group of corporate sustainability report division under the "13th TCSA Taiwan Corporate Sustainability Awards of 2020" organized by the Taiwan Institute for Sustainable Energy and received the "Social Empowerment Award" from its initial participation in the "Asia Responsible Enterprise Awards (AREA)." In addition, the Bank was elected as one of the top 100th in "Excellence in Corporate Social Responsibility" organized by the CommonWealth Magazine for two consecutive years in 2020. Such achievements help upgrade the Bank's visibility and its corporate image for CSR implementation.

  • 3) The Bank continued to optimize the design of its website for the general public to obtain and understand the information on the corporate social responsibility of the Bank through its website more conveniently, to effectively strengthening the communicating function of the Bank regarding corporate social responsibility.

• b. Continual implementation of senior caring policy, donations to vulnerable groups, and active participation in public benefit affairs

  • 1) The Bank carried on the "Project of Senior Dining & Learning Center Sponsorship" to improve the living and care quality for vulnerable seniors in communities. In 2020, additional sponsorships were made to six community organizations (including Chumen Community Development Association in Baihe District, Tainan City; Chiayi Country Sustainable Development Association; Zhongjue Community Development Association in Xihu Township, Changhua County; Guoxing Community Development Association in Qingshui District, Taichung City; Taitung County Aboriginals Culture Association; and Shitan Community Development Association in Qionglin Township, Hsinchu County) for the establishment of Senior Learning Centers. The Bank has set up 18 Senior Learning Centers across Taiwan, and the accumulated sponsorship has amounted to more than NT$15 million. The accumulated number of benefitted seniors is approximately 0.3 million per year.

  • 2) Extended the appropriation purpose and usage regarding the public welfare funds from the "Silver Love Credit Card." The Bank exclusively allocated 0.3% of the general card consumption as the public welfare funds to help seniors to dine and learn together. By doing so, the Bank may spread love to

11

every corner of Taiwan to support vulnerable groups and people with physical/mental disabilities and realize community care and social relief.

• 3) The Bank continued to promote the property trust for the seniors and the disabled, recorded outstanding results for a consecutive four years and received the award for recognition from the FSC.

• c. Fulfilling responsibility for environmental protection and continued energy conservation and carbon emission reduction efforts

• 1) The Environmental Protection Administration of the Executive Yuan and the Department of Environment Protection of the Taipei City Government cited TBB nine years in a row for outstanding performance in green procurement.

• 2) The Taipei City Government publicly cited TBB for receiving ISO 50001 Energy Management Systems certification and the designation of its headquarters as an energy-saving-label building.

• 3) Chu Bei Branch of TBB participated in the "Outstanding Assessment Award for Energy-saving by the Service Industry in Hsinchu County for 2020" and received the High Distinction Award for Commercial Buildings

• 4) The Bank implemented its "Energy Policies" and "Measures for Water and Electricity Conservation" with scheduled follow-up on the status of water and electricity conservation by different units and inclusion of the results in business performance assessments. Various energy conservation improvement programs were vigorously implemented in order to enhance the energy efficiency of equipment and save on electricity costs.

(4) Budget Implementation

• A. The annual average balance of deposits was NT$1,439.740 billion, for an achievement rate of 97.69%.

• B. The annual average balance of outstanding loans was NT$1,168.459 billion, for an achievement rate of 98.35%.

• C. The foreign exchange transactions amounted to US$56.145 billion, for an achievement rate of 108.05%.

• D. The securities brokerage business amounted to NT$474.360 billion, for an achievement rate of 107.56%.

• A. Net income for 2020 amounted to NT$21.869billion; bad debt expense, commitment, and provision for guarantee liabilities totaled NT$4.055 billion; operating expenses were NT$12.429 billion; before-tax net income from continuing operations was NT$5.385 billion; net profit after tax was NT$4.702 billion; return on assets ratio (after-tax) amounted to 0.27%; return on equity ratio (after-tax) amounted to 4.84%; net profit margin (after-tax) was 21.50%, and earnings per share (after-tax) was NT$0.63.

• B. Net income before taxes (excluding provisions) in 2020 amounted to NT$9.440 billion, a decrease of NT$1.043 billion over 2019. NT$4.055 billion was allocated as an allowance for bad debts in order to strengthen risk appetite. Before-tax net profit for 2020 amounted to NT$5.385 billion, a decrease of NT$2.681 billion over 2019, primarily due to the increase in allowances for bad debts.

• C. The non-performing loan (NPL) ratio at the end of 2020 stood at 0.50%, an increase of 0.18% compared with the end of 2019; the bad-debt coverage ratio was 233.60%, a decrease of 134.17% over the end of 2019.

(6) Research and Development

• A. Establishment of an Exclusive Unit for Industry Research

• a. A total of 120 industry analysis reports were published in TBB E-Library in 2020 for the colleagues to peruse.

• b. Elite professionals from industry, government, and academia are invited to speak on an occasional basis to update the TBB employees the latest trends in industrial development.

• B. Encouragement of Innovation and Professionalism in Line with Business Development Needs

• Business lectures are held on a scheduled basis and a wide variety of digital learning courses are offered to encourage employees to engage in further on-the-job studies and absorb new knowledge that will strengthen their competitiveness and enhance their professional know-how.

2. Business Plans for 2021

(1) Operating Directions and Policies

• A. Strengthen the positioning and responsibility as a specialized bank for SMEs

• a. Build a solid foundation

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Taiwan Business Bank Annual Report 2020

I

Under the trend of significant changes in the external environment, the Bank will reinforce its information infrastructure engineering and construction and focus on developing its digital transformation ability to support the future development of the Bank. While expanding its businesses, the Bank will concurrently implement compliance, establish a healthy corporate culture, strengthen its risk control, and implement its three lines of defense for internal control to achieve comprehensive corporate governance.

• b. Continue to promote the "Youngster first, seniors second, and start-ups third" program

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• Combine the core competencies of the Bank with issues concerned in society to integrate our business with social welfare. Implement the "Youngster first, seniors second, and start-ups third" program to help solve the problems of youth startup and employment, promote senior financing and the acceleration of renewal for hazardous and old buildings, and support the development of innovation, creation, and startup.

• c. "Financing, Guidance, Investment" in trinity to create a complete financial ecosystem:

• 1) To secure SME customers, the Bank will actively explore the blue ocean market based on its express pass mechanism with "active exploration, simplified procedures, rapid review, and audit incentives." Together with its guidance and investment plan, the Bank will improve the depth and width of its services to SMEs.

• 2) The Bank will spare no effort to transfer the loan business for SMEs to the SMEG for guarantees, thus minimizing the risk of credit loans; together with external counseling resources from SMEG and SMECF, the Bank will assist enterprises in improving their operating management capacities and counseling their transformation and upgrade.

• d. Grasp the green business opportunities and promote sustainable operations:

• 1) Promote green energy and sustainable operations

  • To slow down climate change and respond to energy-saving and carbon emission reduction, the Bank continues to promote relevant loans to help customers in acquiring the capital required for purchasing equipment related to renewable energy, pollution prevention, and energy-saving. This is to contribute to the development of green enterprise to attain the goal of sustainable operations.

• 2) Promote "Urban Renewal Finance 2.0"

  • To help improve two seniority issues (old buildings and aging population) and two insufficiency issues (land insufficiency and electricity insufficiency), the Bank combined various innovative methods of "Financing, Trust, Green Energy, Silver Care," alongside the professional management by building agent company and continuing construction systems, the Bank shall establish an urban renewal ecosystem where banks actively exert their functions.

• B. Expand customer-oriented businesses

• a. Focus on innovative projects and products of SMEs:

• Setting the core business of SMEs as the center, the Bank will promote differentiated corporate finance loan operations to secure the existing customer relationships, explore new business opportunities, and develop diverse application channels for financing to provide assistance to enterprises during various development stages.

• b. Create wealth management business model with features of SMEs:

• Leverage on the strong foundation of SME customers, the Bank will create a wealth management business models with features of SMEs, plan for integrated wealth management, supplemented by the trust business, to achieve objectives of profiting and growth.

• c. "Double A" strategy for comprehensive digital transformation:

• Initiate the Double A (AI and OPEN API) strategy to create digital life scenarios for customers for improving the development the Bank's digital ecosystem and establish digitalized banking services with customers as its core, data as its foundation, and customer experiences as its primary considerations.

(2) Operating Policies

Facing the ever-changing financial environment and in response to the upsurge of FinTech and the development of digital banking, the Bank will adhere to its core value of "SME Specialized Bank" and utilize the four aspects on its strategy map with a bottom-up approach, to enhance risk control and improve assets quality. Furthermore, in line with the aspects of learning & growth, internal procedures, customers, and finance, the Bank will establish a five-year strategy structure with specified directions and centralized resources for its departments, so as to reinforce the adjustments in its three major structures of labor, channels, and capital.

13

The Bank will achieve its goal of sustainable development by realizing our operating concept and become a premium bank with comprehensive financial services.

• A. Learning & Growth

• a. Improve the professional competencies of our employees: Establish a talent database through human resource inventory; deploy human resources of the entire Bank with plans; enhance cultivation of professional talent for SMEs, digital finance, and international finance; strengthen physical and digital learning content and function; establish financial and industrial digital academies.

• b. Establish a successor scheme: Reinforce key position management and talent cultivation; establish a successor cultivation scheme; enhance the successor system; plan to cultivate successor candidates with potentials for the benefit of the Bank’s sustainable operations.

• c. Optimize the labor structure: Revitalize retired human resources to enhance the inheritance of experience; diversify employment channels; connect with the tertiary education sector for industryacademia cooperation; participate in the youth employment pilot program; recruit outstanding personnel to enrich the talent database of the Bank.

• d. Improve the performance of information systems: Increase investment in IT building and integrate it closely with our business; enhance the overall efficiency of the information system; improve diversity and innovative capacities of our IT team; reinforce the cultivation and motivation of key IT personnel to lay a solid foundation for information technology.

• e. Enhance cybersecurity defense and monitoring capacity: Continue to improve the Bank's cybersecurity management system and maintenance plan; optimize the joint defense system; continue to organize its cybersecurity upgrade and improvement measures; enhance cybersecurity training to reinforce cybersecurity protection ability and realize cybersecurity compliance.

• f. Optimize the accountability mechanism: Establish a comprehensive accountability mechanism and cultivate the culture of accountability; abolish the parochialism and strengthen cross-department cooperation; form the organization and value that allows our fellow colleagues to internalize it as their mission, vision, and core values, so as to strive toward the Bank's goal of sustainable development.

• g. Realize the corporate culture of learning and sharing: Build a "learning" experience inheritance system based on the concept of "learning by doing and doing by learning" and encourage internal innovation by young employees to invigorate corporate human resources.

• B. Internal Procedures

• a. Improve the management by objectives: Establish the goal and realize the execution, optimize the evaluation management system, reinforce the connection between evaluation, and rewards to stimulate boosted performance.

• b. Optimize the procedures for better efficiency: Improve AI technologies application, promote the reformation of business procedures, and continue to optimize Artificial Intelligence Customer Service develop innovative FinTech and promote the digital transformation to improve service quality and optimize customer experiences; value the management for the internal and operating process, regularly examine the SOP for continuous creation for the best working process; develop the application of data center and utilize the information system to assist in the manual examination; create optimized workflows with continuous efforts to improve operating efficiency and manage quality, reducing errors arising from manual procedures.

• c. Enhance risk management: Enhance risk control through understanding, managing, and reducing risks; focus on business development and risk control to safeguard the quality of assets.

• d. Adopt integrated marketing to increase customer contribution: Integrate digital marketing resources to increase dealings with customers, increase overall customer contribution, and provide comprehensive financial services according to the requirements for the business development of customers.

• e. Provide premium services to build customer loyalty: Bearing customers' interests in mind, design comprehensive financial services based on customers' requirements to meet their expectations and demands, in turn, building customer loyalty.

• f. Strengthen customer relationships with the second generation upon the succession of the family business: Strengthen the customer relationship with the younger generation or the second generation upon the succession of the family business to improve SME customers' support to the Bank after generational changes.

14

Taiwan Business Bank Annual Report 2020

I

• g. Adopt a clicks-and-mortar method to reinforce digital financing: Adopt innovative thinking to enhance financial products and services, optimize the trading environment for the clicks-and-mortar channel, and reinforce the digital financial landscape.

• h. Differentiated products and marketing: Apply Big Data analysis to understand customer behavior patterns and requirements; carry out cross-field cooperation to nurture a TBB ecosystem to provide customized services and precise marketing services.

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• i. Adhere to rigorous compliance: Establish a top-down culture of compliance; continue to implement compliance and duly comply with the monitoring measures of the competent authorities; uphold provisions for anti-money laundering and combating the financing of terrorism; implement whistle-blower protection and uphold customer interests; thereby forming a corporate culture that prioritizes compliance.

• j. Strengthen corporate governance: Improve Board of Directors' functions, corporate governance mechanisms, and operations of functional committees; disclose material information regarding corporate governance to improve transparency for information disclosure and shape the culture of corporate governance.

• k. Fulfill corporate social responsibility: Attach importance to the ESG valuation; focus on the "Youngster first, seniors second, and start-ups third" program with our core business to promote the integration of corporates and society; and internalize the fulfillment of social responsibility as its corporate spirit.

C. Customers

• a. Improve channel service quality and integrate customer views from all channels: Improve the value of physical channels; expand the service scope for virtual channels; enhance the control on business opportunities regarding clusters of SMEs to meet the mission of the Bank to provide services for SMEs; establish a data market with the cross-business omnidirectional single view of customers to fully present customer preferences and service channels, optimizing service and experiences for customers.

• b. Focus on the niche market of SMEs and reinforce the brand image of a specialized bank: Specify positioning as an SME specialized bank and focus on the core business of SMEs; commit to policy financings such as such as micro-to-small enterprises, startups, urban renewal for hazardous and old buildings, intangible assets, and placemaking to shape the brand image of a specialized bank; focus on customer management and assist in succession and inheritance to provide drivers for both financing and guidance.

• c. Enhance wealth management services and gain trust from customers: Focus on the three major keys of customization, segmentation, and digitization to deepen the wealth management services and enhance customers' trust; satisfy customers' demands through professional financial planning and assistance in the wealth inheritance between generations; undertake deep-rooted support for investment analysis in order to provide financial planning services for owners and high-asset customers.

• D. Finance

• a. Increase operating performance and respond to risks of climate change: Expand operating scale, increase the profit margins of overseas branches, improve interest rates and diversify the income sources of service charges to enhance profitability; focus on risk management and minimize the pressure arising from the increase in allowances for bad debts; include risks of climate change into the Bank's strategies of operating management and carry out responsible investments to proactively engage in the new environment.

• b. Enhance capital, uphold shareholders' interests, and pursue the sustainable operations of the corporation: Comply with the monitoring requirements of the competent authority regarding authorized capital; ensure a healthy capital structure and the goal of optimized resource allocation; strengthen the risk appetite to expand the growth of operating income; achieve the goal of maximized shareholders' value; develop based on the future strategies and improve the utilization efficiency of resources.

E. Loan Supervision Optimization Program

• To comply with governmental policies and assist in creating a favorable finance environment for SMEs, the Bank will strengthen its risk control, improve asset quality, and develop loan supervision optimization programs. The Bank also keeps abreast of risks for credit loans, safeguard asset quality, and improve the efficacy for approved cases for achieving the objectives of reinforcing asset quality for loans, improving professional audit functions, and enhancing the professional foundation for loans.

15

• F. Strengthen Internal Audit and Control

• Communicate with fellow colleagues and allow them to internalize the concept of compliance as their personal ethics and implement compliance with regard to ordinary businesses. Meanwhile, enhance the management for internal control, risk management, and risk compliance through the first and second lines of defense. Establish a whistleblowing system for anomalies, reinforce monitoring transactions between accounts of wealth management specialists and customers; continue to follow up on the improvements for deficiencies and the effectiveness of control measures to effectively minimize the possibility of fraudulence cases.

(3) Business Targets

To give equal weight to the protection of shareholder interests, improve the capital structure, and enhance asset quality, the Bank has set the following targets in consideration of the Directorate General of Budget, Accounting and Statistics for 2021.

• A. Annual average deposit balance: NT$1,523.520 billion.

• B. Annual average balance of loans outstanding: NT$1,236.645 billion.

• C. Total foreign exchange transactions: US$56.549 billion.

3. Future Development Strategies

Focus on the objective of creating solid internal foundations and deepening the operations for customer values. By introducing innovative products or services, to improve the added value for our business and then establish a comprehensive ecosystem, in order to allow a closer connection between customers and the Bank. And build up a core culture with customer experiences as its core on the basis of business transformation, talent cultivation, and the role as a bank for startup loans; pursue consistent customer experiences for all channels to establish the Bank's mid-to-long-term development strategies in the future.

(1) Build Solid Internal Foundations

• A. Optimize foundation engineering:

• Stable smart resources and human resources are key to future development. For technology infrastructures, the Bank will create an information system with convenience, safety, stability, fast innovation, and user experience to instantly support its businesses and provides horizontal expansion via its flexible system functions, and collaborate with business departments for innovative businesses.

• Execute a strategy of "selection, cultivation, utilization, and retention" for human resources. Stipulate the successor plan, optimize human resources structures, establish a talent database through human resource inventory; utilize human resources of the Bank according to its plans, and reinforce nurturing professional functions for talents in SMEs, digital banking, and international finance. The crucial part for the development of human resources is to strengthen the human capital and organization capital of the Bank through the formulation of organizational culture and values, so as to internalize the Bank's mission of sparing no effort in assisting the development of SMEs into all employees' mind.

• B. Focus on three lines of defense:

• Create a timely, complete, and appropriate risk management system for the Bank and reinforce its internal control and three lines of defense. Adopt a risk-oriented internal audit system to improve its ability in risk identification and evaluation. Detect risks in advance through Big Data analysis to make preventions. Focus on the credit loan refinement program, reduce credit risks, and minimize the recurrence of audit deficiencies to ensure the Bank's stable profitability under a tolerable risk appetite. Set "compliance," "treat clients fairly," and "anti-money laundering and the combatting the financing of terrorism" as the core of its corporate culture to formulate a corporate culture valuing compliance.

• C. Expectation from supervisory agencies:

• Build a comprehensive ESG ecosystem by improving the Board's functions, providing real-time and transparent information, realizing communications with stakeholders, and adopting international disclosure specifications to facilitate the Bank's sustainable development of the Bank and strengthen its corporate competitiveness. In addition, establish a mature structure for cybersecurity governance and keep abreast of the overall cybersecurity execution to optimize the Bank's cybersecurity management system, and in turn, implementing internal cybersecurity governance and defending external cyber-attacks.

16

Taiwan Business Bank Annual Report 2020

I

(2) Reinforce the Management for Customer Values

• A. Transformation guidance for SME customers:

• Focus on the "financing + guidance" business field for SMEs and cultivate relationships with customers. Include customers' transformation demand into consideration to improve its planning for product services and create the accessibility of smart transformation for SME customers. Integrate transformed SMEs within the regions to build up experiences related to cross-field operations.

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• B. Increase dealings with customers:

• Transformations occurred within the social and economic environment under the impacts of the aging population and low birth rate. In response to the trend of the era, the Bank integrated industries related to urban renewal and trust, long-term care and medical services, and seniors to launch innovative products, expand customer base for its services, promote aging in place, and develop Trust 2.0.

• Furthermore, setting the "continual improvements in customer experiences" as its objective, the Bank will optimize its online and offline channel layout. Utilize digital functions to analyze customers' preferences to provide wealth management/loan services, accordingly, providing smart and mutually connected physical products. Focus on target customer groups to duly and appropriately plan for the flexible use of capital. In light of the Bank's primary product (SME loans), the Bank provides supplementary products and provide other financial and wealth management services to offer one-stop services that satisfy customers' financial requirements.

• C. Respond to market trend:

• Grasp business opportunities in a timely manner through adjustments made to branches and channels, focus on developing core businesses and improve values for physical channels. Proactively hold innovative discussion meetings and competitions for business groups. the Bank encourages all fellow colleagues to participate in the brainstorming and form cross-department teams to find solutions for the pain points of internal and external customers, explore new opportunities and break down the boundaries within the organization. It introduces innovative ideas through innovative discussion meetings to improve product services and operating efficacy, creating added values differentiated from the industry.

• D. Digital finance ecosystem:

• The Bank continues to make arrangements and develop digital banking, proactively promote digital transformation, and invest in digital marketing. It introduces FinTech services and establishes new digital development with customers as the core, data foundation, and UX as major concerns. The Bank introduces four major strategic guidelines for innovative FinTech through the full upgrade for its digital channels, the digitalization of business procedures, and its investments in digital marketing. The Bank sets foot into customers' field of life, values customer experiences, and provides convenient digital tools to satisfy customers' requirements for financial services.

and the Overall Economy

(1) External Competitive Environment

Impacts of COVID-19:

• A. As domestic and overseas outbreaks of COVID-19 have yet slowed down, the global economy experiences fluctuations and disturbance. Under the highly effective control of the Taiwanese government, complete basic medical equipment and forward-looking plans were utilized to restrain the spread of the epidemic in Taiwan and withstand the economic recessions brought by COVID-19, recording growth against the trend, and facilitating the return of Taiwanese businesses.

• B. The isolation policy in response to the outbreak materially impacted the retail service industry. Transaction models and operating methods of merchants may be significantly changed due to the safe distance. The low-contact payment model will become the key innovative development for the financial service models after the outbreak A post-pandemic trend of sustainable finance emerges; the Banking industry, therefore, attaches more attention to climate change and natural disasters, systemic risks of plague, and financial disclosures.

17

(2) Regulatory Environment

• A. The competent authority rolled out regulatory policies affecting the premium and operations of new contracts for the insurance industry one after another, including reducing the interest rate for the policy reserve of new life insurance contracts denominated in different currencies, increasing the barrier for death covered by life insurance, and audio and video recording for senior insurance customer purchasing policies with cash surrender values, and relevant regulations, resulting in a drop in total transaction of premium due to the halt of sales in most insurance products. Furthermore, the Bank implemented a more stringent sales operation and added examination items for the procedures, causing an increase in its operating costs. The Bank amended its operating specifications and made promulgation for implementation in due course in light of the changes in relevant regulations. It also reinforced specialists' educational training and communicated with specialists with respect to compliance and operational requirements.

• B. The competent authority imposed strict restrictions on saving insurance policy with higher interest rates favored by citizens, which affects the sales of insurance policies in future. Furthermore, the "sales incentives" provided to bank channels for sales of funds engaged by investment trusts or fund management companies were canceled in 2020. Both circumstances generated significant effects on the Bank's wealth management business. The Bank carried out reviews and made amendments to render more active and challenging strategic measures and expected targets, benefiting the scale of its wealth management business and strengthening its diversified profiting structure.

(3) Overall Operating Environment

Under the impacts of COVID-19 and the trade war between the U.S. and the PRC, multinational enterprises reduced the production ratio in the PRC or moved production bases out of the PRC. Taiwan possesses the comparing to the other countries advantage in manufacturing technology and has relatively better control for the epidemic. It, therefore, become a stronghold for Taiwanese businesses and multinational enterprises when making such transfers, contributing to the domestically economic performance. The return trend of Taiwanese businesses created demands for investments, capital utilization, and plant establishment, which benefit the potential opportunities for financing, loans, and wealth management businesses of the banking industry. Suppliers turn to Southeast Asia for establishing their production capacity also brought chances for banks in Taiwan to promote overseas businesses, including margin purchase businesses such as wealth management planning, plant establishing and land purchasing, and equipment investment. It is estimated that such conditions will contribute to the business volume for the banks in Taiwan regarding deposits, loans, and wealth management in 2021.

5. Results of Latest Credit Rating

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Ratings
Date of Rating Rating Institution Outlook
Long-term Credit Short-term Credit
2021.1.22 Taiwan Ratings twAA- twA-1+ Stable
2021.1.22 Standard & Poor's BBB+ A-2 Stable
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18

Taiwan Business Bank Annual Report 2020

II Bank Profile

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1. Establishment and History

The forerunners of the Taiwan Business Bank (TBB) were two private cooperative savings institutions, one established in Taipei in June 1915 and the other in Tainan the following month. The Taipei institution was merged into another company in 1920 and the Tainan institution was reorganized under a different name in 1926.

Following the restoration of Taiwan to China on October 25, 1945, these two savings institutions, along with two others, were taken over by the Taiwan Provincial Government. On September 1, 1946, the four were combined and reorganized into the "Taiwan Mutual Financial Co." On May 31, 1947, this new financial institution absorbed the Tokiwa Real Estate Co., bringing its capitalization to $10 million Old Taiwan Dollars. Its name was changed to the "Taiwan Provincial Loans and Savings Co." on June 1, 1947, as the original name was under the Japanese system, and again to the "Taiwan Mutual Loans and Savings Co." in January 1948 as the scope of business was similar to the nature of saving institutions.

The government moved to promote Taiwan's economic development and boost the growth of small and medium enterprises (SMEs) in 1975 by revising the Banking Act and writing in an additional provision for a specialized SME bank. In line with the government policy, Taiwan Mutual Loans and Savings Co. was reorganized into the "Medium Business Bank of Taiwan" (later to be known as the Taiwan Business Bank, or TBB) on July 1, 1976, whereupon it became a specialized bank charged with the provision of financial assistance and guidance to SMEs. It has been cultivating the SME financial services field now for more than 44 years. Later, to cope with the liberalized and internationalized financial environment, and to conform to the government's vision of promoting Taiwan to become Asia-Pacific Regional Operations Center, the TBB was transformed into a private bank on January 22, 1998, and officially entered into a whole new era.

At the time of the TBB's reorganization in 1976, it had a capitalization of NT$500 million, 50 branches, and 58 sub-branches. To build up the Bank's operating capital and strengthen its operating structure, repeated capital increases have brought total capitalization to NT$74,885.83 million today. The Bank's structural framework has also been readjusted constantly in response to changes in the financial environment and in business needs. a Department of Auditing and the Secretariat were set up under the Board of Directors in the headquarters. Apart from the Compliance Department, the TBB's management units include 17 departments and three divisions under three major business groups, one development center, and two management centers. The Bank has 125 domestic business units (including the Department of Business) and an Offshore Banking Unit (OBU), and also operates eight overseas branches, including Hong Kong Branch, Los Angeles Branch and New York Branch in the U.S., Sydney Branch and Brisbane Branch in Australia, , Shanghai Branch, Wuhan Branch, and Tokyo Branch, along with the Yangon Representative Office in Myanmar. Regional Operation Centers were set up to handle business development and supervision, centralized business management, operational services, and other business support functions in order to enhance business promotion capability and reinforce asset quality control. In addition, Domestic Processing Centers were established to upgrade operating performance through the centralized handling of domestic outward remittances, bills for collection (B/C), and bills withdrawal. Meanwhile, to cope with the mid-tolong term development and business needs, Strategy Development Committee, CSR Committee, Cyber Security Management Committee, and Digital Transformation Committee were established. In addition, the Innovative Finance Project Office was established to strengthen the supports for important loans to the green finance, urban renewal, and cultural innovation industries. Furthermore, the former Customer Service Division under the Credit Card Department went through stages of expansion to form the Customer Service Center, taking charge of customer advisory services of the entire bank and is now subordinated to the digital banking Department.

2. Bank M&A, reinvestment in related enterprises, and reorganization in 2019 and to the end of February 2020

Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance Agency Co., Ltd. reinvested in 100% ownership were merged on January 2, 2020 to form the Insurance Agent Dept. Numer of enterprises reinvested in 100% ownership has decreased to four—the Taiwan Business Bank Insurance Agency Co., Ltd, Taiwan Business Bank Property Insurance Agency Co., Ltd, TBB International Leasing Co., Ltd and TBB (Cambodia) Microfinance Institution PLC, TBB Venture Capital Co., Ltd.—and the TBB International Leasing Co., Ltd reinvested in 100% ownership in a firm, the Taiwan Business Bank International Leasing Co., Ltd.

20

Taiwan Business Bank Annual Report 2020

II

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----- Start of picture text -----

3. Membership in a designated financing hold company: None.
4. Major exchanges or transfers of shares by directors and others required to
report shareholding under Paragraph 3, Article 25 of the Banking Act in 2020
and for the months ended February 28, 2021: None.
5. Changes in operating rights, major changes in operating methods, or
business content, and other major events of sufficient importance to affect
shareholders' interests:
Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance Agency Co., Ltd.
were merged on January 2, 2020. TBB, as the surviving company, established the Insurance Agent Department
(approximately 25 people) to concurrently engage in the insurance agent business.
本行獲頒第十屆菁業獎 - 最佳中小企業金融獎。
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21

III Corporate Governance Report

• 23 1. Organization

25

2. Directors and Management Team

• 41 3. Implementation of Corporate Governance

• 64

64

65

4. Information on Fees for CPAs

5. Information on Changing CPAs

• or accounting matters who has, in the most recent year, held a position at the accounting firm of its CPA or at an affiliated enterprise

65

• Shareholders Conform to the Requirements under Article 11 of the Regulations Governing the Same Person or Same Concerned Party Holding the Issued Shares with Voting Rights over a Particular Ratio of a Bank

70

8. Information Disclosing the Relationship among Top Ten Shareholders in the Relationship of Related Parties or Spouses, Relatives within the Second Degree of Kinship

71 9. Shareholding in the Same Investee Company of a Business Directly or Indirectly Controlled and Managed by Directors, President, Executive Vice Presidents, and SVP & GM of Departments and Branches, and the Consolidated Shareholding Ratio

1. Organization

(1) Organization Chart

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----- Start of picture text -----

Compliance Affairs Compliance Dept.人人人人人
人人人人人Human
Resources Dept.
Administration AdministrationManagement人人人
Management Center Dept.
人人人
Accounting Dept.
Information Security人人人人人
Dept.
Personal Information
Strategy Development Committee Protection Management Committee Risk Management人人人人人Dept.
Audit Committee
RemunerationCommittee Management Center 人人人人人人 Risk Loan Supervision人人人人人Dept.
CSR Committee
Credit Investigation人人人
Digital Transformation Dept.
Committee
Overdue Loan &人人人人人Control Dept.
Risk Management
Committee
Development Dept.Business Processing Center 人人人人人 Domestic
Chief Compliance Development Center 人人人人人人 Operating Digital Banking Dept. Customer Service Center Do Banking Dept.mestic Branches
Offcer
SharehoMeetinglders' DirectorsBoard of Chairman of the Board President Technology Dept.Information
Executive Vice Regional Operation
President Dept.
人人人人人人人 人人人
Treasury Group Treasury Dept.
ALM Committee Innovative Finance Project Office人人人
Business
ManagementCommittee Banking Dept.Corporat人人人 e
AML and CFT Committee 人人人人人人人Banking Group Corporate International Banking BranchOffshore
Banking Dept.
Overseas Branches
Personal
Banking Dept. 人人人人人
Loan Supervision Committee Credit Card Dept.人人人人
NPL Management Committee
Trust Asset Evaluation CommitteePersonnel Evaluation Committee 人人人Banking GroupPe 人人人人 rsonal Wealth Mana 人人人人人 Dept.gement
IT Planning & Development
Committee Securities Dept.人人人 Secu r ities Branches
Cyber Security Management
Committee
Trust Dept.人人人
Insurance Agent 人人人人人人Dept.
Secretarial Dept.人人人人人人
Chief Auditor人人人 人人人人人人Auditing Dept.
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III
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February 28, 2021
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23

(2) Operations of Major TBB Departments

• A. Corporate Banking Group

• This unit handles financial services for corporate customers, including business planning, promotion, and improvement in respect to loan products, forex products, and corporate financial planning products. It understands customers' needs and proactively carries out marketing, and is responsible for development and service in regard to the Group's products and customers as well as for improvement of the Bank's asset quality, operating income, and profit. The Corporate Banking Dept. and International Banking Dept. operate under the Corporate Banking Group.

• B. Personal Banking Group

• This unit handles planning, promotion, and improvement of the Bank's personal loan products, financial planning for customers, and marketing services for financial planning products. It carries out proactive marketing based on an understanding of customers' needs, is responsible for development and service in regard to the Group's products and customers, and maintains improvement of the Bank's asset quality, operating income, and profit. The Personal Banking Dept., Credit Card Dept., Wealth Management Dept., Securities Dept, Insurance Agent Dept. and Trust Dept. operate under the Personal Banking Group.

• C. Treasury Group

• The Treasury Group handles planning, promotion, and improvement of the Bank's financial businesses, and is responsible for development and service in regard to the Group's products and customers as well as for maintaining improvement of the Bank's asset quality, operating income, and profit. The Treasury Dept. operates under the Treasury Group.

• D. Risk Management Center

• The Risk Management Center handles risk control, maintenance of the quality of the Bank's loan assets, and investigation and review of loan cases and products, economic and financial research and industry investigation, collection of overdue loans and information security matters. The Loan Supervision Dept., Credit Investigation Dept., Overdue Loan & Control Dept., Risk Management Dept. and Information Security Dept. operate under the Risk Management Center.

• E. Operating Development Center

• The Operating Development Center is charged with bank-wide performance analysis, management and planning for operational management and information operations, provision of full and necessary support for business development, and simplification of the planning process, so as to achieve operational centralization and upgrade operational efficiency. The Center also handles planning and implementation of bank-wide operating strategy formulation and public relations. The Business Development Dept., Digital Banking Dept., and Information Technology Dept. operate under the Center.

• F. Administration Management Center

• This Center handles the planning and implementation of document administration, confidential matters, legal affairs, human resources, and accounting systems, as well as other matters not assigned to other units. The Human Resources Dept., Administration Management Dept. and Accounting Dept. operate under the Center.

• G. Compliance Affairs

• Compliance Dept. handles the planning, management, and implementation of legal compliance systems and AML & CFT related matters. Compliance Dept. operate under the Compliance Affairs.

24

Taiwan Business Bank Annual Report 2020

III

2. Directors and Management Team

(1) Board of Directors

A. Board of Directors

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Chairman Managing Director Managing Director
(President) (Independent Director)
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Chih-Chien Chang

Bor-Yi Huang

Xin-Wu Lin

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Director Director
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Director
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Ying-Ming He Wen-Chieh Wang

Hung-Sheng Yu

Dec. 31, 2020

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Independent Director
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Independent Director
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Wei-Sheng Huang

Jin-Long Liu

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Director Director
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Ching-Yu Liu

Tzu-Hao Tsai

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Being the Spouse or
Shareholding by the Relative within the Second
Shareholding Under
Date Tenure Initial Shareholding on Inauguration Current Shareholding Director, Spouse & Minor Children Other's Name Current Positions Degree of Kinship of Other Managers, Directors, or
Title Nationality Name Gender Elected (15th) Inauguration Date Major Experience & Education the Bank and Other Companies Supervisors
Number of Shares Shareholding (%) Number of Shares Shareholding (%) Number of Shares Shareholding (%) of SharesNumber Shareholding (%) Title Name Relationship
Education: Supervisor, Taiwan
Ph.D., Department of Economics, National Taipei University Asset Management
Experience: Corporation
President, Taiwan Academy of Banking and Finance Supervisor, Supervisor, Taiwan
Entie Commercial Bank Urban Regeneration
Chairman (Ministry Representative) of Finance (Note 1) R.O.C Bor-Yi Huang Male June 29, 2018 June 29, June 28, 2018 to 2021 August 24, 2017 135,631,247 2.21 155,514,786 2.08 725,941 0 0 0 Executive Director, Bank OF Kaohsiung Director, E.SUN FHCExecutive Director, Small and Medium Enterprise Credit Guarantee Fund of Taiwan & Financial Services Co. Ltd.Director, Taiwan None None None
President, E.SUN Securities Vice President, Times Securities Academy of Banking
Director of College of Management, Dean of Academic Affairs, and Finance
Dean of Student Affairs, Shih Chien University Director, Act of the
Taiwan Creative
Content Agency
Education: Director, Sunsino
National Taiwan University of Science and Technology Development
Experience: Associate Inc.
Chairman, TBB INTERNATIONAL LEASING CO., LTD. Director, Small &
Chairman, TBB INTERNATIONAL LEASING LTD. Medium Enterprise
Acting President, Taiwan Business Bank Credit Guarantee
June 29, Executive Vice President, Taiwan Business Bank Fund of Taiwan
(Ministry of Finance Managing Director R.O.C Chih-Chien Chang Male March 4, 2020 June 28, 2018 to March 4, 2020 135,631,247 2.21 155,514,786 2.08 223,128 0 0 0 S.V.P. & General Manager, Loan Supervision Dept., Taiwan Business Bank None None None
Representative) 2021 S.V.P. & General Manager, Credit Investigation Dept., Taiwan
Business Bank
S.V.P. & General Manager, Wu Ku Branch, Sung Nan Branch,
Taiwan Business Bank
Chairman, Taiwan Business Bank Insurance Agency Co., Ltd.
Chairman, Taiwan Business Bank Property Insurance Agency
Co., Ltd.
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25

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Being the Spouse or
Shareholding by the Relative within the Second
Shareholding Under
Date Tenure Initial Shareholding on Inauguration Current Shareholding Director, Spouse & Minor Children Other's Name Current Positions Degree of Kinship of Other Managers, Directors, or
Title Nationality Name Gender Elected (15th) Inauguration Date Major Experience & Education the Bank and Other Companies Supervisors
Number of Shares Shareholding (%) Number of Shares Shareholding (%) Number of Shares Shareholding (%) of SharesNumber Shareholding (%) Title Name Relationship
Education: Director, Department
Bachelor, Department of Mechanical Engineering, National of Human
June 29,
Managing Director (Bank of Taiwan R.O.C Shih-Yuan Tai Male March 18, 2019 June 28, 2018 to March 18, 2019 1,058,933,860 17.22 1,214,173,562 16.21 0 0 0 0 Taiwan University of Science and TechnologyExperience: Resources, Bank Of Taiwan None None None
Representative) 2021 Deputy Director, Delegate, Department of Human Resources,
Bank of Taiwan Deputy Director, Department of Staff Training,
Bank of Taiwan
Education: Associate dean &
PH.D., Department of Economics, National Taiwan University Director, Research
Experience: Division Ⅲ , Taiwan
June 29, Director(Independent), Land Bank of Taiwan 6th Member, Fair Institute of Economic
Managing Director (Independent R.O.C Xin-Wu Lin Male June 29, 2018 June 28, 2018 to June 29, 2018 0 0 0 0 0 0 0 0 Trade CommissionAntitrust follows the top executive, AU Optronics Corporation ResearchIndependent Director, None None None
Director) 2021 Full-time researcher & Director, Research Division Ⅲ a, Taiwan FitTech Co., Ltd.
Institute of Economic Research Independent Director,
Full-time associate researcher & Director, Research Division Daxin Materials
Ⅲ ,Taiwan Institute of Economic Research Corp.
Education: Professor,
PH.D., Department of Agricultural economics, Hokkaido Department of
University, JPN Finance and
Experience: Research, Chinese
Associate Professor, Department of Finance and Research, Culture University
Chinese Culture University Director, International
Assistant Professor, Department of Finance and banking, Shih Cooperation and
June 29, Chien University Development Fund
(Ministry of Finance Managing Director R.O.C Lien-Wen Liang Female June 29, 2018 June 28, 2018 to June 29, 2018 135,631,247 2.21 155,514,786 2.08 0 0 0 0 Assistant Professor, Department of Finance and Cooperative Economics, National Taipei University None None None
Representative) 2021 Vice Director, Financial Research Institute, Taiwan Academy of
Banking and Finance
Full-Time Associate Researcher, Financial Research institute,
Taiwan Academy of Banking and Finance
Assistant Researcher, Basic Financial Research and Training
Center
Lecturer, Department of Economics, Fu Jen Catholic University
Columnist, Commercial Times
Education: Deputy director,
M.S., Department of Economics, National Taiwan University National Treasury
Experience: Administration,
June 29, 13th & 14th Managing Director, Taiwan Business Bank Ministry of Finance
Director (Ministry of Finance R.O.C Shiu-Yen Lin Female June 29, 2018 June 28, 2018 to February 27, 2014 135,631,247 2.21 155,514,786 2.08 0 0 0 0 Chief Secretary, National Treasury Administration, Ministry of Finance None None None
Representative) 2021 Team leader, National Treasury Administration, Ministry of
Finance
Deputy head, National Treasury Administration, Ministry of
Finance
Education: Executive Vice
Ph.D., College of Law, National Chengchi President, National
June 29, Experience: Chengchi University
Director (Ministry of Finance R.O.C Wen-Chieh Wang Male June 29, 2018 June 28, 2018 to 103/6/10 135,631,247 2.21 155,514,786 2.08 0 0 0 0 13th,14th Managing Director , Taiwan Business Bank Visiting scholar, College of Law, National Harvard University Director, None None None
Representative) 2021 College of Law, National Chengchi University Chief Secretary,
Secretariat, National Chengchi University Director, The Institute
of Law and Interdisciplinary Studies, Chengchi University
Education: Chairman, TBB
M.S., Executive Master of Business Administration, Ling Tung Industry Union
University
Experience:
13th & 14th Director, Taiwan Business Bank
June 29,
Director (Ministry of Finance R.O.C Hung-Sheng Yu Male June 29, 2018 June 28, 2018 to July 1, 2013(Note 2) 135,631,247 2.21 155,514,786 2.08 26,036 0 0 0 1TH to 7TH Member & Director & Managing Director, TBB Industry Union None None None
Representative) 2021 Supervisor, Taiwan Federation of Financial Uions
3TH Member, Labor Dispute Arbitration Committee, Ministry of
Labor
Member, Basic Salary Review Committee, Ministry of Labor
Managing Director, Taiwan Confederation of Trade Unions
Supervisor, Taiwan Federation of Labor
Education: Executive Vice
B.A., Money and Banking, National Chengchi University President, Bank of
Experience: Taiwan
June 29,
Director (Bank of Taiwan R.O.C Li-Ling Lin Female June 29, 2018 June 28, 2018 to 101/10/19 1,058,933,860 17.22 1,214,173,562 16.21 0 0 0 0 13th & 14th Managing Director, Taiwan Business Bank Manager, Department of Corporate Finance, Bank of Taiwan Manager, None None None
Representative) 2021 Department of Risk Management, Bank of Taiwan Manager, Dun
hua Branch, Bank of Taiwan
Deputy General manager, Department of Corporate Finance,
Bank of Taiwan
Education: Assistant Professor,
June 29,
Director (Bank of Taiwan R.O.C Tzu-Hao Tsai Male January 20, 2020 June 28, 2018 to January 20, 2020 1,058,933,860 17.22 1,214,173,562 16.21 0 0 0 0 Ph.D., Department of Finance, National Taiwan UniversityExperience: Department of Quantitative Finance, None None None
Representative) 2021 Assistant Professor, Department of Quantitative Finance, National Tsing Hua
National Tsing Hua University University
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26

Taiwan Business Bank Annual Report 2020

III

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Being the Spouse or
Shareholding by the Relative within the Second
Shareholding Under
Date Tenure Initial Shareholding on Inauguration Current Shareholding Director, Spouse & Minor Children Other's Name Current Positions Degree of Kinship of Other Managers, Directors, or
Title Nationality Name Gender Elected (15th) Inauguration Date Major Experience & Education the Bank and Other Companies Supervisors
Number of Shares Shareholding (%) Number of Shares Shareholding (%) Number of Shares Shareholding (%) of SharesNumber Shareholding (%) Title Name Relationship
Education: Executive Vice
B.A., Department of Business Administration, Chinese Culture President, Land Bank
University of Taiwan
June 29, Experience: Director, Agricultural
Representative)Bank of Taiwan Director (Land R.O.C Ying-Ming He Male June 29, 2018 June 28, 2018 to 2021 May 23, 2017 149,244,703 2.43 171,123,975 2.29 0 0 0 0 EVP & Chief Auditor, Land Bank of TaiwanEVP & Chief Compliance Officer, Land Bank of Taiwan Manager, Department of Credit Management, Land Bank of Taiwan Credit Guarantee Fund None None None
Manager, Department of Credit Review, Land Bank Of Taiwan
Manager, Chung Hsiao Branch, Land Bank Of Taiwan Manager,
Han Ping Branch, Land Bank Of Taiwan
Education: Clerk, Chang Hwa
Department of Industrial Management, Vanung University Branch, Taiwan
(TBB Industry Union Director R.O.C Ching-Yu Liu Male August 1, 2020 June 29, June 28, 2018 to June 29, 2019 2,376,684 0.04 4,026,193 0.05 74,214 0 0 0 Experience:7th to 8th Member & Director & Managing Director, TBB Industry Business Bank, Ltd. None None None
Representative) 2021 Union 7th to 8th Member, TBB Industry Union 8th Member,
Reserve Supervision Committee of Taiwan Business Bank 40th
to 41th Member, Employee Welfare Committee of Taiwan
Education: Honorary President
B.A., Kindai University, JPN of the Republic of
Experience: China on the Kindai
June 29,
Director R.O.C Che-Nan Wang Male June 29, 2018 June 28, 2018 to 101/7/22 1,276,494 0.02 10,859,194 0.15 10,859,194 0.15 0 0 13th & 14th Director, Taiwan Business BankMember, Overseas Community Affairs Council, Republic of China University Advisory Committee None None None
2021 Director , Taichung Commercial Bank Co., Ltd Member, Overseas
Community Affairs
Council, Republic of
China
Education: Professor, Graduate
Ph.D., Department of Economics, North Carolina State Institute of Industrial
University, USA Economics, National
Experience: Central University
(Independent Director)Director R.O.C Jin-Long Liu Male June 29, 2018 June 29, June 28, 2018 to 2021 August 1, 2020 0 0 0 0 0 0 0 0 Associate Professor, Graduate Institute of Industrial Economics, National Central UniversityDirector, Graduate Institute of Industrial Economics, National None None None
Central University
Visiting Associate Professor, Duke University Visiting scholar,
Foundation for Scholarly Exchange
Supervisor, Integrated Service Technology Inc.
Education: Independent Director
Textile Division, Southern Taiwan University of Science and , Taiwan Business
Technology Bank
Experience: Independent
Independent Director, China Steel Corporation Director,
(Independent Director R.O.C Wei-Sheng Huang Male June 29, 2018 June 29, June 28, 2018 to June 29, 2018 0 0 0 0 0 0 0 0 Chairman, Small & Medium Enterprise Credit Guarantee Fund of Taiwan Sirtec international Co., Ltd None None None
Director) 2021 Director, Small & Medium Enterprise Counseling Foundation
Supervisor, First Financial Holding Co., Ltd. Supervisor, First
Commercial Bank Co., Ltd. Chairman, Yangsheng Knitting Co.,
Ltd.
Chairman, Weifanglong Co., Ltd.
Director, UUPON Inc.
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Note 1. The position of Chairman and the President or an equivalent position (chief manager) are taken by the same person, or are spouses, or are within the first degree of kinship: None.

Note 2. Previous term of Director Hung-Sheng Yu: July 1, 2013 to July 30, 2014 (TBB Industry Union Representative).

B. Major Shareholders of Juristic Person Shareholders

Dec. 31, 2020

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Juristic person Shareholder Major Shareholders of Juristic Shareholders
Ministry of Finance Government Agency
Bank of Taiwan Co., Ltd. Taiwan Financial Holdings Co., Ltd. (100%)
Land Bank of Taiwan Co., Ltd. Ministry of Finance (100%)
Labor Union of Taiwan Business Bank Non-profit Corporation
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C. Major Shareholders of Major Juristic Person Shareholders of the Bank

Dec. 31, 2020	Dec. 31, 2020
Juristic Person Shareholder	Major Shareholders of Juristic Person Shareholders
Taiwan Financial Holdings Co., Ltd.	Ministry of Finance (100%)

27

Dec. 31, 2020

D. Professional Knowledge and Independence of Directors

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Qualifications Qualifications(Note 1) Independence (Note 2) Public Companies Number of Other
Serving as an
Name A B C 1 2 3 4 5 6 7 8 9 10 11 12 independent
Director
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Qualifcations Name	Qualifcations (Note 1)	Qualifcations (Note 1)	Qualifcations (Note 1)	Independence (Note 2)	Independence (Note 2)	Independence (Note 2)	Independence (Note 2)	Independence (Note 2)	Independence (Note 2)	Independence (Note 2)	Independence (Note 2)	Independence (Note 2)	Independence (Note 2)	Independence (Note 2)	Independence (Note 2)	Number of Other Public Companies Serving as an independent Director
	A	B	C	1	2	3	4	5	6	7	8	9	10	11	12
Bor-Yi Huang																0
Chih-Chien Chang																0
Shih-Yuan Tai																0
Xin-Wu Lin																2
Lien-Wen Liang																0
Shiu-Yen Lin																0
Wen-Chieh Wang																0
Hung-ShengYu																0
Li-LingLin																0
Tzu-Hao Tsai																0
Ying-MingHe																0
Ching-Yu Liu																0
Che-Nan Wang																0
Jin-LongLiu																0
Wei-ShengHuang																1

• Note 1: Directors and Supervisors shall meet one of the following professional requirements, together with at least five year work experience: A. An instructor or higher in a department of commerce, law, finance, accounting or other academic department related to the banking business in a public/private junior college, college or university.

• B. A judge, public prosecutor, attorney, certified public accountant, or other professional or technical specialist who has passed a national examination and has been awarded a certificate in a professional necessary for the banking business.

• C. With work experience in the fields of commerce, law, finance, accounting or other profession necessary for the banking business.

• Note 2: Indicate with "" mark for members who meet the following conditions during the two years before being elected and during the term of office.

• (1) Neither employees of the bank nor its affiliates.

• (2) Neither a director or a supervisor of the bank nor its affiliates (this restriction does not apply to independent director positions in the bank, its parent company or subsidiary, or a subsidiary under common control of the parent company which has been appointed in accordance with Securities and Exchange Act or laws of the registered country).

• (3) Neither an individual shareholder who holds shares, together with those held by his/her spouse, minor children, or held under others' names, in an aggregate amount of 1% or more of the total outstanding shares nor a natural person who ranks among the top 10 shareholders in terms of the share volume held.

• (4) Neither a spouse or relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the managerial officers in (1), nor any person in (2) or (3) above.

• (5) Not a director, supervisor, or employee of a juristic person shareholder that directly holds 5% or more of the total outstanding shares of the bank, or ranks among the top 5 juristic person shareholders in terms of share volume held, or is a representative being assigned as the bank's director or supervisor according to Paragraph 1 or Paragraph 2, Article 27 under the Company Act (this restriction does not apply to independent director positions in the bank, its parent company or subsidiary, or a subsidiary under common control of the parent company which has been appointed in accordance with Securities and Exchange Act or laws of the registered country).

• (6) Not a director, supervisor, or employee of another company which is the the bank's director, and the majority of that company's director seats or voting shares are controlled by the same person (this restriction does not apply to independent director positions in the bank, its parent company or subsidiary, or a subsidiary under common control of the parent company which has been appointed in accordance with Securities and Exchange Act or laws of the registered country).

• (7) Not a director, supervisor, or employee of another company or institution who is or whose spouse is the bank's chairman, president, or a person with equivalent position (this restriction does not apply to independent director positions in the bank, its parent company or subsidiary, or a subsidiary under common control of the parent company which has been appointed in accordance with Securities and Exchange Act or laws of the registered country).

• (8) Not a director, supervisor, managerial officer, or a shareholder holding 5% or more shares of a specific company or institution that also have financial or business dealings with the bank (this restriction does not apply to a specific company or institution holding 20% or more but less than 50% of the total outstanding shares of the bank, and independent director positions in the bank, its parent company or subsidiary, or a subsidiary under common control of the parent company which has been appointed in accordance with Securities and Exchange Act or laws of the registered country).

• (9) Not an owner, partner, director, supervisor, or the managerial officer and his/her spouse of a professional, sole proprietorship, partnership, company, or institution that provides auditing services or commercial, legal, financial, accounting, or relevant services, with an accumulated compensation less than NT$0.5 million within the past two years, to the bank or its affiliates. However, this restriction does not apply to a member of the remuneration committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Securities and Exchange Act or Business Mergers and Acquisitions Act or related laws or regulations.

• (10) Not a spouse or relative within the second degree of kinship among directors.

• (11) None of the circumstances in the subparagraphs of Article 30 of the Company Act has occurred.

• (12) None of the governmental agencies, corporations, or their representatives stated in Article 27 of the Company Act was elected.

28

Taiwan Business Bank Annual Report 2020

III

• E. Implementation status of Board diversity of Taiwan Business Bank

•  Diversification Policy

• (1) Article 34 of the Bank's "Corporate Governance Best Practice Principles" stated that the candidate nomination system is adopted for the selection of the Bank's Board members according to Article 20, and the Bank carried out nominations and review on qualifications of director candidates with a shareholding of 1% and above according to Article 192-1 of the Company Act. After the inclusion into the list of the director candidate, an election shall be carried out according to the Bank's "Regulations Governing the Election of Directors" at the Shareholders' Meeting to ensure the diversity and independence of the Board.

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• (2) The diversification policy of the Board composition is disclosed on the corporate website of the Bank and MOPS.

• The Bank's Board comprises of 15 Directors, two Directors who are concurrently employees of the Bank (accounted for 13.3%), three Independent Directors (accounted for 20%) (with the term of office and length of services less than three years), and three female Directors (accounted for 20%). In response to the natural person professional director policy implemented by the government, the Bank will focus on the target of having five seats of natural person professional director (accounted for 33.3%) upon the re-election of Directors in 2021. The Board members of the Bank generally possess experiences and expertise in multiple fields such as banking, finance, insurance, asset management, and risk management. The diversification of Board composition has no deviation from the requirements under the Bank's "Corporate Governance Best Practice Principles." The expertise of Directors is sufficient in assisting TBB in businesses of supporting the development of SMEs, promoting youth entrepreneurship and innovative finance, green energy finance, culture and creativity finance, senior finance, and urban renewal finance, fulfilling its corporate social responsibilities; relevant implementation is set out in the following table:

Dec. 31, 2020

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Basic Composition Industry Experience Professional Skills
Name of the Tenure of and
Director for the Concurrent the Year of
Core Projects Nationality Gender Role as TBB's (Note 1)Age Experiences as Banking Securities Insurance ManagementAsset Accounting Finance Risk Management ResourcesHuman Law
Employee the Independent
Director (Note 1)
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	Nationality	Gender	Concurrent Role as TBB's Employee	Age (Note 1)	Tenure of and the Year of Experiences as the Independent Director (Note 1)	Banking	Securities	Insurance	Asset Management	Accounting	Finance	Risk Management	Human Resources	Human Resources
Bor-Yi Huang	R.O.C	Male		▲		v	v	v	v	v	v	v	v
Chih-Chien Chang	R.O.C	Male	v	●		v	v	v	v	v	v	v	v
Shih-Yuan Tai	R.O.C	Male		●		v			v			v	v
Lien-Wen Liang	R.O.C	Female		●		v		v	v	v	v	v
Xin-Wu Lin	R.O.C	Male		●	☆	v	v	v	v	v	v	v	v
Li-Ling Lin	R.O.C	Female		●		v	v	v	v	v	v	v
Wen-Chieh Wang	R.O.C	Male		●		v		v	v			v	v	v
Hung-Sheng Yu	R.O.C	Male	v	●		v	v	v	v	v		v	v
Shiu-Yen Lin	R.O.C	Female		●		v	v	v	v	v	v	v	v
Tzu-Hao Tsai	R.O.C	Male		◆		v	v	v	v	v	v	v
Ying-Ming He	R.O.C	Male		▲		v	v	v	v	v	v	v
Ching-Yu Liu	R.O.C	Male	v	▲		v	v	v		v	v	v
Che-Nan Wang	R.O.C	Male		★		v	v		v			v	v
Wei-Sheng Huang	R.O.C	Male		▲	☆	v	v	v	v	v	v	v	v
Jin-Long Liu	R.O.C	Male		▲	☆	v	v	v	v	v	v	v

Note 1. ◆ Below 50 years old ● 51 to 60 years old ▲ 61 to 70 years old ★ Over 70 years old Note 2. ☆ With a tenure less than 3 years △ With a tenure ranging from 3 to 9 years ○ With a tenure over 9 years

29

(2) Information of President, Executive Vice President, SVP & GM and Managers of Departments and Branches

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EVP &Chief Auditor

Executive Vice President Executive Vice President

Executive Vice President Executive Vice President

Executive Vice President

Yu-Min Chang

Chang-Yu Lin

Chiu-Yen Chen Shao-Huang Chen Sung Shui Chiu Jia-Ruey Luan

Dec. 31, 2020

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Being the Spouse or Relative
Shareholding by Shareholding
Shareholding Spouse & Minor Under Others' within the Second Degree of
Title nalityNatio Name Gender ElectedDate Children Name Major Experience & Education Current Positions in TBB and Other Companies Kinship of Other Managers, Directors and Supervisors
Number of Number of Number of Relation-
% % % Title Name
Shares Shares Shares ship
Director, Sunsino
Development Associate
MBA, National Taiwan
President (Note) R.O.C Chih-Chien Chang Male 1090311 223,128 0 0 0 0 0 University of Science and Inc. Director, Small and None
Medium Enterprise
Technology Credit Guarantee Fund
of Taiwan
Chairman of TBB
Executive Vice
President R.O.C Yu-Min Chang Male 1080201 174,412 0 4,875 0 0 0 MBA, Tamkang University (Cambodia) Microfinance None
Institution Plc
Director, Taiwan
Financial Asset Service
Executive Vice
President R.O.C Chang-Yu Lin Male 1080901 337,643 0 0 0 0 0 Accounting, Fu Jen University Corporation None
Chairman, TBB Venture
Capital Co., Ltd.
Executive Vice
President and Director, Taipei Forex
SVP&GM, R.O.C Sung-Shui Chiu Male 1090717 155,791 0 8,720 0 0 0 [Economics, National Taiwan ] Inc. Director, TBB None
International University (Cambodia) Microfinance
Institution Plc
Banking Dept.
Chairman, TBB
International Leasing
Executive Vice President R.O.C Shao-Huang Chen Male 1091030 405,827 0 0 0 0 0 MBA,University of Southern Co., Ltd. Chairman, Taiwan Business Bank None
California, USA
International Leasing
Co., Ltd.
Executive Vice President R.O.C Chiu-Yen Chen Female 1091112 230,268 0 1,156 0 0 0 [Statistics, National Chengchi ] University None None
EVP & Chief Master of Banking and
Auditor R.O.C Jia-Ruey Luan Male 1091112 213,427 0 0 0 0 0 Finance, None None
TamKang University
SVP & Chief
Secretary, R.O.C Li-Yueh Hsu Female 1080401 100,000 0 0 0 0 0 [Law, National Taiwan ] None None
University
Secretarial Dept.
Transportation and
SVP&GM Business R.O.C Tzong-Wen Chou Male 1080901 121,310 0 0 0 0 0 Communication Management Director, TBB Venture None
Development Dept. Science, National Cheng Capital Co., Ltd.
Kung University
SVP&GM,
Loan Supervision R.O.C Hsiou-Chen Kang Female 1091030 118,099 0 0 0 0 0 [EMBA,] None None
National Central University
Dept.
Master of Finance, National Director, TBB
SVP&GM, Credit R.O.C Kuo-Liang Tseng Male 1091030 118,448 0 0 0 0 0 Yunlin University of Science International Leasing None
Investigation Dept. and Technology Co., Ltd.
SVP&GM, Auditing Dept. R.O.C Tsung-Chu Hsieh Male 1091030 129,114 0 0 0 0 0 [Public Finance, National ] Chengchi University None None
SVP&GM,
Administration R.O.C Yin-Cheng Tseng Female 1080401 156,011 0 0 0 0 0 [Department of Law, National ] None None
Management Dept. Chengchi University
SVP&GM, Human Resources Dept. R.O.C Ching-Yun Kuo Female 1081001 233,368 0 27,647 0 0 0 [Law, National Taiwan ] University None None
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30

Taiwan Business Bank Annual Report 2020

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Being the Spouse or Relative
Shareholding by Shareholding
Shareholding Spouse & Minor Under Others' within the Second Degree of
Title nalityNatio Name Gender ElectedDate Children Name Major Experience & Education Current Positions in TBB and Other Companies Kinship of Other Managers, Directors and Supervisors
Number of Number of Number of Relation-
% % % Title Name
Shares Shares Shares ship
SVP&GM, Ph.D., Department of
Information R.O.C Ting-Huei Liao Male 1060718 261,720 0 248,106 0 0 0 Banking and Finance, Supervisor, Financial None
Technology Dept. Tamkang University e-solution Co., Ltd.
SVP&GM, Overdue
Loan & Control R.O.C Chiang-Shu Lin Male 1091030 130,587 0 0 0 0 0 [Textile Department, Vanung ] None None
University
Dept.
SVP&GM, Personal Banking Dept. R.O.C Chin-Chuan Su Male 1091030 323,489 0 0 0 0 0 [Accounting, National Chung ] Hsing University None None
Director, CDIB & Partners
Investment Holding
Corp. Supervisor, TBB
Master of Financial International Leasing
SVP&GM, Treasury R.O.C Chih-Wei Chen Male 1070504 0 0 0 0 0 0 Management, National Co., Ltd. Supervisor, None
Dept. Central University Taiwan Business Bank
International Leasing
Co., Ltd. Director, TBB
Venture Capital Co., Ltd.
Acting SVP&GM,
Digital Banking R.O.C Yu-Cheng Tsai Male 1090717 0 0 0 0 0 0 [EMBA, National Chengchi ] None None
University
Dept.
Master of Accounting and
SVP&GM, R.O.C Min-Chung Hsieh Male 1091030 107,369 0 0 0 0 0 Information Technology, None None
Compliance Dept. National Chung Cheng
University
Master of Information
SVP&GM,
Information R.O.C Yi-Chin Chai Male 1070723 102,519 0 0 0 0 0 Management, National None None
Taiwan University of Science
Security Dept. and Technology
Department of Business
SVP&GM, Wealth R.O.C Chu-Chou Chen Female 1070723 242,849 0 0 0 0 0 Administration, SooChow None None
Management Dept. University
Department of Business
SVP&GM, Credit R.O.C Wen-Shu Lin Female 1070208 119,293 0 0 0 0 0 Administration, SooChow None None
Card Dept. University
Director, Chaofu Real
Estate Management
SVP&GM,
Co. Director, TBB
Corporate
Master of Finance, National International Leasing
Banking Dept. R.O.C Tseng-Hsiang Yi Male 1080401 122,918 0 0 0 0 0 Taiwan University of Science Co., Ltd. Director, None
and SVP&GM, Innovative Finance and Technology Taiwan Business Bank
Project Office International Leasing Co., Ltd. Director TBB
Venture Capital Co., Ltd.
Director, Taiwan
SVP&GM, Risk R.O.C Mei-Chun Lin Female 1091030 279,618 0 0 0 0 0 Business Management, National Cheng Kung Business Bank None
Management Dept. International Leasing
University
Co., Ltd.
SVP&GM, Accounting Dept. R.O.C Yu-Chuan Chou Female 1070208 133,893 0 879 0 0 0 [Accounting, National Chung ] Hsing University Supervisor, TBB Venture Capital Co., Ltd. None
SVP&GM, Trust Dept. R.O.C Wen-Qing Huang Female 1080716 218,515 0 0 0 0 0 [Department of Law, Fu Jen ] Catholic University None None
Cooperative Economic,
SVP&GM, R.O.C Li-Hui Chang Female 1070723 139,139 0 0 0 0 0 National Chung Hsing None None
Securities Dept. University
Acting SVP&GM, Department of Cooperative
Insurance Agent R.O.C Wen-Ling Wang Female 1090102 21,656 0 0 0 0 0 Economics, Feng Chia None None
Dept. University
SVP&GM, North 1
Regional Operation R.O.C Chi-Fen Yen Female 1090511 129,631 0 0 0 0 0 [Business Administration, Fu ] None None
Center Jen University
SVP&GM, North 2 Master of Management
Regional Operation R.O.C Ying-Che Fang Male 1091030 208,799 0 0 0 0 0 Sciences, Tamkang None None
Center University
SVP&GM, North 3 Business Management,
Regional Operation R.O.C Bih-Lien Fang Female 1081031 731,631 0 0 0 0 0 National Cheng Kung None None
Center University
Department of Applied
SVP&GM, Central
Regional Operation R.O.C Ming-Yi Lin Male 1091030 369,910 0 265,487 0 0 0 Business, Taichung None None
Center University of Science and
Technology
SVP&GM, South 1
Regional Operation R.O.C Hsiu-Chu Lin Female 1081031 121,352 0 0 121,352 0 0 0 [EMBA, National Chung ] None None
Center Cheng University
SVP&GM, South 2 Department of Business
Regional Operation R.O.C Wen-Hsiu Huang Male 1070208 161,262 0 0 0 0 0 Administration, Tunghai None None
Center University
VP&GM, Domestic Processing Center R.O.C Huei-Nai Hung Female 1030514 118,158 0 0 0 0 0 Accounting, Fu Jen University None None
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31

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Being the Spouse or Relative
Shareholding by Shareholding
Shareholding Spouse & Minor Under Others' within the Second Degree of
Title nalityNatio Name Gender ElectedDate Children Name Major Experience & Education Current Positions in TBB and Other Companies Kinship of Other Managers, Directors and Supervisors
Number of Number of Number of Relation-
% % % Title Name
Shares Shares Shares ship
AVP&GM,
Customer Service R.O.C Ching-Yi Lin Female 1080213 110,691 0 0 0 0 0 Economics, Fu Jen University None None
Center
VP&GM, Chung Ho Branch R.O.C Hsiu-Hsin Hou Male 1090316 118,742 0 0 0 0 0 [Bank & Insurance Section, ] Hsing Wu Business College None None
Department of Business
VP&GM, Po Ai Branch R.O.C Yu-Cheng Chiao Male 1090825 74,482 0 38,236 0 0 0 Administration, National None None
Chung Hsing University
Master of Business
VP&GM, North R.O.C Li-Huei Chen Male 1090316 34,398 0 0 0 0 0 Administration, Tamkang None None
Taoyuan Branch University
Department of Economics,
VP&GM, Nan Ken Branch R.O.C Yu-Chaio Wei Female 1070208 109,336 0 8,763 0 0 0 National Chung Hsing None None
University
VP&GM, Si Tuen Branch R.O.C Yuan-Hsueh Hsiao Male 1070208 118,331 0 0 0 0 0 [EMBA, Taichung Health and ] Management Collage None None
Department of Finance,
VP&GM, Chung Min Branch R.O.C Yun-Shiang Tsai Male 1071029 107,625 0 0 0 0 0 Chao Yang University of None None
Technology
Master of Science and
Technology Management
VP&GM, Kinmen Branch R.O.C Shui-Chiang Fang Male 1080213 62,984 0 0 0 0 0 Industry, Department of None None
Business & Management,
National University of Tainan
VP&GM, Banking Department R.O.C Hsih-Hui Chen Female 1090511 124,222 0 0 0 0 0 [Department of Law, Fu Jen ] Catholic University None None
VP&GM, Ta Ya Branch R.O.C Li-Ching Lai Female 1091030 100,660 0 129,415 0 0 0 [Accounting, National Chung ] Hsing University None VP&GM [Cheng-An ] Hsieh Spouse
Department of Public
VP&GM, Jen Ta Branch R.O.C Jung-Ling Wang Male 1090316 118,962 0 0 0 0 0 Finance, Feng Chia None None
University
VP&GM, Jen Ai Branch R.O.C Mei-Chih Hou Female 1050301 134,028 0 0 0 0 0 [Banking, Feng Chia ] University None None
Department of Finance and
VP&GM, Sung Shan Branch R.O.C Bi-Chu Chuang Female 1071029 119,007 0 0 0 0 0 Taxation, National Chung None None
Hsing University
Executive Master of
VP&GM, Chien R.O.C Guei-Jin Chiou Female 1050301 375 0 0 0 0 0 Business Administration in None None
Cheng Branch International, National Taipei
University
Department of Medical
VP&GM, Shih Lin Branch R.O.C Wen-Fang Lin Male 1070827 101,904 0 0 0 0 0 Administration,Yuanpei Junior College of None None
Medical Technology
Department of Finance,
VP&GM, Yung Ho Branch R.O.C Jiann-Yea Shyu Male 1091030 51,148 0 0 0 0 0 National Taipei College of None None
Business
Department of Industrial
VP&GM, Hsin Tien Branch R.O.C Chien-Fa Wang Male 1080716 104,025 0 0 0 0 0 Engineering, St. John's and St. Mary's Institute of None None
Technology
VP&GM, Hsin Chuang Branch R.O.C Yueh-Yen Weng Female 1090203 115,863 0 0 0 0 0 [Business Administration, ] National Chengchi University None None
VP&GM, Hwa Cheng Branch R.O.C Ruey-Shyang Guo Male 1071029 121,376 0 0 0 0 0 MBA, Baruch College, CUNY None None
VP&GM, Sung Kiang Branch R.O.C Chao-Lieh Chen Male 1060718 891 0 0 0 0 0 EMBA, Tamkang University None None
VP&GM, Taipei Branch R.O.C Ching-Hsiu Liu Female 1080716 44,605 0 0 0 0 0 [International Trade, Chung ] Yuan Christian University None None
Department of International
VP&GM, Wan Hua Branch R.O.C Yen-Wei Huang Male 1090316 130,585 0 1,758 0 0 0 Business, Feng Chia None None
University
VP&GM, South Taipei Branch R.O.C Jiunn-Chin Wang Male 1071029 100,062 0 0 0 0 0 [Statistics, Tamkang ] University None None
VP&GM, Fu Hsin Branch R.O.C Yen-Huey Wang Female 1090511 116,820 0 236 0 0 0 [Banking and Insurance, Ming ] Chuan College None None
Department of Business
VP&GM, Chung R.O.C Chiu-Chin Chen Female 1090825 119,280 0 0 0 0 0 Administration, Chung Yuan None None
Shang Branch Christian University
VP&GM, Chien Kuo Branch R.O.C Tien-Chin Lin Male 1070208 119,251 0 0 0 0 0 [Economics, Tunghai ] University None None
VP&GM, Nai Hu Branch R.O.C Ching-Kuei Hsieh Female 1090203 124,681 0 0 0 0 0 [Insurance, Tamkang ] University None None
VP&GM, Nan King East Road Branch R.O.C Fuh-Yuh Yeh Male 1080716 118,301 0 1,062 0 0 0 [Business, National Open ] University None None
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32

Taiwan Business Bank Annual Report 2020

III

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----- Start of picture text -----

Being the Spouse or Relative
Shareholding by Shareholding
Shareholding Spouse & Minor Under Others' within the Second Degree of
Title nalityNatio Name Gender ElectedDate Children Name Major Experience & Education Current Positions in TBB and Other Companies Kinship of Other Managers, Directors and Supervisors
Number of Number of Number of Relation-
% % % Title Name
Shares Shares Shares ship
Department of
VP&GM, Chung Hsiao Branch R.O.C Yen-Ling Chen Female 1060718 118,773 0 0 0 0 0 International Trade, Takming Junior College of None None
Commerce
VP&GM, World
Trade Center R.O.C Yu Lin Male 1080401 32,118 0 0 0 0 0 Law, Soochow University None None
Branch
Supplementary Open
VP&GM, Yung Trin Branch R.O.C Su-Chen Huang Female 1080716 67,779 0 0 0 0 0 Junior College for Public Administration, National None None
Chengchi University
Master of Economics,
VP&GM, Nan Kang Branch R.O.C Ming-Hui Chen Male 1090717 147 0 0 0 0 0 National Dong Hwa None None
University
Master of Business
VP&GM, Sung Nan Branch R.O.C Chen Ming-Hui Female 1070208 22,932 0 0 0 0 0 Administration in International Business, National Dong None None
Hwa University
Master of Finance, National
VP&GM, Dong Hu Branch R.O.C Mei-Kuei Li Female 1090316 21,136 0 0 0 0 0 Taiwan University of Science None None
and Technology
Department of Industrial
VP&GM, Ta An Branch R.O.C Hsueh-Ru Liu Female 1040207 130,708 0 0 0 0 0 Management, Chinyi Institute None None
of Technology
VP&GM, Shuang Ho Branch R.O.C Liu-Mei Chin Female 1080401 41,450 0 1 0 0 0 [Business Administration, ] National Chengchi University None None
Department of Business
VP&GM, Jim Ho Branch R.O.C Pin-Hsiung Chen Male 1091030 28,120 0 4,462 0 0 0 Administration, SooChow None None
University
Department of Transportation
VP&GM, Wu Ku Branch R.O.C Fang-Chuan Chiu Male 1091030 118,794 0 0 0 0 0 and Logistics, Feng Chia None None
University
VP&GM, Lin Kuo Branch R.O.C Yueh-Chin Wang Female 1060718 129,378 0 6,646 0 0 0 [Accounting, Hsing Wu ] College of Commerce None None
VP&GM, East Linkou Branch R.O.C Hsiao-Ming Chen Male 1080716 117,769 0 57,800 0 0 0 [Master of Economics, ] National Taiwan University None None
VP&GM, Pan Chiao Branch R.O.C Mei-Hui Chen Female 1080213 202,221 0 209,770 0 0 0 [Bank Insurance, National ] Taipei College of Business None None
Master of Business
VP&GM, Shu Lin Branch R.O.C Jui-Yuan Huang Male 1081031 100,744 0 0 0 0 0 Administration, National None None
Taiwan Normal University
VP&GM, Tu Cheng Branch R.O.C Nien-Tzu Chen Female 1070208 125,442 0 0 0 0 0 Accounting, Fu Jen University None None
VP&GM, Hwei Long Branch R.O.C Pao-Sheng Lin Male 1090825 112,728 0 120,596 0 0 0 [Business Administration, Fu ] Jen University None VP&GM [Shu-Ling ] Yuan Spouse
VP&GM, Hsi Chih Branch R.O.C Sung-Nan Chiao Male 1091030 85,379 0 981 0 0 0 [Department of Accounting, ] Soochow University None None
Department of International
VP&GM, Sanxia Branch R.O.C Jui-Yu Li Female 1090825 81,518 0 6,537 0 0 0 Business, Ming Chuan None None
College
Department of Industrial
VP&GM, Keelung Branch R.O.C Chun-Ta Lin Male 1080213 107,009 0 0 0 0 0 Management, Lunghwa University of Science and None None
Technology
VP&GM, Pu Chya Branch R.O.C Shu-Ting Chen Female 1080213 104,327 0 922 0 0 0 [International Trade, Hsing ] Wu Business College None None
VP&GM, North San Chung Branch R.O.C Li-Fang Lee Female 1090316 118,674 0 0 0 0 0 [Economics, Chinese Culture ] University None None
Department of Finance and
VP&GM, South R.O.C Chin-Chih Li Female 1090511 51,443 0 50,845 0 0 0 International Business, Fu None None
San Chung Branch Jen Catholic University
VP&GM, Lu Chow Branch R.O.C Chih-Hsiang Huang Male 1080823 104,168 0 0 0 0 0 [Public Finance, National ] Chengchi University None None
Supplementary Open
VP&GM, I Lan Branch R.O.C Pi-Chuan Chien Female 1060203 119,959 0 1,246 0 0 0 Junior College for Public Administration, National None None
Chengchi University
Business, National Lo-Tung
VP&GM, Lo Tung Branch R.O.C Ming-Fa Chien Male 1080823 100,963 0 0 0 0 0 Commercial Vocational High None None
School
Industrial Management,
VP&GM, Su Aw Branch R.O.C Ping-Hui Lee Male 1070723 107,409 0 0 0 0 0 Southern Taiwan Industrial None None
College
VP&GM, Yang Mei Branch R.O.C Yueh-Mei Chang Female 1080823 127,235 0 0 0 0 0 [MBA, National Dong Hwa ] University None None
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33

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Being the Spouse or Relative
Shareholding by Shareholding
Shareholding Spouse & Minor Under Others' within the Second Degree of
Title nalityNatio Name Gender ElectedDate Children Name Major Experience & Education Current Positions in TBB and Other Companies Kinship of Other Managers, Directors and Supervisors
Number of Number of Number of Relation-
% % % Title Name
Shares Shares Shares ship
VP&GM, Hu Kou Branch R.O.C Chiu-Yu Liu Female 1090316 47,239 0 70,857 0 0 0 Economics, Fu Jen University None None
VP&GM, Taoyuan Branch R.O.C Shu-Fen Li Female 1080823 100,502 0 0 0 0 0 [International Trade, Hsing ] Wu Business College None None
Business Management
SVP&GM, Ta Yuan Branch R.O.C Li-Chuan Huang Female 1060718 118,273 0 68,796 0 0 0 Institute, Chung Hua None None
University
Master of Technology
VP&GM, Ta Shi Branch R.O.C Ju-Hsiang Tien Male 1091030 3,000 0 0 0 0 0 Management, Chung Hua None None
University
VP&GM, Chung Li Branch R.O.C Jiann-Gwo Guu Male 1070208 156,889 0 108,808 0 0 0 [Accounting Statistics, Tamsui ] Exford College None None
Department of Applied
VP&GM, Nei Li Branch R.O.C Mu-Hsiang Wu Male 1080213 116,537 0 0 0 0 0 Business, National Taipei None None
College of Business
Department of Business
VP&GM, Hsin Ming Branch R.O.C Yu-Pei Liao Female 1070208 75,214 0 0 0 0 0 Administration, National None None
Chung Hsing University
Master of International
VP&GM, East R.O.C Shu-E Chen Female 1090316 108,313 0 0 0 0 0 Business, Chung Yuan None None
Taoyuan Branch Christian University
VP&GM, Hsin Wu Branch R.O.C Hsu-Hsiang Huang Male 1080823 106,279 0 0 0 0 0 [Economics, Feng Chia ] University None None
Master of Industrial
VP&GM, Hsin Chu Branch R.O.C Nai-Chia Chi Male 1080823 195,260 0 0 0 0 0 Economics, National Central None None
University
Master of Technology
VP&GM, Chu Pei Branch R.O.C Kuan-Yi Huang Male 1081031 59,116 0 0 0 0 0 Management, Chung Hua None None
University
VP&GM, Hsinchu
Science Based Industrial Park R.O.C Su-Fen Chen Female 1080823 118,553 0 10,909 0 0 0 [Department of Accounting, ] Soochow University None None
Branch
Master of Marketing and
VP&GM, Pa Te Branch R.O.C Shuan-Hua Liu Female 1090316 148,111 0 0 0 0 0 Logistics Management, Hsing Wu University of Science and None None
Technology
VP&GM, Luong Tan Branch R.O.C Shu-Ling Yuan Female 1081031 120,596 0 112,728 0 0 0 Business Management, National Taipei College of Business None VP&GM Sheng LinPao- Spouse
Master of Science in
VP&GM, Chu Tung Branch R.O.C Yun-Hui Chang Male 1080213 53,416 0 0 0 0 0 Engineering, Tatung Institute None None
of Technology
VP&GM, Chu Nan Branch R.O.C Hsiu-Chiao Lin Female 1060203 253,234 0 419,777 0 0 0 [Business Management, ] Tamkang University None None
Department of Business
VP&GM, Tou Fen Branch R.O.C Sheng-Wang Chang Male 1081031 116,603 0 6,537 0 0 0 Management, Chin Min Institute of Technology None None
Department of Chemical
VP&GM, Maio Li Branch R.O.C Hsin-Lu Chiang Male 1091030 390 0 0 0 0 0 Engineering, Chinese Culture None None
University
Business Administration,
VP&GM, Feng Yuan Branch R.O.C Li-Chung Lin Male 1070723 125,824 0 0 0 0 0 National Taichung College of None None
Business
VP&GM, Tai Ping Branch R.O.C Yih-Shiou Wang Male 1090717 151,450 0 0 0 0 0 EMBA, Feng Chia University None None
VP&GM, Ta Chia Branch R.O.C Man-Chung Yeh Male 1071029 20,765 0 0 0 0 0 [International Trade, National ] Taichung College of Business None None
VP&GM, Sha Lu Branch R.O.C Jung-Yu Huang Male 1091030 119,411 0 0 0 0 0 [Accounting, Feng Chia ] University None None
Department of Public
VP&GM, Wu Jih Branch R.O.C Meng-Shin Jeng Male 1071029 173,744 0 47,227 0 0 0 Finance, Feng Chia None None
University
Department of Business
VP&GM, Taichung Branch R.O.C Shun-Tseng Liao Male 1091030 175,509 0 0 0 0 0 Administration, SooChow None None
University
VP&GM, Min Chen Branch R.O.C Chih-Cheng Chen Male 1091030 126,993 0 0 0 0 0 [Business, National Open ] University None None
VP&GM, Hsing Chung Branch R.O.C Fu-Long Chen Male 1090717 131,483 0 0 0 0 0 [Engineering Machinery, ] Pingtung Agricultural None None
VP&GM, Pei Tuen Branch R.O.C Kuo-Tsun Pai Male 1070208 119,535 0 0 0 0 0 [Business, National Open ] University None None
Master of Finance, National
VP&GM, Nan Tou Branch R.O.C Liang-Pin Chen Male 1070723 842 0 811 0 0 0 Yunlin University of Science None None
and Technology
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34

Taiwan Business Bank Annual Report 2020

III

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----- Start of picture text -----

Being the Spouse or Relative
Shareholding by Shareholding
Shareholding Spouse & Minor Under Others' within the Second Degree of
Title nalityNatio Name Gender ElectedDate Children Name Major Experience & Education Current Positions in TBB and Other Companies Kinship of Other Managers, Directors and Supervisors
Number of Number of Number of Relation-
% % % Title Name
Shares Shares Shares ship
Master of Finance, National
VP&GM, Tsao Tuen Branch R.O.C Tsai-Rong Hung Female 1030217 181,719 0 0 0 0 0 Yunlin University of Science None None
and Technology
Department of Applied
VP&GM, Pu Li Branch R.O.C Fu-Ching Chou Male 1060901 114,697 0 0 0 0 0 Business, Taichung University of Science and None None
Technology
VP&GM, Tan Tze Branch R.O.C Cheng-An Hsieh Male 1060901 129,415 0 100,660 0 0 0 [Master of Insurance, Feng ] Chia University None VP&GM Li-Ching Lai Spouse
Business Administration,
VP&GM, Chu Shan Branch R.O.C Shin-Mao Lin Male 1091030 48,479 0 0 0 0 0 National Taichung College of None None
Business
Department of Applied
VP&GM, Chang Hwa Branch R.O.C Chih-Cheng Cho Male 1091030 105,988 0 0 0 0 0 Business, Taichung University of Science and None None
Technology
Department of Industrial
VP&GM, Ho Mei Branch R.O.C Ming-Tang Chen Male 1080213 123,116 0 0 0 0 0 Management, Lunghwa University of Science and None None
Technology
VP&GM, Yuan Lin Branch R.O.C Yueh-Man Sung Female 1071029 143,215 0 0 0 0 0 [International Trade, National ] Taichung College of Business None None
VP&GM, Pei Tou Branch R.O.C Chien-Ta Wu Male 1071224 102,698 0 0 0 0 0 [EMBA, National Chi Nan ] University None None
VP&GM, Erh Lin Branch R.O.C Li-Mo Yang Male 1060203 256,532 0 0 0 0 0 Statistics, Fu Jen University None None
Master of Applied Economics,
VP&GM, Tou Liu Branch R.O.C His-Her Pai Male 1070208 189,963 0 86 0 0 0 National Chung Hsing None None
University
Master of Finance, National
VP&GM, Pei Kang Branch R.O.C Wen-Chi Chen Male 1040306 85,560 0 0 0 0 0 Yunlin University of Science None None
and Technology
VP&GM, Hu Wei Branch R.O.C Tung-Han Lu Male 1080213 70,000 0 0 0 0 0 [Accounting , Tamkang ] University None None
Department of International
VP&GM, Chia Yi Branch R.O.C Su-Ying Tsai Female 1070208 124,606 0 0 0 0 0 Trade, Open College with National Chang Kung None None
University
VP&GM, Ming Hsiung Branch R.O.C I-Man Chen Female 1071029 120,792 0 81 0 0 0 [Business, Providence ] College None None
VP&GM, Chia Hsin Branch R.O.C Li-Feng Huang Female 1090825 102,646 0 0 0 0 0 [Department of Finance and ] Banking, Aletheia University None None
VP&GM, Hsin Ying Branch R.O.C Chia-Cheng Liu Male 1070208 113,661 0 0 0 0 0 [EMBA, National Chiayi ] University None None
VP&GM, Kai Yuan Branch R.O.C Feng-Fu Chen Male 1050715 121,750 0 11,049 0 0 0 Accounting, Fu Jen University None None
Department of Accounting
VP&GM, Yun Kang Branch R.O.C Hsin-Chuan Hsiao Male 1060203 145,830 0 103,398 0 0 0 and Statistics, Tatung Institute of Commerce and None None
Technology
Department of Business
VP&GM, Shiue Chia Branch R.O.C Hui-Pai Kuo Female 1090316 63,849 0 0 0 0 0 Administration, Nan Jeon University of Science and None None
Technology
Business Management,
VP&GM, Shan Hwa Branch R.O.C Hsiu-Chen Chiu Female 1090203 106,200 0 0 0 0 0 National Cheng Kung None None
University
Master of Science and
Technology Management
VP&GM, Yung Ta Branch R.O.C Chien-Lai Su Male 1071224 810 0 0 0 0 0 Industry, Department of None None
Business & Management,
National University of Tainan
Department of Bank and
VP&GM, Tainan Branch R.O.C Chang-Hui Hsu Female 1090825 101,206 0 11,721 0 0 0 Insurance, Chinese Culture None None
University
Cooperative Economic,
VP&GM, Jen Te Branch R.O.C Guo-Shiang Huang Male 1090203 50,246 0 89,306 0 0 0 National Chung Hsing None None
University
VP&GM, Cheng Kung Branch R.O.C Shun-Ho Chen Male 1090825 120,283 0 0 0 0 0 [Business Administration, ] Feng Chia University None None
Department of Applied
VP&GM, East Tainan Branch R.O.C Su-Chih Wang Female 1090825 247,494 0 0 0 0 0 Business, Taichung University of Science and None None
Technology
VP&GM, An Ping Branch R.O.C Mei-Chen Chen Female 1070208 139,528 0 11,069 0 0 0 [MBA, National Cheng Kung ] University None None
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35

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----- Start of picture text -----

Being the Spouse or Relative
Shareholding by Shareholding
Shareholding Spouse & Minor Under Others' within the Second Degree of
Title nalityNatio Name Gender ElectedDate Children Name Major Experience & Education Current Positions in TBB and Other Companies Kinship of Other Managers, Directors and Supervisors
Number of Number of Number of Relation-
% % % Title Name
Shares Shares Shares ship
VP&GM, Hua Lien Branch R.O.C Shu-hui Chen Female 1090825 101,202 0 0 0 0 0 [Department of French, ] Chinese Culture University None None
Master of Tropical
Agriculture and International
VP&GM, Tai Tung Branch R.O.C Wen-Jang Jou Male 1070208 112,987 0 0 0 0 0 Cooperation, National None None
Pingtung University of
Science & Technology
Master of Finance, Kaohsiung
VP&GM, East R.O.C Leh-Chin Kuo Female 1070208 100,031 0 0 0 0 0 First University of Science None None
Kaohsiung Branch and Technology
VP&GM, Kang Shan Branch R.O.C Kuang-Tsai Wang Male 1091030 118,435 0 0 0 0 0 [MBA, National Sun Yat-sen ] University None None
VP&GM, North Feng Shan Branch R.O.C Fu-Lai Chang Male 1090511 105,256 0 0 0 0 0 [Business, National Open ] University None None
Master of Finance, Kaohsiung
VP&GM, Ling Ya Branch R.O.C An-Yun Lin Female 1080716 235,363 0 51,187 0 0 0 First University of Science None None
and Technology
VP&GM, Kaohsiung Branch R.O.C Der-Hsung Lin Male 1090316 118,684 0 0 0 0 0 [Bank Insurance, Meiho ] University None None
Master of Business
Administration in International
VP&GM, North R.O.C Yi-Ching Wang Female 1080716 105,955 0 0 0 0 0 Business, National None None
Kaohsiung Branch
Kaohsiung University of
Applied Sciences
VP&GM, Ta Chang Branch R.O.C Li-Jung Lin Female 1070208 130,790 0 0 0 0 0 [Business, National Open ] University None None
Department of Business
VP&GM, Chien Chen Branch R.O.C Meng-Hsun Sung Male 1080213 94,723 0 0 0 0 0 Management, National Pingtung University of None None
Science & Technology
Master of Finance and
VP&GM, Jeou Ru Branch R.O.C Yao-Chin Yang Male 1080823 106,047 0 0 0 0 0 Information, National Kaohsiung University of None None
Applied Sciences
VP&GM, San Ming Branch R.O.C Lan-Ying Chu Female 1090203 100,347 0 0 0 0 0 [Banking and Insurance, ] KUOCHI College of Business None None
VP&GM, Feng Shan Branch R.O.C Feng-Ying Chen Female 1091122 121,401 0 0 0 0 0 [Banking, National Chengchi ] University None None
VP&GM, Ta Fa Branch R.O.C Chien-Chung Lin Male 1090316 55,852 0 63,369 0 0 0 [International Trade, Chinese ] Culture University None None
Shipping & Transportation
VP&GM, Ping Tung Branch R.O.C Hsueh-Hsia Chen Female 1070827 251,288 0 0 0 0 0 Management, National None None
Taiwan Ocean University
VP&GM, Xiao Gang Branch R.O.C Hsueh-Mei Yang Female 1081223 20,097 0 1,222 0 0 0 [Business Management, ] Chinese Culture University None None
VP&GM, Chiao Chou Branch R.O.C Cheng-Chuan Lin Male 1090825 213 0 0 0 0 0 [Bank Administration ,] Tamsui Exford College None None
VP&GM, Offshore Banking Unit R.O.C Ching-Yang Lee Female 1040403 120,332 0 0 0 0 0 MBA, CMSU None None
VP&GM, Los Angeles Branch R.O.C Shenn-Bao Jean Male 1070430 122,164 0 0 0 0 0 [Economics, Soochow ] University None None
Department of Business
VP&GM, Hong R.O.C Jen-Jung Fan Male 1050919 118,722 0 0 0 0 0 Management, National Sun None None
Kong Branch Yat-sen University
Business & Secretarial
VP&GM, Sydney Branch R.O.C Be-Yun Tong Female 1030327 147,283 0 0 0 0 0 Science, Tamsui Exford None None
College
VP&GM, Shanghai Branch R.O.C Chao-Ming Huang Male 1080128 114,633 0 0 0 0 0 [EMBA, National Chiao Tung ] University None None
Master of International
VP&GM, Brisbane Branch R.O.C Sue-Jen Chen Female 1070413 108,671 0 107,693 0 0 0 Business, Soochow None None
University
VP&GM, New York Branch R.O.C Feng-Chang Wu Male 1090928 0 0 0 0 0 0 [MBA, Northern Illinois ] University, USA None None
MBA, National Taiwan
VP&GM, Wuhan Branch R.O.C Chin-Fu Chiang Male 1070516 194,082 0 6,552 0 0 0 University of Science and None None
Technology
VP&GM, Tokyo Branch R.O.C Cheng-Hung Chang Male 1070815 115,290 0 0 0 0 0 [MBA, University of ] Wisconsin, USA None None
VP & Chief
Representative, Department of Business
Yangon R.O.C Hung-Tien Chiang Male 1080520 118,678 0 0 0 0 0 Administration, National None None
Representative Chung Hsing University
Office
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Note: The positions of President or an equivalent position (chief manager) and Chairman are held by the same person, or spouses, or relative within the first degree of kinship: None.

36

Taiwan Business Bank Annual Report 2020

III

(3) Remuneration to Directors, President, Executive Vice President, and Remuneration Distribution to Employees for 2020

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A. Remuneration and Table of Remuneration Range for General Directors and Independent Directors

Unit: NT$1,000

2020

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----- Start of picture text -----

Director's Remuneration Relevant Remuneration Received by Directors Who are Also Employees
Ratio of Total Ratio of Total
Remuneration Number of Remuneration
Compensation (A) Separation Pay (B) Pension and [Remuneration (C)] [Business Affair ] Expense (D) (A+B+C+D) to Net Income (%) Disbursement (E)Salary, Bonus and Special Separation Pay (F)Pension and Remuneration Employee's (G) Number of Shares May be Acquired for Employee Stock Options (H) Employee Stock New Restricted Awards (A+B+C+D+E+F+G) to Net Income (%) Directors from Remuneration Paid to
an Investee
Title Name
All Companies Company
Companies All Companies All Companies All Companies All Companies All Companies All Companies All TBB within the Finance Companies All Companies All Companies All Other than TBB´s
TBB within the TBB within the TBB within the TBB within the TBB within the TBB within the TBB within the Statements TBB within the TBB within the TBB within the Subsidiary
Finance Finance Finance Finance Finance Finance Finance Finance Finance Finance
Statements Statements Statements Statements Statements Statements Statements Amount Amount Amount Amount Statements Statements Statements
in Cash in Stock in Cash in Stock
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		Compensation (A)	Compensation (A)	Pension and Separation Pay (B)	Pension and Separation Pay (B)	**Remuneration (C) **	**Remuneration (C) **	Business Affair Expense (D)	Business Affair Expense (D)	Business Affair Expense (D)	Business Affair Expense (D)	Salary, Bonus and Special Disbursement (E)	Salary, Bonus and Special Disbursement (E)	Pension and Separation Pay (F)	Pension and Separation Pay (F)	Employee's Remuneration (G)	Employee's Remuneration (G)	Number of Shares May be Acquired for Employee Stock Options (H)	Number of Shares May be Acquired for Employee Stock Options (H)	Number of Shares May be Acquired for Employee Stock Options (H)	Number of Shares May be Acquired for Employee Stock Options (H)	Number of New Restricted Employee Stock Awards	Number of New Restricted Employee Stock Awards	Number of New Restricted Employee Stock Awards	Number of New Restricted Employee Stock Awards	Number of New Restricted Employee Stock Awards
		TBB	All Companies within the Finance Statements	TBB	All Companies within the Finance Statements	TBB	All Companies within the Finance Statements	TBB	All Companies within the Finance Statements	TBB	All Companies within the Finance Statements	TBB	All Companies within the Finance Statements	TBB	All Companies within the Finance Statements	TBB		All Companies within the Finance Statements		TBB	All Companies within the Finance Statements	TBB	All Companies within the Finance Statements	TBB	All Companies within the Finance Statements
																Amount in Cash	Amount in Stock	Amount in Cash	Amount in Stock
Representative of the Ministry of Finance
Chairman	Bor-Yi Huang
President	Chih-Chien Chang
Director	Shiu-Yen Lin
Director	Wen-Chieh Wang
Managing Director	Lien-Wen Liang
Director	Hung-Sheng Yu
Bank of Taiwan Representative
Director	Li-Ling Lin
Director	Tzu-Hao Tsai
Managing Director	Shih-Yuan Tai
Land Bank of Taiwan Representative
Director	Ying-Ming He
Director	Che-Nan Wang
TBB Industry Union Representative
Former Director	Ching-Yu Liu
Director	Kuo-Chang Huang
Subtotal		8,869	8,869	755	755	33,748	33,748	2,170	2,170	0.97%	0.97%	8,572	8,572	428	428	127		127						1.16%	1.16%	205
Independent Executive Director	Xin-Wu Lin
Independent Director	Jin-Long Liu
Independent Director	Wei-Sheng Huang
Subtotal		2,520	2,520	0	0	0	0	857	857	0.07%	0.07%	0	0	0	0	0		0						0.07%	0.07%	0

Note: 1. Please describe the compensation payment policy, systems, standards, and structure for Independent Directors, and illustrate the connectivity with the amount paid as compensation according to factors such as duties and risks assumed by and time invested by the Independent Directors: Independent Directors receive monthly compensation without receiving the Director's remuneration. Their compensation standards are below the maximum standards stated in the Letter Tai-cai-ku-zi No. 09903518290 issued by the Ministry of Finance on September 10, 2010, and such compensation has been submitted to and passed by as a resolution at the Shareholders' Meeting of the Bank on June 24, 2011.

1. Except for the disclosures made in the above table, the compensation received by Directors of the Bank for providing services

2. (i.e., serving as a non-employee consultant) to any companies within the financial statements in the latest year: None.

37

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Name of Director
Total of Remuneration (A+B+C+D) Total of Remuneration (A+B+C+D+E+F+G)
Remuneration Range Paid to the Director by TBB
All Companies within
TBB (Note 9) the Finance Statements TBB All Investee Companies
I
S h i u - Ye n L i n ; We n - S h i u - Ye n L i n ; We n -
Chieh Wang; Lien-Wen Chieh Wang; Lien-Wen Shiu-Yen Lin; Wen-Chieh Shiu-Yen Lin; Wen-Chieh
Liang; Li-Ling Lin; Tzu- Liang; Li-Ling Lin; Tzu- Wang; Lien-Wen Liang; Wang; Lien-Wen Liang;
Hao Tsai; Shih-Yuan Tai; Hao Tsai; Shih-Yuan Tai; Li-Ling Lin; Tzu-Hao Tsai; Li-Ling Lin; Tzu-Hao Tsai;
Below NT$1,000,000 Ying-Ming He; Che-Nan Ying-Ming He; Che-Nan Shih-Yuan Tai; Ying-Ming Shih-Yuan Tai; Ying-Ming
Wang; Hung-Sheng Yu; Wang; Hung-Sheng Yu; He; Che-Nan Wang; He; Che-Nan Wang;
Ching-Yu Liu; Kuo-Chang Ching-Yu Liu; Kuo-Chang Ching-Yu Liu; Wei-Sheng Ching-Yu Liu; Wei-Sheng
H u a n g ; W e i - S h e n g H u a n g ; W e i - S h e n g Huang Huang
Huang Huang
Xin-Wu Lin; Jin-Long Liu; Xin-Wu Lin; Jin-Long Liu;
NT$1,000,000 (inclusive) ~ NT$2,000,000 (exclusive) Xin-Wu Lin; Jin-Long Liu Xin-Wu Lin; Jin-Long Liu
Kuo-Chang Huang Kuo-Chang Huang
NT$2,000,000 (inclusive) ~ NT$3,500,000 (exclusive) Hung-Sheng Yu Hung-Sheng Yu
NT$3,500,000 (inclusive) ~ NT$5,000,000 (exclusive)
Bor-Yi Huang Bor-Yi Huang; Chih- Bor-Yi Huang; Chih-
Bor-Yi Huang
NT$5,000,000 (inclusive) ~ NT$10,000,000 (exclusive) Chien Chang Chien Chang
NT$10,000,000 (inclusive) ~ NT$15,000,000 (exclusive)
NT$15,000,000 (inclusive) ~ NT$30,000,000 (exclusive)
NT$30,000,000 (inclusive) ~ NT$50,000,000 (exclusive)
NT$50,000,000 (inclusive) ~ NT$100,000,000 (exclusive)
NT$100,000,000 and above
Total 15 15 16 16
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• Note: 1. The compensation related to drivers for each of our Chairman Bor-Yi Huang and President Chih-Chien Chang totaled NT$1,809 thousand.

• The amounts disclosed in columns (B) and (F) are the provisions pension and separation pay expensed.

• Hung-Sheng Yu, Ching-Yu Liu, and Kuo-Chang Huang are employees of the Bank.

B. Remuneration and Table of Remuneration for President and Executive Vice President

2020

Unit: NT$ 1,000

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Ratio of Total
Pension and Separation Bonus and Special Remuneration
Salary (A) Pay (B) Disbursement (C) Employee's Compensation (D) (A+B+C+D) to Net Remuneration
Income (%) Paid to Directors
from an Investee
Title Name All All All TBB All Companies within All company Other
Companies Companies Companies the Finance Statements Companies than TBB´s
TBB within the TBB within the TBB within the TBB within the Subsidiary
Finance Finance Finance Amount in Amount in Amount in Amount in Finance
Statements Statements Statements Cash Stock Cash Stock Statements
Chih-Chien
President Yes
Chang
Executive Vice
Chiu-Yen Chen None
President
Executive Vice
President Yu-Min Chang None
Executive Vice
President Chang-Yu Lin Yes
Executive Vice
President and
SVP&GM, Sung-Shui Chiu Yes
International
Banking Dept.
Executive Vice Shao-Huang None
President Chen
EVP& Chief
Auditor Jia-Ruey Luan None
Former
Chih-Chien
Executive Vice None
President Chang
Former
Executive Vice Yi-Yun Wang Yes
President
Total 15,134 15,134 1,335 1,335 11,914 11,914 551 551 0.62% 0.62% 324
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Note: The compensation related to drivers for each of the senior officers totaled NT$4,713 thousand in 2020.

38

Taiwan Business Bank Annual Report 2020

III

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Name of the President or the Executive Vice President
Remuneration Range Paid to the President and Executive Vice
Presidents by TBB TBB All Companies within the Finance Statements
Below NT$1,000,000 Shao-Huang Chen Shao-Huang Chen
NT$1,000,000 (inclusive) ~ NT$2,000,000 (exclusive) Sung-Shui Chiu Sung-Shui Chiu
NT$2,000,000 (inclusive) ~ NT$3,500,000 (exclusive) Yi-Yun Wang Yi-Yun Wang
Chiu-Yen Chen; Yu-Min Chang Chiu-Yen Chen; Yu-Min Chang
NT$3,500,000 (inclusive) ~ NT$5,000,000 (exclusive) Chang-Yu Lin; Jia-Ruey Luan Chang-Yu Lin; Jia-Ruey Luan
NT$5,000,000 (inclusive) ~ NT$10,000,000 (exclusive) Chih-Chien Chang Chih-Chien Chang
NT$10,000,000 (inclusive) ~ NT$15,000,000 (exclusive)
NT$15,000,000 (inclusive) ~ NT$30,000,000 (exclusive)
NT$30,000,000 (inclusive) ~ NT$50,000,000 (exclusive)
NT$50,000,000 (inclusive) ~ NT$100,000,000 (exclusive)
NT$100,000,000 and above
Total 8 people 8 people
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C. Name of Management Receiving the Distribution of Employee's Compensation and the Distribution

2020

Unit: NT$1,000; %

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Ratio of Total
Title Name Amount Amount in Total Compensation
in Stock Cash to Net Income
(%)
Executive Vice
Chiu-Yen Chen
President
Executive Vice
President Yu-Min Chang
Executive Vice
President Chang-Yu Lin
Executive Vice
President and
SVP&GM, Sung-Shui Chiu
International
Banking Dept.
Executive Vice
President Shao-Huang Chen
EVP& Chief Auditor Jia-Ruey Luan
Former Executive
Vice President Chih-Chien Chang
Former Executive
Vice President Yi-Yun Wang
SVP&GM, Treasury Chih-Wei Chen
Dept.
SVP&GM,
Yu-Chuan Chou
Accounting Dept.
Li-Yueh Hsu; Tzong-Wen Chou; Hsiou-Chen Kang; Kuo-Liang Tseng; Tsung-Chu Hsieh;
Yin-Cheng Tseng; Ching-Yun Kuo; Ting-Huei Liao; Chiang-Shu Lin; Chin-Chuan Su; Yu-
Cheng Tsai; Min-Chung Hsieh; Yi-Chin Chai; Chu-Chou Chen; Wen-Shu Lin; Tseng-Hsiang
Yi; Mei-Chun Lin; Wen-Qing Huang; Li-Hui Chang; Wen-Ling Wang; Chi-Fen Yen; Ying-Che
Fang; Bih-Lien Fang; Ming-Yi Lin; Hsiu-Chu Lin; Wen-Hsiu Huang; Huei-Nai Hung; Ching-Yi
Lin; Hsiu-Hsin Hou; Yu-Cheng Chiao; Li-Huei Chen; Yu-Chaio Wei; Yuan-Hsueh Hsiao; Yun-
Shiang Tsai; Shui-Chiang Fang; Hsih-Hui Chen; Li-Ching Lai; Jung-Ling Wang; Mei-Chih
Hou; Bi-Chu Chuang; Guei-Jin Chiou; Wen-Fang Lin; Jiann-Yea Shyu; Chien-Fa Wang;
Yueh-Yen Weng; Ruey-Shyang Guo; Chao-Lieh Chen; Ching-Hsiu Liu; Yen-Wei Huang;
Jiunn-Chin Wang; Yen-Huey Wang; Chiu-Chin Chen; Tien-Chin Lin; Ching-Kuei Hsieh; Fuh-
Yuh Yeh; Yen-Ling Chen; Yu Lin; Su-Chen Huang; Chin-Tsan Wu; Ming-Hui Chen; Mei-Kuei
Li; Hsueh-Ru Liu; Liu-Mei Chin; Pin-Hsiung Chen; Fang-Chuan Chiu; Yueh-Chin Wang;
Hsiao-Ming Chen; Mei-Hui Chen; Jui-Yuan Huang; Nien-Tzu Chen; Pao-Sheng Lin; Sung-
Nan Chiao; Jui-Yu Li; Chun-Ta Lin; Shu-Ting Chen; Li-Fang Lee; Chin-Chih Li; Chih-Hsiang
SVP, VP, GM for
Huang; Pi-Chuan Chien; Ming-Fa Chien; Ping-Hui Lee; Yueh-Mei Chang; Chiu-Yu Liu; Shu-
Departments and
Branches Fen Li; Li-Chuan Huang; Ju-Hsiang Tien; Jiann-Gwo Guu; Mu-Hsiang Wu; Yu-Pei Liao;
Shu-E Chen; Hsu-Hsiang Huang; Nai-Chia Chi; Kuan-Yi Huang; Su-Fen Chen; Shuan-Hua
Liu; Shu-Ling Yuan; Yun-Hui Chang; Hsiu-Chiao Lin; Sheng-Wang Chang; Hsin-Lu Chiang;
Li-Chung Lin; Yih-Shiou Wang; Man-Chung Yeh; Jung-Yu Huang; Meng-Shin Jeng; Shun-
Tseng Liao; Chih-Cheng Chen; Fu-Long Chen; Kuo-Tsun Pai; Liang-Pin Chen; Tsai-Rong
Hung; Fu-Ching Chou; Cheng-An Hsieh; Shin-Mao Lin; Chih-Cheng Cho; Ming-Tang Chen;
Yueh-Man Sung; Chien-Ta Wu; Li-Mo Yang; His-Her Pai; Wen-Chi Chen; Tung-Han Lu;
Su-Ying Tsai; I-Man Chen; Li-Feng Huang; Chia-Cheng Liu; Feng-Fu Chen; Hsin-Chuan
Hsiao; Hui-Pai Kuo; Hsiu-Chen Chiu; Chien-Lai Su; Chang-Hui Hsu; Guo-Shiang Huang;
Shun-Ho Chen; Su-Chih Wang; Mei-Chen Chen; Shu-hui Chen; Wen-Jang Jou; Leh-Chin
Kuo; Kuang-Tsai Wang; Fu-Lai Chang; An-Yun Lin; Der-Hsung Lin; Yi-Ching Wang; Li-Jung
Lin; Meng-Hsun Sung; Yao-Chin Yang; Lan-Ying Chu; Feng-Ying Chen; Chien-Chung Lin;
Hsueh-Hsia Chen; Hsueh-Mei Yang; Cheng-Chuan Lin; Ching-Yang Lee; Shenn-Bao Jean;
Jen-Jung Fan; Be-Yun Tong; Chao-Ming Huang; Sue-Jen Chen; Feng-Chang Wu; Tsin-Fu
Jiang; Cheng-Hung Chang; Hung-Tien Chiang; a total of 163 people.
Total 0 14,076 14,076 0.3%
Notes:1. According to the requirements under Article 41 of the Article of Association of the Bank, shall there be profits of the year and
except for retaining the compensation amount for losses from previous years, the Bank shall allocate 1% to 6% as employee's
compensation.
----- End of picture text -----

1. The employee bonus of managers shall be determined and paid according to the requirements of "Directions for Payment of Employee's Compensation" after evaluating the performance of managers in accordance with the "Directions for Employee Audit" and "Directions for Performance Audit."

39

• (4) The analysis of the ratio of the total remuneration paid to the Directors, President and Executive Vice Presidents in the last two fiscal years to net profit after tax in the parent company individual financial statements, the policy, standards, and package of remuneration payment

• A. In 2019 and 2020, the ratio of the remuneration (including salaries, incentives, retirement allowance, and employee compensation) paid to Directors, President, and Executive Vice Presidents to net profit after tax in the parent company individual financial statements were 1.12%, 0.47%, 1.23%, and 0.62%, respectively.

• B. The policy, standards, and package of remuneration payment are analyzed as follows: a Directors

  • According to the requirements under Article 41 of the Article of Association of the Bank, shall there be profits of the year and except for retaining the compensation amount for losses from previous years, shall allocate no more than 0.6% as the remuneration of Directors.

  • Furthermore, according to the requirements under Article 21 of the Article of Association of the Bank, the Board was authorized by the Shareholders' Meeting to determine the remuneration of Directors, and such amount shall be determined according to the general remuneration offered within the industry.

  • The remuneration paid to the directors is based on the standards in the industry, the respective performance of Directors, the performance of corporate operations, and the results of the performance assessment by the Board. The remuneration for Independent Directors shall be subject to the monthly payment plan for remuneration passed at the Shareholders' Meeting in 2011. Except for the monthly fixed remunerations payment, such Directors shall not receive the Director remuneration specified in the Article of Association.

  • Directors' remuneration distributed in 2019 was NT$50,456 thousand, and the Directors' remuneration proposed to be distributed in 2020 shall be NT$33,748 thousand.

  • b President, Executive Vice Presidents, and Chief Auditor

  • Regarding the remuneration paid to the President, Vice Presidents, and Chief Auditor, except for giving considerations to the standard in the industry, personal performance and corporate business performance are also taken into account. Moreover, such remuneration shall be based on relevant requirements of "Directions for Salary Payment to Employees," "Directions for Payment of New Year, Festival, and Performance Bonuses," "Directions for Payment of Employee's Compensation," and "Remuneration Committee Organizational Procedures."

(5) The procedures for determining the remuneration for Directors, President, Executive Vice Presidents and members of management, and the relevance to business performance and future risk

• A. Directors

• Regarding the bonus of Directors of the Bank, the Article of Association has provided that, shall there be profits of the year and except for retaining the compensation amount for losses from previous years, the Bank shall allocate no more than 0.6% as the remuneration of Directors. The Shareholders' Meeting authorized the Board to determine the payment for such remuneration according to the standards in the industry, the respective performance of Directors, the performance of corporate operations, and the results of the performance assessment by the Board. The evaluation items in the Bank's “Regulations for Board Performance Assessment” include the understanding of the Bank's goals and tasks and level of participation in corporate operations, the understanding of the duties and functions of Directors and improvement of the quality of the Board of Directors' decisions, the composition and structure of the Board of Directors, the professional and continuing education for Directors, and internal control. Relevant performance assessment and remuneration packages were proposed at the meeting of the Remuneration Committee for discussion and was submitted to and approved by the Board meeting. Regarding the remuneration for Independent Directors, the Board shall determine a reasonable remuneration different from that of the general Directors according to the relevant standards within the industry. Except for the monthly fixed remunerations payment, such directors shall not receive the Director remuneration specified in the Article of Association. For losses incurred to the Bank resulting from dubious acts of the Directors, the Audit Committee shall exert control and supervision on the existing and potential risks, and impose necessary punishment according to the relevant laws and regulations.

• B. President, Executive Vice Presidents, Chief Auditor, and members of management

• The approval procedures for the remuneration of President, Executive Vice Presidents, Chief Auditor, and members of management shall be based on relevant requirements of "Directions for Salary Payment to

40

Taiwan Business Bank Annual Report 2020

III

Employees," "Directions for Payment of New Year, Festival, and Performance Bonuses" "Directions for Payment of Employee's Compensation," and "Remuneration Committee Organizational Procedures." Such remuneration shall be implemented and paid after an assessment of performance based on the "Directions for Employee Audit," "Directions for Performance Audit," and "Directions for Administrative Incentives for Performance Audit" of the Bank (the evaluation items include profitability, business performance, internal control, and management), with consideration to the general standard within the industry. Furthermore, the remuneration and relevant performance assessment of the Bank's managers shall be proposed at the meeting of the Remuneration Committee for discussion annually, and the results thereof shall be submitted to the Board for approvals. Among which, the bonus part shall be linked to and subject to the before tax net profit achieving rate, business performance financial indications, and personal audit results of the Bank. For losses incurred to the Bank resulting from dubious acts of President, Executive Vice Presidents, Chief Auditor, and members of management, the Board shall not only approve the dismissal of them and cease the payment of remuneration, but also impose necessary punishment according to the relevant laws and regulations.

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3. Implementation of Corporate Governance

(1) Operations of Board of Directors

A total of 12 meetings were held by the Board in the most recent year (2020). The attendance of the members of the Board are as follows: Dec. 31, 2020

Dec. 31, 2020

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Number of Number of
Title Name required Number of actual delegated Actual attendance Name of the corporate Note
attendance (A) attendance (B) attendance rate (%) (B/A) represented
Chairman Bor-Yi Huang 12 12 0 100 Ministry of Finance
Managing Director Chih-Chien 11 11 0 100 Ministry of Finance Appointed on March
Chang 4, 2020
Managing Director Shih-Yuan Tai 12 12 0 100 Bank of Taiwan
Managing Director Xin-Wu Lin 12 12 0 100
(Independent Director)
Managing Director Lien-Wen Liang 12 12 0 100 Ministry of Finance
Director Shiu-Yen Lin 12 12 0 100 Ministry of Finance
Wen-Chieh
Director 12 11 1 91.6 Ministry of Finance
Wang
Director Hung-Sheng Yu 12 12 0 100 Ministry of Finance
Director Li-Ling Lin 12 11 1 91.6 Bank of Taiwan
Director Tzu-Hao Tsai 12 12 0 100 Bank of Taiwan Appointed on January
20, 2020
Director Ying-Ming He 12 12 0 100 Land Bank of Taiwan
Director Che-Nan Wang 12 2 0 16.6
Director Kuo-Chang 6 6 0 100 Labor Union of Taiwan Business Retired on August 1,
Huang Bank 2020
Director Ching-Yu Liu 6 6 0 100 Labor Union of Taiwan Business Bank Appointed on Au. 1, 2020
Independent Director Jin-Long Liu 12 12 0 100
Independent Director Wei-Sheng 12 12 0 100
Huang
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Other items that shall be recorded:

1. When any of the following situations occurred to the operations of the Board, state the date and term of the Board meeting, the content of proposals, opinions of all Independent Directors, and the Bank's actions in response to the opinions of the Independent Directors:

2. (1) Matters included in Article 14-3 of the Securities and Exchange Act: Not applicable, the Bank has already established an Audit Committee.

3. (2) Other resolutions of the Board, which the Independent Director(s) voiced objection or reservation that are documented or issued through a written statement in addition to the above: None.

4. When Directors abstain themselves for being a stakeholder in certain proposals, the name of the Directors, the content of the proposal, reasons for abstentions and the results of voting counts should be stated.

5. (1) Regarding the resolution of "a proposal for submitting a tender to Southern Region Branch, National Property Administration, MOF, to rent a piece of national land amounted to 350 square meters behind Kang Shan Branch at No. 519-44, Gangshan Sec., Gangshan District, Kaohsiung City and the determination on the bid price" at the 5th extraordinary Board meeting of the 15th Board on June 20, 2020, except for Chairman Bo-Ri Huang (corporate representative of the Ministry of Finance), Managing Director and President Chih-Chien Chang, Managing Director Lien-Wen Liang, Director Shiu-Yen Lin, Director Hung-Sheng Yu, and Director Wen-Chieh Wang, who abstained from the meeting, all attending Directors have approved to pass the resolution as proposed and determine the bid price.

41

• (2) Regarding the resolution of "a report to the Auditing Dept. Regarding the amendments to the "Declaration of Annual Audit Plan for Financial Institutions" in 2020" at the 13th Board meeting of the 15th Board on March 11, 2020, except for Managing Director and acting President Chih-Chien Chang, who abstained from the meeting before the discussion, all attending Directors have approved to pass the resolution as proposed.

• (3) Regarding the resolution of "a report to the Board of the Bank regarding the solution for whether Director Che-Nan Wang may participate in the discussion and the vote upon any credit loan cases to China Man-Made Fiber Corporation" at the 13th Board meeting of the 15th Board on March 11, 2020, except for Director Che-Nan Wang, who abstained from the meeting before the discussion, all attending Directors have agreed to accept the proposal of the Audit Committee, and the Secretariat is delegated to make subsequent reports for related results.

• (4) Regarding the resolution of nominating Managing Director Chih-Chien Chang as Chairman of the Bank at the 13th Board meeting of the 15th Board on March 11, 2020, except for Managing Director and President Chih-Chien Chang, who abstained from the meeting before the discussion, all attending Directors have approved to pass the resolution as proposed.

• (5) Regarding the resolution of "a report regarding the Budget Draft and Budget Draft for Audit Operations' Operating Expense of the Bank for Next Year (2021)" at the 17th Board meeting of the 15th Board on October 28, 2020, except for Managing Director and President Chih-Chien Chang, Director Hung-Sheng Yu, and Director Ching-Yu Liu, who abstained from the meeting before the discussion, all attending Directors have approved to pass the resolution as proposed.

• (6) Regarding the resolution of "submission of the credit loan case for Mega Bills Finance Co., Ltd." at the 17th Board meeting of the 15th Board on October 28, 2020, Director Shiu-Yen Lin abstained from the meeting before the discussion as she has interests in the resolution for being a relative within 2nd degree of kinship to a director of Mega Bills.

• (7) Regarding the resolution of "a report regarding the audit plan for the internal audit operations for securities business and futures trading assistance business of the Bank in 2021" at the 18th Board meeting of the 15th Board on December 16, 2020, except for Managing Director and President Chih-Chien Chang, who abstained from the meeting before the discussion, all attending Directors have approved to pass the resolution as proposed.

• (8) Regarding the resolution of "a report to the Auditing Dept. Regarding the amendments to the "Declaration of Annual Audit Plan for Financial Institutions" in 2021" at the 18th Board meeting of the 15th Board on December 16, 2020, except for Managing Director and acting President Chih-Chien Chang, who abstained from the meeting before the discussion, all attending Directors have approved to pass the resolution as proposed.

• Information on the evaluation cycle and period, evaluation scope, method, and evaluation content for the Board's evaluation:

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Evaluation Evaluation Evaluation
Evaluation Cycle Period Scope Method Evaluation Content
Once a year January 1, 2020 Board of Self- 1. Understanding of the Bank's goals and tasks and level
to December 31, Directors and evaluation of participation in corporate operations.
2020 its members of the Board 2. Understanding of the duties and functions of Directors
Functional of Directors (committee members) and improvement of the quality
Committees (functional of the Board of Directors' decisions.
and its committees) 3. Composition and structure of the Board of Directors
members and its (functional committees).
members 4. Professional and continuing education for Directors
(committee members).
5. Internal control.
Engage external September 1, Board of Evaluation 1. Composition of the Board.
parties for an 2019 Directors and by external 2. Guidance provided by the Board.
evaluation every August 31, its members parties (TBB 3. Authorization of the Board.
three years 2020 Functional engaged 4. Supervision of the Board.
Committees Taiwan 5. Communication within the Board.
and its Corporate 6. Internal control and risk management.
members Governance 7. Self-discipline of the Board.
Association 8. Others, including Board meetings and support systems.
to perform
a review
on written
materials
and on-site
interviews
during 2020)
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1. Measures undertaken during the current year and the latest year in order to strengthen the functions of the Board of Directors (the establishment of an audit committee and improvement of information transparency, etc.) And assessment of the implementation:

2. (1) Directors participated in continual education regarding programs on corporate governance. Except for Director Che-Nana Wang (who resides in Japan for a long period due to the effect of COVID-19), the continuing education hour for each Director has complied with the requirements under "Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and tpex Listed Companies." Furthermore, educational training for legal compliance and Treat Clients Fairly were organized for Directors.

3. (2) The Bank amended its regulations governing procedures for the Board of directors meeting according to requirements of Article 7 under the "Regulations Governing Procedure for Board of Directors Meetings of Public Companies," stated that at least one independent director shall attend the Board meeting in person. In the case of a Board meeting concerning any matter required to be submitted for a resolution by the Board, all independent directors shall attend in person; if an independent director is unable to attend in person, he or she shall appoint another independent director to attend as his or her proxy. All three Independent Directors have attended 12 Board meetings convened in person during 2020.

42

Taiwan Business Bank Annual Report 2020

III

(2) Audit Committee activities

The Audit Committee is comprised of three Independent Directors; Independent Director Jin-Long Liu is the convener. A total of 13 meetings were held by the Audit Committee in the most recent year (2020). The attendance of Independent Directors was as follows:

Dec. 31, 2020

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Title	Name	Number of required attendance (A)	Number of actual attendance (B)	Number of delegated attendance	Actual attendance rate (%) (B/A)	Note
Committee chair	Jin-Long Liu	13	13	0	100
Member	Xin-Wu Lin	13	13	0	100
Member	Wei-Sheng Huang	13	13	0	100

Other items that shall be recorded:

1. Where the proceedings of the Audit Committee meeting include one of the following circumstances, then describe the date, session, and motion of the board meeting, the relevant resolutions of the Audit Committee, and the Bank's handling of the comments of the Audit Committee: (1) All conditions stated in Article 14-5 of the Securities and Exchange Act.

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Board Date/ The resolution results of the Audit Committee and the Bank's response
Period Agenda regarding the Audit Committee's opinions
The 12th Board The branch in the U.S. region engaged an external Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the audit company to perform the 2020 internal control Board for consideration.
15th Board on audit (the 12th meeting of the 3rd Audit Committee The Bank's response to the opinions of the Auditing Committee: Resolution
January 21, 2020 on January 17, 2020) passed by all Directors in attendance with consent.
Amendments to the Bank's "Regulations for
The 13th Board Internal Control System for Securities Firms" Resolution results of the Audit Committee: Ratified, and submitted to the
meeting of the (including the internal control system, internal audit Board for ratification.
15th Board on implementation rules, audit statement, and audit The Bank's response to the opinions of the Auditing Department: Resolution
March 11, 2020 working paper) (the 13th meeting of the 3rd Audit passed by all directors in attendance with consent for approving ratification.
Committee on March 9, 2020)
The 13th Board meeting of the Individual financial report and consolidated financial Resolution results of the Audit Committee: Passed, and submitted to the Board for consideration.
15th Board on report of the Bank for 2019 (the 13th meeting of the The Bank's response to the opinions of the Auditing Committee: Resolution
3rd Audit Committee on March 9, 2020)
March 11, 2020 passed by all directors in attendance with consent.
The 13th Board Resolution of the issuance of new shares for capital Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the increase by earnings for distributing share dividends Board for consideration.
15th Board on from earnings in 2019 (the 13th meeting of the 3rd The Bank's response to the opinions of the Auditing Committee: Resolution
March 11, 2020 Audit Committee on March 9, 2020) passed by all directors in attendance with consent.
The 13th Board Resolution to include the capital increase by a Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the private placement of common shares for 2020 as a Board for consideration.
15th Board on proposal at the 2019 Annual Shareholders' Meeting The Bank's response to the opinions of the Auditing Committee: Resolution
(the 13th meeting of the 3rd Audit Committee on
March 11, 2020 passed by all directors in attendance with consent.
March 9, 2020)
Proposal to issue the “Declaration of Internal
The 13th Board Control System for Anti-Money Laundering and Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the Combatting the Financing of Terrorism” of the Bank Board for consideration.
15th Board on for 2019 according to the requirements (the 13th The Bank's response to the opinions of the Auditing Committee: Resolution
March 11, 2020 meeting of the 3rd Audit Committee on March 9, passed by all directors in attendance with consent.
2020)
The 13th Board Proposal to issue the "Declaration of Internal Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the Control System" for 2019 according to the Board for consideration.
15th Board on requirements (the 13th meeting of the 3rd Audit The Bank's response to the opinions of the Auditing Committee: Resolution
March 11, 2020 Committee on March 9, 2020) passed by all directors in attendance with consent.
The capital increase by a private placement
The 4th of common shares for 2020 was passed as a
Resolution results of the Audit Committee: Passed, and submitted to the
extraordinary resolution at the 2020 Annual Shareholders' Board for consideration.
Board meeting of Meeting, and the remaining limits will not be utilized
the 15th Board on during the remaining period. (the 8th extraordinary The Bank's response to the opinions of the Auditing Committee: Resolution
passed by all directors in attendance with consent.
April 22, 2020 meeting of the 3rd Audit Committee on April 22,
2020)
A proposal for submitting a tender to Southern Resolution results of the Audit Committee: Passed and determined the bid
The 5th Region Branch, National Property Administration, price, and submitted to the Board for consideration.
MOF, to rent a piece of national land amounted to The Bank's response to the opinions of the Auditing Committee: Except
extraordinary
350 square meters behind Kang Shan Branch at for Chairman Bo-Ri Chang, Managing Director and President Chih-Chien
Board meeting of
the 15th Board on No. 519-44, Gangshan Sec., Gangshan District, Chang, Director Lien-Wen Liang, Director Hung-Sheng Yu, and Director
Kaohsiung City and the determination on the bid Wen-Chieh Wang, who abstained from the meeting, all attending Directors
June 20, 2020
price (the 10th extraordinary meeting of the 3rd have approved to pass the resolution as proposed and determine the bid
Audit Committee on June 20, 2020) price.
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43

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Board Date/ The resolution results of the Audit Committee and the Bank's response
Period Agenda regarding the Audit Committee's opinions
Amendments to the Bank's "Regulations for
The 15th Board Internal Control System for Securities Firms" Resolution results of the Audit Committee: Ratified, and submitted to the
meeting of the (including the internal control system, internal audit Board for ratification.
15th Board on implementation rules, audit statement, and audit The Bank's response to the opinions of the Auditing Department: Resolution
July 15, 2020 working paper) (the 15th meeting of the 3rd Audit passed by all directors in attendance with consent for approving ratification.
Committee on July 6, 2020)
Amendments to the Bank's "Regulations for Internal
The 16th Board Control System for Futures Trading Assistance Resolution results of the Audit Committee: Ratified, and submitted to the
meeting of the Business" (including the internal control system, Board for ratification.
15th Board on internal audit implementation rules, audit statement, The Bank's response to the opinions of the Auditing Department: Resolution
August 19, 2020 and audit working paper) (the 16th meeting of the passed by all directors in attendance with consent for approving ratification.
3rd Audit Committee on August 14, 2020)
The 16th Board Individual financial report and consolidated financial Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the report of the Bank for the second quarter of 2020 Board for consideration.
15th Board on (the 16th meeting of the 3rd Audit Committee on The Bank's response to the opinions of the Auditing Committee: Resolution
August 19, 2020 August 14, 2020) passed by all directors in attendance with consent.
The 7th To align with the international financial supervision,
the Bank built a comprehensive compliance system Resolution results of the Audit Committee: Passed, and submitted to the
extraordinary
and intended to adjust the duties of the Banks Board for consideration after added the explanations on the qualification of
Board meeting of Executive Vice President and Chief Audit. Executive Vice President Luan.
the 15th Board on
(the 11th extraordinary meeting of the 3rd Audit Committee: Resolution passed by all directors in attendance with consent.
October 7, 2020
Committee on October 7, 2020)
Resolution results of the Audit Committee: Passed, and submitted to the
The 17th Board Board for consideration.
Submission of the credit loan case for Mega Bills
meeting of the The Bank's response to the opinions of the Auditing Committee: Except
15th Board on Finance Co., Ltd. (the 17th meeting of the 3rd Audit for Director Shiu-Yen Lin, who abstained from the meeting before the
Committee on October 23, 2020)
October 28, 2020 discussion, all attending Directors have approved to pass the resolution as
proposed.
Resolution of the proposed engagement of Tan-Tan
Chung and Chun-Guang Chen (both accountants)
The 18th Board from KPMG by the Bank regarding its financial Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the report, tax assessment and certification, agreement Board for consideration.
15th Board on procedure project auditing, and other businesses for
The Bank's response to the opinions of the Auditing Committee: Resolution
December 16, the following year (2021), with professional charges
2020 on auditing of NT$7.73 million in total. (the 18th passed by all directors in attendance with consent.
meeting of the 3rd Audit Committee on December
11, 2020)
The 18th Board
A report regarding subsidiary TBB Venture Capital Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the 15th Board on Co., Ltd. proposing for a capital increase by Board for consideration.
NT$400 million (the 18th meeting of the 3rd Audit The Bank's response to the opinions of the Auditing Committee: Resolution
December 16,
2020 Committee on December 11, 2020) passed by all directors in attendance with consent.
A proposal for the procuring "Corporate Software
and Services - IBM Program Authorization and
Relevant Program Services" from IBM Taiwan
The 18th Board Corporation (hereinafter, "IBM Corporation") to buy
Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the out the authorization of use for the current central Board for consideration.
15th Board on billing mainframe and new purchases of software
The Bank's response to the opinions of the Auditing Committee: Resolution
December 16, authorization, with an estimated procurement
2020 amount of approximately NT$598,974 thousand passed by all directors in attendance with consent.
(tax included), dividing into 5 installments in arrear
(the 18th meeting of the 3rd Audit Committee on
December 11, 2020)
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• (2) Except for the items in the preceding issues, other resolutions approved by two-thirds of all the Directors but yet to be approved by the Audit Committee: None.

• When Independent Directors abstain themselves for being a stakeholder in certain proposals, the name of the Independent Directors, the content of the proposal, reasons for abstentions and the results of voting counts should be stated: None.

• Communication between Independent Directors and head of internal audit and CPAs (including material issues, audit methods and results relating to the TBB's finances and business).

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Communication Recommendations from Independent
Date Communication content
target Directors and the Bank's response
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Date	Communication target	Communication content	Recommendations from Independent Directors and the Bank's response
March 9, 2020	CPA	1. The responsibility of auditors in auditing financial statements. 2. Audit scope. 3. Audit description. 4. Updates on important accounting standards and regulations.	Recommendations from Independent Directors: Independent Directors provided concrete recommendations regarding defciencies discovered during the audit on branches for the management’s reference; Independent Directors also advised CPAs to provide their assistance in discovering issues. The Bank's response: Handled according to the Independent Directors' recommendation.

44

Taiwan Business Bank Annual Report 2020

III

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Communication Recommendations from Independent
Date Communication content
target Directors and the Bank's response
August 14, 2020 CPA 1. Independence. Recommendations from Independent Directors:
2. Responsibilities for the interim financial statements 1. For the self-prepared financial statements,
(review items) Independent Directors advised CPAs to cooperate
3. Review scope. and assist in such tasks.
4. Review descriptions. 2. In response to the effect of COVID-19, Independent
5. Concerns of competent authorities. Directors provided recommendations regarding the
6. Updates on important accounting standards and effects on financial statements.
laws and regulations. The Bank's response: Handled according to the
Independent Directors' recommendation.
October 23, 2020 Head of Internal 1. Follow-up on the improvements in primary Recommendations from Independent Directors:
Audit and deficiencies found during the internal audit and Independent Directors suggested that the
Auditors the audit carried out by competent authorities. cooperation between the three lines of defense
2. Progress for the establishment and preparation is crucial, and prevention and detection shall be
of a risk-oriented internal audit system. managed for significant issues with high-risks.
3. Establishment status for mobile audit operations. The Bank's response: Handled according to the
Independent Directors' recommendation.
December 11, 2020 CPA 1. Key audit matters, including Recommendations from Independent Directors:
(1) Discounting and loans. 1. Regarding the issuance of annual financial
(2) Fair value of financial products. report within 75 days from the end of the year, as
(3) Income recognition. Chinese New Year celebrated in Taiwan occurred
(4) Assessment on loan impairment. during such 75 days, the shortened time may cut
(5) Assessment on financial products impairment. down the decision-making procedures.
2. Among the above matters, the assessment on 2. Promote risk-oriented operations, and it is
loan impairment is included as a key matter. advised to propose an effective risk management
model to the competent authority.
The Bank's response: Handled according to the
Independent Directors' recommendation.
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1. Key annual emphasis in working for the Audit Committee: The Audit Committee aims to assist the Board in using the appropriate expressions of the Bank's financial statements; appointing (dismissing) the CPA and assuring its independence and performance; and overseeing effective implementation of internal controls, compliance with laws, regulations, and rules; as well as implementing controls for existing or potential risks.

2. (1) Supervise the appropriate expressions in the Bank's financial statements: Review the annual financial statements, operating reports, and earning distribution each year (considered and passed at the 13th meeting of the 3rd Audit Committee on March 9, 2021), and on March 30, 2021 issue the review report to the shareholders' meeting according to the requirements under Article 219 of the Company Act approved by Paragraph 3, Article 14-4 of the Securities and Exchange Act.

3. (2) Appointment (dismissal) of the CPA and assuring its independence and performance: Evaluate the appointment (dismissal) of the CPA and undertaking the annual assessment of the independence and performance of the CPA (considered and passed at the 18th meeting of the 3rd Audit Committee on December 11, 2020); and report to the Shareholders' Meeting for review (considered and passed at the 18th meeting of the 15th Board on December 16, 2020).

4. (3) Effective implementation of internal controls: The Bank has established the organization, structure, and authorization, and has prepared the internal audit workbook and the working paper. These items shall contain evaluations of the requirements and the business process under the internal control system to determine whether the current system and procedures have proper internal controls in place; whether the departments comply with relevant requirements and duly execute the internal controls; and the rationale of the effects of executing such internal controls, and proposals of improvement recommendations at any time. The internal audit shall carry out the audit activity according to the rules, and shall submit reports to the Board and the Audit Committee on a regular basis.

5. (4) Comply with relevant laws, regulations, and rules as well as control over existing and potential risks: The Chief Compliance Officer reports to the Audit Committee and the Board at least every half year regarding the execution of the legal compliance system of the Bank. The execution of the legal compliance system for the first half of 2020 and the second half of 2020 has been reported at the 13th meeting of the 3rd Audit Committee on March 9, 2020 and the 13th Board meeting of the 15th Board on March 11, 2020, as well as the 16th meeting of the 3rd Audit Committee on August 14, 2020 and the 16th Board meeting of the 15th Board on August 19, 2020, respectively.

(3) Strategy Development Committee activities

The Strategy Development Committee is comprised of the Chairman, President, and three Independent Directors, with the Chairman being the convener. A total of 2 meetings were held by the Strategy Development Committee in the most recent year (2020). The attendance of members was as follows:

Dec. 31, 2020

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Number of Number
Number of Actual
Title Name attendance required attendance of actual delegated attendance Note
attendance rate (%) (B/A)
(A) (B)
Chairman Bor-Yi Huang 2 2 0 100
Managing Director and Chih-Chien 2 2 0 100 on March 4, Appointed
President Chang 2020
Managing Director Xin-Wu Lin 2 2 0 100
(Independent Director)
Independent Director Jin-Long Liu 2 2 0 100
Independent Director Wei-Sheng Huang 2 2 0 100
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Note: Independent Director Jin-Long Liu lectures at Graduate Institute of Industrial Economics, National Central University, and possesses expertise related to the strategic development of industries.

45

(4) CSR Committee activities

The CSR Committee is comprised of the Chairman, President, and three Independent Directors, with the Chairman being the convener. A total of 2 meetings were held by the CSR Committee in the most recent year (2020). The attendance of members was as follows:

Dec. 31, 2020

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----- Start of picture text -----

Number of Number
Number of Actual
Title Name attendance required attendance of actual delegated attendance Note
attendance rate (%) (B/A)
(A) (B)
Chairman Bor-Yi Huang 2 2 0 100
Managing Director and Chih-Chien 2 2 0 100 on March 4, Appointed
President Chang 2020
Managing Director Xin-Wu Lin 2 2 0 100
(Independent Director)
Independent Director Jin-Long Liu 2 2 0 100
Independent Director Wei-Sheng 2 2 0 100
Huang
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Note: Chairman Bor-Yi Huang has dedicated to the research on SME development, as well as the role and social responsibility of an SME specialized bank for a long time.

(5) Items disclosed in accordance with the Corporate Governance Best Practice Principles for Banking Industry: Please refer to the Bank's website under About TBB > Corporate Governance and Investor Relations (https://www.tbb.com.tw/).

(6) State of corporate governance, shortcomings in fulfilling the "Corporate Governance Best Practice Principles for Banking Industry," and the cause of the said gaps

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State of operations Gaps with the "Corporate
Governance Practices Best
Assessed items Practice Principles for the
Yes No Summary Banking Industry," and the
cause of the said gaps
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Assessed items	State of operations	State of operations	State of operations	Gaps with the "Corporate Governance Practices Best Practice Principles for the Banking Industry," and the cause of the said gaps
	Yes	No	Summary
1. Structure of the bank's shareholders and equities (1) Does the bank stipulate and implement a set of internal procedures to handle shareholders' suggestions, queries, disputes, and litigations? (2) Does the bank keep track of the major controlling shareholders as well as their ownership structures? (3) Does the the bank set up a frewall and risk control mechanism to reduce the risks involved with the bank's related companies?	  		The Bank has established customer complaints procedures and the customer complaint and stock affairs contact window, which will look into the circumstances upon receiving recommendations, doubts, or disputes, and pass the task to relevant departments for handling. The Bank also has a spokesperson to address the problem to external parties. The Bank refers to the declaration of changes in the Register of Shareholders when closing the stock transfer and the monthly report for internal parties to keep track and understand the shareholding changes of substantial Shareholders and analyze the fnal controller of substantial Shareholders. The Directions and procedures for the management of investee companies of the Bank provide relevant requirements for the supervisors of its related companies, benefitting in effective control over its performance and business overview. In respect of the frewall mechanism, personnel, accounting, assets, and fnance departments all have distinct operations. Loans to related companies are all subject to the relevant laws and regulations under Article 32 and Article 33 of the Banking Act.	No gap No gap No gap

本行與政府單位合作推廣青年創業及啟動金貸款。

本行獲頒 2020 微型創業鳳凰貸款感謝狀。

46

Taiwan Business Bank Annual Report 2020

III

Assessed items	State of operations	State of operations	State of operations	Gaps with the "Corporate Governance Practices Best Practice Principles for the Banking Industry," and the cause of the said gaps
	Yes	No	Summary
2. Board composition and its responsibilities (1) Apart from the Remuneration Committee and Audit Committee, does the bank assembled other functional committees at its own discretion? (2) Does the bank have a set of performance assessment regulations and assessment methods for the Board in place, carry out regular performance assessment, submit the results of the performance assessment to the Board and utilizes such results as a reference for determining the remuneration and compensation of individual Directors and their nomination for re-election? (3) Does the bank regularly evaluate the independence of CPAs?	  		1. The Bank has established the Audit Committee, Remuneration Committee, CSR Committee, Strategic Development Committee, and Digital Transformation Committee under the Board. 2. There is no nomination committee; however, the Article of Association of the Bank provide that the election of Directors shall adopt the nomination system. Any re-election of Directors shall be subject to nomination by a shareholder with over 1% shareholding of the Bank or by the Board and subject to the approval of the Board before being proposed at the Shareholders' Meeting for election. According to Articles 2 and 3 of the Bank's Regulations for Board Performance Assessment, the Board of the Bank shall complete the annual performance assessment within two months after the ending of the year and report to the Board regarding the results of the assessment within one month after the completion of the assessment (reported to the 20th Board meeting of the 15th Board). The scope of assessment shall include the overall operation of the Board (including functional committees) and the performance of individual directors (members). Regarding the assessment method, the directors (members) and executive departments (departments responsible for such affairs) shall perform self-assessment and evaluation, and an external party shall be engaged for the performance assessment every three years (Taiwan Corporate Governance Association was engaged to conduct the performance evaluation for 2020, and the Association had issued their evaluation report). The remuneration of the Bank's Directors is determined with reference to the standard in the industry, individual performance, operating effciency of the Bank, and the results of the Board performance assessment. Fixed compensation is paid to Independent Directors monthly; Independent Directors do not receive the Director's remuneration stated in the Article of Association of the Bank. Regular assessment on the independence of the appointed CPA is carried out annually submitted to the Board meeting for approval before granting the appointment The estimate had been carried out at the 18th meeting of the 15th Board on December 16, 2020 according to the requirements under Article 38 of "Corporate Governance Practices Best Practice Principles for the Banking Industry" and Article 68 of "Statement on Auditing Standards No.46," with reference to the independence of CPA in the CPA Auditing Plan. The assessing items are as follow: 1. The CPA appointed by the Bank does not provide account-keeping, financial system design introduction, appraisal (assessment) business, management function, actuary services, internal audit outsourcing, human resources services, investment consultancy, and legal services. 2. The CPA appointed by the Bank does not undertake contingency cases on professional charges (i.e., proceedings), active or confdential tax avoidance plan and personal taxation case for the chief of fnance (above). 3. The 2 appointed CPAs have not been appointed for over 7 years, which complies with the requirements under Article 38 of "Corporate Governance Practices Best Practice Principles for the Banking Industry" and Article 68 of "Statement on Auditing Standards No.46."	No gap No gap No gap
3. Does the bank has proper number of eligible corporate governance personnel in place and appoint a manager for corporate governance to be in charge of affairs relating to corporate governance (including but not limited to, the provision of necessary data for directors and supervisors to execute their duties, assisting directors and supervisors in legal compliance, administering matters relating to the Board meetings and Shareholders' Meetings in accordance with the law, and producing minute books for the Board and shareholders' meetings)?			Relevant departments of the headquarters, such as the Secretariat, shall be the department fully (jointly) responsible for corporate governance. Passed at the 13th meeting of the 15th Board, Chief Secretary Li- Yueh Hsu from the Secretariat was designated as the manager for corporate governance to protect the Shareholders' interests and strengthen the function of the Board. Ms. Hsu has held the post of director in relation to affairs of legal affairs, fnance, stock affairs, or corporate governance for over three years. Her primary duties are handling matters concerning the compliance of Board meetings and Shareholders' Meetings according to the law, preparing the meeting minutes for Board meeting and Shareholders' Meeting, providing assistance for Directors and Supervisors when assuming office and continuing education, providing required information for Directors and Supervisors in executing businesses, providing assistance to Directors and Supervisors regarding their compliance with the law. Affairs carried out in relation to the corporate governance in 2020 are as follow: 1. On January 20, March 4, July 31, 2020, there were changes in Directors. The Secretariat has disclosed material information and reported to the Board meeting according to the requirements. Moreover, the Administration Management Dept. has applied for the alteration registration to the Ministry of Economic Affairs, and both tasks were successfully completed. 2. Provide Directors the continuing education information regarding corporate governance and track the continuing education conditions. Except for Director Che-Nana Wang (who resides in Japan for a long period due to the effect of COVID-19), the continuing education hour for each Director has complied with the requirements under "Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies," with an number of average education hour amounted to 11.26. 3. Providing logistics of Board meetings for 12 times, succeeded in delivering the notice of meetings and the agenda to Directors 7 days prior to the date of the meeting and dispatched the meeting minutes within 20 days from the ending of the Board meeting. 4. Providing the logistics for the Annual Shareholders' Meeting of 2020, including dispatching the notice of the meeting 20 days prior to the meeting, preparing the agenda of the Shareholders' Meeting, and publishing the meeting minutes of the Shareholders' meeting within 20 days from the ending of the meeting, and all tasks were successfully completed.	No gap

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47

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State of operations Gaps with the "Corporate
Governance Practices Best
Assessed items Practice Principles for the
Yes No Summary Banking Industry," and the
cause of the said gaps
4. Does the bank establish a channel to  1. Stakeholders may contact the Bank through methods of presenting themselves at branches, letters, No gap
communicate with stakeholders (including phone calls, fax, and e-mail. A reporting mailbox and a direct line are also in place for reporting matters
but not limited to Shareholders, employees, of breach of trust.
and customers)? Does the bank set up a 2. The Bank's website has sections including About TBB, News and Events, Financial Information,
section for stakeholders on its website and Corporate Governance, Stakeholder, CSR, FAQs, and IR Contacts, to provide better services to
duly respond to the material CSR issues investors.
concerned by stakeholders? 3. At Investors Relations > Stakeholder on the Bank's website, Procedures for the Analysis of Material
Issues, Summary Table of Concerned Issues and Communication Channels, Sustainable Development
Goals (SDGs), Q&A concerned by stakeholders, and Stakeholder Contact Info are in place to respond
to the issues concerned by stakeholders and safeguard their interests.
4. Report the content and frequency of communications with stakeholders during the past year to the
Board before the first quarter of each year (reported to the 20th Board meeting of the 15th Board).
5. Information disclosure
(1) Does the bank set up a website for  1. The Investor Relations section on the Bank's website disclosed sections including About TBB, News No gap
the disclosure of relevant information and Events, Financial Information, Corporate Governance, Stakeholder, CSR, FAQs, and IR Contacts,
on financial status and corporate to provide better services to investors.
governance? 2. The Investor Relations > Corporate Governance section on TBB's website has sections including Board
of Directors, Committees, Organization Chart, Functions and Duties of Departments, Internal Audit,
Regulation Documents, Operations, Information Security, and Corporate Integrity.
(2) Does the bank take any other methods  1. To realize the open information, the Bank has established the "Procedures for the Operations for No gap
to disclose its information (e.g. english Disclosing Information Externally." According to the requirements, the disclosure to be reported such
website, a special group engaged on as information on finance and business shall be carried out by designated personnel of the relevant
gathering and compiling the the bank's department in accordance with the duties. Furthermore, information such as About TBB, News and
information, the information announced Events, Financial Information, Corporate Governance, Stakeholder, CSR, FAQs, and IR Contacts, is
through the the bank's spokesman, and provided in the Investor Relations on the the Bank's Chinese and English websites to offer relevant
regular investor conference process
provided in the Investor Relations on the the Bank's Chinese and English websites to offer relevant
disclosed on the the bank's website)? information to domestic and overseas investors.
2. The mechanism of spokesperson is responsible for providing descriptions and announcing the news to
external parties, so as to ensure investors may receive accurate news.
(3) Does the the bank publish its annual  The Bank publishes its annual financial reports and make filings at the end of the accounting year within No gap
financial reports and make filings at time according to relevant requirements under the Banking Act and the Securities and Exchange Act, and
the end of the accounting year within publish financial reports of the first, second, and third quarters and the operating status each month and
time according to relevant requirements make filings according to the time prescribed.
under the Banking Act and the Securities
and Exchange Act, and publish financial
reports of the first, second, and third
quarters and the operating status each
month and make filings in advance
according to the time prescribed?
6. Does the bank have other relevant  1. To clarify the rights and obligations of employees and the employer, the Bank established the "Working No gap
information for better understanding the Rules" according to the Labor Standards Act and relevant laws and regulations, with reference to the
bank's corporate governance operation nature of the banking industry, to regulate employees' rights. the Bank also established the "Directions
(such as employee rights, caring for for Measures of Prevention, Complaint, and Punishment of Sexual Harassment at the Workplace of
employees, investors relationship, Taiwan Business Bank" as regulations according to the Act of Gender Equality in Employment.
stakeholder rights, on-the-job education of 2. Caring for Employees:
Directors and Supervisors, implementation (1) Employees are assets of enterprises. the Bank has spared no efforts in caring for its employees.
of risk management policies and risk Except for establishing working rules and personnel management rules according to relevant
assessment standards, implementation of labor laws such as the Labor Standards Act, the Bank complied with the laws and regulations and
customer policies, liability insurance policies insured for the Labor Insurance, National Health Insurance, and provision of retirement pension for
purchased by the bank for Directors and its employees. It also organizes health inspections for employees regularly, provides discounted
Supervisors, and donations to political group medical insurance and casualty insurance to protect the lives of our employees, allowing
parties, interested parties, or charity employees to exert their talents at work worry-free. Also, to strengthen the competitiveness of
organizations)? our employees and improve their professional know-how, the Bank organizes training courses for
different businesses according to the annual employee training plan, provide a diversified programs
on the digital learning website, and holds nonscheduled celebrity seminars and professional
lectures via video. the Bank has a comprehensive system of remuneration and rewards as well as
the promotion channel, diversified training and welfare measures that attract and retain talents,
joining hands for the prosperity of the Bank.
(2) The Bank places the utmost emphasis on employee rights and regularly calls labor-management
meetings where the two sides can fully communicate and negotiate on employee rights and welfare
issues, and sign the Collective Agreement, thereby maintaining harmonious labor-management
relations.
3. The Bank subscribed for "Directors, Supervisors, and Officers' Liability Insurance" for Directors and
officers of the Bank and reported the insured circumstances to the Board.
4. The Bank established the "Directions for Processing of Donations of Taiwan Business Bank" to regulate
the charitable group donation projects where the stakeholder(s) acts as the representative or the
manager.
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48

Taiwan Business Bank Annual Report 2020

III

• State of operations Gaps with the "Corporate Governance Practices Best

• Assessed items Practice Principles for the Yes No Summary Banking Industry," and the cause of the said gaps

• 1. The Bank considers that proper handling of customer complaints may improve the service quality and realize the control for operating risks. the Bank established the "Customer Complaint Center" to respond to customer complaints, and established the "Directions for the Processing of Customer Complaints" of the Bank for compliance.
• 1. The Bank established the handling procedures and regulations in response to "scams against financial institutions by scoundrels," "report and contact for major contingencies," and "report and contact for disastrous emergencies" to actively care for and effectively remind our customers to avoid the losses resulting from scams.
• 1. To improve our attention attaches to the handling of customers' disputes, increase the efficiency and quality for handling consumption disputes, and protect the rights of consumers, the Bank established the "Consumer Disputes Handling System," and the Auditing Dept. shall review the execution.
• 1. To protect customer rights and benefits and optimize the business operation, the Bank established the "Consumer Protection Policy of Taiwan Business Bank" and "Procedures for Consumer Protection Procedures of Taiwan Business Bank," and designated a responsible department to inspect the effectiveness of the consumer protection system. The Auditing Dept. shall be responsible for examine the execution and realize the protection for consumers.
• 1. To treat Shareholders in a fair manner, the Bank established the "Procedures for the Operations for Disclosing Information Externally," "Directions for Equity Management," and "Ethical Corporate Management Best Practice Principles," which clearly stated that the internal personnel is prohibited from trading securities of the Bank before the announcement of relevant information.

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1. With respect to the results of the annual corporate governance evaluation most recently issued by the Corporate Governance Center of Taiwan Stock Exchange, please describe the improvements and provide priority and measures to enhance those matters that have not yet been improved.

2. On March 11, 2020, the Board approved the appointment of Chief Secretary Li-Yueh Hsu from the Secretariat as the manager for corporate governance. In addition, in response to Corporate Governance 3.0 and to enhance the diversification of the Board (gender/expertise), recommendations have been made to substantial Shareholders for them to nominate candidates with professional information security backgrounds and female Director candidates, and increase the number of Independent Director's seats before the re-election of Directors at the 2021 Annual Shareholders' Meeting, so as to realize gender equality and independence of the Board.

3. Continual education of manager for corporate governance

Manager for corporate governance: Chief Secretary Li-Yueh Hsu from the Secretariat Date of appointment: March 11, 2020

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Time for Continual Education
Serial Number of Hours for
Number Institution for Continual Education Program Title Continual Education
From To
1 Taiwan Corporate Governance Association Corporate Governance and Securities Regulation 2020/06/05 2020/06/05 3
2 Taiwan Corporate Governance Association [CGP-He] 10 Classes Required for Corporate Governance 2020/06/12 2020/06/15 3
Aspects of Shareholders' Interests - Starting from the
3 Corporate Operation Association 2020/08/04 2020/08/04 3
Disputes of Operating Rights
4 Taiwan Insurance Institute Information Security Insurance and Corporate Governance 2020/08/10 2020/08/10 3
Labor Laws Reformation from the Aspect of Corporate
5 Taiwan Academy of Banking and Finance 2020/09/29 2020/09/29 3
Governance
6 Taiwan Academy of Banking and Finance Corporate Law and Taxation Governance 2020/10/13 2020/10/13 3
7 Taiwan Academy of Banking and Finance Corporate Governance and Audit Committee Operations 2020/11/12 2020/11/12 3
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49

(7) Remuneration Committee activities

1. Members of the Remuneration Committee

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Whether the member meets the following professional requirements
and has at least five years of work experience Independence (Note 2)
An instructor or A judge, public prosecutor, With work Number of
higher in a department attorney, certified public experience in Other Public
(Note 1)Title QualificationsName department related to finance, accounting, of commerce, law, or other academic specialists who have passed professional or technical a national examination accountant, or other accounting, or law, finance, the fields of commerce, 1 2 3 4 5 6 7 8 9 10 member of the Remuneration Serving as a Companies Note
the banking business and has been awarded a other professions Committee
in a public/private certificate in a professional necessary for the
junior college, college, necessary for the banking banking business.
or university. business.
Independent Director Xin-Wu Lin            2
(Managing Director)
Independent Director Jin-Long Liu             0
Independent Director Wei-Sheng Huang            1
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• Note 1. Please respectively specify whether the title is Director, Independent Director, or Others.

• Note 2. Indicate with "" mark for members who meet the following conditions during the two years before being elected or during the term of office.

• (1) Neither employees of the Bank nor its affiliates.

• (2) Neither a director or a supervisor of the Bank nor its affiliates (this restriction does not apply to independent director positions in the Bank, its parent company or subsidiary, or a subsidiary under common control of the parent company which has been appointed in accordance with Securities and Exchange Act or laws of the registered country).

• (3) Neither an individual shareholder who holds shares, together with those held by his/her spouse, minor children, or held under others' names, in an aggregate amount of 1% or more of the total outstanding shares nor a natural person who ranks among the top 10 shareholders in terms of the share volume held.

• (4) Neither a spouse or relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the managerial officers in (1), nor any person in (2) or (3) above.

• (5) Not a director, supervisor, or employee of a juristic person shareholder that directly holds 5% or more of the total outstanding shares of the Bank, or ranks among the top 5 juristic person shareholders in terms of share volume held, or is a representative being assigned as the Bank's director or supervisor according to Paragraph 1 or Paragraph 2, Article 27 under the Company Act (this restriction does not apply to independent director positions in the Bank, its parent company or subsidiary, or a subsidiary under common control of the parent company which has been appointed in accordance with Securities and Exchange Act or laws of the registered country).

• (6) Not a director, supervisor, or employee of another company which is the the Bank's director, and the majority of that company's director seats or voting shares are controlled by the same person (this restriction does not apply to independent director positions in the Bank, its parent company or subsidiary, or a subsidiary under common control of the parent company which has been appointed in accordance with Securities and Exchange Act or laws of the registered country).

• (7) Not a director, supervisor, or employee of another company or institution who is or whose spouse is the Bank's chairman, president, or a person with equivalent position (this restriction does not apply to independent director positions in the Bank, its parent company or subsidiary, or a subsidiary under common control of the parent company which has been appointed in accordance with Securities and Exchange Act or laws of the registered country).

• (8) Not a director, supervisor, managerial officer, or a shareholder holding 5% or more shares of a specific company or institution that also have financial or business dealings with the Bank (this restriction does not apply to a specific company or institution holding 20% or more but less than 50% of the total outstanding shares of the Bank, and independent director positions in the bank, its parent company or subsidiary, or a subsidiary under common control of the parent company which has been appointed in accordance with Securities and Exchange Act or laws of the registered country).

• (9) Not an owner, partner, director, supervisor, or the managerial officer and his/her spouse of a professional, sole proprietorship, partnership, company, or institution that provides auditing services or commercial, legal, financial, accounting, or relevant services, with an accumulated compensation less than NT$0.5 million within the past two years, to the Bank or its affiliates. However, this restriction does not apply to a member of the remuneration committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Securities and Exchange Act or Business Mergers and Acquisitions Act or related laws or regulations.

• (10) None of the circumstances in the subparagraphs of Article 30 of the Company Act has occurred.

50

Taiwan Business Bank Annual Report 2020

III

2. Operation of Remuneration Committee:

• (1) The Bank has a Remuneration Committee composed of 3 members.

• (2) Term of office of the current members: From June 29, 2018 to June 28, 2021. The Salary and Remuneration Committee met six (6) times (A) in the most recent year. The table below provides information on the qualifications and attendance of the members.

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Title Name Number of actual atten- Number of delegated Actual attendance rate (%) Note
dance (B) attendance (B/A) (Note)
Committee chair Xin-Wu Lin 6 0 100
Member Jin-Long Liu 6 0 100
Member Wei-Sheng Huang 6 0 100
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Other items that shall be recorded:

1. If the Board of Directors does not adopt or amend the recommendations made by the Remuneration Committee, the date, and session of the Board of Directors' meeting, resolutions, voting results, and handling of opinions of the Remuneration Committee by the Bank shall be disclosed (if the remuneration approved by the Board of Directors is better than that of the Remuneration Committee, the discrepancies and related reasons should be stated): None.

2. For the decisions made by the Remuneration Committee, if there are members who vetoed or withheld from the decision and there are documented records, the date, number, content of the motion, all members' opinions, and ways in handling these opinions should be elaborated: none.

3. Discussion of the proposal and handling of opinions for 2020

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Date of Remuneration
Committee Meeting/ The resolution results of the Remuneration Committee and the Bank’s response
Date and Session of Agenda regarding the Remuneration Committee’s opinions
Board Meeting
January 17, 2020/the Amendments to the "Directions for Employee Audit of Resolution results of the Remuneration Committee: Passed, and submitted to the
12th Board meeting Taiwan Business Bank." Board for consideration.
of the 15th Board on The Bank's response regarding the Remuneration Committee's opinions: All Directors
January 21, 2020 in attendance agreed to pass the resolution with amendments made.
March 9, 2020/the 13th Resolution for the allocation and distribution amount Resolution results of the Remuneration Committee: Passed, and submitted to the
Board meeting of the and percentage for the compensation of employees and Board for consideration.
15th Board on March remunerations for Directors. BB's response regarding the Remuneration Committee's opinions: Resolution passed
11, 2020 by all Directors in attendance as proposed.
March 9, 2020/the 13th Resolution for the proposed amendments to partial Resolution results of the Remuneration Committee: Passed, and submitted to the
Board meeting of the provisions of the Bank's "Remuneration Committee Board for consideration.
15th Board on March Organizational Procedures." The Bank's response regarding the Remuneration Committee's opinions: Resolution
11, 2020 passed by all Directors in attendance as proposed.
March 9, 2020/the 13th Resolution for regular assessment on Directors and Resolution results of the Remuneration Committee: Passed, and submitted to the
Board meeting of the members of management of the Bank. Board for consideration.
15th Board on March the Bank's response regarding the Remuneration Committee's opinions: Resolution
11, 2020 passed by all Directors in attendance as proposed.
March 9, 2020/the 13th Resolution for the proposed performance bonus with an Resolution results of the Remuneration Committee: Agreed to pass after refinements
Board meeting of the amount equals to 2.6 months of salary for 2019. made to the wording of the original proposal, and submitted to the Board for
15th Board on March consideration. the Bank’s response regarding the Remuneration Committee’s opinions:
11, 2020 (I) All Directors in attendance agreed to pass the resolution with amendments made,
where employees with the title of Executive Vice President and above shall receive
2-month-bonus and other fellow colleagues shall receive 2.4-month-bonus. (II)
Attached resolution: Re-examine the salary and bonus systems from the aspects of the
Bank's sustainable development.
July 6, 2020/the 15th Resolution for the distribution of Director’s remuneration of Resolution results of the Remuneration Committee: Passed, and submitted to the
Board meeting of the the Bank for 2019. Board for consideration.
15th Board on July 15, BB's response regarding the Remuneration Committee's opinions: Resolution passed
2020 by all Directors in attendance as proposed.
August 14, 2020/the Resolution for establishing the "Taiwan Business Bank's Resolution results of the Remuneration Committee: Passed, and submitted to the
16th Board meeting Guidelines for Recruiting Senior Financial Professional Board for consideration.
of the 15th Board on Talents from Hong Kong." BB's response regarding the Remuneration Committee's opinions: Resolution passed
August 19, 2020 by all Directors in attendance as proposed.
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• Note 1. Where members of the Remuneration Committee resign before the end of the year, the Notes column shall be annotated with the date of resignation. Actual presence rate (%) shall be calculated using the number of Remuneration Committee meetings convened and actual presence during the term of service.

• Note 2. When an election is held for the Remuneration Committee before the end of the year, members of both the new and old committee shall be listed in separate columns and noted as new, old or re-elected members, along with the elected date, in the remark column. The actual presence rate (%) shall be calculated using the number of Remuneration Committee meetings convened and actual presence during the term of service.

51

• (8) State of performing social responsibilities, shortcomings in fulfilling the "Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies," and the cause of the said gaps

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Corporate Social Responsibility
State of operations (Note 1) Gaps with the
"Corporate Social
Responsibility Best
Assessed items Practice Principles
for TWSE/GTSM
Yes No Summary (Note 2)
Listed Companies,"
and the cause of the
said gaps
1. Does the bank carry out any  The Bank collects, understands, and identifies concerns related to the Bank’s stakeholders through No gap
risk assessment for ESG distributing the “Stakeholder Identification” form to evaluate the concerns of different types of
aspects related to corporate stakeholders and the level of influence on the operations of the Bank. The selected materials aspects
operations based on materiality receiving significant concerns, establish relevant management directions, and report to the CSR
principles and establish relevant Committee regarding the execution results of last year, mid-to-long-term targets, and policies.
risk management policies or
strategies?(Note 4)
2. Does the bank have a unit that  The Bank has a functional committee "CSR Committee" in place and has five subordinated units No gap
specializes (or is involved) in CSR dedicated to Corporate Governance, Customer Rights, Sustainable Environment, Social Benefit, and
practices? Does the CSR unit run Employee Care. The Committee is responsible for CSR policies, systems, or relevant management
by senior management authorized directions, and the proposal and execution of particular promotional plans. The Committee regularly
by the Board and report its reports to the Board regarding the implementation effect every year.
progress to the Board?
3. Environmental aspects
(1) Does the bank establish  1. Executing environment cleaning and maintenance according to the "Procedure Guidelines for the No gap
proper environmental Cleaning and Maintenance of Business Premises" and implement the waste sorting in response to
management systems based environmental protection.
on the characteristics of its 2. To save energy on a sustained basis, the Bank complied with the ISO50001 Energy Management
industries? and published the energy policy on our official website, and built the management system and
regulations for energy usage. The headquarters' building was awarded the certificate for ISO50001
Energy Management System.
(2) Does the bank endeavor to  1. Toner cartridges are provided to recycling companies for recycling and reusing. No gap
utilize all resources more 2. Promotion of double-sided printing to save the usage of paper.
efficiently and use renewable 3. Engaging recycling companies to handle or donate old "computer equipment,"
materials which have a low 4. Continuous using paper rolls free of BPA.
impact on the environment? 5. Fully replacing office lightings at our business promises to LED lightings with "Energy Label."
6. Lightings in public areas and emergency lightings in the headquarters' building are replaced with
new LED lightings.
(3) Does the bank evaluate  The Bank evaluates the potential risks and opportunities of climate change on the Bank and adopts No gap
potential current and future relevant corresponding measures.
risks and opportunities
regarding climate change
on the corporate and adopt
corresponding measures for
aspects related to climate?
(4) Does the bank prepare  1. Compliance with "Rules of Energy Saving for Specified Energy Users" promulgated by the Ministry No gap
statistics for the greenhouse of Economic Affairs and Taipei City Self-Government Ordinance for Energy Saving and Carbon
gas emissions, water usage, Emission Reduction, the average air-conditioning temperature within business promises and offices
and total weight of wastes remained at 26°C or above.
for the past two years and 2. The Bank announced its energy policies and appointed the President as the chairman of the
establish policies for energy- Energy Management Committee
saving and carbon reduction, 3. The Bank implemented its Measures for Water and Electricity Conservation with follow-up on the
greenhouse gas reduction, status of water and electricity conservation by different units and inclusion of the results in business
water usage reduction, or performance assessments. the Bank examined the execution of various energy conservation
other waste management? improvement programs in order to enhance the energy efficiency of equipment and save on
electricity costs.
4. Declaration of "Information on Greenhouse Gases Emission and Reduction" on Market Observation
Post System of TWSE for disclosing the results of the Bank's energy saving and carbon emission
reduction execution.
5. Introduction of ISO 14064 Greenhouse gases Part 1: Specification with Guidance to disclose the
greenhouse gases emission of the headquarter building.
6. The Bank disclosed the water usage and the total weight of wastes for all its venue of operations.
4. Social aspects
(1) Does the bank develop its  The regulations on personnel affairs of the Bank are established in accordance with the relevant labor No gap
policies and procedures in laws, with reference to internationally recognized principles concerning basic human rights of labor.
accordance with laws and the the Bank adopts an equal employment policy irrespective of gender, race, age, marriage status, and
International Bill of Human family conditions, and delivers equal opportunities principles in respect of compensation, employment
Rights? conditions, training, and promotion to protect the legal rights of employees.
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52

Taiwan Business Bank Annual Report 2020

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State of operations (Note 1) Gaps with the
"Corporate Social
Responsibility Best
Assessed items Practice Principles
for TWSE/GTSM
Yes No Summary (Note 2)
Listed Companies,"
and the cause of the
said gaps
(2) Does the bank establish and  The Bank has established the "Directions for Salary Payment to Employees" and "Directions for No gap
implement fair employees' Payment of New Year, Festival, and Performance Bonuses," which awards employee bonus according
welfare measures (including to the operating performance of the Bank and considers the year-end audit results of the employees as
remuneration, vacation, and the basis for promotion and salary. Furthermore, the "Employee Reward and Punishment Regulations"
other benefits) and reflect of the Bank provide clear punishment terms regarding violation of business ethics or conduct of bribery
the operating performance and corruption, with dismissal from office as the heaviest punishment. In addition, the Regulations also
or results on employees' set out the reward provisions regarding prevention or reporting of misconducts or fraud, effectively
remuneration? encouraging employees to realize business ethics and fulfill social responsibilities.
(3) Does the bank provide  The Bank provides regular health inspections every one-to-two year and one-hour safety and health No gap
safe and healthy work eductaion training for employees on active duties every three-year, respectively. the Bank also
environments for its engaged visiting service doctors, recruited regular nursing personnel, and established a health service
employees, and organize and stress-free activity center and breastfeeding room to care for the employees' health and address
training on safety and health the importance of health.
for its employees on a regular
basis?
(4) Does the bank implement  The Bank establishes the annual employee training plan according to function and experiences No gap
an effective training program of employees, including comprehensive programs such as general knowledge program for new
that helps employees develop employees, foundation program, advance program and workshops for various business, as well as
skills over the course of their officer training and seminars. the Bank also assigns relevant personnel to participate in professional
career? training programs organized by external institutions or engage external professional lecturers to
provide lessons, cultivating the professional skills and knowledge of our employees, exerting the
effect of training-application integration, so as to improve the career development potentials for our
employees.
(5) Regarding customers' health  Except for complying with relevant requirements of the Bank, the marketing and description for the No gap
and safety, customer privacy, products and services also abide by the relevant regulations, letters, and orders from the competent
marketing, and labeling authority as well as international standards. the Bank has also established the Consumer Protection
of products and services, Policy and Directions for the handling of Customer Complaints. the Bank also established a customer
does the bank comply with complaint management system, set up the warning value of risk indicator for the number of customer
relevant regulations and complaint cases.
international standards and
establish relevant policies
and complaint procedures to
protect customers' rights?
(6) Does the bank establish  1. The Bank discloses its supplier management policies on its website The contract of the Bank No gap
policies for supplier set out terms for supplier management that require contractors to fulfill social and environmental
management, requiring protection responsibilities, to improve the obligations of contractors.
suppliers to comply with 2. The contract of the Bank provides that where suppliers violate its corporate social responsibility
relevant regulations regarding policies and generate material effects to the environment and society, the Bank may terminate such
aspects of environment contracts upon verifying that the violations were true, so as to require contractors to fulfill the self-
protection, occupational management regarding their social responsibilities.
safety and hygiene, or
labor rights and monitor the
implementations?
5. Does the bank refer to report  Taiwan Business Bank's Corporate Social Responsibility (CSR) Report has passed the verification No gap
preparation standards or conducted by the British Standards Institution (BSI) according to AA1000 (Accountability) Type 1 and
guidelines commonly used guidelines of GRI Standards. Content disclosed in the CSR Report of the Bank complied with the
internationally to prepare reports core indication options of GRI Standards; BSI has also issued an Independent Assurance Opinion
that disclose non-financial Statement to the Bank.
information of the bank, such
as CSR reports? Has the
abovementioned report received
the confirmation or assurance
opinion of any third-party
certification department?
6. Regarding banks that established its "Corporate Social Responsibility Best Practice Principles" based on the "Corporate Social Responsibility Best Practice Principles for TWSE/
GTSM Listed Companies," please specify the gaps between its operations and the provisions in the Principles: The Bank established its "Corporate Social Responsibility Best
Practice Principles " according to "Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies" to promote the performance of corporate social
responsibility, and no such gap exists.
7. Other important information contributes to understanding the operations of corporate social responsibility: Please refer to IX. Corporate Social Responsibility Report.
Note 1. If "Yes" is checked for the state of operations, please explain the key policies, strategies, measures taken, and the execution;
if "No" is checked for the state of operations, please provide reasons and explain the policy, strategy, measure planned for the
future.
Note 2. If the Bank has prepared a CSR report, the state of operations may be completed by providing page references to the CSR
report instead.
Note 3. Non-listed banks are not required to complete the column of "Gaps with the 'Corporate Social Responsibility Best Practice
Principles for TWSE/GTSM Listed Companies,' and the cause of the said gaps."
Note 4. Materiality principle refers to environmental, social and corporate governance issues that are of material impact to the Bank's
investors and other stakeholders.
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III
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53

Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies," and the cause of the said gaps

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Gaps with the "
State of operations
Ethical Corporate
Management Best
Assessed items Practice Principles
for TWSE/GTSM
Yes No Summary Listed Companies,"
and the cause of the
said gaps
1. Establishment of Corporate
Conduct and Ethics Policy and
Implementation Measures
(1) Has the bank established  1. The Bank's "Ethical Corporate Management Best Practice Principles" stipulated the performance No gap
the integrity management of business activities on the basis of fairness, honesty, integrity, and transparency. The Bank
policies that were approved disclosed its ethical operating policies on its website. To realize the ethical policies, the Directors
by the Board and stated in its and senior management of the Bank have signed the declaration for complying with ethical
Memorandum and external operating policies.
correspondence about the 2. The Bank duly implements integrity management in its internal management and business activities.
policies and practices it For example, the Working Rules of the Bank provides that, an employee shall not take advantage
has to maintain business of his/her post to break the rules or commit jobbery for illegal interests of himself/herself or others;
integrity? Are the Board and also, the employees shall not accept any gifts or enjoy other illegitimate benefits. Furthermore, the
the management committed "Directions for Construction Work as well as Purchase, Customization and Selling of Properties"
to fulfilling this commitment? stated that invitation for banquet and gifts from suppliers are strictly forbidden to ensure the
integrity and just.
(2) Does the bank has an  1. The Bank complied with requirements under Article 7 of the "Ethical Corporate Management Best No gap
evaluation system for the Practice Principles for TWSE/GTSM- Listed Companies," and checked the risks of dishonesty
risk of dishonest conduct within the business scope of the Bank. It also introduced a risk-oriented internal audit system and
to regularly analyze and internal control measures, respectively, to estimate the risk assessment results. The self-evaluation
evaluate operating activities for self-evaluation items under the RCSA and the CRA provide relevant risk descriptions and
with a higher probability of control point descriptions regarding dishonest conduct that may occur to employees engaging in
dishonest conduct within its different businesses, so as to precisely evaluate relevant risks.
scope of operations, so as 2. Employees of the Bank shall comply with the internal control system of the Bank when carrying
to establish the program for out business. the Bank stipulates preventive measures for articulation in its business rules; for
preventing dishonest conduct, example, the signed contracts prohibit suppliers from conducting any illegal acts that may infringe
and such program includes intellectual property rights, etc. Regarding the credit loans for stakeholders, based on Article 32,
preventions for occurrences Article 33 of the Banking Act and its relevant requirements, the Bank has its "Procedures of Credit
listed in Paragraph 2, Article Loans for Stakeholders" in place, and carried out the pre-loan review, post-loan review, as well as
7 of the "Ethical Corporate regular and nonscheduled reviews to give effect to the preventive measures.
Management Best Practice
Principles for TWSE/GTSM-
Listed Companies"?
(3) Does the bank have any  The Bank has its "Ethical Code of Conduct for Directors and Management" and "Working Rules" in No gap
measures against dishonest place and has established containment requirements in its internal operating procedures for work
conduct? Are these measures distribution between employees. For any unethical conduct by an employee that is found true after
supported by proper investigation, the case shall be submitted to the Personnel Evaluation Committee according to
procedures, behavioral the punishment provisions. The involving party for the punishment may reply in writing. Where the
guidelines, disciplinary Personnel Evaluation Committee has any doubt, In 2020, there was no case that violates the ethical
actions, and complaint operations of the Bank submitted to the Personnel Evaluation Committee.
systems? Does the bank
implement such measures
and regularly review and
amend the abovementioned
measures?
2. Actions to ensure business
integrity
(1) Does the bank evaluate the  Article 20 under the "Ethical Corporate Management Best Practice Principles" of the Bank provides No gap
integrity of all counterparties that, when signing a contract with others, it is required to fully understand the other party's integrity.
it has business relationships The contract shall include terms of complying with the ethical corporate management of the Bank and
with? Are there any integrity shall stipulate that when the counterparty in the transaction engages in unethical behaviors, the Bank
clauses in the agreements it may terminate or cancel the terms of the contract at any time. When engaging in credit investigation,
signs with business partners? it is required to access the credit and check records of the borrower through JCJC and the Clearing
House to evaluate its credit conditions. Once the loan is approved, enter a credit loan contract with
the customer, which shall set out matters regarding the bad check or credit records of the customer,
or financial reports and data provided, or any statement, description, waiver, consent, or commitment
made. For any event of fraudulent and deliberate omission that violates integrity, the Bank may call
the loan or reduce the credit amount or shorten the term for borrowings, or deem the terms as expired.
Furthermore, when processing purchase or tender, where the assigned personnel from the awarded
supplier of the purchasing project engages in any illegal conduct, leakage of confidential information,
or fault that results in losses of the Bank, the supplier shall be jointly responsible for compensating
the losses. In addition, refer to the Government e-Procurement system regarding suppliers on the
blacklist; the Bank may reject such suppliers to participate in the tender.
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Taiwan Business Bank Annual Report 2020

III

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Gaps with the "
State of operations
Ethical Corporate
Management Best
Assessed items Practice Principles
for TWSE/GTSM
Yes No Summary Listed Companies,"
and the cause of the
said gaps
(2) Does the bank have a  The Bank's CSR Committee is the dedicated unit for ethical operations, and there are five subordinated No gap
unit that specializes in units dedicated to Corporate Governance, Customer Rights, Sustainable Environment, Social
business integrity? Does Benefit, and Employee Care. The units would report to the Board regarding the execution during the
this unit report to the Board previous year before the first quarter of each year. Furthermore, the Secretariat is responsible for the
regularly (at least once a amendment, interpretation, and consultation services for the Bank's Ethical Corporate Management
year) regarding the business Best Practice Principles, as well as the report of content for archiving, and other relevant tasks.
integrity policy, measures to
prevent dishonesty, and the
supervision and execution?
(3) Does the bank have any  1. Article 11 under the "Ethical Corporate Management Best Practice Principles" of the Bank provides No gap
policy that prevents conflict that, regarding the resolutions at the Board meeting, where such resolutions relate to the interests
of interest, and channels of Directors, managers, authorized parties, or other stakeholders presenting at or attending the
that facilitate the reporting of Board, or the legal entity being one presented, the relevant personnel shall disclose the material
conflicting interests? content of such interests. If such interests may be harmful to the interests of the Bank, such
personnel shall present his/her opinion and answer inquiries, and shall not participate in the
discussion and poll. Also, such personnel shall abstain from the discussion and the poll, and shall
not represent other Directors to exercise their voting rights. Directors shall maintain discipline
among one another and not inappropriately support one another.
2. According to the "Directions for Credit Loans to Stakeholders" and the "Procedures for Credit Loans
to Stakeholders" of the Bank, it is required to implement the Know Your Customer (KYC) measures
upon credit investigation, and investigate whether the customer is a stakeholder of the Bank, so as
to duly comply with the requirements of the law.
3. The "Code of Conduct for Financial Advisors" and the "Anomaly Report System" of the Bank are
implemented to provide proper communication channels.
4. "Procedures for Acquisition or Disposal of Assets," "Directions for Construction Work, Purchase,
Customization and Selling of Properties," "Directions for Acquisition and Disposal of Premises and
Real Estate," and "Directions for Leasing Real Estate" of the Bank stipulate the terms to regulate
transactions with related parties.
5. As stipulated in the Bank's Internal Control System for Securities Firms (CA-11210), the Bank shall
examine the consigned trading by the internal staff of the Bank after closing the deal for ensuring
whether such transaction involves undisclosed information, or is in conflicts of interests with the
Bank or other clients and shall be avoided. The examination procedures had been established.
6. The Bank has established a customer service center with toll-free services (0800-00-7171); also,
its website (https://www.tbb.com.tw) has the customer service mailbox to provide channel for
representation.
(4) Has the bank implemented  1. The Bank adopted the accounting system established according to the International Financial No gap
effective accounting and Reporting Standards (IFRS) recognized by the FSC for its operations, and regularly check the
internal control systems appropriateness of the accounting system. the Bank shall carry out the audit business according
for maintaining business to the "Implementation Rules of Internal Audit and Internal Control System of Financial Holding
integrity? Does the internal Companies and Banking Industries" and the "Internal Audit Operation Guidelines," and shall report
audit department establish to the Board and Audit Committee regarding the audit business at least every six months
relevant audit plans 2. The audit plan in 2020 included an audit for the unethical behavior of employees (based on
according to the results of the evaluation results regarding the risk of unethical behaviors of all departments, audits were
risk assessment of dishonest conducted at all departments to determine whether any employee has conducted unethical
conduct, so as to check the behaviors, and on the compliance with prevention programs). The audit was completed according
compliance with measures to the audit plan, and no case of violation to the ethical operation of the Bank is found during the
for preventing dishonest audit on all departments.
conduct? Or does the bank
engage external auditors for
audits?
(5) Does the bank organize  1. Regarding the ethical training program of the Bank, the relevant business departments shall No gap
internal or external training promote the internal and external requirements through managing the training, including contents
on a regular basis to maintain in relation to ethical operations such as laws and regulations promotion, legal responsibilities of
business integrity? employees of the Bank, etc. By doing so, the Bank may reinforce the cognition and practices of
fellow colleagues regarding requirements under ethical and employee's code of conduct (such as
"Treat Client Fairly Policies" and "Treat Client Fairly Strategies") as well as ethical operations.
2. The Bank organized the business foundation program for new employees upon the date of arriving
at their post and arranged programs for "Legislative Requirements for Financial Practitioners,"
which shall be primarily based on the regulations (including ethical training). 5 echelons of training
were organized during 2020, and 290 new employees completed training in total. Furthermore,
the Bank communicated with its employees via the internal digital learning website, and 5,102
employees browsed online for learning. Moreover, a lecture for the "How Do Directors and
Supervisors Strengthen the Corporate Governance by Managing the Detection and Prevention of
Malpractices and the whistle-blowing System" was organized, and a total of 151 participants. For
the audit items under the statutory program during the 4th quarter of 2020, the Bank included the
code of service and Ethical Corporate Management Best Practice Principles as mandatory items
3. The Bank regularly assign employees to participate in external educational training, and it had
assigned a total of 101 employees for such training in 2020.
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55

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Gaps with the "
State of operations
Ethical Corporate
Management Best
Assessed items Practice Principles
for TWSE/GTSM
Yes No Summary Listed Companies,"
and the cause of the
said gaps
3. Implementation of a misconduct
reporting system
(1) Does the Bank provide  1. To establish an ethical and transparent corporate culture and promoting healthy operations, the No gap
incentives and means Bank established its "Directions for Handling Reported Cases" based on the "Implementation
for employees to report Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking
malpractices? Does the Bank Industries," "Regulations Governing the Establishment of Internal Control Systems by Service
assign dedicated personnel Enterprises in Securities and Futures Markets," and "Ethical Corporate Management Best Practice
to investigate the reported Principles for TWSE/GTSM Listed Companies." It also announced the whistle-blowing channels
malpractices? on its website and the integrated portal of its internal employee system, set up the whistle-blowing
mailbox and direct line for internal and external parties; the Compliance Dept. would assign officers
to handle the reported matters.
2. According to the "Working Rules" of the Bank, incentives are provided for those who made advance
report or prevention that prevents the Bank from suffering losses or mitigates such losses
(2) Does the Bank implement  The "Directions for Handling Reported Cases" of the Bank has stated the responsible department, No gap
any standard procedures SOP for investigation, and execution of related confidentiality system regarding any reported cases.
or confidentiality measures
for handling reported
malpractices?
(3) Does the Bank assure  Article 12 under the "Directions for Handling Reported Cases" of the Bank has provided that the Bank No gap
employees who report shall keep confidential regarding the information that is sufficient to identify the informant, including
malpractices that they will not name, age, residence, and identity of the informant. Except for otherwise provided by the laws,
face repercussions for making no third party is allowed to browse or transcribe. the Bank may not carry out dismissal, discharge,
such reports? demotion, pay cut regarding the informant, or form damages to the rights that the informant is entitled
to according to laws and regulations, contracts, or practices, or other adverse actions. However, where
the informant reported untrue facts or set unjustified benefits as targets shall be excluded.
4. Enhanced information disclosure  The "Ethical Corporate Management Best Practice Principles" of the Bank is disclosed on the Market No gap
Does the Bank disclose its Observation Post System and its corporate website. the Bank will facilitate the disclosure of its yearly
integrity principles and progress ethical operations on its website (Home > Investor Relations > Corporate Governance > Corporate
on its website and MOPS? Integrity).
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1. Regarding banks that established its "Ethical Corporate Management Best Practice Principles" based on the "Ethical Corporate Management Best Practice Principles for TWSE/ GTSM Listed Companies," please specify the gaps between its operations and the provisions in the Principles: The Bank's "Ethical Corporate Management Best Practice Principles" was modified with reference to the "Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies," and no such gap exists.

2. Other important information contributes to understanding the ethical operations of the Bank (such as the Bank examining and revising its "Ethical Corporate Management Best Practice Principles"): The Bank inspected the risk of unethical behaviors within its scope of business during the year and submitted the inspection results to the Auditing Dept., Risk Management Dept., and Compliance Dept. to introduce the risk of unethical behaviors into the risk-oriented internal audit system, the RCSA system, and CRA, realizing the prevention for unethical behaviors.

(10) Procedures for Handling Material Inside Information:

The Bank reports its information according to the "Taiwan Stock Exchange Corporation Procedures for Verification and Disclosure of Material Information of Companies with Listed Securities," "Taiwan Stock Exchange Corporation Rules Governing Information Filing by Companies with TWSE Listed Securities and Offshore Fund Institutions with Listed Offshore Exchange Traded Funds," and "Taiwan Business Bank Procedures for External Information Disclosures."

• (11) Inquiry for Corporate Governance Principles and relevant rules: Please refer to TBB's website (https://www.tbb.com.tw) at Investor Relations > Corporate Governance > Regulation Documents.

• (12) Other important information contributes to understanding the operations of corporate governance: Please refer to TBB's website (https://www.tbb.com.tw) at Investor Relations.

本行於 109 年 9 月 19 、 20 日與財訊雜誌、現代地政等單位共同舉辦第二屆「危老 + 都更博覽會暨研討會」 系列活動。

56

Taiwan Business Bank Annual Report 2020

III

(13) Implementation of the Internal Control System

A. Internal control system statement

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57

Taiwan Business Bank Matters of Internal Control to be Enhanced and Improvement Plan

(Base Day: December 31, 2020)

Matters to be Enhanced	Improvement Measures	Estimated Time for the Completion of the Improvement
The FSC affrmed that the defciencies involved in the Bank's operations in relation to the document-flling for stakeholders are to be corrected.	1. Issue all branches of the Bank to examine the completed information sheet, document-flling, and verifcation of the Bank's stakeholders. 2. Issue and reinforce the shareholder's identity of corporate loan customers. Based on the inquiry results, where the shareholder of the corporate is a stakeholder of the Bank, subject to the "Directions for Credit Loans to Stakeholders" and the "Procedures for Credit Loans to Stakeholders" of the Bank.	Improved according to the improvement measures.
The FSC ordered the Taiwan Business Bank Insurance Agency Co., Ltd., a former subsidiary of the Bank, to make two corrections within the timeframe of one month, together with the punishment of a fne that amounted to NT$3 million only, for the following matters of defciency for its insurance agent business. I. (I) The review has not been duly performed regarding the specialist report failing to accurately set out the source of premium. (II) Regarding cases where the nature of risks is inconsistent with the risk level of the investment object upon verifcation, the insurance company had notifed the insurance customer to alter the analytical assessment sheet for the nature of risks and increase the nature of risk to accord with the risk level of the investment object; however, the insurance company failed to described the rationale for short-term alteration. (III) The customer purchased the second policy within a short period, the conditions then had signifcant differences with the fnancial position of the insurance customer stated in the specialist report, but the specialist failed to acquire the reason thereof; the operation of Know Your Customer (KYC) was conducted poorly.	I. (I) On the improved insurance agent operation management system, the Bank enhanced control to verify the data of the applicant, the insured, and the premium payer regarding for any loan, time deposit in NTD/foreign currency any discounted termination interests with the Bank, or any surrender of policy or borrowings made via the Bank within the latest three months. (II) Issue the "Operating Procedures for Verifcation" under the "Insurance Agent Operation Management System," where a customer with short-term nature of risk heightens the premium after the rationale explanation, the signatory will perform a telephone visit. (III) Establish Insurance documents, the insurance agent operation management system would verify the fnancial status of the customer regarding the previous purchase of policy. In case of discrepancy, the Insurance Agent Department shall require the specialist to explain the rationale of the discrepancy. When the branch is unable to provide a clear explanation, the Insurance Agent Department will reject the case.	Improved according to the improvement measures.
II. The specialist failed to handle the dispute of fnance consumption according to internal regulations; review analysis was not established for anomalies in relation to the verifcation records of the insurance company.	II. (I) Issue the "Standard Operating Procedures for Customer Appeals by the Insurance Agent Department" for compliance. (II) Since November 2019, a statement of verifcation data shall be established, and analysis for irregularity shall be reviewed on a monthly basis.
III. Regarding the recordings for selling investment products to a customer over 70 years old, the specialist merely described products in a word- by-word manner according to the sample of recordings established by the insurance company without further explanations on the signifcant terms and content of products, which is unfavorable to the protection of senior customers' interests in purchasing insurance products.	III. (I) Update the "Samples for the Course of Sales Recordings," which contains the signifcant terms and content, exclusions, major risks, and material content of the product instruction of all insurance products. (II) Reinforce educational training for regulations, required specialists to carefully select senior customers for sales, and include the sales operation specifcation as an self-examination.
Regarding the implementation of the internal control system for the concurrent operation of the security business, there were cases where the internal personnel failed to distinguish the number of accounts opened from other grantors, where the internal personnel made use of its personal cell phone to place orders for purchasing securities on behalf of its family and friends, where the margin purchase limits of related customers were not under a combined control, where no control system was established to verify whether any person uses or falsely uses other's name to make purchases for public offerings, and where personnel concurrently engages in securities business failed to register and participate in educational training according to the requirements. A fne of NT$240,000 was imposed, and the Bank was ordered to make corrections.	1. Issue the "Operating Procedures for Assisting Account Control on Internal Personnel of Securities and Futures" to establish relevant requirements for internal personnel regarding opening securities or futures accounts. 2. Regularly examine the "Statement of Inquiry on Internal Personnel's Account" on a yearly basis. 3. Enact the "Procedures for the Verifcation of Securities Orders Placed with the Same IP." 4. Amend the "Operating Procedures for the Limits of Margin Purchase and Short Sale by Customers" to add specifcations for the approving level for credit loans and combined control regarding the credit limits for related customers. 5. Impose regulations where inquiries for the inquiry sheet of the customer's related parties shall be made for newly opened credit accounts and renewal upon expiry to combine the audit and control functions and keep records for future reference. 6. Issue the "Control System for Preventing the Usage or False Usage of Other's Names to Apply for Securities under Public Offerings," where the branches shall verify whether there is any case of using or falsely using other's names for purchase applications and shall keep the verifcation records. 7. The Bank's personnel concurrently engages in securities business had registered and participated in educational training according to the requirements.	Improved according to the improvement measures.

58

Taiwan Business Bank Annual Report 2020

III

• B. Where CPAs are commissioned to audit the Bank's internal control systems, the audit report prepared by the CPAs should be disclosed

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To the members of Taiwan Business Bank, Ltd.:

Pursuant to the agreed-upon procedures, we have reviewed the correctness of the report submitted to

the competent authority for the banking business, the execution status of the internal control system, compliance system, and the appropriateness of policies for the provision of allowance for doubtful debts of

Taiwan Business Bank for 2020. Your company made the final decision in these procedures; therefore, we do not express our opinion regarding whether these procedures were sufficient. The work is conducted in accordance with the Statement on Auditing Standard No.34 “Perform Agreed-Upon Procedures Regarding Financial Information,” and its purpose is to assist your company in evaluation the compliance with the Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries, promulgated by the Financial Supervisory Commission. Complying with the aforementioned regulation is the responsibility of your company’s management. We have provided the procedures, sampling methods, and the associated findings in the attachments herein, respectively. The audits we performed are not in accordance with Generally Accepted Auditing Standards; hence, we do not assure your company of the correctness of the report submitted to the competent authority for the banking business, the execution status of the internal control system, compliance system, and the appropriateness of policies for the provision of allowance for doubtful debts. If we perform additional procedures or audits in accordance with Generally Accepted Auditing Standards, we may have additional findings. This report provides your company for the purpose of the first paragraph mentioned only, and should not distribute to any third parties for whatever purposes.

KPMG

CPA

Date

59

C. Overall information security implementation statement

On behalf of Taiwan Business Bank, we hereby certify that from January 1, 2019 to December 31, 2019,

TBB has duly complied with Subparagraph 5 of Article 38 and Article 38-1 of the “Implementation Rules of

Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries,” and the self-disciplinary regulations of information security established by the Bankers Association. After prudent

evaluation, the overall implementation of information security for the year has effectively implemented,

except for the items listed in the attached table. If there is any hypocrisy, we are willing to take legal responsibility.

To:

Financial Supervisory Commission Declarant Chairman: (Signature & Seal) President: (Signature & Seal) Chief Audit: (Signature & Seal)

Chief Information Security Officer: (Signature & Seal)

[*], 2020

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Items to be improved and Countermeasures of Overall Information Security Implementation of Taiwan Business Bank

(Base date: December 31, 2020)

Matters to be improved	Improvement measures	Estimated time for the completion of the improvement
None

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Taiwan Business Bank Annual Report 2020

III

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On behalf of Taiwan Business Bank, we hereby certify that from January 1, 2019 to December 31, 2019, TBB
has duly complied with Subparagraph 10 of Article 10 and Article 36-2 of the “Regulations Governing the
Establishment of Internal Control Systems by Service Enterprises in Securities and Futures Markets,” and
the self-disciplinary regulations of information security established by the Securities Association and National
Futures Association. After prudent evaluation, the overall implementation of information security for the year
has effectively implemented, except for the items listed in the attached table. If there is any hypocrisy, we
are willing to take legal responsibility.
To:
Financial Supervisory Commission
Declarant Chairman: (Signature & Seal)
President: (Signature & Seal)
Chief Audit: (Signature & Seal)
Chief Information Security Officer: (Signature & Seal)
[], 2020
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Items to be improved and Countermeasures of Overall Information Security Implementation of Taiwan Business Bank

(Base date: December 31, 2020)

Estimated time for the completion of Matters to be improved Improvement measures the improvement None

61

• (14) Sanctions imposed for violation of laws and regulations and corrective actions taken in the most recent two years and up to the end of February 2020

• A. Disclose any indictment of a responsible person or employee by a prosecutor for an offense related to the occupation: None.

• B. Disclose any fine imposed by the Financial Supervisory Commission for violation of a law or regulation:

  • Regarding the loan to New ○ Group provided by the Bank, as improvements were required for the investigation and assessment for its operations, and more prudence was required for the loan approval and fund usage verification, the Financial Supervisory Commission (FSC) imposed a fine of NT$2 million on October 17, 2019. the Bank shall reinforce its operations related to investigation and verification for loans and continue to implement post-loan follow-up management.

• C. Disclose any matters in which sanctions were imposed by the Financial Supervisory Commission pursuant to Article 61-1 of the Banking Act:

  • a According to the Letter Jin-guan-guo-zi No. 10702256210 from the FSC on May 2, 2019, deficiencies were found regarding the implementation of the Bank's anti-money laundering operations which might compromise the healthy operations of the Bank; the FSC determined that the Bank shall make rectification pursuant to Paragraph 1, Article 61-1 of the Banking Act. the Bank has amended the relevant internal regulations, enhanced its audit procedures, and improved self-audit and educational training for employees.

  • b The deficiencies in archiving and case approval operations for stakeholders has the risk of affecting a healthy operation; the FSC determined that the Bank shall make rectification pursuant to Paragraph 1, Article 61-1 of the Banking Act on April 13, 2020. the Bank has established its stakeholder's inquiry system to compare and cross-examine the information from the National Credit Card Center and the information from the Bank's databank to improve the completeness of archiving for the scope of business operated by stakeholders of the Bank. Such deficiencies are included in the Bank's project audit to review the operating status of branches.

• D. Disclose any matters in which sanctions were imposed by the FSC pursuant to Article 44 of the Trust Enterprise Act and Article 61-1 of the Banking Act:

  • For deficiencies in non-discretionary money trusts with the purpose of investment through the trust in foreign securities and the statements for trust transactions, the Bank failed to comply with the requirements under Article 21 of the "Regulations Governing the Scope of Business, Restrictions on Transfer of Beneficiary Rights, Risk Disclosure, Marketing, and Conclusion of Contract by Trust Enterprises" and it is verified that such behavior has the risk of affecting the healthy operation of the Bank; the FSC determined that the Bank shall make rectification pursuant to Article 44 of the Trust Enterprise Act and Paragraph 1, Article 61-1 of the Banking Act on February 26, 2020. the Bank had included such deficiencies into its annual and project audit to strengthen the observation of laws and regulations and the principle of Treat Clients Fairly.

• E. Taiwan Business Bank Insurance Agency Co., Ltd., a subsidiary, has the following deficiencies when performing the insurance agent business:

  • a It failed to duly confirm the suitability of the insurance product for consumers, which violates the requirements under Subparagraph 24, Article 49 of the Regulations Governing Insurance Agents.

  • b It failed to handle the complaints according to its internal regulations and a review analysis system was not established, which violates the requirements under Article 6 and Subparagraph 1, Paragraph 1, Article 7 of the "Regulations Governing the Implementation of Internal Control and Audit System and Business Solicitation System of Insurance Agent Companies and Insurance Broker Companies."

  • c It merely described products to customers in a word-by-word manner according to the sample of recordings without further explanations on the significant terms and content of products, exclusions, major risks and product instructions, which has the risk of affecting the healthy operations of the insurance agent business.

  • d As the subsidiary was dissolved after the merger with the Bank, the FSC ordered the the Bank to make two corrections within the timeframe of one month, together with the punishment of a fine that amounted to NT$3 million only, and rectify according to the requirements under Paragraph 1, Article 164-1, Article 167-2, and Article 167-3 of the Insurance Act. To prevent the recurrence of such deficiencies, the Bank has established relevant control measures to reinforce the protection to customers and continued to enhance educational training related to the regulations.

62

Taiwan Business Bank Annual Report 2020

III

• F. Content of punishment according to Jin-guan-zheng-quan-fa-zi No. 1090351676 on Jan. 21, 2021: The FSC conducted a project inspection on the securities business concurrently operated by the Bank. The deficiencies found were verified to be violating the requirements under Paragraph 2 in Article 2 of the "Regulations Governing Securities Firms." Therefore, a fine of NT$240,000 was imposed according to Subparagraph 4, Paragraph 1 in Article 178-1 of the Securities Exchange Act. Furthermore, Letter Jin-guanzheng-quan-zi No. 10903516761 ordered the Bank to rectify according to the requirements under Article 65 of the Securities Exchange Act.

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• G Disclose any security incident arising from employee infidelity or material contingencies or failure to faithfully abide by security maintenance work. If actual losses, whether singly or in aggregate, exceed NT$50 million in any given year: None.

• H. Other matters that must be disclosed pursuant to Financial Supervisory Commission designation: No the Bank's approval of the grace period for housing loans for the purchase of high-priced residential violated regulations in Article 3, Subparagraph 1 of the "Central Bank Regulations Governing High-Priced Housing Loans Extended by Financial Institutions." The Central Bank imposed a fine of NT$1 million. To prevent the re-occurrence, the Bank has adopted measures of increasing educational training for legal regulations, reinforcing information system control, and enhancing post-loan management to make improvements.

• (15) Material resolutions of a Shareholders' Meeting or a Board meeting during 2020 and up to the end of February 2021

• Resolutions at the Annual Shareholders' Meeting of 2020 (May 29, 2020) and resolution execution process

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----- Start of picture text -----

Reason for the
resolution Decision-making and Implementation
Resolution to ratify the The Shareholders’ Meeting has ratified the annual final statement and statements for
annual final statement 2019.
and statements for 2019.
Resolution to ratify The Shareholders’ Meeting has ratified the earnings distribution from the final accounts
the annual earnings of 2019 and the execution of such distribution (cash dividend of NT$0.2 per share and
distribution from the final stock dividend of NT$0.5 per share), and the distribution was made to Shareholders on
accounts of 2019. August 26, 2020.
Resolution to carry out
Reported to the Financial Supervisory Commission upon receiving the approval from
a capital increase via
the Shareholders' Meeting, and was publicly announced and became effective on July
transferred earnings and
issuance of new stocks 6, 2020. Also, the alteration registration was completed according to the approval from
in accordance with the the Ministry of Economic Affairs through Letter Jing-shou-shang-zi No. 10901148080 on August 20, 2020. Stock certificates were transferred to Shareholders on August 26,
earnings distribution of
dividends for 2019. 2020, and the listing for trading of our new shares completed smoothly.
Reported the amendments to TBB's Article of Association to the Ministry of Economic
Resolution of revising the
Article of Association of Affairs upon receiving the approval from the Shareholders' Meeting. The alteration
the Bank registration was completed according to the approval from the Ministry of Economic
Affairs through Letter Jing-shou-shang-zi No. 10901098430 on June 11, 2020.
Resolution for the
Removal of TBB's Approved by the Shareholders' Meeting, and such removal was disclosed on TBB's
Rules Governing website (Investor Relations > Corporate Governance > Regulation Documents) and
the Proceedings of MOPS.
Shareholders' Meetings
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1. Material resolutions of Board meetings for 2020 and up to the end of February 2021: Please refer to TBB's website (https://www.tbb.com.tw) at Investor Relations > Corporate Governance > Board of Directors.

2. (16) For 2020 and up to the end of February 2021, disclose any dissenting opinion of any director regarding any material resolution passed by the Board, where there is a record or written statement of such opinion: None.

3. (17) For 2020 and up to the end of February 2021, the resignations and dismissals of relevant personnel to the financial report

(16) For 2020 and up to the end of February 2021, disclose any dissenting opinion of any director regarding any material resolution passed by the Board, where there is a record or written statement of such opinion: None. (17) For 2020 and up to the end of February 2021, the resignations and dismissals of relevant personnel to the fnancial report	(16) For 2020 and up to the end of February 2021, disclose any dissenting opinion of any director regarding any material resolution passed by the Board, where there is a record or written statement of such opinion: None. (17) For 2020 and up to the end of February 2021, the resignations and dismissals of relevant personnel to the fnancial report	(16) For 2020 and up to the end of February 2021, disclose any dissenting opinion of any director regarding any material resolution passed by the Board, where there is a record or written statement of such opinion: None. (17) For 2020 and up to the end of February 2021, the resignations and dismissals of relevant personnel to the fnancial report	(16) For 2020 and up to the end of February 2021, disclose any dissenting opinion of any director regarding any material resolution passed by the Board, where there is a record or written statement of such opinion: None. (17) For 2020 and up to the end of February 2021, the resignations and dismissals of relevant personnel to the fnancial report	(16) For 2020 and up to the end of February 2021, disclose any dissenting opinion of any director regarding any material resolution passed by the Board, where there is a record or written statement of such opinion: None. (17) For 2020 and up to the end of February 2021, the resignations and dismissals of relevant personnel to the fnancial report
Dec. 31, 2020
Title	Name	Date of arrival	Date of dismissal	Reason for resignation or dismissal
EVP& Chief Auditor	Chiu-Yen Chen	2016.2.1	2020.11.12	Re-appointed as the Executive Vice President of the Bank
Manager for Corporate Governance	Chih-Chien Chang	2019.3.26	2020.3.11	Re-appointed as the President of the Bank

Note: Relevant personnel of the Bank refers to Chairman, President, CFO, Chief Auditor, internal audit officer, and manager for corporate governance.

63

4. Information on Fees for CPAs

(1) CPA professional charges grading table

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----- Start of picture text -----

Name of the accounting firm Name of the CPA Audit period Note
KPMG Tan-Tan Chung Jeff Chen 2020.1.1-2020.12.31
Unit: NT$ 1,000
Professional charge Accounting charge Non-accounting Total
Fee range charge
1 Less than NT$2,000,000
2 NT$2,000,000 (inclusive) to NT$4,000,000
3 NT$4,000,000 (inclusive) to NT$6,000,000 5,352
4 NT$6,000,000 (inclusive) to NT$8,000,000
5 NT$8,000,000 (inclusive) to NT$10,000,000
6 Over NT$10,000,000 (inclusive) 13,998 19,350
Unit: NT$ 1,000
Name of the Non-accounting charge
accounting firm Name of the CPA Accountingcharge System design registrationCorporate ResourcesHuman Others (Note) Subtotal PeriodAudit Note
Tan-Tan Chung 2020.1.1-
KPMG 13,998 190 5,162 19,350
Jeff Chen 2020.12.31
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Note: The primary content of the service for “Others” included in the non-audit fees are: The audit for significant bad debts, legal compliance risk management and supervision, audit for personal data protection, audit for anti-money laundering and combatting the financing of terrorism controlling project, issuance of review opinions on bank debentures, double examination report and security assessment for e-payment institutions’ income, vulnerability screening and penetration test of the headquarters, assessment on overall execution of information security, and work and bridging visas.

previous year: None.

(3) The audit charges have decreased by 10% or more: None.

5. Information on Changing CPAs

(1) Former CPA

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----- Start of picture text -----

Date of Change January 23, 2019
----- End of picture text -----

Date of Change	January 23, 2019	January 23, 2019	January 23, 2019	January 23, 2019	January 23, 2019
Reason of Change and Explanation	Internal structural adjustment of KPMG
Whether the appointment is terminated by the appointor or CPA or the CPA does not accept the appointment	Parties Involved Condition		CPA		Appointor
	Terminate the Appointment by Initiative		None		None
	Cease to Accept (Continue) the Appointment		None		None
Opinion and reason for issuing an audit report during the most recent 2 years containing an opinion other than an unqualifed opinion		None
Whether the CPA has any opinion discrepancy	Yes			Accounting principles or practices
				Disclosure in fnancial reports
				Scope or process of audit
				Other
	No	
	Explanation: None
Other Disclosures (disclosures required under item A(d), Subparagraph 6, Article 10 of the Regulations)	None

64

Taiwan Business Bank Annual Report 2020

III

(2) Successor CPA

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----- Start of picture text -----

Name of the Accounting Firm KPMG
Name of the CPA Tan-Tan Chung; Jeff Chen
Date of Appointment January 23, 2019
Consultations and the consultation results may be issued by the CPA regarding None
the accounting treatment of or application of accounting principles to a specific
transaction, or the type of audit opinion that might be rendered on the financial
report before the appointment
Written opinions from the successor CPA regarding the matters on which the firm None
disagreed with the former CPA
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• (3) A letter of response from the former CPA regarding Item A and Item B (c), Subparagraph 6, Article 10 of the Regulations: None.

• matters who has, in the most recent year, held a position at the accounting firm of its CPA or at an affiliated enterprise: None.

7. Changes in Shareholdings of Directors, Executive Officers, and Shareholders Conform to the Requirements under Article 11 of the Regulations Governing the Same Person or Same Concerned Party Holding the Issued Shares with Voting Rights over a Particular Ratio of a Bank

(1) Changes in Shareholding

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2020 As of February 28, 2021
Increase Increase Increase Increase
Title Name (decrease) (decrease) (decrease) (decrease)
in number of in number of in number of in number of
shares held pledged shares shares held pledged shares
Chairman Bor-Yi Huang 245,521 0 0 0
Managing Director and President Chih-Chien Chang 25,625 0 0 0
Managing Director Shih-Yuan Tai 0 0 0 0
Managing Director Xin-Wu Lin 0 0 0 0
Managing Director Lien-Wen Liang 0 0 0 0
Director Shiu-Yen Lin 0 0 0 0
Director Wen-Chieh Wang 0 0 0 0
Director Hung-Sheng Yu 1,239 0 0 0
Director Li-Ling Lin 0 0 0 0
Director Tzu-Hao Tsai 0 0 0 0
Director Ying-Ming He 0 0 0 0
Director Ching-Yu Liu 3,492 0 50,000 0
Director Che-Nan Wang 817,104 0 300,000 0
Director Jin-Long Liu 0 0 0 0
Director Wei-Sheng Huang 0 0 0 0
President Chih-Chien Chang 25,625 0 0 0
Executive Vice President Yu-Min Chang 8,305 0 0 0
Executive Vice President Chang-Yu Lin 111,316 0 0 0
Executive Vice President Sung-Shui Chiu 7,418 0 0 0
Executive Vice President Shao-Huang Chen 0 0 6,000 0
Executive Vice President Chiu-Yen Chen 20,965 0 0 0
Chief Auditor Jia-Ruey Luan 39,210 0 0 0
Chief Secretary Li-Yueh Hsu 39,771 0 0 0
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65

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----- Start of picture text -----

2020 As of February 28, 2021
Increase Increase Increase Increase
Title Name (decrease) (decrease) (decrease) (decrease)
in number of in number of in number of in number of
shares held pledged shares shares held pledged shares
SVP & GM Tzong-Wen Chou 5,776 0 0 0
SVP & GM Hsiou-Chen Kang 5,623 0 0 0
SVP & GM Kuo-Liang Tseng 5,640 0 0 0
Director Tsung-Chu Hsieh 6,148 0 0 0
Director Yin-Cheng Tseng 7,429 0 0 0
Director Ching-Yun Kuo 19,112 0 0 0
SVP & GM Ting-Huei Liao 12,462 0 0 0
SVP & GM Chiang-Shu Lin 6,218 0 0 0
SVP & GM Chin-Chuan Su 15,404 0 0 0
SVP & GM Chih-Wei Chen 0 0 0 0
Acting SVP & GM Yu-Cheng Tsai 0 0 0 0
Director Min-Chung Hsieh 5,112 0 0 0
SVP & GM Yi-Chin Chai 47,739 0 0 0
SVP & GM Chu-Chou Chen 11,564 0 0 0
SVP & GM Wen-Shu Lin 5,680 0 0 0
SVP & GM Tseng-Hsiang Yi 5,853 0 0 0
SVP & GM Mei-Chun Lin 13,315 0 0 0
Director Yu-Chuan Chou 6,375 0 0 0
SVP & GM Wen-Qing Huang 10,405 0 0 0
SVP & GM Li-Hui Chang 6,625 0 0 0
SVP & GM Wen-Ling Wang 0 0 0 0
Director Chi-Fen Yen 6,172 0 0 0
Director Ying-Che Fang 9,942 0 0 0
Director Bih-Lien Fang 34,839 0 0 0
Director Ming-Yi Lin 17,614 0 0 0
Director Hsiu-Chu Lin 5,778 0 0 0
Director Wen-Hsiu Huang 7,679 0 0 0
Executive Huei-Nai Hung 5,626 0 0 0
Executive Ching-Yi Lin 5,271 0 0 0
Manager Hsiu-Hsin Hou 5,654 0 0 0
Manager Yu-Cheng Chiao 22,594 0 0 0
Manager Li-Huei Chen 1,638 0 0 0
Manager Yu-Chaio Wei 5,206 0 0 0
Manager Yuan-Hsueh Hsiao 5,634 0 0 0
Manager Yun-Shiang Tsai 5,125 0 0 0
Manager Shui-Chiang Fang 26,808 0 10,000 0
Manager Hsih-Hui Chen 5,915 0 0 0
Manager Li-Ching Lai 61,936 0 0 0
Manager Jung-Ling Wang 5,664 0 0 0
Manager Mei-Chih Hou 6,382 0 0 0
Manager Bi-Chu Chuang 5,667 0 0 0
Manager Guei-Jin Chiou 130,268 0 0 0
Manager Wen-Fang Lin 76,281 0 0 0
Manager Jiann-Yea Shyu 21,483 0 49,000 0
Manager Chien-Fa Wang 43,048 0 0 0
Manager Yueh-Yen Weng 13,517 0 0 0
Manager Ruey-Shyang Guo 5,779 0 0 0
Manager Chao-Lieh Chen 42 0 0 0
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66

Taiwan Business Bank Annual Report 2020

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----- Start of picture text -----

2020 As of February 28, 2021
Increase Increase Increase Increase
Title Name (decrease) (decrease) (decrease) (decrease)
in number of in number of in number of in number of
shares held pledged shares shares held pledged shares
Manager Ching-Hsiu Liu 2,124 0 0 0
Manager Yen-Wei Huang 6,218 0 0 0
Manager Jiunn-Chin Wang 76,193 0 0 0
Manager Yen-Huey Wang 5,562 0 0 0
Manager Chiu-Chin Chen 5,680 0 0 0
Manager Tien-Chin Lin 5,678 0 0 0
Manager Ching-Kuei Hsieh 5,937 0 0 0
Manager Fuh-Yuh Yeh 5,633 0 0 0
Manager Yen-Ling Chen 5,655 0 0 0
Manager Yu Lin 11,053 0 0 0
Manager Su-Chen Huang 3,227 0 0 0
Manager Chin-Tsan Wu 7 0 0 0
Manager Chen Ming-Hui 1,092 0 0 0
Manager Mei-Kuei Li 1,006 0 0 0
Manager Hsueh-Ru Liu 6,224 0 0 0
Manager Liu-Mei Chin 22,926 0 0 0
Manager Pin-Hsiung Chen 0 0 0 0
Manager Fang-Chuan Chiu 5,656 0 0 0
Manager Yueh-Chin Wang 6,160 0 0 0
Manager Hsiao-Ming Chen 5,608 0 0 0
Manager Mei-Hui Chen 9,629 0 0 0
Manager Jui-Yuan Huang 27,654 0 0 0
Manager Nien-Tzu Chen 5,973 0 0 0
Manager Pao-Sheng Lin 5,368 0 0 0
Manager Sung-Nan Chiao 42,160 0 6,000 0
Manager Jui-Yu Li 7,578 0 0 0
Manager Chun-Ta Lin 5,095 0 0 0
Manager Shu-Ting Chen 14,491 0 0 0
Manager Li-Fang Lee 5,651 0 0 0
Manager Chin-Chih Li 1,449 0 21,000 0
Manager Chih-Hsiang Huang 73,531 0 0 0
Manager Pi-Chuan Chien 5,712 0 0 0
Manager Ming-Fa Chien 14,331 0 0 0
Manager Ping-Hui Lee 39,400 0 0 0
Manager Yueh-Mei Chang 6,058 0 0 0
Manager Chiu-Yu Liu 2,249 0 0 0
Manager Shu-Fen Li 38,119 0 0 0
Manager Li-Chuan Huang 43,727 0 0 0
Manager Ju-Hsiang Tien 3,000 0 0 0
Manager Jiann-Gwo Guu 7,470 0 0 0
Manager Mu-Hsiang Wu 100,787 0 0 0
Manager Yu-Pei Liao 41,676 0 0 0
Manager Shu-E Chen 5,157 0 0 0
Manager Hsu-Hsiang Huang 5,060 0 0 0
Manager Nai-Chia Chi 9,298 0 0 0
Manager Kuan-Yi Huang 2,815 0 0 0
Manager Su-Fen Chen 5,645 0 0 0
Manager Shuan-Hua Liu 7,052 0 0 0
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67

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2020 As of February 28, 2021
Increase Increase Increase Increase
Title Name (decrease) (decrease) (decrease) (decrease)
in number of in number of in number of in number of
shares held pledged shares shares held pledged shares
Manager Shu-Ling Yuan 21,949 0 0 0
Manager Yun-Hui Chang 24,448 0 0 0
Manager Hsiu-Chiao Lin 12,058 0 0 0
Manager Sheng-Wang Chang 5,552 0 0 0
Manager Hsin-Lu Chiang 0 0 0 0
Manager Li-Chung Lin 5,991 0 0 0
Manager Yih-Shiou Wang 7,211 0 0 0
Manager Man-Chung Yeh 10,512 0 10,000 0
Manager Jung-Yu Huang 5,686 0 0 0
Manager Meng-Shin Jeng 8,273 0 0 0
Manager Shun-Tseng Liao 8,357 0 0 0
Manager Chih-Cheng Chen 6,047 0 0 0
Manager Fu-Long Chen 6,261 0 0 0
Manager Kuo-Tsun Pai 5,692 0 0 0
Manager Liang-Pin Chen 40 0 20,000 0
Manager Tsai-Rong Hung 8,653 0 0 0
Manager Fu-Ching Chou 5,461 0 0 0
Manager Cheng-An Hsieh 6,162 0 0 0
Manager Shin-Mao Lin 6,263 0 0 0
Manager Chih-Cheng Cho 20,285 0 0 0
Manager Ming-Tang Chen 5,862 0 0 0
Manager Yueh-Man Sung 6,819 0 0 0
Manager Chien-Ta Wu 33,461 0 0 0
Manager Li-Mo Yang 12,215 0 0 0
Manager His-Her Pai 9,045 0 0 0
Manager Wen-Chi Chen 12,645 0 0 0
Manager Tung-Han Lu 52,944 0 0 0
Manager Su-Ying Tsai 5,933 0 0 0
Manager I-Man Chen 5,752 0 0 0
Manager Li-Feng Huang 21,000 0 0 0
Manager Chia-Cheng Liu 5,412 0 0 0
Manager Feng-Fu Chen 5,797 0 0 0
Manager Hsin-Chuan Hsiao 6,944 0 0 0
Manager Hui-Pai Kuo 2,040 0 0 0
Manager Hsiu-Chen Chiu 22,200 0 0 0
Manager Chien-Lai Su 38 0 0 0
Manager Chang-Hui Hsu 4,819 0 0 0
Manager Guo-Shiang Huang 2,392 0 0 0
Manager Shun-Ho Chen 5,727 0 0 0
Manager Su-Chih Wang 11,785 0 0 0
Manager Mei-Chen Chen 6,644 0 0 0
Manager Shu-hui Chen 36,000 0 0 0
Manager Wen-Jang Jou 5,380 0 0 0
Manager Leh-Chin Kuo 7,620 0 0 0
Manager Kuang-Tsai Wang 5,639 0 0 0
Manager Fu-Lai Chang 5,012 0 0 0
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68

Taiwan Business Bank Annual Report 2020

III

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----- Start of picture text -----

2020 As of February 28, 2021
Increase Increase Increase Increase
Title Name (decrease) (decrease) (decrease) (decrease)
in number of in number of in number of in number of
shares held pledged shares shares held pledged shares
Manager An-Yun Lin 11,207 0 0 0
Manager Der-Hsung Lin 5,651 0 0 0
Manager Yi-Ching Wang 25,045 0 0 0
Manager Li-Jung Lin 6,228 0 0 0
Manager Meng-Hsun Sung 47,367 0 10,000 0
Manager Yao-Chin Yang 5,049 0 0 0
Manager Lan-Ying Chu 9,540 0 0 0
Manager Feng-Ying Chen 5,781 0 0 0
Manager Chien-Chung Lin 2,659 0 0 0
Manager Hsueh-Hsia Chen 11,966 0 0 0
Manager Hsueh-Mei Yang 19,052 0 40,000 0
Manager Cheng-Chuan Lin 10 0 0 0
Manager Ching-Yang Lee 5,730 0 0 0
Manager Shenn-Bao Jean 5,817 0 0 0
Manager Jen-Jung Fan 5,653 0 0 0
Manager Be-Yun Tong 7,013 0 0 0
Manager Chao-Ming Huang 5,458 0 0 0
Manager Sue-Jen Chen 5,174 0 0 0
Manager Feng-Chang Wu 0 0 0 0
Manager Tsin-Fu Jiang 9,242 0 0 0
Manager Cheng-Hung Chang 5,490 0 0 0
Chief Representative Hung-Tien Chiang 5,651 0 0 0
Manager (Note 2) Pi-Chen Yang - - 50,000 0
Manager (Note 2) Wen-Ling Chang - - 0 0
Manager (Note 2) Chun-Yu Shih - - 5,000 0
Manager (Note 2) Tsai-Chuan Wu - - 0 0
Manager (Note 2) Chung-Hsien Huang - - 0 0
Manager (Note 2) Shu-Ching Wu - - 0 0
Manager (Note 2) Cheng-Chih Huang - - 0 0
Manager (Note 2) Pi-Shuang Lin - - 0 0
Manager (Note 2) Chun-Jen Huang - - 40,000 0
Corporate Shareholder
Represented by the Ministry of Finance 7,405,466 0 0 0
Director (Note 1)
Corporate Shareholder
Bank of Taiwan Co.,
Represented by the Ltd. 57,817,788 0 0 0
Director (Note 1)
Corporate Shareholder
Represented by the Land Bank of Taiwan 8,148,760 0 0 0
Director (Note 1)
Corporate Shareholder
Represented by the TBB Industry Union 249,523 0 0 0
Director
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Note 1: A major shareholder holding 1% of the Bank's total shares or above.

Note 2: Managers appointed based on the resolution passed at the 19th Board meeting of the 15th Board on January 20, 202q. ("0" means that the information is not required to be disclosed)

• (2) Information of shareholding transfer: The counterparties of the above shareholding transfer are not related parties, therefore, this item is not applicable.

• (3) Information for shareholding pledge: None.

69

8. Information Disclosing the Relationship among Top Ten Shareholders in the Relationship of Related Parties or Spouses, Relatives within the Second Degree of Kinship

Information on the Relationship among Top Ten Shareholders

Feb. 28, 2021

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----- Start of picture text -----

Names and the Relationship among
Shareholding by the Top Ten Shareholders in the
Shareholding Spouse & Minor Shareholding under Others' Names Relationship of Related Parties or Note
Name Children Spouses, Relatives within the Second
Degree of Kinship
Number of Number of Number of
Shares % Shares % Shares % Name Relationship
Taiwan Financial Holding
Bank of Taiwan Co., Ltd., parent company
(Representative: Chu- 1,214,173,562 16.21% 0 0 0 0 Ministry of Finance of Bank of Taiwan and a
Cheng Lu) wholly-owned subsidiary
of the Ministry of Finance
National Development 439,330,543 5.87% 0 0 0 0 None None
Fund, Executive Yuan
Land Bank of Taiwan Land Bank of Taiwan, a
(Representative: Bor- 171,123,975 2.29% 0 0 0 0 Ministry of Finance wholly-owned subsidiary
Chang Hwang) of the Ministry of Finance
Bank of
Taiwan
(parent Taiwan Financial Holding
company Co., Ltd., a wholly-owned
Taiwan subsidiary of the Ministry
Ministry of Finance
Financial of Finance
(Representative: Jian- 155,514,786 2.08% 0 0 0 0
Holding Co.,
Rong Su)
Ltd.)
Land Bank of Taiwan, a
Land Bank of
Taiwan wholly-owned subsidiary
of the Ministry of Finance
JPMorgan Chase Bank
N.A. Taipei Branch in
custody for Vanguard 91,556,023 1.22% 0 0 0 0 None None
Total International Stock
Index Fund a series of
Vanguard Star Funds
Citibank in custody for
Norges Bank Investment 68,071,580 0.91% 0 0 0 0 None None
Management
Vanguard Emerging
Markets Stock Index
Fund A Series of 67,233,544 0.90% 0 0 0 0 None None
Vanguard International
Equity Index Funds
BES Engineering
Corporation 64,897,560 0.87% 0 0 0 0 None None
(Representative: Hui-
Lan Chu)
Standard Chartered
Bank (Taiwan) Business
Department as 47,136,547 0.63% 0 0 0 0 None None
custodian of iShares
MSCI Taiwan ETF
Investment Account
Deutsche Bank as
custodian of California
Public Employees' 43,864,952 0.59% 0 0 0 0 None None
Retirement System
Emerging Market
Investment Account
----- End of picture text -----

Note: Shareholding amount represents the number of shares recorded on the last date of book closure of the Bank.

70

Taiwan Business Bank Annual Report 2020

III

9. Shareholding in the Same Investee Company of a Business Directly or Indirectly Controlled and Managed by Directors, President, Executive Vice Presidents, and SVP & GM of Departments and Branches, and the Consolidated Shareholding Ratio

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Consolidated Shareholding Ratio

Dec. 31, 2020 Unit: Share; %

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Investments of A Business
Directly or Indirectly
Controlled and Managed
Investments of TBB by Directors, President, Consolidated Investments
Name of the Investee Executive Vice Presidents,
Company (Note) and SVP & GM of
Departments and Branches
Number of Number of Number of
% % %
Shares Shares Shares
Taipei Forex Inc. 700,000 3.5318% 2,100,000 10.5954% 2,800,000 14.1272%
Financial Information Service
6,284,653 1.2040% 21,153,728 4.0524% 27,438,381 5.2564%
Co., Ltd.
Taiwan Stock Exchange Co. 7,125,704 0.9496% 97,626,318 13.0096% 104,752,022 13.9592%
Taiwan Futures Exchange Co. 3,683,018 1.0000% 29,648,323 8.0500% 33,331,341 9.0500%
Taiwan Asset Management 60,000,000 5.6754% 120,000,000 11.3507% 180,000,000 17.0261%
Corporation
Taiwan Financial Asset
5,000,000 2.9412% 15,000,000 8.8235% 20,000,000 11.7647%
Service Corporation
Sunny Asset Management 46,062 0.7678% 74,729 1.2457% 120,791 2.0135%
Corporation
Financial eSolution Co., Ltd. 905,475 4.1158% 2,156,769 9.8035% 3,062,244 13.9193%
Taiwan Depository & 322,862 0.0830% 278,241 0.0715% 601,103 0.1545%
Cleansing Corporation
Taiwan Mobile Payment Co. 600,000 1.0000% 2,400,000 4.0000% 3,000,000 5.0000%
Taiwan Power Company 1,451,523 0.0044% 918,981,385 2.7848% 920,432,908 2.7892%
Taiwan Sugar Corporation 16,831,537 0.2986% 24,307,963 0.4312% 41,139,500 0.7298%
Taiwan Incubator SME
3,417,440 4.8438% 3,417,440 4.8438%
Development Corporation
Sunsino Development 1,480,402 3.1166% 1,480,402 3.1166%
Associated Inc.
CDIB & Partners Investment
54,000,000 4.9505% 54,000,000 4.9505%
Holding Corp.
Taipei Financial Center Co. 11,760,000 0.8000% 11,760,000 0.8000%
Taiwan Urban Regeneration & 2,500,000 5.0000% 5,000,000 10.0000% 7,500,000 15.0000%
Financial Services Co., Ltd.
Chaofu Real Estate
150,000 3.0000% 150,000 3.0000%
Management Co., Ltd.
Taiwan High Speed Rail 44,500,000 0.7906% 51,365 0.0009% 44,551,365 0.7915%
Corporation
TBB International Leasing 150,000,000 100.000% 150,000,000 100.0000%
Co., Ltd.
TBB (Cambodia) Microfinance 20,000 100.000% 20,000 100.0000%
Institution Plc (Cambodia)
TBB Venture Capital Co., Ltd. 60,000,000 100.000% 60,000,000 100.0000%
Taiwania Capital Buffalo II 1.6900% 1.6900%
Bioventures, LP
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Note: Long-term investment of the Bank.

71

IV

Fund-Raising Status

73 76

81

1. Shares and Dividends

2. Issuance Status of Financial Bonds

3. Preferred Stocks, Global Depository Receipts, and Employee Stock Warrants, New Restricted Employee Shares, Any Merger and Acquisition Activities, and Acceptance of Transfer of the Shares of Another Financial Institution

81

4. Status of Implementation of Capital Allocation Plans

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Ⅳ

1. Shares and Dividends

(1) Sources of Capital

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Unit: Share; NT$

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Authorized Capital Paid-in Capital Remarks
Year/ Issue
Month Price Number of Number of Sources of
Amount Amount Others
shares shares Capital
Letter of Jing-
Shou-Shang-Zi No.
Capital 10901148080 issued
2020.8 10.00 8,000,000,000 80,000,000,000 7,488,583,457 74,885,834,570 Increased by by MOEA approved
Earnings of
the change in
3,565,992,130
registration on
August 20, 2020.
Unit: Shares
Authorized Capital
Category of Shares Remarks
Outstanding Shares Un-issued Shares Total
Common Stock 7,488,583,457 511,416,543 8,000,000,000 Listed Shares
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Note: No Preferred Shares.

(2) Structure of Shareholders

Feb. 28, 2021

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Structure of
Shareholders Other Foreign
Government Financial Personal Institutions
institutions institutions Corporate Shareholders and Personal Total
Shareholders
Shareholders
Quantity
Number of Shareholders 4 9 438 245,062 746 246,259
Number of Shares Held
637,761,465 1,409,292,749 360,788,678 3,497,360,661 1,583,379,904 7,488,583,457
(share)
Shareholding Ratio (%) 8.52 18.82 4.82 46.70 21.14 100.00
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Note: Recorded on the last closing date of the Bank

(3) Distribution of Shareholding

Feb. 28, 2021

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Classification of Shareholding Number of Shareholders Number of Shares Held Shareholding Ratio (%)
1 to 999 54,657 14,245,007 0.19
1,000 to 5,000 95,896 215,958,415 2.88
5,001 to 10,000 34,626 257,186,406 3.43
10,001 to 15,000 17,533 246,768,630 3.29
15,001 to 20,000 10,446 188,780,181 2.52
20,001 to 30,000 11,263 317,858,942 4.24
30,001 to 40,000 5,510 222,043,460 2.96
40,001 to 50,000 3,484 182,381,193 2.43
50,001 to 100,000 7,115 540,283,048 7.21
100,001 to 200,000 3,419 545,123,720 7.27
200,001 to 400,000 1,340 409,494,787 5.46
400,001 to 600,000 358 179,814,329 2.4
600,001 to 800,000 182 114,415,570 1.52
800,001 to 1,000,000 85 89,502,295 1.19
1,000,001 to 99,999,999,999 345 3,964,727,474 52.94
Total 246,259 7,488,583,457 100
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73

(4) Major Shareholders

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Feb. 28, 2021
Number of Shares Shareholding Ratio
Name of Major Shareholders Held (%)
Bank of Taiwan 1,214,173,562 16.21%
National Development Fund, Executive Yuan 439,330,543 5.87%
Land Bank of Taiwan 171,123,975 2.29%
Ministry of Finance 155,514,786 2.08%
JPMorgan Chase Bank N.A. Taipei Branch in custody for Vanguard Total 91,556,023 1.22%
International Stock Index Fund a series of Vanguard Star Funds
Citibank in custody for Norges Bank Investment Management 68,071,580 0.91%
Vanguard Emerging Markets Stock Index Fund A Series of Vanguard International 67,233,544 0.90%
Equity Index Funds
BES Engineering Corporation (Representative: Hui-Lan Chu) 64,897,560 0.87%
Standard Chartered Bank (Taiwan) Business Department as custodian of iShares 47,136,547 0.63%
MSCI Taiwan ETF Investment Account
Deutsche Bank as custodian of California Public Employees' Retirement System 43,864,952 0.59%
Emerging Market Investment Account
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Note: Shareholding amount represents the number of shares recorded on the last closing date of the Bank.

(5) Market Price Per Share, Net Value, Surplus, Capital Bonus, and Related Information for the Past Two Years (based on consolidated financial information)

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Year 2019 2020 As of Feb. 28,
Item 2021
Max. 13.95 12.80 9.80
Market Price per Min. 10.25 8.56 9.10
Share (NT$)
Average 12.40 10.49 9.46
Before Distribution 13.39 13.17 -
Net Value per
Share (NT$) After Distribution - - -
Weighted Average Number of Shares 6,855,719,000 7,488,584,000 7,488,584,000
(before adjustment) shares shares shares
Earnings per Share Weighted Average Number of Shares (after adjustment) 7,198,505,000 shares - -
Earnings per Share (before adjustment) (NT$) 0.98 0.63 -
Earnings per Share (after adjustment) (NT$) 0.94 - -
To be determined -
at the
Cash Dividends 0.2
Shareholders’
Meeting
To be determined -
Dividends per at the
Share (NT$) Stock Stock Dividends from Surplus 0.5 Shareholders’
Dividends Meeting
Capital Surplus Distribution - - -
Accumulated Undistributed Dividend - - -
Price/Earnings (P/E) Ratio (Note 1) 12.65 16.65 -
Return on
Investment Price/Dividend Ratio (Note 2) 62 - -
Analysis
Cash Dividend Yield (Note 3) 1.61 - -
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Note: 1. P/E ratio = average closing price per share of the year/earnings per share.

1. Price/dividend ratio = average closing price per share of the year/cash dividends per share.

2. Cash dividend yield = cash dividends per share/average closing price per share of the year

74

Taiwan Business Bank Annual Report 2020

Ⅳ

(6) Dividend Policy and Distributions

• A. Dividend policy prescribed in the Article of Association of the Bank: Please refer to "Earnings Distribution and Dividend Policy" in the "Notes to the Financial Statements" of "Chapter 6 Financial Overview."

• B. Dividend distribution to be proposed in the upcoming Shareholders' Meeting: A cash dividend of NT$0.10 per share and a stock dividend of NT$0.34 per share are proposed to be distributed from the capital surplus of 2020 of the Bank.

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(7) Impacts of the Stock Dividends to be Proposed in the Upcoming Shareholders' Meeting to Operating Performance and Earnings Per Share

According to the requirements under the "Regulations Governing the Publication of Financial Forecasts of Public Companies" and "Taiwan Stock Exchange Corporation Standards for Determining Whether a TWSE Listed Company Shall Publish Complete Financial Forecasts," as the Bank has not published a complete financial forecast in 2021, the item of disclosure is not applicable.

(8) Employees and Directors' Remuneration

• A. Percentage or scope of employees and Directors' remuneration set out in the Article of Association of the Bank: Please refer to "Employees and Directors' Remuneration" in the "Notes to the Financial Statements" of "Chapter 6 Financial Overview."

• B. If the amounts of estimated employees and Directors' remuneration differ from the actual distribution amounts, such differences are deemed as changes in estimates, which shall be recorded in profit or loss for 2021.

• C. Status of remuneration distribution as approved by the Board

• a. The Bank has proposed a total of NT$217,393 thousand of employees' remuneration and NT$33,748 thousand of Directors' remuneration to be distributed for 2020.

• b. The amount of any employees' remuneration distributed in stocks as a percentage of the sum of the current after-tax net income and total employees' remuneration in the individual financial report: The Bank has not distributed any employees' remuneration in stocks during 2020.

• D. Actual distribution of employees and Directors' remuneration for the previous year: The Bank distributed employees and Directors' remuneration for the previous year amounted to NT$384,639 thousand and NT$50,456 thousand, respectively, equivalent to the estimates set out in the financial statements of 2019.

(9) Share Redemption by the Bank in 2020 and as of the End of February 2021: None.

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2020/6/5 至 8/7 舉辦海外員工防疫生活主題展。

75

2. Issuance Status of Financial Bonds

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Tranche 105-1 non-
Tranche 104-2 (A) long-term Tranche 104-2 (B) long-term
Category of Financial Bonds subordinated bonds subordinated bonds cumulative perpetual
subordinated bonds
Approval Date and Approval April 8, 2015 April 8, 2015 June 24, 2016
Document Number of the Letter of Jin-Guan-Yin-Guo-Zi Letter of Jin-Guan-Yin-Guo-Zi Letter of Jin-Guan-Yin-Guo-Zi
Central Competent Authority No. 10400065480 No. 10400065480 No. 10500148070
Date of Issuance August 31, 2015 August 31, 2015 September 20, 2016
Nominal Value NT$10 million NT$10 million NT$10 million
Place of Issuance and Trading Taiwan Taiwan Taiwan
Currency New Taiwan Dollar New Taiwan Dollar New Taiwan Dollar
Issue Price Issued in full Issued in full Issued in full
Total Amount NT$4.7 billion NT$0.3 billion NT$8 billion
Coupon Rates Annual rate fixed at 2.05% Annual rate fixed at 2.10% Annual rate fixed at 3.20%
Term 8-year termMaturity date: August 31, 2023 10-year termMaturity date: August 31, 2025 [No maturity date]
Superior to shareholders’ Superior to shareholders’ Subordinate to the holders of
rights in asset securitization rights in asset securitization the Bank’s tier II subordinated
Priority of Distribution and subordinate to all and subordinate to all bonds and other ordinary
depositors and other ordinary depositors and other ordinary creditors
creditors of the Bank. creditors of the Bank.
Guarantor None None None
Trustee None None None
Underwriting Agency None None None
Verification Lawyer None None None
Verification Accountant KPMG KPMG KPMG
Feng-Hui Lee, CPA Feng-Hui Lee, CPA Tan-Tan Chung, CPA
Verification Financial None None None
Institution
5 years and 3 months
(including) after the bond is
issued, the Bank may redeem
Lump sum payment at Lump sum payment at
Payment Method the bond, upon the approval
maturity (bullet loan) maturity (bullet loan)
of the competent authority, in
full at its face value with the
accrued interest paid.
Outstanding Balances NT$4.7 billion NT$0.3 billion NT$8 billion
Paid-in Capital of the
NT$52.979 billion NT$52.979 billion NT$56.846 billion
Preceding Year
Net Worth of Paid-in Capital
After Final Report for the NT$62.738 billion NT$62.738 billion NT$67.659 billion
Preceding Year
Payment Status Normal Normal Normal
None None 5 years and 3 months
(including) after the bond is
issued, the Bank may redeem
Redemption or Early
Settlement Term the bond, upon the approval
of the competent authority, in
full at its face value with the
accrued interest paid.
Conversion and Exchange None None None
Terms
Restrictive terms Subordinate bonds Subordinate bonds Subordinate bonds
Net Value of Paid-in Capital
After Final Report for the 72.68 72.68 71.02
Preceding Year
Application of Funds Medium-to-long-term loans Medium-to-long-term loans Medium-to-long-term loans
Eligible Equity Capital Tier II Capital Tier II Capital Tier I Capital
Credit Rating Agencies,
Evaluation Date and Rating
Score
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76

Taiwan Business Bank Annual Report 2020

Ⅳ

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Tranche 105-2 long-term Tranche 106-1 (A) long-term Tranche 106-1 (B) long-term
Category of Financial Bonds subordinated bonds subordinated bonds subordinated bonds
Approval Date and Approval June 24, 2016 June 24, 2016 June 24, 2016
Document Number of the Letter of Jin-Guan-Yin-Guo-Zi Letter of Jin-Guan-Yin-Guo-Zi Letter of Jin-Guan-Yin-Guo-Zi
Central Competent Authority No. 10500148070 No. 10500148070 No. 10500148070
Date of Issuance December 20, 2016 March 28, 2017 March 28, 2017
Nominal Value NT$10 million NT$10 million NT$10 million
Place of Issuance and Trading Taiwan Taiwan Taiwan
Currency New Taiwan Dollar New Taiwan Dollar New Taiwan Dollar
Issue Price Issued in full Issued in full Issued in full
Total Amount NT$2.7 billion NT$0.39 billion NT$0.25 billion
Coupon Rates Annual rate fixed at 1.40% Annual rate fixed at 1.50% Annual rate fixed at 1.60%
7-year term
Term Maturity date: December 20, 7-year term 8-year term
2023 Maturity date: March 28, 2024 Maturity date: March 28, 2025
Superior to shareholders’ rights Superior to shareholders’ rights Superior to shareholders’ rights
in asset securitization and in asset securitization and in asset securitization and
Priority of Distribution subordinate to all depositors subordinate to all depositors subordinate to all depositors
and other ordinary creditors of and other ordinary creditors of and other ordinary creditors of
the Bank. the Bank. the Bank.
Guarantor None None None
Trustee None None None
Underwriting Agency None None None
Verification Lawyer None None None
Verification Accountant KPMG KPMG KPMG
Tan-Tan Chung, CPA Tan-Tan Chung, CPA Tan-Tan Chung, CPA
Verification Financial Institution None None None
Lump sum payment at maturity Lump sum payment at maturity Lump sum payment at maturity
Payment Method
(bullet loan) (bullet loan) (bullet loan)
Outstanding Balances NT$2.7 billion NT$0.39 billion NT$0.25 billion
Paid-in Capital of the
NT$56.846 billion NT$59.689 billion NT$59.689 billion
Preceding Year
Net Worth of Paid-in Capital
After Final Report for the NT$67.659 billion NT$70.87 billion NT$70.87 billion
Preceding Year
Payment Status Normal Normal Normal
Redemption or Early None None None
Settlement Term
Conversion and Exchange None None None
Terms
Restrictive terms Subordinate bonds Subordinate bonds Subordinate bonds
Net Value of Paid-in Capital
After Final Report for the 71.02 64.48 64.48
Preceding Year
Application of Funds Medium-to-long-term loans Medium-to-long-term loans Medium-to-long-term loans
Eligible Equity Capital Tier II Capital Tier II Capital Tier II Capital
Credit Rating Agencies,
Evaluation Date and Rating
Score
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77

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Tranche 106-1 (C) long-term Tranche 106-2 long-term Tranche 106-3 unsecured US
Category of Financial Bonds subordinated bonds subordinated bonds dollar bonds
Approval Date and Approval June 24, 2016 June 24, 2016 April 28, 2017
Document Number of the Letter of Jin-Guan-Yin-Guo-Zi Letter of Jin-Guan-Yin-Guo-Zi Letter of Jin-Guan-Yin-Guo-Zi
Central Competent Authority No. 10500148070 No. 10500148070 No. 10600090390
Date of Issuance March 28, 2017 May 23, 2017 October 27, 2017
Nominal Value NT$10 million NT$10 million US$1 million
Place of Issuance and Trading Taiwan Taiwan Taiwan
Currency New Taiwan Dollar New Taiwan Dollar US dollar
Issue Price Issued in full Issued in full Issued in full
Total Amount NT$3.36 billion NT$1.3 billion US$0.12 billion
Annual rate fixed at 1.850% Annual rate fixed at 1.850% Issued as zero-coupon bond,
Coupon Rates with an internal rate of return of
4.10%
30-year term
Term 10-year term 10-year term Maturity date: October 27,
Maturity date: March 28, 2027 Maturity date: May 23, 2027 2047
Superior to shareholders’ rights Superior to shareholders’ rights The distribution priority is
in asset securitization and in asset securitization and equivalent to other unsecured
Priority of Distribution subordinate to all depositors subordinate to all depositors creditors of the Bank.
and other ordinary creditors of and other ordinary creditors of
the Bank. the Bank.
Guarantor None None None
Trustee None None None
Underwriting Agency None None None
Verification Lawyer None None None
Verification Accountant KPMG KPMG KPMG
Tan-Tan Chung, CPA Tan-Tan Chung, CPA Tan-Tan Chung, CPA
Verification Financial Institution None None None
Except for the redemption via
Lump sum payment at maturity Lump sum payment at maturity the “issuer’s right,” the bond is
Payment Method
(bullet loan) (bullet loan) subject to lump sum repayment
at maturity (bullet loan).
Outstanding Balances NT$3.36 billion NT$1.3 billion US$0.12 billion
Paid-in Capital of the
NT$59.689 billion NT$59.689 billion NT$59.689 billion
Preceding Year
Net Worth of Paid-in Capital
After Final Report for the NT$70.87 billion NT$70.87 billion NT$70.87 billion
Preceding Year
Payment Status Normal Normal Normal
None None Issuer’s redemption right: 5
years after the bond is issued,
the Bank may redeem the
Redemption or Early bond in full, on each effective
Settlement Term day of redemption and at the
par value prices per share as
set out in the bond redemption
table.
Conversion and Exchange None None None
Terms
Restrictive terms Subordinate bonds Subordinate bonds
Net Value of Paid-in Capital
After Final Report for the 64.48 66.32 62.96
Preceding Year
Application of Funds Medium-to-long-term loans Medium-to-long-term loans Medium-to-long-term loans
Eligible Equity Capital Tier II Capital Tier II Capital No
Credit Rating Agencies,
Evaluation Date and Rating
Score
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78

Taiwan Business Bank Annual Report 2020

Ⅳ

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Tranche 107-1 unsecured Tranche 107-2 long-term Tranche 107-3 unsecured
Category of Financial Bonds senior bonds subordinated bonds US dollar bonds
Approval Date and Approval November 15, 2017 June 6, 2018 April 28, 2017
Document Number of the Letter of Jin-Guan-Yin-Guo-Zi Letter of Jin-Guan-Yin-Guo-Zi Letter of Jin-Guan-Yin-Guo-Zi
Central Competent Authority No. 10600265650 No. 10702114820 No. 10600090390
Date of Issuance January 5, 2018 August 20, 2018 September 27, 2018
Nominal Value NT$10 million NT$10 million US$1 million
Place of Issuance and Trading Taiwan Taiwan Taiwan
Currency New Taiwan Dollar New Taiwan Dollar US dollar
Issue Price Issued in full Issued in full Issued in full
Total Amount NT$1 billion NT$5.45 billion US$0.18 billion
Annual rate fixed at 0.70% Annual rate fixed at 1.450% Issued as zero-coupon bond,
Coupon Rates with an internal rate of return
of 4.70%
30-year term
Term 3-year term 10-year term Maturity date: September 27,
Maturity date: January 5, 2021 Maturity date: August 20, 2028 2048
The distribution priority is Superior to shareholders’ The distribution priority is
equivalent to other unsecured rights in asset securitization equivalent to other unsecured
Priority of Distribution creditors of the Bank. and subordinate to all creditors of the Bank.
depositors and other ordinary
creditors of the Bank.
Guarantor None None None
Trustee None None None
Underwriting Agency None None None
Verification Lawyer None None None
Verification Accountant KPMG KPMG KPMG
Tan-Tan Chung, CPA Tan-Tan Chung, CPA Tan-Tan Chung, CPA
Verification Financial None None None
Institution
Except for the redemption
via the “issuer’s right,” the
Lump sum payment at Lump sum payment at
Payment Method bond is subject to lump sum
maturity (bullet loan) maturity (bullet loan)
repayment at maturity (bullet
loan).
Outstanding Balances NT$1 billion NT$5.45 billion US$0.18 billion
Paid-in Capital of the
NT$61.48 billion NT$61.48 billion NT$61.48 billion
Preceding Year
Net Worth of Paid-in Capital
After Final Report for the NT$75.818 billion NT$75.818 billion NT$75.818 billion
Preceding Year
Payment Status Normal Normal Normal
None None Issuer’s redemption right: 5
years after the bond is issued,
the Bank may redeem the
Redemption or Early bond in full, on each effective
Settlement Term day of redemption and at the
par value prices per share as
set out in the bond redemption
table.
Conversion and Exchange None None None
Terms
Restrictive terms Subordinate bonds
Net Value of Paid-in Capital
After Final Report for the 60.19 67.37 74.66
Preceding Year
Application of Funds Medium-to-long-term loans Medium-to-long-term loans Medium-to-long-term loans
Eligible Equity Capital No Tier II Capital No
Credit Rating Agencies,
Evaluation Date and Rating
Score
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79

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Tranche 108-1 (A) long-term Tranche 108-1 (B) long-term Tranche 109-1 long-term
Category of Financial Bonds subordinated bonds subordinated bonds subordinated bonds
Approval Date and Approval June 6, 2018 June 6, 2018 July 11, 2019
Document Number of the Letter of Jin-Guan-Yin-Guo-Zi Letter of Jin-Guan-Yin-Guo-Zi Letter of Jin-Guan-Yin-Guo-Zi
Central Competent Authority No. 10702114820 No. 10702114820 No. 10802116910
Date of Issuance March 21, 2019 March 21, 2019 March 25, 2020
Nominal Value NT$10 million NT$10 million NT$10 million
Place of Issuance and Trading Taiwan Taiwan Taiwan
Currency New Taiwan Dollar New Taiwan Dollar New Taiwan Dollar
Issue Price Issued in full Issued in full Issued in full
Total Amount NT$1 billion NT$4.8 billion NT$10 billion
Coupon Rates Annual rate fixed at 1.20% Annual rate fixed at 1.30% Annual rate fixed at 0.80%
Term 7-year term 10-year term 10-year term
Maturity Date: March 21, 2026 Maturity Date: March 21, 2029 Maturity Date: March 21, 2030
Superior to shareholders’ rights Superior to shareholders’ rights Superior to shareholders’ rights
in asset securitization and in asset securitization and in asset securitization and
Priority of Distribution subordinate to all depositors subordinate to all depositors subordinate to all depositors
and other ordinary creditors of and other ordinary creditors of and other ordinary creditors of
the Bank. the Bank. the Bank.
Guarantor None None None
Trustee None None None
Underwriting Agency None None None
Verification Lawyer None None None
Verification Accountant KPMG KPMG KPMG
Tan-Tan Chung, CPA Tan-Tan Chung, CPA Tan-Tan Chung, CPA
Verification Financial Institution None None None
Lump sum payment at maturity Lump sum payment at maturity Lump sum payment at maturity
Payment Method
(bullet loan) (bullet loan) (bullet loan)
Outstanding Balances NT$1 billion NT$4.8 billion NT$10 billion
Paid-in Capital of the
NT$63.938 billion NT$63.938 billion NT$71.319 billion
Preceding Year
Net Worth of Paid-in Capital
After Final Report for the NT$84.853 billion NT$84.853 billion NT$95.517 billion
Preceding Year
Payment Status Normal Normal Normal
Redemption or Early None None None
Settlement Term
Conversion and Exchange None None None
Terms
Restrictive terms Subordinate bonds Subordinate bonds Subordinate bonds
Net Value of Paid-in Capital
After Final Report for the 73.36 73.36 79.19
Preceding Year
Application of Funds Medium-to-long-term loans Medium-to-long-term loans Medium-to-long-term loans
Eligible Equity Capital Tier II Capital Tier II Capital Tier II Capital
Credit Rating Agencies,
Evaluation Date and Rating
Score
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80

Taiwan Business Bank Annual Report 2020

Ⅳ

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Category of Financial Bonds Tranche 109-1 non-cumulative perpetual subordinated bonds
July 2, 2020
Approval Date and Approval Document Number of the Central Competent Authority Letter of Jin-Guan-Yin-Guo-Zi No. 1090216191
Date of Issuance August 13, 2020
Nominal Value NT$10 million
Place of Issuance and Trading Taiwan
Currency New Taiwan Dollar
Issue Price Issued in full
Total Amount NT$10 billion
Coupon Rates Annual rate fixed at 1.62%
Term No maturity date
Priority of Distribution Subordinate to the holders of the Bank’s tier II subordinated bonds and other ordinary creditors
Guarantor None
Trustee None
Underwriting Agency None
Verification Lawyer None
Verification Accountant KPMGTan-Tan Chung, CPA
Verification Financial Institution None
5 years and 1 month (including) after the bond is issued, the Bank may redeem the bond, upon the
Payment Method approval of the competent authority, in full at its face value with the accrued interest paid.
Outstanding Balances NT$10 billion
Paid-in Capital of the Preceding Year NT$71.319 billion
Net Worth of Paid-in Capital After Final Report for the Preceding Year NT$95.517 billion
Payment Status Normal
5 years and 1 month (including) after the bond is issued, the Bank may redeem the bond, upon the
Redemption or Early Settlement Term approval of the competent authority, in full at its face value with the accrued interest paid.
Conversion and Exchange Terms None
Restrictive terms Subordinate bonds
Net Value of Paid-in Capital After Final Report for the Preceding Year 80.67
Application of Funds Medium-to-long-term loans
Eligible Equity Capital Tier I Capital
Credit Rating Agencies, Evaluation Date and Rating Score
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3. Preferred Stocks, Global Depository Receipts, and Employee Stock Warrants, New Restricted Employee Shares, Any Merger and Acquisition Activities, and Acceptance of Transfer of the Shares of Another Financial Institution: None.

4. Status of Implementation of Capital Allocation Plans

(1) Plan Details

• A. To improve the Bank's capital adequacy and risk-bearing capacity in response to the capital requirement of business development, the issuance of NT$10 billion of long-term subordinated bonds was completed on March 25, 2020, and the issuance of NT$10 billion non-cumulative perpetual subordinated bonds was completed on August 13, 2020.

• B. In response to the program of government-funded financial institutions business innovation, TBB Venture Capital Co., Ltd., a subsidiary of the Bank, complied with the government's initiative to help the transformation and upgrade of SMEs and provided funds required for innovative development or inheritance. As of Dec. 31, 2020, it had approved 21 investment cases and appropriated funds for 19 investment cases. Furthermore, to meet the demand for future operations and business promotion, the Bank completed a capital increase of NT$0.4 billion on Jan. 7, 2021.

(2) Status of Implementation

Analysis of the changes of major financial ratios, capital adequacy ratios, and after-tax earnings per share of the Bank: Unit:NT$1,000;%

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Year
2020 2019 Increase/Decrease
Items
Financial Ratios
After-tax Return on Assets (ROA) 0.27% 0.40% -0.13%
After-tax Return on Shareholders' Equity (ROE) 4.84% 7.47% -2.63%
Capital Adequacy Ratio 13.42% 12.66% 0.76%
Net Profit After Tax 4,701,775 6,734,253 -2,032,478
Earnings Per Share After Tax 0.63 0.94 -0.31
----- End of picture text -----

• Notes:1. Earnings per share is calculated according to the weighted average number of shares of the current fiscal year. The effects of retrospective adjustments apply to basic earnings per share for 2019.

• Net profit after tax for 2020 totaled NT$4.702 billion, decreased by NT$2.032 billion from 2019, primarily due to the increase in the allowance for bad debts.

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V Business Operation

83

1. Business Scope

• 101 2. Employees

• 103 3. Corporate responsibilities and moral conduct

• 103

4. The Number of Non-Managerial Full-time Employees, and Their Average Salary and Median Salary

• 103 5. Information Equipment

• 105 6. Labor-Management Relations

• 106 7. Important Contracts

• 107 8. Relevant information on securitization products

V

1. Business Scope

(1) Principal Activities for Different Areas of Business

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• A. Corporate Banking

• a. Corporate financing loan

• Engage in different corporate loans, project loans, syndication, bills discounting, domestic credit issuing, domestic and overseas guarantee provision, as well as accounts receivable financing and factoring.

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• b. Foreign exchange

• Engage in foreign currency in cash, foreign-currency deposits, import and export foreign exchange, general outward and inward remittance, loans in foreign currency, and foreign currency guarantee.

B. Personal Banking

• a. Personal loans

• Engage in personal mortgage and consumer financing business.

• b. Credit card

• Engage in credit card issuance and acquiring businesses.

• c. Wealth management

• Engage in the promotion of wealth products such as life insurance, property insurance, funds, offshore bonds, and gold passbook.

• d. Insurance agency

• Engage in life and property insurance agency.

• e. Trust service

• 1) Monetary trust: Fiduciary investments in domestic and overseas marketable securities, advance trust, real estate transaction trust, civil servant estate trust, government projects subsidy trust, caring trust, insurance trust, third-party payment trust, foreign exchange trust, charitable trust, employee stock ownership trust, and other monetary trusts.

• 2) Custodian business: Entrusted for keeping domestic securities investment trust fund, entrusted for keeping investment-linked fund products, and entrusted for keeping operation bond and foreign investment safe-keeping.

• 3) Others: Real estate trust, securities trust, marketable securities trust, and marketable securities certification services.

• f. Securities

• Engage in marketable securities transactions, margin trading and short selling, as well as futures introducing broker services.

C. Finance Logistics

• Engage in the capital movement for New Taiwan Dollars and foreign currencies, foreign exchange transactions, marketable securities transactions, long-term equity investments, financial products marketing, and derivatives business.

D. Deposits

• Engage in check deposits, passbook deposits, certificate deposits, tax collection, national treasury agent, collections, and remittance.

E. Digital Banking Business

• Engage in digital finance services such as the Bank's website, general online banking, online corporate banking and online banking banking APP, global e-banking, mobile banking APP, telephone banking, e-ATM, online cash register, national payment, parking fee collection, virtual accounts, digital deposit account, crossborder remittance, deposit account acquisition with QR Code, ACH (eACH, eDDA), blockchain confirmation, Open API, Artificial Intelligence Customer Service, Accountlink, and social media.

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(2) Business Overview for the Past Two Years

A. Corporate Banking

• a. Corporate financing loan

Unit: NT$ million

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----- Start of picture text -----

Year 2020 2019 Increase
Items Amount Percentage % Amount Percentage % (Decrease) %
SMEs loan balances 601,120 64.96 513,663 59.95 17.03
Large enterprises loan 129,265 13.97 139,194 16.25 -7.13
balances
Government and
public enterprise loan 64,803 7.00 75,702 8.84 -14.40
balances
Corporate banking 795,188 85.93 728,559 85.04 9.15
NTD loan balances
Foreign currency loan 130,242 14.07 128,206 14.96 1.59
balances
Total 925,430 100.00 856,765 100.00 8.01
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b. Foreign exchange

Unit: NT$ million

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----- Start of picture text -----

Year 2020 2019 Increase
Items Amount Percentage % Amount Percentage % (Decrease) %
Balances of foreign
currency demand 106,894 45.21 86,499 39.26 23.58
deposit
Balances of foreign 129,556 54.79 133,812 60.74 -3.18
currency time deposit
Total 236,450 100 220,311 100 7.33
Unit: US$ million
Year Increase
2020 2019
Items (Decrease) %
Volume of foreign exchange business 56,145 56,698 -0.98
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Note: The volume of foreign exchange business is the sum of DBU and OBU.

B. Personal Banking

• a. Personal loans

Unit: NT$ million

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----- Start of picture text -----

Year 2020 2019 Increase
Items Amount Percentage % Amount Percentage % (Decrease) %
Consumer loan
6,996 2.41 6,142 2.16 13.90
balances
Mortgage balances 188,109 64.75 189,253 66.68 -0.60
Other personal loan 95,407 32.84 88,429 31.16 7.89
balances
Total 290,512 100 283,824 100.00 2.36
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b. Wealth management and insurance agency

Unit: NT$ million

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Year 2020 2019 Increase
Items Amount Percentage % Amount Percentage % (Decrease) %
Service fee income for
771.34 57.13 528.76 36.60 45.88
trust funds
Service fee income for 529.84 39.24 881.49 61.01 -
life insurance (Note 1) (Note 2)
Service fee income for
44.00 3.26 32.08 2.22 37.16
property insurance
Gold passbook income 4.98 0.37 2.39 0.17 108.37
Total 1,350.16 100.00 1,444.72 100.00 -6.55
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Note 1: Insurance Agent Department merged into the Bank in 2020. Income from house mortgages, life insurance, credit card marketing/telemarketing of insurance are included in the service fee income for life insurance for 2020.

Note 2: Income from house mortgages, life insurance, credit card marketing/telemarketing of insurance are not included in the service fee income for life insurance for 2019.

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c.	Trusts Unit: NT$ million	Trusts Unit: NT$ million	Trusts Unit: NT$ million	Trusts Unit: NT$ million
	Year Items	2020	2019	Increase (Decrease) %
	Fiduciary investments in domestic and overseas marketable securities balances	62,100	55,185	12.53
	Custodian bank balances (Note)	96,602	97,137	-0.55
	Other trusts balances	21,130	21,388	-1.21

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Note: Including custodian business.

Unit: NT$ million/card

d. Credit card Unit: NT$ million/card Year Items 2020 2019 Increase (Decrease) % Card transaction volume 9,704 12,143 -20.08 Number of issued cards 199,434 203,587 -2.04	d. Credit card Unit: NT$ million/card Year Items 2020 2019 Increase (Decrease) % Card transaction volume 9,704 12,143 -20.08 Number of issued cards 199,434 203,587 -2.04	d. Credit card Unit: NT$ million/card Year Items 2020 2019 Increase (Decrease) % Card transaction volume 9,704 12,143 -20.08 Number of issued cards 199,434 203,587 -2.04	d. Credit card Unit: NT$ million/card Year Items 2020 2019 Increase (Decrease) % Card transaction volume 9,704 12,143 -20.08 Number of issued cards 199,434 203,587 -2.04	d. Credit card Unit: NT$ million/card Year Items 2020 2019 Increase (Decrease) % Card transaction volume 9,704 12,143 -20.08 Number of issued cards 199,434 203,587 -2.04
	Year Items	2020	2019	Increase (Decrease) %
	Card transaction volume Number of issued cards	9,704 199,434	12,143 203,587	-20.08 -2.04

Note: Visa Debit and Easy Debit are not included in the number of issued cards.

e. Securities

Unit: NT$ million/lot

Year Items	2020	2019	Increase (Decrease) %
Securities broker transacted amount	474,360	276,243	71.72
Average securities fnancing balances	2,109	1,950	8.15
Lot amount for futures(lot)	189,384	148,147	27.84

C. Finance Logistics

• a. Foreign currency and foreign capital transaction

Unit: US$ million

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----- Start of picture text -----

Year 2020 2019 Increase
(Decrease) %
Items Amount Percentage % Amount Percentage % Percentage %
Forwards 572 0.56 485 0.37 17.91
SWAP 39,118 38.07 36,884 28.27 6.02
Non-deliverable forwards - 0.00 35 0.03 -100.00
Options 279 0.27 435 0.33 -35.96
Inter-bank borrowings and 62,774 61.11 92,647 71.00 -32.24
inter-bank loans
Total 102,729 100.00 130,486 100.00 -21.27
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Note: The volume of foreign exchange transactions is the sum of the transaction volume of our head office and its overseas branches.

• b. Stock fund investment

Unit: NT$ million

Year Items	2020	2020	2019	2019	Increase (Decrease) % Percentage %
	Amount	Percentage %	Amount	Percentage %
Shares	7,400	98.07	5,167	98.85	43.22
Funds	146	1.93	60	1.15	143.33
Total	7,546	100.00	5,227	100.00	44.37

Note: Stated at the initial acquisition costs.

c. Bonds and notes

Unit: NT$ million

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----- Start of picture text -----

Year At the end of 2020 At the end of 2019 Increase
Items Amount Percentage % Amount Percentage % (Decrease) %
Short-term notes 174,123 50.53 195,920 51.16 -11.13
Certificates of deposit 161,705 174,880
acquisition
Commercial paper
12,418 21,040
acquisition
Acceptances acquisition - 0
Bonds 170,451 49.47 183,353 48.84 -7.04
Government debts 63,385 75,398
Corporate bonds 58,518 51,852
Financial bonds 47,792 54,637
Beneficiary securities and 756 1,466
asset-backed securities
Total 344,574 100.00 379,273 100.00 -9.15
----- End of picture text -----

Note: Stated at the initial acquisition costs.

85

d. Reinvestment

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Investment Amount Shareholding Ratio
Investment Target
(NT$1,000) (%)
Taipei Forex Inc. 7,000 3.5318
Financial Information Service Co., Ltd. 54,316 1.2040
Taiwan Stock Exchange Co. 198,012 0.9496
Taiwan Futures Exchange Co. 20,000 1.0000
Taiwan Asset Management Corporation 600,000 5.6754
Taiwan Financial Asset Service Corporation 50,000 2.9412
Sunny Asset Management Corporation 461 0.7678
Financial eSolution Co., Ltd. 9,244 4.1158
Taiwan Depository & Cleansing Corporation 4,639 0.0830
Taiwan Mobile Payment Co. 6,000 1.0000
Taiwan Power Company 11,427 0.0044
Taiwan Sugar Corporation 58,294 0.2986
Taiwan Incubator SME Development Corporation 29,000 4.8438
Sunsino Development Associated Inc. 17,440 3.1166
CDIB & Partners Investment Holding Corp. 500,000 4.9505
Taipei Financial Center Co. 328,104 0.8000
Taiwan Urban Regeneration & Financial Services Co., Ltd. 25,000 5.0000
Chaofu Real Estate Management Co., Ltd. 8,598 3.0000
Taiwan High Speed Rail Corporation 445,000 0.7906
Taiwania Capital Buffalo II Bioventures, LP 96,400 1.6900
Note: The Bank's long-term investments.
D. NTD Deposits Unit: NT$ million
Year At the end of 2020 At the end of 2019 Increase
Items Amount Percentage % Amount Percentage % (Decrease) %
Demand Deposits 706,569 56.52 669,549 52.16 5.53
Time Deposits 543,532 43.48 614,040 47.84 -11.48
Total 1,250,101 100 1,283,589 100 -2.61
E. Digital Banking Business Unit: Customer/Transaction
Year
At the end of 2020 At the end of 2019 Increase/Decrease %
Items
Number of online banking 5.85%
1,555,269 customers 1,469,354 customers
customers
Number of mobile banking 15.02%
801,263 customers 696,622 customers
customers
Number of electronic financial 12,746,334 transactions 11,572,377 transactions 10.14%
transactions
----- End of picture text -----

(3) Operating Plan for 2021

• A. Corporate Banking

• a. Corporate financing loan

  • 1) Continue to promote the government's initiative for actively assisting in micro-scale enterprises and start-ups (of which the capital is below NT$ 30 million) to obtain the capital required for operations; participate in project loans inaugurated by county/city governments; support youth entrepreneurs as well as small and medium enterprise (SME) corporate financing; invigorate the local economy and fulfill its corporate social responsibilities.

  • 2) Promote the "3 Major Investments in Taiwan," "Zillion Revitalization Financing Project," and major start-up industry financing policy of the government to assist enterprises to obtain required funding and increase the investment in Taiwan, creating more domestic employment opportunities.

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• 3) Focus on the cluster area of companies to expand the scale of loans and market share in the industrial area.

• 4) Focus on long-term SME customers or SMEs supported by the Bank and actively organize and manage the syndicated loans and credits to expand the number of loans and commissions from corporates.

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  - 5) With consideration of credit risks and revenue, adjust loan structure, enhance the credit guarantee funds transferring to reduce the risk-adjusted assets, and increase the loans for SMEs.

  - 6) Focus on the major business of SMEs, enhance educational training and enhance professional competencies to effectively control risks and improve overall service quality.

• b. Foreign exchange

  • 1) Strengthen the expansion of our foreign exchange business

    • A) Adopt incentive measures or projects in due course; actively expand the foreign exchange business.

    • B) Improve the interactions with regional operation centers to collectively provide assistance to the development of foreign exchange business for branches.

    • C) Enhance training to improve professional competencies for foreign exchange, and increase the service quality of foreign exchange business.

    • D) Examine standard operation procedures (SOP) to minimize operating risks.

  • 2) Facing the turmoil arising from the global outbreak and the political and economic status between China, the U.S., and other countries, our overseas branches will continue to focus on the implementation of credit risk control to respond to the local political and economic circumstances, changes in industries at any time, and steadily promote their business with considerations given to different risks in accordance with factors such as the nature of regions, policies implemented by the headquarters, regulations, and supervisory strength.

• c. Innovative financing

  • 1) Commit to promoting smart and green building plans, include guaranteed for green building labels as the item for financing and loans, and promote building plans with smart and environmental protection design to achieve the objectives of safety, health, and energy-saving, assisting in building sustainable cities.

  • 2) Grasp the business opportunities related to demands for offices in plants and urban renewal, provide financial services in different phases for companies in industrial zones, and encourage offices in plants to adopt building elements such as electricity farming and energy storage to build smart buildings with new models for the creation of maximum benefits of enterprises. Assist enterprises in developing the green energy business to achieve the objective of sustainable operations.

• B. Personal Banking

• a. Personal loans

  • 1) Enhance the operating efficiencies of personal banking and focus on the growth of revenue.

  • 2) Continue to strengthen the expansion of house mortgage and life insurance business to increase the commission revenue of the Bank.

  • 3) Strengthen online service functions for personal banking provide diverse selling channels.

  • 4) Actively cooperate with governmental policies to fulfill the Bank's corporate social responsibilities.

• b. Wealth management

  • 1) Leverage on the advantage of the Bank related to abundant SME customers: Confirm and perform an inventory check for the Bank's list of customers with high net values and refer to the operations of financial institutions to amend the qualification for applying for "professional investor" of the Bank and examine the appropriateness of its regulations.

  • 2) Manage niche products: Increase products for investments by professional investors, plan for online transaction functions for foreign bonds and back-end sales fund.

  • 3) Provide comprehensive services for VIP customers: Expand the customer service team for highasset customers, enhance training programs related to asset management of wealth management personnel, research and analysis, tax planning, and cash management; meanwhile, employ senior professionals with in-depth experiences in investment planning within the industry.

87

• 4) Integrate cross-department resources: Integrate the Bank's resources for corporate banking, personal banking, and wealth management, provide comprehensive service marketing in due course, and promote family wealth management and wealth inheritance with CPA and lawyers when necessary to rapidly improve the Bank's service capacity for VIP customers.

• c. Insurance agent

• 1) Digital services - Establish an insurance document scanning system for insurance agents

  • i. In response to the paperless trend and to reduce the storage costs, transfer to a centralized operation from the current scanning data in single PCs to improve operating efficiencies for document preservation and inquiry.

  • ii. Continue to optimize system functions and strengthen risk management to comply with the inspection requirements the Bank and the competent authority related to the internal control information system for insurance businesses and compile data for insurance customers to prepare for the subsequent demand in business promotions and Big Data utilization.

• 2) Continue to select premium insurance products for sale to enrich the Bank's product portfolio that hit the store shelves: Keep abreast of market trends and products, distribute premium and advantageous products with market competitiveness to satisfy customers' demand for insurance protection.

• 3) Integrate cross-departmental marketing and property insurance businesses: Target the business property insurance for corporate banking customers, fire insurance for personal banking customers with house mortgages, accident insurance and car insurance for deposit customers and wealth management customers to integrate marketing across departments for the improving revenue and accumulating business volume year by year.

d. Trusts

• 1) Continue to work with investment trusts for the custodianship of the market and differentiated IPO and ETF products and private equity to benefit customers' asset allocation, expand the custodian product line, and improve its revenue.

• 2) Continue introducing offshore debenture products with the marketability and satisfy the demand from high-asset customers to increase the market competitiveness of the Bank.

• 3) Expand external sales channels to jointly engage in marketing for funds in the Bank's custody with investment trusts, centralize the selling momentum, and increase the scale of funds in the Bank's custody.

• 4) Organize urban renewal trust and join forces with long-term care medication and senior industries to jointly develop long-term care elderly centers and elderly centers, and develop comprehensive trust services.

• 5) In response to the trend of aging and low birth rate, strengthen the promotion of property trust for seniors and persons with physical or mental disabilities and launch projects such as "Safe Living Trust" and "Safe Protection Trust" to safeguard the elderly life for seniors and implement the government's material policy.

• 6) Continue to promote real estate trusts in response to government policies related to urban renewal and reconstruction of hazardous and old buildings.

• 7) Promote foreign monetary trusts to accord with the repatriated fund for investment in Taiwan encouraged by the government.

• 8) Continue to promote family trusts and launched the "Ease Inheritance Trust" project to help corporate owners with their demand in business inheritance and succession for generations.

• 9) Engage in the public welfare trusts to care for the community, improve the living and caring standards for seniors and the underprivileged groups, fulfilling the Bank's corporate social responsibilities.

• 10) Continue to cooperate with organizations such as social welfare and elderly institutions, improve promotional and marketing exposures, and promote the Bank's trust business to implement the Bank's concept for social care and improve its brand image.

• 11) Develop niche products, organize to launch private equity, foreign stock, ETF, and preferential shares businesses and reinforce its digital financing services to create a comprehensive wealth management platform.

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• 12) Improve the functions of the organization, cultivate professional talents, and organize diverse trust products and services to accord with the implementation of the Trust 2.0 policy.

• 13) Regularly examine the operating procedures for the trust business and amend the business handbook and SOP according to the changes in laws and regulations and practical operations to render effective execution.

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• 14) In view of the inauguration of the new trust product business, introduce new system functions and reinforce digital financing services to provide comprehensive and efficient services for customers and improve the competitive strength of the Bank.

• e. Credit card

• 1) Issued the "Art FUN Card" in January 2021. Any credit card consumption reaching a designated amount may be entitled to visits to 100 major domestic and foreign museums free of entrance fees. Furthermore, any consumption made at designated channels such as Opentix, KHAM Tickets, and Kingstone Bookstore may have up to 10% cash return. the Bank continues to organize its product portfolio to attract customer groups with different payment requirements and provide more options for cardholders, conforming to the market demand.

• 2) Continue the promotion for the Silver Love Credit Card, in which the Bank allocated 0.3‰ of the general card consumption as the public welfare fund to help seniors in dining and learning together, spreading love to different corners in Taiwan at the same time. It also supports the disadvantaged, the disabled, implements community care and social relief, spreading love to different corners in Taiwan, in the hope to call upon more people to join public welfare activities and generating the power of love and warmth in Taiwan.

• 3) Cooperate with the government-funded platform to introduce Taiwan Pay scanned transactions, continue holding marketing events, and encourage cardholders' usage by utilizing credit card statements and the website of the Bank to achieve the goal of mobile payment under the government's policy and increase the usage rate of mobile payment.

• f. Securities

• 1) The Bank will continue to engage Yuanta Futures to organize marketing reward activities; actively expand the ancillary business of futures to increase the trade volume and commission income.

• 2) Vigorously cooperate with branches to jointly visit the target customer groups, execute annual key operations, and develop securities business to fully exerting the integral marketing function of the Bank and improve the overall contribution of customers.

• 3) To conform with the new system of the Stock Exchange and enhance the promotion of businesses, the Bank planned to establish an "Odd Lot Transaction and Accounting System" to provide a convenient odd lot investment channel for small sum investors.

• 4) To better meet the investment demand from our customers, the Bank established an "E-instant Accounting" system that allows securities customers to have instant access to information on their personal accounts online to boost customer satisfaction.

• 5) To reinforce the information security of the securities system, the Bank established a webpage firewall and invasion protection system to prevent different malicious attacks on the internet, ensuring the undisrupted operation.

• 6) Conforming to the new system of "continuous trading" implemented by the TWSE, the Bank completed the hardware upgrades for its securities order-placing system and amendments to relevant programs; the system was formally released on March 23, 2020.

• C. Finance Logistics

• a. Enhance capital management and operating efficiency to maintain liquidity and improve capital utilization income.

• b. Actively carry out foreign exchange operations to increase exchange gains.

• c. Closely monitor domestic and overseas governmental and economic conditions to get hold of the overall market investment trend. Select premium stocks in different industries in due course to balance the investment allocation and increase our investment income.

89

• d. Improve the planning and management for our reinvestment business to increase the reinvestment income of the Bank.

• e. Cautiously select premium investment targets with growth potentials and financial health to expand our investment portfolio, boosting foreign currency securities income.

• f. Implement KYC system and assessment for product adequacy; closely monitor customers' credit limits and carry out risk control.

D. Deposits

• a. Make use of various incentive oversight and evaluations to improve the demand deposits promotion momentum of branches, actively integrate marketing, improve the deposit structure, and reduce capital costs to increase the interest rate differential for deposits.

• b. Combine the development trend of digital financing and mobile payment, advance various collection businesses and services, and improve customer service functions to enhance the strength in competing for the current deposits from customers.

• c. Continue to expand current deposit businesses such as salary transfers to expand the scale of current deposits.

E. Digital Banking Business

• a. Facilitate the comprehensive upgrades for digital channels and value user experiences to satisfy customers' demands.

• 1) Revision and optimization of the digital channel platform: Value customers' demand, adopt the customer-oriented concept, and continue to upgrade, optimize, and develop innovative functions for online banking, mobile banking, and online corporate banking to improve customer satisfaction and the number of real users.

• 2) Revision and optimization of corporate website: Introduce the latest webpage structure, enhance UIUX, organize the website from customers' perspective/habits/demands to reorient services to sales, and introduce backstage management to improve management efficacy.

• 3) Enhance customers experiences:Build up push platform APP to provide various services for customers.

• b. Introduce digitalized procedures, promote mobile payment, and expand sales momentum

• 1) Rebuilding of the online account-opening platform and product packaging: Rebuild the online accountopening platform, organize the addition of type 3 digital deposit accounts and foreign currency deposit accounts, and design product packaging to increase the number of customers, deposit volume, and transition volume of different products.

• 2) Creation of an online loan platform and product packaging: Expand the "E-Loan" online loan platform, introduce an online application for new personal accounts, and integrate all products related to personal loan/house mortgage/corporate financing.

• 3) Rebuilding of the online card application platform and product packaging: Rebuild the online card application platform, optimize backstage credit investigation to facilitate the speed card issuance, including OCR uploading, instant submission, independent online contact line, systematic case assignment, and limit molding.

• 4) Taiwan Pay Bonus Accumulation Platform (Stage 2): Invigorate the point accumulation method and credit methods for bonus points and implement system settings for various activity models, including "point transfer and gifting" between customers, "limited point acquisition," "double gift points for specific transactions," and "points in exchange for gifts," to improve customers' intention of point accumulation, and in turns facilitate the business growth.

• 5) Taiwan Pay supporting transportation code transactions: Citizens may present the transportation QR Code by using Taiwan Pay from the Bank's mobile banking services for the payment of traffic charges at the boarding gate or machine via code scanning when taking buses, MRT, and other public transportation.

• 6) Taiwan Pay acquiring services with the shared platform for e-payment institutions: Include the wallet platform payment operation provided by e-payment institution as a collection model for the Bank's Taiwan Pay merchants.

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• c. Utilize Big Data analysis, develop digital marketing, facilitate financial services

• 1) Creation of LINE official account: Introduce personalized functions, provide customized services, and design the Bank's mascot and LINE stickers to attract citizens to download, and increase the number of friends and influences of LINE to improve the publicity of the Bank's brand.

• 2) Expansion of fan page operation and increase in the number of fans: Initiate the transformation of the fan page and young operations to facilitate the increase in the number of fans on the fan page to actively improve the Bank's social volume.

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• 3) Digital marketing and formulation of brand image: Introduce the latest marketing method to connect with customers, utilize online advertisement media for development and online activities with new models for external advertisement, and create and improve the digital brand image of the Bank by regularly publishing digital press releases and actively participating in competitions and exhibitions.

• 4) Big Data analysis and personalized services: Make use of Big Data analysis to carry out customer group analysis, customer behavior prediction, recommendation, and risk prevention, and introduce personalized services for online banking, website, and Artificial Intelligence Customer Service platforms, and carry out precision marketing.

• 5) Mobile banking smart audio instruction services: Adopt audio recognition technologies and natural semantics analyzing technologies for financial services being commonly used regarding the Bank's mobile banking services (i.e., inquiry, transfer, and payment) to guide customers in completing financial transaction services after understanding customers' transaction instructions by means of dual-model smart audio and text interactive communication.

• 6) Push platform: Adopt personalized message dispatch for various types of messages through the push platform, such as transaction notice, verification notice, and marketing activity notice, and integrate the push demands for different operations to improve the system efficiency and precision for message push.

• d. Develop the innovative FinTech, promote digital transformation, and establish smart banking

• 1) Introduce RPA: The Bank introduced RPA to simplify its operating procedures for assisting in statement preparation, data acquisition, application procedures, and other services to improve the efficacy.

• 2) Open API: Develop Open API and seek various strategic alliances and cooperate with TSP suppliers for Open API to expand the Bank's business into customers' lives.

• 3) The eFlow system: Electricize forms and documents for operations via the electronic form systems and establish an online instant response system to improve the operating efficiency.

• 4) Upgrades for Artificial Intelligence Customer Service: Introduce the Chatbot business communication for Artificial Intelligence Customer Service 2.0 and the sales behavior model to expand its foreign currency, credit card, loan, account opening businesses, and provide personal account inquiry services.

F. Risks Management

• a. As the FSC implemented the requirements for the calculation of risk-weighted assets guaranteed by real estate, the Bank amended relevant functions of the capital appropriation system of the Bank to improve the Bank's automated calculation abilities for capital appropriation.

• b. Amend regulations related to market risks to reinforce its market risk monitoring and control system for financial product transactions.

• c. As FSC amended the qualitative and quantitative indicators for IRRBB, the Bank amended the module related to "IRRBB quantitative indicator calculation" in its ALM system to improve its risk control abilities.

• d. Pursue enhancing linking function among the top three managing tools for operating risks, allowing management tools to support and link to one another, perform cross-over analysis and verification, to improve the Bank's capacity for active and advance control on operating risks.

• G. Legal compliance and anti-money laundering

• a. Comply with regulations imposed by domestic and foreign competent authorities and continue to optimize the AML system of the Bank.

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• b. Strengthen the supervision for the first line of defense as well as field visits and sampling tests for domestic branches.

• c. Adopt diversified channels to continue organizing educational training in light of COVID-19's outbreak.

• d. Convene video conference from time to time to communicate with branches regarding relevant regulations and matters of attention, so as to achieve the effectiveness and immediacy of control.

(4) Market Analysis

• A. Geographic Scope of Operations

Apart from being a specialized bank for SMEs, the Bank also provides diversified services in personal financing, wealth management, and the professional financing field. With our branches spreading across the nation, we have 125 branches in Taiwan and 1 Offshore Banking Unit, 8 overseas branches in Hong Kong, Los Angeles, Sydney, Shanghai, Brisbane, Wuhan, New York, and Tokyo as well as one representative office in Yangon, Myanmar.

• B. Market supply and demand and market growth in the future

Under the impacts of COVID-19 and the trade war between the U.S. and the PRC, multinational enterprises reduced the production ratio in the PRC or moved production bases out of the PRC. Taiwan possesses the comparing to the other countries advantage in manufacturing technology and has relatively better control for the epidemic. It, therefore, become a stronghold for Taiwanese businesses and multinational enterprises when making such transfers, contributing to the domestically economic performance. According to the figure marked up by the Directorate General of Budget, Accounting and Statistics (DGBAS), the economic growth rate in Taiwan was 3.11% for 2020, and it is estimated that the economic growth rate in Taiwan for 2021 will increase to 4.64%. According to the forecast made by the DGBAS, the economic performance in 2021 will surpass that of 2020. According to ITRI's IEKCQM, it is estimated that the output value of the manufacturing industry in Taiwan will reach NT$19.68 trillion in 2021 with an output value growth of 4.75%.

As the Fed implied that mark-up of the interest rate would not occur by 2023, the probability of interest rate increase by the Central Bank of Taiwan is low with the backdrop that the probability of interest rate increase by Fed of the U.S. is low. As the interest rate in Taiwan is at the low range historically, the probability of interest rate decrease is low, unless another global trend of interest rate decrease occurred. Therefore, it is estimated that bank interest rate differential for banks funded by the government is unlikely to experience further significant shrinkage and the impacts arising from the shrinking interest rate differential will also decline. Regarding the exchange rate performance, with the continuous weakening of USD, the exchange rate for NTD against USD is maintained at approximately USD 1: NTD 28, which may become the new norm as indicated by the Central Bank.

The return trend of Taiwanese businesses created demands for investments, capital utilization, and plant establishment, which benefit the potential opportunities for financing, loans, and wealth management businesses of the banking industry. Suppliers turn to Southeast Asia for establishing their production capacity also brought chances for banks in Taiwan to promote overseas businesses, including margin purchase businesses such as wealth management planning, plant establishing and land purchasing, and equipment investment. It is estimated that such conditions will contribute to the business volume for the banks in Taiwan regarding deposits, loans, and wealth management in 2021.

As for the development trend for the industry, the isolation policy resulted from COVID-19 facilitates the development trend for low-contact services within the banking industry. A post-epidemic trend of sustainable finance emerges; the banking industry attaches more attention to climate change and natural disasters, detection for systemic risks of plague, and financial disclosures.

The isolation policy in response to COVID-19 materially minimized the chances of consumers entering real outlets, generating significant impacts on the retail service industry. Transaction models and operating methods of merchants may be significantly changed due to the safe distance. The low-contact payment model will become the key innovative development for the financial service models after the outbreak.

It is expected for the year 2021 that there will be more banks continue to optimize their mobile banking service platform and increase the cross-field operations with different industries to build scenario finance, create the financial ecosystem, and put focus on the customer groups with non-high-end asset that received minor services in the past, so as to expand their businesses to general citizens and bring new business opportunities for the banking industry. The internal management of the banking industry is developing

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new financial services and improving technologies related to online credit investigation, credit loans, risk management, and performance management.

• C. Positive and negative factors affecting competitive niches and long-term development, as well as response strategies

Regarding the fast-changing global financing and economic state, the Bank may encounter the following circumstances:

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• a. Favorable factors

• 1) Ease monetary policies implemented by central banks worldwide resulted in a mild prospect for inflation.

• 2) The Bank possesses a profound local operation basis and extensive groups of customers having long-term relationships with the Bank.

• 3) Leverage on the competitive advantage of "Financing, Guidance, Investment," the Bank has been focusing on the SMEs loan business in the long run, assuming an essential part in the market share of SME loans with the benefit of scale profit.

• 4) With Taiwan growing into a senior society and the rising of the "senior economy" era, demands for elderly institutions and care remained high. Furthermore, urban renewal and renovation of hazardous and old buildings promoted by the government also created business opportunities related to urban renewal and hazardous and old buildings. Together with the "Trust 2.0" project promoted by the government, banks were encouraged to develop comprehensive trust operations through crossindustry cooperation with senior industries to satisfy the demands for elderly care of seniors.

• b. Unfavorable Factors

• 1) As the economic recovery is poorer than expected due to the impact of COVID-19 and the continuation of wrestling between China and the U.S., the global market will experience significant fluctuations. Furthermore, the outbreak generated turmoil for the international economy; the stagnant global industries and lockdowns of countries affect the operations of international trade in Taiwan, creating uncertainties for the economic growth in Taiwan.

• 2) Increasing competition among our business for high homogeneity in products and services provided.

• c. Countermeasures

• 1) Conservative and stable strategies are intended to be taken for our investment operating to obtain stable returns.

• 2) Consider factors of risks and returns to make effective adjustments on asset allocation for the increase of overall income.

• 3) Continue to strengthen our specialized field of SMEs with considerations equally given to financing and counseling and create a leading financial brand as a specialized bank for SMEs.

• 4) Leverage on the channel advantages and integrate marketing resources, increase in-depth dealings with target customers and core product promotions to improve the operating performance.

• 5) Responding to the government policies implemented, the Bank organize diverse trust products and services and develop a comprehensive trust business that caters to different aspects of citizens' lives to increase the momentum for the Bank's trust businesses and improve the revenue.

• 6) Expand and strengthen the customer service team for VIPs, focus on target customer groups, carry out business opportunity and customer analysis, and integrate the internal resources from different departments based on customers' demands to provide comprehensive wealth management services for customers. In addition, continue to optimize digital financial services and enhance the backstage system to improve customer experiences.

(5) Financial Product Research and Business Development Summary

• A. Primary Financial Products and Size of Newly Added Business Department, and Profit or Loss for the Past Two Years

• a. Major financial products of the Bank for the past two years

  • 1) Providing the "Micro-credit and Start-up Loan," and the loan balances were NT$73.844 billion at the end of February 2021.

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• 2) Providing the "Loan for Startup Funding for Young Entrepreneurs," and the loan balances were NT$6.331 billion at the end of February 2021.

• 3) Providing the "Preferential Loans for Key Innovative Industries," and the loan balances were NT$91.106 billion at the end of February 2021.

• 4) Providing the "Green Energy Sustainable Project Loan," and the loan balances were NT$915 million at the end of February 2021.

• 5) Regarding the occurrence of a senior society, to provide diverse products for seniors, the Bank provides the guaranteed house mortgages of "Provide for Elderly Life with Houses" and "Joyful Retirement Part II," and a total of 227 customers received the loans with the loan balances amounted to NT$ 884 million at the end of February 2021.

• 6) To prevent losing customers for the existing Considerate Loan and improve premium customers’ intention in dealing with the Bank, it provides the "Heart of Gold" civil and teaching personnel credit loan in the hope of improving its consumption loan business, and the loan balances were NT$960 million at the end of February 2021.

• 7) In response to government policies for satisfying capital demands for giving birth, pregnancy, and raising children under 5-year-old, the Bank provides the "Childbirth Consumer Loans (originally Golden Pregnancy), and a total of 1,615 families received the assistance with the approved loan amounted to NT$623 million at the end of February 2021.

• 8) The Bank carries out the Ministry of Finance's "Preferential Housing Loan Program for Successful Family Foundation of Youth (Case 2)," and a total of 27,986 customers received the loans with the loan amounted to NT$114.514 billion at the end of February 2021.

• 9) To satisfy the demands of borrowers regarding the flexible deployment of funds, the Bank continues to provide the "Convenient Revolving Loan," a product with mid-term guarantee limits, and the utilized balances were NT$14.821 billion at the end of February 2021.

• 10) To improve owners of SMEs and high-income groups' intention to deal with the Bank, it launches the house mortgage project of "Corporate Elite Loan," and the loan balances were NT$9.048 billion at the end of February 2021.

• 11) To expand its mid-to-long-term guaranteed house mortgage loan business to improve the Bank's revenue, it launches the guaranteed house mortgage project of "Satisfactory Housing," and the loan balances were NT$9.224 billion at the end of February 2021.

• b. Newly added business departments of the Bank for the past two years

• 1) Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance Agency Co., Ltd. were merged on January 2, 2020. The Bank, as the surviving company, established the Insurance Agent Department to concurrently engage in the insurance agent business.

• 2) In accordance with the policies implemented by the competent authority and the key market trend, the Bank adjusts the business structure of its insurance products for different customer groups to expand the diversity of life and property insurances and increase insurance commission income.

• B. R&D expenses and results, and the future R&D plan

the Insurance Agent Department to concurrently engage in the insurance agent business. 2) In accordance with the policies implemented by the competent authority and the key market trend, the Bank adjusts the business structure of its insurance products for different customer groups to expand the diversity of life and property insurances and increase insurance commission income. D expenses and results, and the future R&D plan	the Insurance Agent Department to concurrently engage in the insurance agent business. 2) In accordance with the policies implemented by the competent authority and the key market trend, the Bank adjusts the business structure of its insurance products for different customer groups to expand the diversity of life and property insurances and increase insurance commission income. D expenses and results, and the future R&D plan	the Insurance Agent Department to concurrently engage in the insurance agent business. 2) In accordance with the policies implemented by the competent authority and the key market trend, the Bank adjusts the business structure of its insurance products for different customer groups to expand the diversity of life and property insurances and increase insurance commission income. D expenses and results, and the future R&D plan
R&D expenses for the past two years Unit: NT$ 1,000
Year	2020	2019
Amount	33,353	36,464

• a. R&D expenses for the past two years

• b. R&D results for the past two years

• 1) Provide industrial information on a regular basis

To improve the professional knowledge and expertise of industries for our employees, industrial analysis reports were written by the Bank on a regular basis; 96 industrial dynamics reports, 12 profile analysis on domestic and overseas economics and finance, 8 monthly statement for industry trends, and 4 quarterly reports for prospects of domestic industries were completed during 2020.

96 industrial dynamics reports, 12 profile analysis on domestic and overseas economics and finance, 8 monthly statements for industry trends, and 4 quarterly reports for prospects of domestic industries are expected to be completed during 2021.

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• 2) Analysis, reports, and research on particular and major industries

• i. Given the global outbreak of COVID-19, the global economy experienced a significant hit, together with the material adjustments in global supply chains resulting from the fight between the U.S. and China, a brand-new development layout was presented to the world. the Bank prepared the "Economic and Industry Prospect of Taiwan in the Post Pandemic Era." According to the prospect, COVID-19 materially prolonged the time for domestic activities, which will stimulate the demands for the applications of smart sensors in remote operations, VR, security defense, sports and rehabilitation, and manifest the application of new no-contact sensing technologies, which will be comprehensively introduced into scenarios of transportation, plants, hotels, and hospitals. In addition, the prospect compiled forecasts made by research institutions on financial institutions, information electronics, chemical industry, commodity sector, semi-conductor industry, real estate industry, machinery and equipment manufacturing industry, tourism and travel industry, and other industries for 2021, in the hope of seeking new business opportunities to serve as a reference for its headquarters in determining the adjustments made to the industrial credit loans.

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• ii. In response to the coordination and organization of syndicated loan by the Bank, it prepared project reports such as "Present State of Stainless Steel Industry," "Present State of Machine Tool Industry," "Analysis on the Effects of COVID-19 on the Changes in Monetary Policies and Economic Growth of Major Economies Worldwide," and "Overview of Automotive Manufacturing Industry."

• 3) The Bank amended the discount authorization for purchase application of all levels to improve the operational efficiency and align with the practices on January 2, 2019.

• 4) The Bank completed the derivative guarantee and market price evaluation comparison on January 16, 2019, to facilitate the control over the opening of derivatives and disgorgement of guarantees.

• 5) The Bank added functions of "user authentication procedure" and "QR Code scanned payment for cross-border online shopping" for the cross-border online shopping (outward cross-border remittance) service on January 30, 2019.

• 6) The Bank completed the speed raising for VPN in January 2019; the bandwidth was increased to 20Mbps/60Mbps (uploading/downloading). Divert the administration and business network connection yet carry out the backup procedures for one another for the branches, and allocate the bandwidth more efficiently.

• 7) Taiwan Pay Red Envelope Issuing: The Bank organized the Taiwan Pay Red Envelope Issuing for its mobile banking from February 1 to February 10, 2019.

• 8) The Bank added the expiry notice and review function for the overseas bond custodian system on February 13, 2019, to increase the control over process risks and minimize human error during the operations.

• 9) The Bank added the system function of automated interest crediting/charging at the end of February 2019 to reduce human work and simplify operating procedures.

• 10) The Ministry of Health and Welfare permitted the Bank to establish the "Public Welfare Trust - Senior Carefree Social Welfare Fund" as the trustee on March 15, 2019. On November 12, 2019, the "Public Welfare Trust - Senior Carefree Social Welfare Fund" made donations to Baojhang Community Development Association in Guanyin District, Taoyuan City and Houhu Community Development Association in Xinwu District, Taoyuan City to assist the associations in repairing the venue and equipment for social care, realizing community care.

• 11) The Bank issued the long-term subordinated financial bonds in the amount of NT$5.8 billion on March 21, 2019.

• 12) Added Taiwan Pay Scanned for Withdrawal: The Bank adopted the cross-bank scanned for withdrawal specification established by FISC to provide Taiwan Pay Scanned for Withdrawal through mobile banking since March 29, 2019.

• 13) The Bank added functions such as procedures for rejected statements and data maintenance, transaction notification, and repeated statement for mailbox, on April 18, 2019 to reduce human work and provide instant investment information for customers.

• 14) The Bank completed the update for the central billing mainframe on April 20, 2019, to improve the usability of the system.

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• 15) The Bank successively completed the storage encryption system for the core system database of its 7 overseas branches since April 2019.

• 16) The Bank added Taiwan Pay Tax Payment by Credit Cards: To provide convenient tax payment for taxpayers, the Bank inaugurated the credit card payment services for Taiwan Pay to make tax payments on April 22, 2019.

• 17) The Bank added the fund return (interests included) information under "Online Banking - Fund Balances and Profit or Loss Inquiry" and "Trust Fund Transaction Report and Physical/E-Statement" on May 9, 2019, to improve the information disclosure, allowing the beneficiaries of funds to learn the full picture of their investments and understand the investment performance.

• 18) The Bank organized the "Transmission through Successive Generations Family Trust" event on May 10, 2019, to ensure the successive inheritance for family businesses of SME owners and increase the driving momentum for family trusts.

• 19) Taiwan Pay Debit Payment for Credit Card Purchase: The Bank added the credit card payment function of Taiwan Pay to make purchase payment on June 24, 2019, to expand the utilizing scenarios and usage of Taiwan Pay credit card purchase.

• 20) Cloud Payment HCE Card Service: The Bank inaugurated the pilot for Cloud Payment HCE Card Service on June 28, 2019; customers may use the Taiwan Pay mobile banking APP to convert the debit card number or deposit account number with the Bank to corresponding code and download the code to customers' mobile devices for customers to make proximal and remote mobile payment transactions such as transfer, purchase, and tax/fee payments.

• 21) The Bank simplified the closing account procedures of the Bank in June 2019, which significantly improved the operating efficiency of its branches and minimized the time for closing accounts.

• 22) The Bank was invited to the ceremony of "Property Trust for the Senior and the Disabilities Evaluation" held by the FSC on July 18, 2019. The nursing trust business of the Bank recorded outstanding performance in 2018 and received an award from the FSC as recognition. According to the statistics of the Trust Association, from 2016 to the 3rd quarter of 2019, the Bank's size of trust estates and the number of beneficiaries ranked the 5th and the 2nd, respectively, among the 43 banks under evaluation, achieving outstanding performances.

• 23) The mobile banking of the Bank provides barrier-free services with full function since August 2019.

• 24) Establishment of Taiwan Pay Merchant Service System: Allow customers to customize their online real-time account statement and reconciliation to encourage large-scale chain stores to introduce Taiwan Pay QR Code for payment collection; the system was launched at the end of September 2019.

• 25) Added the Voice Access for Payment through Mobile Banking Service: To improve the convenience for payments, users may opt for using Taiwan Pay to pay on the page/APP or payment page/APP of merchants. The system was launched in October 2019.

• 26) The Bank inaugurated foreign currency trust activities in response to the promulgation of the Management, Utilization, and Taxation of Repatriated Offshore Funds Act on November 28, 2019, to pursue the business opportunities of repatriated offshore funds, and fulfill requirements of foreign currency from customers such as asset allocation and wealth management.

• 27) The Bank launched the data loss prevention (DLP) system in November 2019 and enhanced the review regarding copying documents from personal PC to portable storage media (USB-A portable disks), the audit for trajectory, and the encryption mechanism.

• 28) The Bank launched the intranet terminal equipment management system in December 2019 to control the devices linking to the intranet of the Bank (such as restricting devices with outdated virus definition to connect to the intranet) and integrate the terminal management software of the Bank to generate customized statements.

• 29) Released the usage of Artificial Intelligence Customer Service to customers in February 2020.

• 30) Completed the establishment of a node-to-node encryption system in February 2020 to comply with the e-banking security control standards, realize the protection and safety for the transmission of customers' passwords, and strengthen the defense of online transactions.

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• 31) The Bank issued the long-term subordinated financial bonds in the amount of NT$10 billion on March 25, 2020.

• 32) The Bank made donations out of the "Public Welfare Trust - Senior Carefree Social Welfare Fund" on April 27, 2020 to "Chumen Community Development Association in Baihe District, Tainan City"; "Chiayi Country Everlasting Development Association"; "Zhongjue Community Development Association in Xihu Township, Changhua County"; "Guoxing Community Development Association in Qingshui District, Taichung City"; and Tangchang Community in Qishan District, Kaohsiung City" for them to repair the community care stronghold and equipment, implementing community care.

• 33) The Bank establish the Parallel SYSPLEX system with local backup in April 2020, so as to ensure the continuous operations of the system, providing undisrupted system operations.

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• 34) The Bank added the trust seal archiving management on May 11, 2020 to include trust seal into the Bank's seal comparison connection system for management, replacing the current manual acquiring of trust seal card for approval and usage, improving its operating efficiency.

• 35) Completed the API connection to the "financial blockchain confirmation" system provided by FISC in June 2020 for providing financial blockchain confirmation services.

• 36) Completed the blockchain confirmation and API application blockchain confirmation on June 29, 2020 to connect to automatic responses via API and the operation was adjusted to be regulated under the headquarters.

• 37) Established the network segment partition system and firewalls to control the network connection between network segments, cross-network segment access of IoT equipment, and the connection to the internet, in order to avoid information equipment being implanted with malicious ware and resulting in effects on the Bank's operations due to the spreading and infection of viruses.

• 38) The barrier-free online banking of the Bank started to provide undesignated transfer services for customers from July 2020 and was certified by NCC.

• 39) In response to the economic revitalization policy enacted by the government, the Bank launched the payment service for paper based Triple Stimulus Vouchers on July 23, 2020 for merchants to exchange the vouchers at 125 domestic branches.

• 40) Introduced the 1D barcode credit card collection services of Taiwan Pay to respond to the diverse receipts and reimbursements scenarios at large-scale chain merchants; the services were launched in July 2020.

• 41) In response to Bank 3.0 policy and provision of convenient services for customers, the Bank released the "E-Loan" online personal credit loan service on July 28, 2020, providing "limit and rate calculation," "immediate credit loan," "loan application progress inquiry/online document supplementation," and "contract signing" functions to satisfy the demand of customers in avoiding presenting at branches and rapid services.

• 42) The Bank made donations out of the "Public Welfare Trust - Senior Carefree Social Welfare Fund" on July 28, 2020 to "Taitung County Aboriginals Culture Association"; "Shuangtan Community Development Association in Sanyi Township, Miaoli County"; and "Donggang Community Development Association in Budai District, Chiayi City" for them to repair the community care stronghold and equipment, implementing community care.

• 43) The Bank signed and approved the new foreign stock/ETF system procurement case on August 5, 2020 to provide diverse trust products for high-asset groups and facilitate business promotions.

• 44) The issuance of non-accumulated subordinated financial debentures in the amount of NT$10 billion was completed on August 13, 2020.

• 45) Added the system remark for offshore back-end sales fund - "declaration of range of expenditure structure for back-end sales services fees" on August 26, 2020 to accord with legal regulations and enhance its internal control system.

• 46) The Bank was invited to the ceremony of "Property Trust for the Senior and the Disabilities Evaluation" held by the FSC on August 27, 2020. The nursing trust business of the Bank recorded outstanding performance in 2019 and received an award from the FSC as recognition.

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• 47) To improve the operating efficiency and effectively integrate the combined effects of insurance operating procedures and customer insurance policy management between branches, relevant departments at the headquarters, and cooperating insurance companies, and concurrently establish an insurance document examination and control system, the Bank released the usage of the "insurance agent operating management system" on August 28, 2020 and continued to improve the system functions.

• 48) Established the digital video surveillance system and storage equipment for all branches in August 2020. The video files are monitored and preserved by branches and supervisory departments for six months to mitigate the risks of the inability to provide evidence due to the loss of surveillance image backup data.

• 49) To reinforce the online ATM functions of the Bank, the stage 1 system release for the new online ATM was conducted on September 2, 2020, and an internal package test was performed by the Bank; the new online ATM was released to customers on October 20, 2020.

• 50) Completed the comprehensive defense of DDoS regarding external connections in September 2020 to prevent hackers' illegal connection and occupying the Bank's external connection bandwidth that may result in the external operations of the Bank.

• 51) Organized a "Family Trust" lecture on September 28, 2020 and invited professionals and scholars to provide lectures, so as to understand the market development trend and improve the business promotion abilities of our fellow colleagues at branches through the lecturing content.

• 52) The Bank made donations out of the "Public Welfare Trust - Senior Carefree Social Welfare Fund" on October 20, 2020 to "Chumen Community Development Association in Baihe District, Tainan City" and "Chiayi Country Everlasting Development Association" for them to repair the community care stronghold and equipment, implementing community care.

• 53) The Bank signed and approved the new foreign bond online transaction system procurement case on November 5, 2020 to provide convenient transaction channels for customers.

• 54) Completed the contract-signing for the new after-end sales fund online transaction system on November 17, 2020 to develop the high-asset property management center strategy and optimize customer experiences.

• 55) The Bank carried out business cooperation with JKOS Network Co., Ltd. to allow the Bank's customers to use their deposit account with the Bank as the designated deposit account for payment. The system was released on November 20, 2020.

• 56) Completed the establishment of new online banking in November 2020. The system is able to automatically evaluate the usage through micro-service technologies and containerization structure to carry out the horizontal expansion, so as to prevent the delay in services. Meanwhile, it can rapidly, safely, and flexibly respond to business requirements and connect to services and data to provide a safe and stable transaction environment for customers.

• 57) To improve general online banking and provide premium services for customers, the Bank released the new general online banking for customers on December 1, 2020.

• 58) The Bank signed and approved the procurement case for new private equity function module application software for the fund system on December 1, 2020 to provide diverse options of investment targets for particular investment customer groups.

• 59) The Bank made donations out of the "Public Welfare Trust - Senior Carefree Social Welfare Fund" on October 20, 2020 to "Shitan Community Development Association in Qionglin Township, Hsinchu County" for it to repair the community care stronghold and equipment, implementing community care.

• 60) To provide comprehensive real-time inquiry services for cross-border remittance information to customers, the Bank joined the SWIFT GPI (Global Payments Innovation) and inaugurated the services on December 14, 2020.

• 61) The Bank signed and approved the procurement case for the new customer information inquiry function on December 31, 2020 to respond to the severs development trend of trust products and protect the interests of consumers.

• 62) The Bank improved the functions for its mobile banking and strengthened user experiences for customers; the phase 1 new mobile banking services were released on December 31, 2020.

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• 63) The Bank cooperated with iPass and LINE PAY to allow the Bank's customers to use their deposit account with the Bank as the "LINE PAY MONEY e-Payment Account" to make deposits or withdrawals. The system was released on December 31, 2020.

• 64) Released the Taiwan PAY bonus service to provide instant bonus collection and exchange services for customers, and in turns, improve the will of use. The system was released on December 31, 2020.

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• 65) Financing patent: To develop FinTech, the Bank had applied for 39 patents (including 20 utility model patents and 19 inventions patents) to the Intellectual Property Office, MOEA, by the end of December 2020. 26 of such applications were approved (including 16 utility model patents and 10 inventions patents).

• c. Future research and development (R&D) plans and the R&D expenses expected to be invested

• 1) R&D budget for 2021 is NT$42,367 thousand.

• 2) To improve the backup system for the Bank's bond transaction system and align with the upgrades for the trading information operating system of TPEx, the Bank carried out the procurement and upgrade for the software and hardware used in the information server in the bond trading system in January 2021.

• 3) The Bank expects to receive the certification regarding the Business Continuity Management System for Internet Bank service , Corporate Internet Banking service, and Mobile Banking service (ISO 22301:2019) in February 2021.

• 4) The Bank expects to RPA implementation in the 1st quarter of 2021 for substituting the laboring procedures related to the great number of repetitive inquiries for AML/CFT investigation.

• 5) The Bank expects to complete the establishment of DDoS defensive equipment to prevent hackers from using DDoS to consume the system's resources and collect information security information related to global malicious ware to prevent malicious attacks.

• 6) Revision of the Bank's website: the Bank expects to commence a grand revision for its website in the 2nd quarter of 2021, introduce the latest webpage structure, enhance UIUX, organize the website from customers' perspective/habits/demands to reorient services to sales, and introduce backstage management to improve management efficacy.

• 7) The Bank provides extended online currency exchange services for customers to extend the transaction hours for currency exchange transactions for customers using general online banking and mobile banking; the services were extended from 15:30 until 19:00, which is expected to the completed in the 2nd quarter of 2021.

• 8) To improve the operating efficiency for domestic operating centers regarding arrests and seizures under legal process and minimize risks related to manual procedures, the Bank intends to establish a "Centralized Operating and Management System for Arrests and Seizures under Legal Process" to effectively control the operating procedures and time and safeguard the Bank's interest. The Bank expects to complete the operations for arrests and seizures under legal process in the 2nd quarter and the 4th quarter of 2021, respectively.

• 9) Online loan platform: Expand the "E-Loan" online loan platform, introduce an online application for new personal accounts, and integrate all products related to personal loan/house mortgage/corporate financing, which is expected to the completed in the 4th quarter of 2021.

• 10) Introduce RPA: The Bank introduced RPA to simplify its operating procedures for assisting in statement preparation, data acquisition, application procedures, and other services to improve the efficacy, which is expected to the completed in the 4th quarter of 2021.

• 11) The Bank expects to complete the development of its dashboard smart forecast monitoring and management platform, data analysis system, and data driven application projects in the 3rd quarter of 2021.

• 12) Contact with TSP for Open API cooperation: The Bank develops Open API and selects suitable TSP suppliers for the development of phase 1 banking information API to expand the Bank's business into customers' lives. For phase 2 and phase 3 related to customer information and transactions, the Bank will carefully select cooperating suppliers and continue to negotiate the business model with mutual benefits, and evaluate the possibility of API cooperation, and expect to cooperate with 3 TSP companies in the 4th quarter of 2021.

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• 13) Upgrade for Artificial Intelligence Customer Service: Carry out the Artificial Intelligence Customer Service 2.0 program and conduct the revision and optimization to present graphic display and precision interaction, which is expected to the completed in the 3rd quarter of 2021. The Bank will further introduce the chatbot business communication model and sales behavior models to expand its foreign currency, credit card, loan, account opening businesses, and provide personal account inquiry services.

• 14) Integral upload system for equipment: Integrate the upload backstage of digital signages with different models and systems at present to ensure the delivery of data to each equipment effectively and properly, which is expected to the completed in the 3rd quarter of 2021.

• 15) In response to the operating regulations related to information security, the ATM operating system was upgraded from Windows 7 to Windows 10 to reinforce the security of the ATM system, which is expected to the completed in the 4th quarter of 2021.

• 16) Develop mobile banking smart audio instruction services that adopt audio recognition technologies and natural semantics analyzing technologies for financial services being commonly used regarding the mobile banking services to guide customers in completing financial transaction services after understanding customers' transaction instructions by means of dual-model smart audio and text interactive communication, which is expected to the completed in the 4th quarter of 2021.

• 17) Function optimization for online banking and mobile banking: Continue to optimize and develop innovative functions for online banking and mobile banking to improve transaction security and convenience, and customer satisfaction, which is expected to the completed in the 4th quarter of 2021.

• 18) Webpage optimization for the online application platform: Rebuild the online account-opening, loan, and card application platform and product packaging and value the design of UI and UX to provide flexible and efficient services, rendering brand-new experiences for customers, which is expected to the completed in the 4th quarter of 2021.

• 19) Taiwan Pay Bonus Accumulation Platform (Stage 2): Invigorate the point accumulation method and credit methods for bonus points and implement system settings for various activity models, including "point transfer and gifting" between customers, "limited point acquisition," "double gift points for specific transactions," and "points in exchange for gifts," to improve customers' intention of point accumulation, and in turns facilitate the business growth, which is expected to the completed in the 4th quarter of 2021.

• 20) The eFlow system: Examine the current operating procedures of the Bank's departments, electricize forms and documents available for online operations, and establish an online instant response system to save the current paper consumption and duly preserve relevant documents for future inquiries, which is expected to the completed in the 4th quarter of 2021.

• 21) Optimize the wealth management system and introduce functions related to offshore bonds to effectively analyze and compare customers' investment targets and habits for the purpose of improving customer services, which is expected to be released at the end of 2021.

• 22) Taiwan Pay supporting transportation code transactions: Citizens may present the transportation QR Code by using Taiwan Pay from the Bank's mobile banking services for the payment of traffic charges at the boarding gate or machine via code scanning when taking buses, MRT, and other public transportation.

• 23) Taiwan Pay acquiring services with the shared platform for e-payment institutions: As e-payment institutions will join the "QR Code Shared Payment Platform" directed by the FISC, subject to FISC's schedule, the Bank included the wallet platform payment operation provided by e-payment institutions as a collection model for the Bank's Taiwan Pay merchants to achieve the connectivity and connection regarding transaction cash flows between the Bank's merchants and e-payment institutions.

(6) Short- and Long-Term Business Development Plans

• A. Short-term business development plan: Please refer to the "(3) Operating Plan for 2021" in this section.

• B. Long-term business development plan: Please refer to "3. Future Development Strategies" in "Chapter 1 Letter to the Shareholders."

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Taiwan Business Bank Annual Report 2020

V

2. Employees

(1) Employees Information

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For the year
and as of
Year 2019 2020
February 28,
2021
Number of employees 5353 5221 5256
Average age 43.84 44.17 44.28
Average year of service 16.37 17.06 16.85
Ph.D. 0.26 0.21 0.27
Percentage Master's degree 17.88 16.64 17.66
Distribution
of Academic University/College 75.60 75.87 75.32
Qualifications
(%) High school 5.98 6.88 6.41
Below high school 0.28 0.40 0.34
Licenses for trusts 4506 4390 4522
Financial planner 1699 1686 1708
Senior Qualification Examination for Professional
and Technical Personnel (Lawyers and Chartered 8 12 8
Public Accountant)
Qualification Examination for Senior Securities 1703 1696 1709
Specialist
Qualification Examination for Securities 85 87 86
Investment Analyst
Qualification Examination for Futures Specialist 2091 2089 2099
Grade above S2 for FLPT® 1236 1125 1215
Internal auditor 11 12 11
Basic Proficiency Test on Bank Internal Controls 3777 3647 3794
Name and
number of Financial Risk Manager (FRM) 15 14 15
employees
who hold Certified Financial Planner (CFP) 17 17 17
professional
licenses Qualification Examination for Property and 15 13 16
Insurance Broker
Qualification Examination for Property Insurance 12 9 13
Agent
Qualification Examination for Personal Insurance 9 8 10
Broker
Qualification Examination for Personal Insurance 9 7 10
Agent
Qualification Examination for Investment- 4143 4072 4172
orientated Insurance Product Representative
Property Insurance Representative 3794 3684 3809
Personal Insurance Representative 4614 4536 4637
Test for the Sales of Non-investment-oriented Life
Insurance with Payment in Foreign Currency by 3117 3029 3125
Personal Insurance Representative
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101

(2) Studies and Training for Employees

• A. The Bank executed different training according to the "Enforcement Guidelines for Training for Employees of Taiwan Business Bank, Ltd." and the Bank's employee training program for 2020; however, due to the effects arising from the outbreak and in response to the central pandemic-prevention policies and measures, partial programs adopted the model of digital learning or video connection. Physical sessions held during 2020 recorded a total of 325 sessions (including 19 sessions of business foundation, 232 sessions of business seminars, 6 sessions for managers, 25 sessions of weekend classes, 43 sessions of lectures/orientations) held; the total number of people trained was 50,728, the average employee training rate was approximately 9.65 times per person, and the annual employee training expenses were NT$26,466 thousand in total.

• B. In response to the Bank 4.0 digital financing environment, the Bank provides a series of courses in relation to digital marketing for its employees to gain a profound insight into FinTech and innovation, corresponding to the future transformation opportunities for banks.

• C. To strengthen the competitiveness of the Bank and improve the professional knowledge, expertise, and function, the Bank organized business directing and management development training courses to boost the quality of our management and reduce the operating risks.

• D. The competent authority from our head office will assign relevant personnel to participate in training courses organized by external professional training institutions, encouraging employees to absorb new knowledge and improve their professional competencies, so as to meet the requirements on professional competencies for the business development of the Bank, comprehensively promote the business development.

(3) Employee Code of Conduct and Ethics

The Bank attaches great importance to the employee code of conduct and ethics. All of our employees are provided with the working rules for them to clearly understand their own rights and code of conduct to be observed, including loyalty and dedication, legal compliance and faithfulness, honesty and integrity, professional commitment, confidentiality, and courtesy. Our employees also adhere to a high standard of morals and ethics.

(4) Protective Measures for the Safety of the Work Environment and Personal Safety of the Employees

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Item Description
Access control A. Rigorous access control monitor system is available during daytime and nighttime.
B. The Bank has signed a contract with the security company regarding nighttime and weekends to
protect the safety of the branches.
C. Connect with the police and public security unit as a precaution.
Equipment A. According to the requirements under Regulations for Inspecting and Reporting Buildings Public
inspection and Security, the Bank shall engage professional companies to carry out the security inspection every
maintenance two to four years.
B. The Bank commissioned professional organizations to inspect the fire safety facilities every year as
required by the Fire Services Act.
C. According to the Occupational Safety and Health work rules of the Bank, the maintenance and
inspection for motorcycles, air conditioners, vehicles, coin counters, kitchen, hole puncher, and bill
counter are carried out per day; the maintenance and inspection for air conditioners, first-aid kit, fire
service equipment, and elevators are carried out per month; the maintenance and inspection for
vehicles are carried out per season; the maintenance and inspection for high/low voltage electrical
equipment are carried out per six months; the maintenance and inspection for motorcycles, fire
service equipment, and elevators are carried out per year; and the maintenance and inspection for
motorcycles are carried out per three years.
Disaster A. The Bank has disaster prevention, rescue notes, and occupational accident reporting procedures
prevention in place, including "Disaster Emergency Response Countermeasures Manual," "Management
and response Guidelines for Major Contingencies," "Procedure Guidelines for Security and Grouping of Branches,"
measures "Code of Practice for Occupational Safety and Health," "Regulations Governing Occupational
Safety and Health," "Workplace Self-inspection Plan," and "Procedure Guidelines for Equipment
Maintenance." Such procedures specify the responsibilities and mission for personnel at each level
before and after material events of natural disasters and material emergencies of robberies. Anti-
robbery drills are performed twice a year at our branches.
B. Except for the organization of the Civil Defense Corps, our head office also engages the competent
authority regarding fire services to organize the fire service lectures.
C. To safeguard the security and health of our employees, the Occupational Safety Section
subordinates to the Human Resources Department is in place for the promotion of safety and health
affairs.
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Taiwan Business Bank Annual Report 2020

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Item Description
Physical Health A. Health check and health management: Regular health check is provided for employees, and medical
workers present at the branches will offer health guidelines and recommendations to employees who
receive abnormal results of the health check.
B. Hygiene of the working environment: Smoking is prohibited at all business premises. The Bank also
carries out regular office cleaning and sterilization and sets the 17th of each month as the cleaning
day.
C. In order to help voluntary health management of our employees, the Bank organizes health
seminars, CPR training, and provides health-related programs on the digital learning website of the
Bank for our fellow colleagues to learn new knowledge from the internet and enrich their concepts of
health.
D. To provide employees a healthy working environment, the Bank established a health service and
stress relief activity center, nursing rooms, and emergency facilities (such as AED and first -aid kit),
and improved the workplace facilities in due course to improve the safety of the environment and
minimize the occurrence of workplace accident.
Mental Health A. Provide physical and mental relaxation for employees: To help care for the living quality of our
employees and relieve their stress from workplace and family, the Bank provides programs of
pressure release, family care, emotion control, and encouragement on its digital learning platform for
our fellow colleagues to access, adjusting mental health in due course.
B. Prevention of sexual harassment at the workplace: Establish report regulations and punitive terms.
Advice on Setting up the "Advice on hazardous analysis during operations environment of contractors" and "Q&A"
hazardous in the exclusive zone for the employees of the Bank according to the government regulations.
factors during
operations of
contractors
Insurance and A. The Bank provides labor insurance (including occupational injury and disease) and health insurance
Medical Care to its employees according to the law, and negotiates with insurance companies to provide casualty
Consolation insurance, accident medical insurance, and cancer insurance to the Bank's employees and their
families at a rate of concession.
B. The Bank offers work-related casualty insurance for all our employees with coverage of NT$3 million.
For work-related disability or work-related deaths, the insurance claim will be used to support the
employee or its successors.
C. Provide disease subsidies to our clerks, their spouses, and descendants.
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3. Corporate responsibilities and moral conduct: Please refer to IX. Corporate Social Responsibility Report.

4. The Number of Non-Managerial Full-time Employees, and Their Average Salary and Median Salary

Items	2020	2019	Growth Rates
Number of non-managerial full-time employees (person)	4,929	4,863	1.36%
Average salary of non-managerial full-time employees (NT$ thousand)	1,127	1,158	-2.68%
Median salary of non-managerial full-time employees (NT$ thousand)	1,007	1,029	-2.14%

• Note: The average salary and median salary of non-managerial full-time employees has decreased primarily due to the reduction in performance bonus and employee remuneration

5. Information Equipment

• (1) Primary hardware: Central accounting mainframe, foreign exchange mainframe, fund mainframe, automatic tape library of the mainframe, virtual tape library of the mainframe, hard drive of the mainframe, laser printer of the mainframe, hard drive of the open system, tape library of the open system, virtual tape library of the open system, server of the open system, and network equipment.

103

• (2) Primary information system: Deposits system, loans system, remittance system, foreign exchange system, credit card system, general ledger system, e-banking information system, teller terminal system, seal/signature verification system of the Bank, ATM system, ATM monitoring system, the central operating system for collection bill and outward remittance, statement management and inquiry system, CRM system, digital branches system, AML system, fund system, wealth management system, and overseas branches system.

(3) Information operating project

• A Continue to establish information infrastructure and strengthen the defense abilities to provide secured and stable operations.

• B Promote business procedure reformation and digital finance development, introduce innovative developing technologies to replace highly repetitive manual procedures and integrate cross-system business procedures, including the simplification of human inquiry process within the credit investigation procedures and simplification of AML alert operations assisted by RPA. By doing so, human resources may be used in the innovative development and promotions of digital finance services to improve the human resources structure of the Bank.

• C Establish the open baking platform, manage API services and security of the Bank, and develop phase 2 Open API functions, so as to provide deposits and credit card account data inquiry functions and develop the open banking operation of the Bank.

• D Develop data driven applications and continue to establish the infrastructure for the data applications, including the replacement of enterprise data warehouse software, address normalization of collaterals, and data analysis applications (including the Single Customer View, Public opinion analysis for business decision making, the implementation of data analysis tools, and customer attribute tags).

(4) Emergency backup and security protection measures for information operations

• A. Central mainframe backup

The operating center of the Bank is located at Linkou, and a remote backup center is established in Taipei. Established the SYSPLEX system with local HA in April 2020. The core system structure is the SYSPLEX system with local HA and remote mainframe backup. The data storage adopts local dual-disk backup and remote disk backup to prevent the disruption of operations and data damages due to the malfunction of a single mainframe or disk unit. In addition, to enhance the familiarity of our employees toward the operating procedures and the completeness of the verification document, remote backup rehearsals are carried out twice a year.

• B. Branches backup

Our branches are equipped with backup networks. Also, when accidents occur and the connection system is down, customers may present at the nearby branch with relevant documents for handling.

• C. Computer virus and hacker invasion precaution for computer equipment of the Bank

• a. Spam filtering and malicious email blocking system is in place; meanwhile, external email accounts are prohibited, and letters have been dispatched to all departments regarding internal control operations.

• b. Building anti-virus walls for Internet, internal local server firewalls, dual-firewall system, and Intrusion Prevention System (IPS); monitor the access to DMZ zone (i.e., Internet banking, the entry portal, and online financing system, etc.) and server zone (i.e., application server, and database server, etc.), as well as all external website connection made by our employees, to reinforce the cybersecurity protection.

• c. Establish the network segment partition and firewalls to control the network connection between network segments, cross-network segment access of IoT equipment, and the connection to the internet, in order to avoid information equipment being implanted with malicious ware and resulting in effects on the Bank's operations due to the spreading and infection of viruses.

• d. Establish the web application firewall (WAF) to strengthen protection against Web application vulnerabilities and block application layer web attacks (i.e., DDoS and SQL injection)

• e. Establish the Symantec anti-virus software to maintain the operating security of PCs, work stations, and servers using the Windows platform at all departments of the Bank, to prevent the interruption of normal business operations or leakage of important information due to the infection of computer viruses (including malicious ware).

104

Taiwan Business Bank Annual Report 2020

V

• D. Carry out information security vulnerability scanning and penetration scan regularly and set up an internal vulnerability scanning system to scan PCs, newly launched business, and testing systems of the Bank to reinforce the security system.

6. Labor-Management Relations

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(1) Welfare measure of the Bank

• A. Employees may use their off-hours to participate in language studies and fitness programs and apply for subsidies according to the Bank's requirements.

• B. The cafeteria at the headquarter provides delicious lunch at a decent price for employees.

• C. Except for employees involving in the securities business, all the employees may enjoy blue-chip rates for deposits and loans.

• D. For employees reaching the age of retirement and at the age of 60 or above, the Bank will provide bonuses for the three important Chinese holidays to those who are willing to retire voluntarily.

• E. The Bank provides insurance for all employees with coverage of NT$3 million regarding emergencies related to work; employees may apply for claims from insurance companies concerning work-related injury or illness or work-related death.

• F. The Bank has established an "Employee Benefits Committee" that withholds the 0.5% of the employees' salaries as the benefit payment per month and allocate 0.15% of the revenue for the Employee Benefits Committee to organize and use in matters in relation to employee benefits, including education scholarships for children of employees, employees fertility subsidies, disease subsidies to our clerks, their spouses, and descendants, provision of one-year term group insurance, and benefit payment for the three important Chinese holidays for employees on duties.

• G. Except for the fertility subsidies distributed to employees from the Bank's employee benefit association, the Bank also provided additional fertility subsidies distributed to employees starting from 2020.

• H. Inaugurate the Employee Stock Ownership Trust to create a win-win situation for the Bank and its employees.

(2) Retirement system

The Bank shall set aside the pension (contribution rate of 6%) per month to deposit in the employees' individual pension accounts for employees eligible for the new labor pension plan. the Bank shall set aside employees' retirement allowance (contribution rate of 7.46% at the end of 2020) per month to deposit in financial institutions designated by the government for employees eligible for the old labor pension plan. As of the end of 2020, balances in the employees' retirement allowance account were over NT$5 billion. the Bank has established the Labor Retirement Allowance Supervision Committee to supervise the utilization and contribution of retirement reserve funds.

Regarding the procedures and conditions for retirement application, the Bank complies with the "Direction for Employees' Retirement, Consolation Payment, and Discharge with Severance Payment of the Bank" and the "Group Contract" signed between the Bank and the Bank Industry Union for employees' retirement.

(3) Labor-management Agreements and Protective Measures for Employee Rights and Interests

• A. The Bank convenes labor-management conferences regularly according to "Regulations for Implementing Labor-Management Meeting" to negotiate employee rights and interests, and implements according to the resolutions at the conferences; the execution process remains well.

• B. The Bank conducted its first employee satisfaction survey in 2020. Regarding the results of the questionnaire survey, the Bank will continue to study the improvement measures to improve employees' interests

• (4) Losses arising from labor disputes in the most recent year and up to the end of February 2021: None.

• (5) Current or future potential losses arising from labor disputes: None.

105

7. Important contracts:

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Nature of contract Parties Starting date of the contract Major contents Restrictive terms
Outsourcing contract Taiwan Mobile From December 25, 2014 Join the Payment Service Confidentiality
Payment Co., Ltd. to December 24, 2016 Provider TSM (PSP clause
(Automatically renew for TSM) and outsource data
2 years where no party processing services to
disagree; currently, the Taiwan Mobile Payment Co.,
expiry is December 24, Ltd., including card creation
2022) (i.e., credit card, and
debit card, etc.) for mobile
payment instruments and life
cycle management for cards.
Outsourcing contract SYSTEX From July 1, 2020 to June Credit card-related Confidentiality
Corporation 30, 2022 operations - Operations clause
(Automatic renewal for 1 of form printing, filling and
year upon expiry and up to 2 sealing, and posting.
times)
Outsourcing contract Financial Information From December 1, 2013, to Credit card-related Confidentiality
Service Co., Ltd. December 31, 2014 operations - Operations of clause
(Automatic renewal for international card purchase
1 year upon expiry and and authorization, operations
the same rules apply of card opening/card
subsequently; currently, suspension/reporting of loss,
the expiry is December 31, cash advance, emergency
2021) services.
Outsourcing contract Taiwan FamilyMart. From October 1, 2012, to Credit card operations - Confidentiality
Co., Ltd. December 31, 2013 Collecting the credit card clause
(Automatic renewal for bill payment from the
1 year upon expiry and cardholders.
the same rules apply
subsequently; currently,
the expiry is December 31,
2021)
Outsourcing contract Hong Li Assets From November 7, 2007, Outsourcing debt collection Confidentiality
Management onward (No expiration date for credit card and consumer clause
Consultancy Co., and the Bank may terminate finance
Ltd. the contract at any time)
Outsourcing contract Hong Kong Gold From November 7, 2007, Outsourcing debt collection Confidentiality
Partners (Asia) Asset onward (No expiration date for credit card and consumer clause
Management Co., and the Bank may terminate finance
Ltd. Taiwan Branch the contract at any time)
Outsourcing contract Trade-Van. Com From August 2, 2019 to Issuing the uniform invoice Confidentiality
December 31, 2021 and receipt for participating clause
(Automatic renewal for merchants and providing
1 year upon expiry, and online inquires and
the same rules apply statement downloading
subsequently) services for participating
merchants.
Outsourcing contract Taiwan Security Co., Established on the date Cash transit operation - None
Ltd. and LeeBao of signing by the signing Temporary and pay-per-use
Security Co., Ltd. department for a term of one (2 firms)
year (the contract has an
automatic extension term)
Outsourcing contract Taiwan Security Co., Established on the date Cash transit operation - None
Ltd. and LeeBao of signing by the signing Charter by month (2 firms)
Security Co., Ltd. department for a term of one
year (the contract has an
automatic extension term)
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Taiwan Business Bank Annual Report 2020

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Nature of contract Parties Starting date of the contract Major contents Restrictive terms
Outsourcing contract Chung Hwa Express Established on the date Marketable securities, None
Corp. of signing by the signing notes, and receipts transit
department for a term of operations
one year, the contract will
automatically extend for 1
year, and the same rules
apply subsequently.
Outsourcing contract An Feng Enterprise Established on the date ATM replenishing operations None
Co., Ltd. and Lian An of signing by the signing (2 firms)
Service Co., Ltd. department for a term of 1
year, and the contract has
an automatic extension term.
Outsourcing contract Shin Kong Security Established on the date ATM video monitoring None
Co., Ltd., Taiwan of signing by the signing operations
Secom Co., Ltd., and department for a term of 3 (3 firms)
China Steel Security years, and the contract has
Co., Ltd. an automatic extension term.
Outsourcing contract Yuen Foong Paper From July 24, 2020 to July Matters of printing cash None
Co., Ltd. 23, 2021 (the contract has dividends check, data
an automatic extension term processing and folding for
to automatically renew for 1 postage.
year)
Outsourcing contract Yuen Foong Paper 2020.10.1-2021.9.30 Logistics for data processing None
Co., Ltd. (the contract has an - Notice operations for New
automatic extension term) Taiwan Dollar time deposits
automatic renewal upon
expiry.
Outsourcing contract SYSTEX 2020.1.1-2023.12.31 Trust reports and relevant None
Corporation book printing, binding, and
dispatch.
Outsourcing contract SYSTEX From July 1, 2020 to Matters of printing, filling None
Corporation June 30, 2022 (Automatic and sealing, and posting
extension for half year upon of balances verification
expiry and up to 2 times) statement regarding
transactions with customers.
Outsourcing contract SYSTEX From July 1, 2017 to Printing, filling and sealing, None
Corporation June 30, 2019 (Automatic and posting of e-bank
extension for half year upon transfer transaction
expiry and up to 2 times) statements.
Outsourcing contract SYSTEX From November 1, 2019 to Printing, sealing, and posting None
Corporation October 31, 2022 of the balance statements
(Automatic extension for 1 for check deposits.
year where no party sends a
letter to notify the termination
of the contract, and the
automatic extension is up to
2 times)
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8. Relevant information on securitization products: The Bank has not offered securitization products.

107

VI

Financial Overview

• 109 1. Condensed Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income for the Past Five Years

113

118

119

120

2. Financial Analysis for the Past Five Years

3. Audit Committee's Audit Report on the 2020 Financial Statements

4. Representation Letter for 2020 Consolidated Financial Statements

5. Independent Auditors' Report for 2020 Consolidated Financial Statements

• 123 6. 2020 Consolidated Financial Statements and Accompanying Notes

223

226

323

7. Independent Auditors' Report for 2020 Individual Financial Statements

• Individual Financial Statements and Accompanying Notes

• the Related Impacts

Ⅵ

1. Condensed Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income for the Past Five Years

• (1) Condensed Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income

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Condensed Consolidated Balance Sheets

Unit: NT$ 1,000

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Year Financial information for the past five years (Note 1)
Item 2020 2019 2018 2017 2016
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		2020	2019	2018	2017	2017
Cash and cash equivalents, due from the Central Bank and call loans to banks		145,013,105	156,827,077	133,016,947	152,634,715	140,184,210
Financial assets at fair value throughproft or loss		15,597,556	26,972,786	7,134,604	1,061,789	1,443,693
Financial assets at fair value through other comprehensive income		117,355,850	102,597,144	73,164,201	0	0
Investment in debt instruments at amortized costs		228,003,332	263,056,842	261,470,496	0	0
Securitiespurchased under agreements to resell		6,132,162	13,399,113	2,386,518	3,998,104	619,201
Receivables－net		43,448,157	27,736,905	45,652,981	23,951,301	24,000,980
Current income tax assets		306,417	810	64,880	129,455	116,062
Discounts and loans－net		1,209,716,083	1,132,462,936	1,074,627,748	1,111,559,969	1,045,014,647
Available-for-sale fnancial assets - net		0	0	0	66,233,836	73,330,688
Held-to-maturityfnancial assets - net		0	0	0	202,967,083	192,523,259
Other fnancial assets－net		13,781	19,928	17,971	2,159,191	2,132,723
Premises and equipment－net		14,514,906	14,498,237	14,309,738	14,226,866	14,120,706
Right-of-use assets - net		1,073,757	1,051,559	0	0	0
Intangible assets－net		375,008	352,376	286,054	274,349	183,061
Deferred income tax assets		1,843,835	1,624,651	1,646,991	1,222,464	1,240,678
Other assets - net		8,241,104	5,552,450	5,261,326	3,674,849	3,819,074
Total assets		1,791,635,053	1,746,152,814	1,619,040,455	1,584,093,971	1,498,728,982
Deposits from the Central Bank and other banks		118,201,039	104,793,612	91,314,543	93,529,770	75,817,857
Due to the Central Bank and other banks		29,040,100	752,145	591,988	31,464	0
Financial liabilities at fair value throughproft or loss		8,639,002	9,393,336	9,339,273	3,732,481	214,259
Securities sold under agreements		2,055,991	868,581	1,657,706	1,105,596	2,758,905
Payable		47,787,075	31,057,684	58,674,131	36,630,052	35,412,594
Current income tax liabilities		3,053	258,956	1,017,575	62,495	310,077
Deposits and remittances		1,418,572,000	1,435,049,547	1,311,041,103	1,316,023,711	1,253,804,477
Financial debenturespayable		53,250,000	53,250,000	47,450,000	41,000,000	42,750,000
Other fnancial liabilities		5,492,366	6,835,084	7,507,715	10,120,545	10,819,145
Provisions for liabilities		3,393,417	3,158,003	3,565,727	3,515,351	3,606,753
Lease liabilities		1,062,021	1,041,183	0	0	0
Deferred income tax liabilities		901,581	888,436	880,738	881,318	884,569
Other Liabilities		4,578,659	3,289,481	1,146,937	1,643,515	1,480,006
Total liabilities (Note 2)	Before distribution	1,692,976,304	1,650,636,048	1,534,187,436	1,508,276,298	1,427,858,642
	After distribution	Note 3	1,650,636,048	1,534,187,436	1,508,276,298	1,427,858,642
Equityattributable to owner	s of theparent company	98,658,749	95,516,766	84,853,019	75,817,673	70,870,340
Stock capital (Note 2)	Before distribution	74,885,834	71,319,842	63,938,802	61,479,617	59,688,949
	After distribution	Note 3	74,885,834	67,135,742	63,938,802	61,479,617
Capital surplus		815,900	815,900	0	0	0
Retained earnings (Note 2)	Before distribution	19,245,962	19,702,723	18,007,553	14,644,284	12,210,873
	After distribution	Note 3	14,710,334	12,892,449	10,537,445	9,811,377
Other equity		3,711,053	3,678,301	2,906,664	(306,228)	(1,029,482)
Total equity (Note 2)	Before distribution	98,658,749	95,516,766	84,853,019	75,817,673	70,870,340
	After distribution	Note 3	94,090,369	82,934,855	74,170,019	70,261,512

Note 2: Regarding the above information on pre-distribution and post-distribution, the pre-distribution amount was based on the amount certified by the CPA, while the post-distribution amount was based on the appropriation and distribution of surplus passed on the resolution of the Shareholders' Meeting in the following year.

Note 3: Distribution of earnings for 2020 is subject to the resolution at the Shareholders' Meeting.

109

Condensed Individual Balance Sheets

Unit: NT$ 1,000

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Year Financial information for the past five years (Note 1)
Item 2020 (Restated) 2019 2018 2017 2016
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Year Item	Year Item	Financial information for thepast fveyears(Note 1)	Financial information for thepast fveyears(Note 1)	Financial information for thepast fveyears(Note 1)	Financial information for thepast fveyears(Note 1)	Financial information for thepast fveyears(Note 1)
		2020	(Restated) 2019	2018	2017	2016
Cash and cash equivalents, due from the Central Bank and call loans to banks		144,398,236	156,550,730	132,686,605	152,408,883	139,847,761
Financial assets at fair value through proft or loss		15,003,571	26,626,885	6,934,604	1,061,789	1,443,693
Financial assets at fair value through other comprehensive income		117,352,923	102,597,144	73,164,201	0	0
Investment in debt instruments at amortized costs		228,003,332	263,056,842	261,470,496	0	0
Securities purchased under agreements to resell		6,047,187	13,399,113	2,386,518	3,998,104	619,201
Receivables－net		41,709,998	25,662,450	43,698,543	22,353,991	22,842,758
Current income tax assets		302,967	0	64,842	129,435	114,583
Discounts and loans－net		1,209,716,083	1,132,462,936	1,074,627,748	1,111,559,969	1,045,014,647
Available-for-sale fnancial assets - net		0	0	0	66,233,836	73,330,688
Held-to-maturityfnancial assets - net		0	0	0	202,967,083	192,523,259
Investments measured by equity method - net		2,568,843	2,216,377	2,684,501	2,345,937	1,852,246
Other fnancial assets－net		13,781	19,928	17,971	2,159,191	2,132,723
Premises and equipment－net		14,512,022	14,493,529	14,298,525	14,216,773	14,112,644
Right-of-use assets - net		1,066,732	1,037,377	0	0	0
Intangible assets－net		374,263	351,476	284,944	273,608	181,992
Deferred income tax assets		1,815,778	1,591,851	1,623,371	1,203,779	1,224,623
Other assets - net		8,209,863	5,514,283	5,222,172	3,639,872	3,796,738
Total assets		1,791,095,579	1,745,580,921	1,619,165,041	1,584,552,250	1,499,037,556
Deposits from the Central Bank and other banks		118,201,039	104,793,612	91,314,543	93,529,770	75,817,857
Due to the Central Bank and other banks		28,450,000	0	0	0	0
Financial liabilities at fair value through proft or loss		8,639,002	9,393,336	9,339,273	3,732,481	214,259
Securities sold under agreements		2,055,991	868,581	1,657,706	1,105,596	2,758,905
Payable		47,767,380	31,039,875	58,620,227	36,591,457	35,360,208
Current income tax liabilities		0	257,687	952,293	0	288,846
Deposits and remittances		1,418,703,482	1,435,332,094	1,311,937,545	1,316,671,351	1,254,224,230
Financial debenturespayable		53,250,000	53,250,000	47,450,000	41,000,000	42,750,000
Other fnancial liabilities		5,492,366	6,835,084	7,507,715	10,120,545	10,819,145
Provisions for liabilities		3,393,417	3,158,003	3,565,727	3,515,351	3,606,753
Lease liabilities		1,054,665	1,026,667	0	0	0
Deferred income tax liabilities		901,581	888,436	880,738	881,318	884,569
Other Liabilities		4,527,907	3,220,780	1,086,255	1,586,708	1,442,444
Total liabilities (Note 2)	Before distribution	1,692,436,830	1,650,064,155	1,534,312,022	1,508,734,577	1,428,167,216
	After distribution	Note 3	1,650,064,155	1,534,312,022	1,508,734,577	1,428,167,216
Stock capital (Note 2)	Before distribution	74,885,834	71,319,842	63,938,802	61,479,617	59,688,949
	After distribution	Note 3	74,885,834	67,135,742	63,938,802	61,479,617
Capital surplus		815,900	815,900	0	0	0
Retained earnings (Note 2)	Before distribution	19,245,962	19,702,723	18,007,553	14,644,284	12,210,873
	After distribution	Note 3	14,710,334	12,892,449	10,537,445	9,811,377
Other equity		3,711,053	3,678,301	2,906,664	(306,228)	(1,029,482)
Total equity (Note 2)	Before distribution	98,658,749	95,516,766	84,853,019	75,817,673	70,870,340
	After distribution	Note 3	94,090,369	82,934,855	74,170,019	70,261,512

Note 2: Regarding the above information on pre-distribution and post-distribution, the pre-distribution amount was based on the amount certified by the CPA, while the post-distribution amount was based on the appropriation and distribution of surplus passed on the resolution of the Shareholders' Meeting in the following year.

Note 3: Distribution of earnings for 2020 is subject to the resolution at the Shareholders' Meeting.

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Condensed Consolidated Statements of Comprehensive Income

Unit: NT$ 1,000

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Year Financial information for the past five years (Note 1)
Item 2020 2019 2018 2017 2016
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	2020	2019	2018	2017	2017
Interest income	25,026,784	29,444,970	28,287,358	24,782,215	24,191,265
Less: Interest expenses	(8,834,567 )	(12,413,857 )	(11,089,482 )	(9,356,793 )	(9,195,062 )
Net interest income	16,192,217	17,031,113	17,197,876	15,425,422	14,996,203
Non-interest net income	5,677,225	6,178,829	5,829,071	5,437,273	5,660,831
Net Income	21,869,442	23,209,942	23,026,947	20,862,695	20,657,034
Allowances for doubtful accounts, commitments and guarantees	(4,054,740 )	(2,417,677 )	(794,134 )	(3,028,711 )	(2,504,194 )
Operating expenses	(12,429,441 )	(12,726,585 )	(13,034,396 )	(11,962,883 )	(11,793,424 )
Net income before tax from continuing operation	5,385,261	8,065,680	9,198,417	5,871,101	6,359,416
Less: Income tax (expenses) gains	(683,486 )	(1,331,427 )	(1,557,875 )	(831,177 )	(1,163,717 )
Net income from continuing operation for the period	4,701,775	6,734,253	7,640,542	5,039,924	5,195,699
Net income (net loss) for the period	4,701,775	6,734,253	7,640,542	5,039,924	5,195,699
Other comprehensive income for the period	(133,395 )	847,658	583,288	516,236	(1,416,022 )
Total comprehensive income for the period	4,568,380	7,581,911	8,223,830	5,556,160	3,779,677
Net income attributable to owners of the parent company for the period	4,701,775	6,734,253	7,640,542	5,039,924	5,195,699
Total comprehensive income attributable to owners of the parent company for the period	4,568,380	7,581,911	8,223,830	5,556,160	3,779,677
Earnings per share (Note 2)	0.63	0.94	1.14	0.79	0.85

Note 2: Earnings per share is calculated based on the weighted average number of shares of the current year and on the basis of NT$. The effects of stock dividends have been included in the retrospective adjustments.

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Unit: NT$ 1,000

Condensed Individual Statements of Comprehensive Income

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Year Financial information for the past five years (Note 1)
Item 2020 (Restated) 2019 2018 2017 2016
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Year Item	Financial information for the past fve years (Note 1)	Financial information for the past fve years (Note 1)	Financial information for the past fve years (Note 1)	Financial information for the past fve years (Note 1)	Financial information for the past fve years (Note 1)
	2020	(Restated) 2019	2018	2017	2016
Interest income	24,884,487	29,270,949	28,156,855	24,677,007	24,127,714
Less: Interest expenses	(8,822,210 )	(12,384,142 )	(11,082,469 )	(9,357,801 )	(9,195,987 )
Net interest income	16,062,277	16,886,807	17,074,386	15,319,206	14,931,727
Non-interest net income	5,711,669	6,130,438	5,572,596	5,264,047	5,477,003
Net Income	21,773,946	23,017,245	22,646,982	20,583,253	20,408,730
Allowances for doubtful accounts, commitments and guarantees	(4,072,168 )	(2,349,480 )	(745,770 )	(3,009,551 )	(2,463,643 )
Operating expenses	(12,328,268 )	(12,611,218 )	(12,814,383 )	(11,785,693 )	(11,621,647 )
Net income before tax from continuing operation	5,373,510	8,056,547	9,086,829	5,788,009	6,323,440
Less: Income tax (expenses) gains	(671,735 )	(1,322,294 )	(1,446,287 )	(748,085 )	(1,127,741 )
Net income from continuing operation for the period	4,701,775	6,734,253	7,640,542	5,039,924	5,195,699
Net income (net loss) for the period	4,701,775	6,734,253	7,640,542	5,039,924	5,195,699
Other comprehensive income for the period	(133,395 )	847,658	583,288	516,236	(1,416,022 )
Total comprehensive income for the period	4,568,380	7,581,911	8,223,830	5,556,160	3,779,677
Earnings per share (Note 2)	0.63	0.94	1.14	0.79	0.85

Note 2: Earnings per share is calculated based on the weighted average number of shares of the current year and on the basis of NT$. The effects of stock dividends have been included in the retrospective adjustments.

(2) Name of CPA and its Audit Opinions

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Financial Year Unqualified Opinion from CPA CPA
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Financial Year	Unqualifed Opinion from CPA	CPA
2016	Unmodifed opinion	Tan-Tan Chung, Feng-Hui Lee
2017	Unmodifed opinion	Tan-Tan Chung, Feng-Hui Lee
2018	Unmodifed opinion	Tan-Tan Chung, Feng-Hui Lee
2019	Unmodifed opinion	Tan-Tan Chung, Chun-Kuang Chen
2020	Unmodifed opinion	Tan-Tan Chung, Chun-Kuang Chen

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2. Financial Analysis for the Past Five Years

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Year Financial information for the past 5 years (Note 1)
Analysis item 2020 2019 2018 2017 2016
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		2020	2019	2018	2017	2017
Operation performance	Loan-to-deposit ratio (%) (Note 2)	81.97	76.03	79.41	81.67	81.63
	NPL ratio (%) (Note 2)	0.50	0.32	0.30	0.33	0.43
	Interest expense to average deposits balances ratio (%)	0.50	0.71	0.67	0.60	0.61
	Interest income to average credit loan balances ratio (%)	1.74	2.06	2.00	1.89	1.93
	Total assets turnover rate (%)	1.24	1.38	1.44	1.35	1.39
	Average revenue of employee (NT$1,000)	4,042	4,309	4,385	4,092	4,160
	Average proft of employee (NT$1,000)	869	1,250	1,455	989	1,046
Proftability	Tier 1 return on capital (%)	5.09	8.35	10.22	6.86	8.14
	Return on asset (%)	0.27	0.40	0.48	0.33	0.35
	Return on equity (%)	4.84	7.47	9.51	6.87	7.50
	Net proft margin (%)	21.50	29.01	33.18	24.16	25.15
	Earnings per share (NT$)	0.63	0.94	1.14	0.79	0.85
Financial structure	Debts to total assets ratio (%)	94.49	94.53	94.76	95.21	95.27
	Real estate and equipment to equity ratio (%)	14.71	15.18	16.86	18.76	19.92
Growth rate	Asset growth ratio (%)	2.60	7.85	2.21	5.70	1.55
	Proft growth ratio (%)	(33.23 )	(12.31 )	56.67	(7.68 )	2.63
Cash fow	Cash fow ratio (%)	(23.46 )	3.86	31.91	4.48	40.07
	Cash fow adequacy ratio (%)	707.51	1,507.14	3,177.03	4,404.56	5,587.48
	Cash fow adequacy ratio (%)	Note 3	Note 3	Note 3	Note 3	Note 3
Liquidity reserv	e ratio (%)	18.21	23.81	20.94	17.21	17.03
Total credit loan balances for stakeholders (NT$1,000)		10,214,528	9,542,062	9,598,016	9,042,678	8,401,148
Ratio of total credit loan balances for stakeholders to total credit loan balances (%)		0.83	0.83	0.88	0.80	0.78
Operating scale (Note 5)	Market share of assets (%)	2.91	3.06	2.96	3.02	2.99
	Market share of net value (%)	2.28	2.28	2.20	2.07	2.03
	Market share of deposits (%)	3.17	3.51	3.38	3.50	3.44
	Market share of loans (%)	3.66	3.61	3.57	3.89	3.80

the increase in allowances for bad debt in 2020.

financial report certified by the CPA.

1. Represent the key performance indicators with the industry particularity of the Bank.

113

1. Operation performance

2. (1) Loan-to-deposit ratio = total loans/total deposits

3. (2) NPL ratio = total not performing loans/total loans

4. (3) Interest expense to annual average deposits balances ratio = total interest expenditures related to deposits/annual average deposits balances

5. (4) Interest income to annual average credit loan balances ratio = total interest income related to credit loan balances/annual average credit loan balances

6. (5) Total assets turnover rate = net gain/total average assets

7. (6) Average gain for employee = net gain/total number of employees

8. (5) Earnings per Share = (income attributable to owners of the parent company – dividends on preferred stock)/weighted average number of shares issued.

9. Financial structure

10. (1) Debt-asset ratio = total liabilities/total assets

11. (2) Real estate and equipment to equity ratio = net real estate and equipment/net equity

12. Growth rate

13. (1) Asset growth ratio = (total assets of the current year - total assets of the previous year)/total assets of the previous year

14. year)/before-tax profit or loss of the previous year

15. paper payables + financial at fair value through profit or loss + notes issued under repurchase agreement and bond indebtedness + amount payable with maturity within one year)

16. expenditures + cash dividend) for the past five years.

17. (3) Cash flow adequacy ratio = net cash flow from operating activities/net cash flow from investment activities

18. Liquidity reserve ratio = current assets prescribed by the central bank/liabilities required liquid reserves

19. Operating scale

20. loans business

21. loans business

22. and loans business

23. loans business

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Financial analysis for the past five years (Note 1)
Year
Analysis item 2020 (Restated) 2018 2017 2016
2019
Loan-to-deposit ratio (%) (Note 2) 81.96 76.01 79.36 88.99 81.60
NPL ratio (%) (Note 2) 0.50 0.32 0.30 0.33 0.43
Interest expense to annual average
0.50 0.71 0.67 0.60 0.61
deposits balances ratio (%)
Operation
Interest income to average credit loan
performance 1.74 2.06 2.00 1.89 1.93
balances ratio (%)
Total assets turnover rate (%) 1.23 1.37 1.41 1.34 1.37
Average revenue of employee (NT$1,000) 4,055 4,305 4,365 4,078 4,139
Average profit of employee (NT$000") 876 1,259 1,473 998 1,054
Return on tier 1 capital (%) 5.08 8.34 10.10 6.76 8.09
Return on asset (%) 0.27 0.40 0.48 0.33 0.35
Profitability Return on equity (%) 4.84 7.47 9.51 6.87 7.50
Net profit margin (%) 21.59 29.26 33.74 24.49 25.46
Earnings per share (NT$) 0.63 0.94 1.14 0.79 0.85
Debts to total assets ratio (%) 94.49 94.53 94.76 95.22 95.27
Financial
structure Real estate and equipment to equity ratio
14.71 15.17 16.85 18.75 19.91
(%)
Asset growth ratio (%) 2.61 7.81 2.18 5.70 1.55
Growth rate
Profit growth ratio (%) (33.30 ) (11.34 ) 56.99 (8.47 ) 2.50
Cash flow ratio (%) (23.62 ) 4.08 32.50 4.82 41.36
Cash flow Cash flow adequacy ratio (%) 740.83 1,525.21 3,275.58 4,582.30 5,837.69
Cash flow adequacy ratio (%) Note 3 Note 3 Note 3 Note 3 Note 3
Liquidity reserve ratio (%) 18.21 23.81 20.94 17.21 17.03
Total credit loan balances for stakeholders (NT$1,000) 10,214,528 9,542,062 9,598,016 9,042,678 8,401,148
Ratio of total credit loan balances for stakeholders to total
0.83 0.83 0.88 0.80 0.78
credit loan balances (%)
Market share of assets (%) 2.91 3.06 2.96 3.02 2.99
Market share of net value (%) 2.28 2.28 2.20 2.07 2.03
Operating
scale
Market share of deposits (%) 3.17 3.51 3.38 3.50 3.44
Market share of loans (%) 3.66 3.61 3.57 3.89 3.80
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the increase in allowances for bad debt in 2020.

financial report certified by the CPA.

1. Represent the key performance indicators with the industry particularity of the Bank.

115

1. Operation performance

2. (1) Loan-to-deposit ratio = total loans/total deposits

3. (2) NPL ratio = total not performing loans/total loans

4. (3) Interest expense to annual average deposits balances ratio = total interest expenditures related to deposits/annual average deposits balances

5. (4) Interest income to annual average credit loan balances ratio = total interest income related to credit loan balances/annual average credit loan balances

6. (5) Total assets turnover rate = net gain/total average assets

7. (6) Average gain for employee = net gain/total number of employees

8. (5) Earnings per Share = (income attributable to owners of the parent company – dividends on preferred stock)/weighted average number of shares issued.

9. Financial structure

10. (1) Debt-asset ratio = Total liabilities / assets.

11. (2) Real estate and equipment to equity ratio = net real estate and equipment/net equity

12. Growth rate

13. (1) Asset growth ratio = (total assets of the current year - total assets of the previous year)/total assets of the previous year

14. year)/before-tax profit or loss of the previous year

• paper payables + financial at fair value through profit or loss + notes issued under repurchase agreement and bond indebtedness + amount payable with maturity within one year)

• expenditures + cash dividend) for the past five years.

• (3) Cash flow adequacy ratio = net cash flow from operating activities/net cash flow from investment activities

• Liquidity reserve ratio = current assets prescribed by the central bank/liabilities required liquid reserves

• Operating scale

• loans business

• loans business

• and loans business

• loans business

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(2) Capital Adequacy

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Year Capital adequacy ratio for the past 5 years (Note 1)
Analysis item 2020 2019 2018 2017 2016
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			2020	2019	2018	2017	2017
Regulatory capital	Common equity		93,119,841	88,212,592	78,947,036	73,448,764	68,922,354
	Other tier 1 of capital that is not common equity		17,504,060	12,708,443	13,386,998	14,140,802	14,664,225
	Tier 2 capital		40,329,291	32,082,995	29,797,442	25,396,643	20,221,002
	Regulatory capital		150,953,192	133,004,030	122,131,476	112,986,209	103,807,581
Weighted risk- adjusted assets	Credit risk	Standardized approach	1,058,435,685	992,799,980	912,764,211	871,996,666	818,988,412
		Internal ratings-based approach
		Asset securitization
	Operational risk	Basic indicator approach
		Standardized approach/ alternative standardized approach	38,142,417	38,286,712	36,971,711	35,136,391	34,024,618
		Advanced measurement method
	Market risk	Standardized approach	28,041,588	19,565,088	11,844,063	13,786,563	18,539,100
		Internal models approach
	Total risk-weighted assets		1,124,619,690	1,050,651,780	961,579,985	920,919,620	871,552,130
Capital adequacy ratio (Note 2)			13.42%	12.66%	12.70%	12.27%	11.91%
Ratio of tier 1 capital to risk-based assets			9.84%	9.61%	9.60%	9.51%	9.59%
Ratio of common equity to risk-based assets			8.28%	8.40%	8.21%	7.98%	7.91%
Leverage ratio (Note 3)			5.90%	5.53%	5.40%	5.26%	5.30%
	Please explain the reasons for the change in the capital adequacy ratio in the last two years. (Note 3)

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1. Represent the key performance indicators with the industry particularity of the Bank.

2. Changes for the latest two periods (2020 and 2019) have not reached 20%; analysis of the reason is exempted.

Calculation formula of capital adequacy ratio is as follow:

1. Equity capital = common stock equity + other tier 1 capital + tier 2 capital that is non-common stock equity.

2. Total risk-weighted assets = credit-risk-weighted assets + capital charge of (operating risk + market risk) × 12.5

3. Capital adequacy ratio = equity capital / total risk-weighted assets.

4. Tier 1 capital to risk assets ratio = (common stock equity + other tier 1 capital under non-common stock equity) / total risk-weighted assets.

5. Common stock equity to risk assets ratio = common stock equity / total risk-weighted assets.

6. Gearing ratio = net tier 1 capital / total exposure.

7. (3) Improvement measures when the equity capital to risk assets ratio calculated according to Article 44 of the Banking Act is lower than the required ratio: None.

117

3. Audit Committee's Audit Report on the 2020 Financial Statements

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4. Representation Letter for 2020 Consolidated Financial Statements

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Representation Letter

The entities that are required to be included in the combined financial statements of TAIWAN BUSINESS BANK, LTD. as of and for the year ended December 31, 2020 under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standards No. 10 endorsed by the Financial Supervisory Commission, "Consolidated and Spearate Financial Statements." In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, TAIWAN BUSINESS BANK, LTD. and Subsidiaries do not prepare a separate set of combined financial statments.

Company name: TAIWAN BUSINESS BANK, LTD. Chairman: Bor-Yi Huang Date: March 10, 2021

119

5. Independent Auditors' Report for 2020 Consolidated Financial Statements

Independent Auditors' Report

To the Board of Directors of Taiwan Business Bank, Ltd.:

Opinion

We have audited the consolidated financial statements of Taiwan Business Bank, Ltd. "the Bank" and subsidiaries which comprise the consolidated balance sheets as of December 31, 2020 and 2019, the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and 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 the Bank and subsidiaries as of December 31, 2020 and 2019, 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 Held Banks, and with the International Financial Reporting Standards ("IFRSs"), International Accounting Standards ("IAS"), Interpretations developed by the International Financial Reporting Interpretations Committee ("IFRIC") or the former Standing Interpretations Committee ("SIC") endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

of Financial Statements by Certified Public Accountants, Jin-Kuan-Yin-Zi No.1082731571 and the auditing standards generally accepted in the Republic of China.Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Bank and subsidiaries in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

consolidated financial statements of the current period. 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.

1. The assessment of loans impairment

Please refer to Note (4) (F) "Financial Instruments" for related accounting policy, Note 5 (A) for accounting assumptions and estimates, and Note 6 (F) "Discount and loans,net" and Note 6 (AO) "Financial Risk Information" for details of loans impairment, respectively.

The management of the Bank and subsidiaries assess the impairment of loans by determining if there is any observable evidence indicating impairment, and dividing them into collective assessment and individual assessment based on the materiality levels to measure by different impairment method. For the individual assessment with objective evidence of impairment, the measurement is based on expected future cash flow. For the collective assessment with objective evidence of impairment, the Bank and its subsidairies need to calculate the recovery rate of each group to measure the impairment amount. For the collectively assessed loans without objective evidence of impairment, the impairment is calculated by establishing an impairment model using the pass loss experience on assets with similiar credit risk characteristic to form basic estimation. Besides the methods mentioned above, the management of the Bank and its subsidairies should inspect weather the amount of impairment is in compliance with the minimum level made by the authority. Both the evaluation of impairment evidences and its methods, as well as the uses of assumptions, such as the expected recovery rates and default rates, which are applied to determine the future cash flow, involved significant judgements and estimations. Therefore, the assessment on the impairment of loans has been identified as a key audit matter in our audit.

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How the matter was addressed in our audit

Our principal audit procedures included: understanding the methodology and related control procedure about how the management asseses and measures the impairment amount of loans. For individual assessment, we used sampling test to evaluate the use of the original effective interest rate, the appropriateness of the estimation of future recoverable amounts and value of collateral. For collective assessment, we assessed the impairment model adopted by the management and reviewed the appropriated of the calculation of the impairment parameters and verified the completeness of the loans portfolio via sampling. Also, we inspect the overall credit default risk, and evaluated whether the relevant expected credit impairment parameters have been adjusted due to the impact of the epidemic. Meanwile, we assessed whether allowance for the loans meets the requirements.

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Other Matters

December 31, 2020 and 2019, on which we have issued an unmodified opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Public Held Banks, and with the IFRSs, IASs, IFRC, SIC endorsed and issued into effect 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.

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 and subsidiaries or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including the Audit Committee), are responsible for overseeing the Bank and subsidiaries' financial reporting process.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

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 the 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

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:

• 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.

• 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 the Bank and subsidiaries' internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• 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 the Bank and subsidiaries' 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 the Bank and subsidiaries to cease to continue as a going concern.

121

1. 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.

2. Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Group 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.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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 of the current period 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

The engagement partners on the audits resulting in this independent auditors' report are CHUNG, TAN TAN and CHEN, CHUN KUANG.

KPMG

Taipei, Taiwan (Republic of China) March 10, 2021

Notes to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with the 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 accepted and applied in the Republic of China.

The independent auditors' report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors' report and consolidated financial statements, the Chinese version shall prevail.

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Taiwan Business Bank Annual Report 2020

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6. 2020 Consolidated Financial Statements and Accompanying Notes

(English Translation of Consolidated Financial Statements Originally Issued in Chinese.) TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Consolidated Balance Sheets

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December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

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December 31, 2020 December 31, 2019
Assets Amount ％ Amount ％
11000 Cash and cash equivalents (Notes 6(A) and 7) $ 30,817,437 2 31,395,561 2
11500 Due from the Central Bank and call loans to banks (Notes 114,195,668 6 125,431,516 7
6(B) and 7)
12000 Financial assets at fair value through profit or loss (Note 15,597,556 1 26,972,786 1
6(C))
12100 Financial assets at fair value through other comprehensive 117,355,850 7 102,597,144 6
income (Notes 6(G) and (P))
12200 Investment in debt instruments at amortized cost (Note 228,003,332 13 263,056,842 15
6(H))
12500 Securities purchased under resell agreements (Note 6(D)) 6,132,162 - 13,399,113 1
13000 Receivables (Note 6(E)) 43,448,157 2 27,736,905 2
13200 Current tax assets 306,417 - 810 -
13500 Discounts and loans, net (Notes 6(F) and 7) 1,209,716,083 68 1,132,462,936 65
15500 Other financial assets (Note 6(I)) 13,781 - 19,928 -
18500 Property and equipment, net (Note 6(J)) 14,514,906 1 14,498,237 1
18600 Right-of-use assets, net (Note 6(K)) 1,073,757 - 1,051,559 -
19000 Intangible assets, net 375,008 - 352,376 -
19300 Deferred tax assets (Note 6(Y)) 1,843,835 - 1,624,651 -
19500 Other assets, net (Note 6(L)) 8,241,104 - 5,552,450 -
Total assets $ 1,791,635,053 100 1,746,152,814 100
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December 31, 2020 December 31, 2019
Liabilities and equity
Amount % Amount %
Liabilities
21000 Deposits from the Central Bank and banks (Notes 6(M) $ 118,201,039 7 104,793,612 6
and 7)
21500 Due to the Central Bank and banks (Note 6(N)) 29,040,100 2 752,145 -
22000 Financial liabilities at fair value through profit or loss 8,639,002 - 9,393,336 1
(Notes 6(O) and (S))
22500 Notes and bonds issued under repurchase agreement 2,055,991 - 868,581 -
(Note 6(P))
23000 Payables (Note 6(Q)) 47,787,075 3 31,057,684 2
23200 Current tax liabilities 3,053 - 258,956 -
23500 Deposits and remittances (Notes 6(R) and 7) 1,418,572,000 79 1,435,049,547 82
24000 Bank notes payable (Note 6(S)) 53,250,000 3 53,250,000 3
25500 Other financial liabilities (Note 6(T)) 5,492,366 - 6,835,084 1
25600 Provisions (Note 6(U)) 3,393,417 - 3,158,003 -
26000 Lease liabilities (Note 6(V)) 1,062,021 - 1,041,183 -
29300 Deferred tax liabilities (Note 6(Y)) 901,581 - 888,436 -
29500 Other liabilities (Note 6(W)) 4,578,659 - 3,289,481 -
Total liabilities 1,692,976,304 94 1,650,636,048 95
Equity attributable to owners of parent
31101 Common stock (Note 6(X)) 74,885,834 4 71,319,842 4
31500 Capital Surplus(Note 6(X)) 815,900 - 815,900 -
Retained earnings:
32001 Legal reserve (Note 6(X)) 14,332,452 1 12,312,175 1
32003 Special reserve (Note 6(X)) 185,128 - 223,331 -
32005 Unappropriated retained earnings (Note 6(X)) 4,728,382 1 7,167,217 -
32500 Other equity interest (Note 6(X)) 3,711,053 - 3,678,301 -
Total equity 98,658,749 6 95,516,766 5
Total liabilities and equity $ 1,791,635,053 100 1,746,152,814 100
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124 Taiwan Business Bank Annual Report 2020

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese.)

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income

For the years ended December 31, 2020 and 2019

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(Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Common Share)

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For the year ended December 31, Percent
2020 2019 Change
Amount ％ Amount ％ %
41000 Interest income (Notes 6(AC) and 7) $ 25,026,784 114 29,444,970 127 (15 )
51000 Less: Interest expenses (Notes 6(AC) and 7) (8,834,567 ) (40 ) (12,413,857 ) (54 ) (29 )
Net interest revenue 16,192,217 74 17,031,113 73 (5 )
Net revenue other than interest
49100 Net service fee revenue (Notes 6(AD) and 13) 2,821,451 13 3,536,846 15 (20 )
49200 Gain on financial assets or liabilities measured at fair value
through profit or loss (Note 6(AE)) 870,291 4 1,351,414 6 (36 )
49310 Realized gain on financial assets at fair value through other
comprehensive income (Note 6(AF)) 1,098,686 5 613,920 3 79
49450 Gain arising from derecognition of financial assets measured at
amortized cost (Note 6(H)) 210,105 1 980 - 21,339
49600 Foreign exchange gain 103,211 - 227,555 1 (55 )
49700 Reversal of impairment loss on assets (impairment loss on
- -
assets) (Note 6(AG)) (1,148 ) (16,330 ) (93 )
49800 Net other revenue other than interest income (Note 6(AH)) 216,109 1 115,368 - 87
49831 Net securities brokering revenue 358,520 2 210,077 1 71
49899 Other miscellaneous revenue (expense) (Note 6(AI)) - - 138,999 1 (100 )
Net revenue 21,869,442 100 23,209,942 100 (6 )
58200 Bad debts expense, commitment and guarantee liability provision
(Note 6(AJ)) (4,054,740 ) (19 ) (2,417,677 ) (10 ) 68
Operating expense
58500 Employee benefits expenses (Notes 6(AK)) (7,937,666 ) (36 ) (8,104,119 ) (35 ) (2 )
59000 Depreciation and amortization expense (Notes 6(AL)) (992,513 ) (5 ) (957,863 ) (4 ) 4
59500 Other general and administrative expense (Note 6(AM)) (3,499,262 ) (16 ) (3,664,603 ) (16 ) (5 )
Total operating expense (12,429,441 ) (57 ) (12,726,585 ) (55 ) (2 )
61001 Income from continuing operation before tax 5,385,261 24 8,065,680 35 (33 )
61003 Less: Income tax expenses (Note 6(Y)) 683,486 3 1,331,427 6 (49 )
Net income 4,701,775 21 6,734,253 29 (30 )
65000 Other comprehensive income:
65200 Components of other comprehensive income that will not be
reclassified to profit or loss
65201 Remeasurements of defined benefit plans (Note 6(Z)) (205,996 ) (1 ) 29,493 - (798 )
65204 Revaluation (losses) gains on investments in equity (312,557 ) (1 ) 851,684 4 (137 )
instruments measured at fair value through other
comprehensive income
65220 Less: Income tax related to components of other (41,199 ) - 5,899 - (798 )
comprehensive income that will not be reclassified to profit or
loss (Note 6(Y))
Components of other comprehensive income that will not (477,354 ) (2 ) 875,278 4 (155 )
be reclassified to profit or loss
65300 Components of other comprehensive income that will be
reclassified to profit or loss
65301 Exchange difference on translation (767,381 ) (3 ) (402,180 ) (2 ) (91 )
65308 Gains (losses) from investments in debt instruments 971,009 4 301,822 2 222
measured at fair value through other comprehensive income
65320 Less: Income tax related to components of other (140,331 ) (1 ) (72,738 ) - 93
comprehensive income that will be reclassified to profit or loss
(Note 6(Y))
Components of other comprehensive income that will be 343,959 2 (27,620 ) - (1,345 )
reclassified to profit or loss
65000 Other comprehensive income (133,395 ) - 847,658 4 (116 )
Total comprehensive income $ 4,568,380 21 7,581,911 33 (40 )
Earnings per share (in NT dollar) (Note 6 (AA))
Basic earnings per share (in NT dollar) $ 0.63 0.94
Diluted earnings per share (in NT dollar) $ 0.63 0.93
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(English Translation of Consolidated Financial Statements Originally Issued in Chinese.)

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

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Attributable to owners of parent
Other equity interest
Unrealized gains
on financial assets
Exchange measured at fair
differences on value
Share Capital Retained earnings translation of through other
Unappropriated foreign financial comprehensive
Common stock Capital Surplus Legal reserve Special reserve retained earnings Total statements income Total
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Balance at January 1, 2019 Net income for the year ended December 31, 2019 Other comprehensive income(losses) for the year ended December 31, 2019 Total comprehensive income for the year ended December 31, 2019 Appropriation and distribution of retained earnings : Legal reserve appropriated Reversal of special reserve Cash dividends of ordinary share Stock dividends of ordinary share Issue of shares Disposal of investment in equity instruments designated at fair value through other comprehensive income Balance at December 31, 2019 Net income for the year ended December 31, 2020 Other comprehensive income for the year ended December 31, 2020 Total comprehensive income for the year ended December 31, 2020 Appropriation and distribution of retained earnings : Legal reserve appropriated Reversal of special reserve Cash dividends of ordinary share Stock dividends of ordinary share Disposal of investments in equity instruments designated at fair value through other comprehensive income Balance at December 31, 2020	$ 63,938,802 - -	- - -	10,020,013 - -	516,555 - -	7,470,985 6,734,253 23,594	18,007,553 6,734,253 23,594	(541,122 ) - (321,744 )	3,447,786 - 1,145,808	84,853,019 6,734,253 847,658 7,581,911 - - (1,918,164 ) - 5,000,000 - 95,516,766 4,701,775 (133,395 ) 4,568,380 - - (1,426,397 ) - - 98,658,749
	-	-	-	-	6,757,847	6,757,847	(321,744 )	1,145,808
	- - - 3,196,940 4,184,100 -	- - - - 815,900 -	2,292,162 - - - - -	- (293,224 ) - - - -	(2,292,162 ) 293,224 (1,918,164 ) (3,196,940 ) - 52,427	- - (1,918,164 ) (3,196,940 ) - 52,427	- - - - - -	- - - - - (52,427 )
	71,319,842 - -	815,900 - -	12,312,175 - -	223,331 - -	7,167,217 4,701,775 (164,797 )	19,702,723 4,701,775 (164,797 )	(862,866 ) - (613,905 )	4,541,167 - 645,307
	-	-	-	-	4,536,978	4,536,978	(613,905 )	645,307
	- - - 3,565,992 -	- - - - -	2,020,277 - - - -	- (38,203 ) - - -	(2,020,277 ) 38,203 (1,426,397 ) (3,565,992 ) (1,350 )	- - (1,426,397 ) (3,565,992 ) (1,350 )	- - - - -	- - - - 1,350
	$ 74,885,834	815,900	14,332,452	185,128	4,728,382	19,245,962	(1,476,771 )	5,187,824

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Taiwan Business Bank Annual Report 2020

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese.)

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2020 and 2019

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(Expressed in Thousands of New Taiwan Dollars)

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For the years ended December 31,
2020 2019
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	2020	2020	2020	2020
Cash fows from operating activities: Net income before tax Adjustments: Income and expenses items: Depreciation expenses Amortization expenses Provision for bad debt expenses Net loss on fnancial assets or liabilities at fair value through proft or loss Interest expenses Net gain arising from derecognition of fnancial assets measured at amortized cost Interest income Net change in provisions for guarantee liabilities Net change in other provisions Loss on disposal of property and equipment Property and equipment transferred to expenses Impairment loss on fnancial assets Total adjustments to reconcile proft Changes in Operating Assets and Liabilities: Changes in Operating Assets: Decrease (increase)in due from the Central Bank and call loans to banks Decrease(increase) in fnancial assets at fair value through proft or loss Decrease (increase) in securities purchased under resell agreements (Increase) decrease in receivables Increase in discounts and loans Decrease (increase) in other fnancial assets Increase in other assets Total changes in operating assets Changes in Operating Liabilities: Increase in deposits from the Central Bank and banks Decrease in fnancial liabilities at fair value through proft or loss		$ 5,385,261 850,732 141,781 4,015,658 469,113 8,834,567 (210,105 ) (25,026,784 ) 17,634 21,379 1,799 5,719 1,148 (10,877,359 ) 11,248,260 11,418,343 7,266,951 (16,628,426 ) (81,221,944 ) 14,881 (2,900,656 ) (70,802,591 ) 13,407,427 (1,266,559 )		8,065,680 833,161 124,702 2,474,188 93,076 12,413,857 (980 ) (29,449,170 ) (14,340 ) (42,171 ) 693 - 16,330 (13,550,654 ) (38,466,421 ) (18,606,344 ) (11,012,595 ) 17,988,332 (60,243,206 ) (743 ) (348,531 ) (110,689,508 ) 13,479,069 (1,270,852 )

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For the years ended December 31,
2020 2019
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	For the years ended December 31,	For the years ended December 31,	For the years ended December 31,	For the years ended December 31,
	2020		2019
Increase (decrease) in notes and bonds issued under repurchase agreement Increase (decrease) in payable (Decrease) increase in deposits and remittances Decrease in other fnancial liabilities Decrease in provisions for employee benefts Total Changes in Operating Liabilities Total Changes in Operating Assets and Liabilities Total adjustments Cash outfow generated from operations Interest received Interest paid Income tax paid Net cash fow (used in) generated from operating activities Cash fows from investing activities: Acquisition of fnancial assets at fair value through other comprehensive income Acquisition of fnancial assets at amortized cost Proceeds from disposal of fnancial assets at amortized cost Acquisition of property and equipment Proceeds from disposal of property and equipment Increase in refundable deposits Acquisition of intangible assets Net cash fows generated from (used in) investing activities Cash fows from fnancing activities: Increase in due to the Central Bank and banks Proceeds from issuing bank notes payable Repayments of bank notes payable Increase in guarantee deposits received Payments of lease liabilities Increase in other liabilities Cash dividends paid Proceeds from issuing shares Net cash fows generated from fnancing activities Effect of exchange rate changes on cash and cash equivalents Net decrease in cash and cash equivalents Cash and cash equivalent at beginning of period Cash and cash equivalent at end of period		$ 1,187,410 16,478,855 (16,477,547 ) (1,342,718 ) (9,318 ) 11,977,550 (58,825,041 ) (69,702,400 ) (64,317,139 ) 25,908,496 (9,085,084 ) (768,475 ) (48,262,202 ) (14,114,410 ) (123,843,438 ) 159,121,500 (500,297 ) 137 (551,476 ) (139,804 ) 19,972,212 28,287,955 20,000,000 (20,000,000 ) 298,408 (411,713 ) 990,605 (1,426,397 ) - 27,738,858 (26,992 ) (578,124 ) 31,395,561 $ 30,817,437		(789,125 ) (28,070,608 ) 124,008,444 (651,610 ) (321,541 ) 106,383,777 (4,305,731 ) (17,856,385 ) (9,790,705 ) 29,342,963 (11,973,585 ) (1,915,437 ) 5,663,236 (28,297,971 ) (1,582,649 ) - (658,309 ) 378 (363,698 ) (155,613 ) (31,057,862 ) 160,157 5,800,000 - 480,730 (414,333 ) 1,661,814 (1,918,164 ) 5,000,000 10,770,204 (16,690 ) (14,641,112 ) 46,036,673 31,395,561

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Taiwan Business Bank Annual Report 2020

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese.) TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

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Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

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1. Company history

TAIWAN BUSINESS BANK, LTD. (the "Bank") was formerly a general savings union known as "Taiwan Mutual Financing Bank" or "Tai-Shio Mutual Financing Bank" when it was established in 1915. After several mergers and acquisitions, it was renamed as Taiwan Business Bank, Ltd. in order to finance and provide banking assistance to small and medium-size businesses on July 1, 1976. The Bank's major lines of business are the following:

• (A) As prescribed by the Banking Law, provides professional services tailored to the needs of small and medium-size businesses;

• (B) Trust and securities brokerage businesses as approved by the relevant authority;

• (C) International banking business; and

• (D) Other relevant businesses as authorized by the relevant authority in-charge.

As of December 31, 2020, the Bank not only sets up the business dept., international dept., securities dept. and trust dept. under head office but also has 124 domestic branches, 1 offshore banking unit, 8 overseas branches, 1 oversea representative office and 16 securities brokerage locations.

The Bank became listed on the Taiwan Stock Exchange on January 3, 1998.

Under the "Statute for Privatization of State Enterprises" and upon the approval of Taiwan Province Government, the shares of the Bank owned by the provincial government were sold to the public. In line with privatization of the three other major Taiwan province government owned run commercial banks, the Bank had completed its own privatization on January 22, 1998.

As of December 31, 2020 and 2019, the Bank and subsidiaries has 5,411 and 5,387 employees, respectively.

3. New standards, amendments and interpretations adopted:

• (a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The Bank and subsidiaries has initially adopted the following new amendments, which do not have a significant impact on its consolidated financial statements, from January 1, 2020:

• Amendments to IFRS 9, IAS39 and IFRS7 "Interest Rate Benchmark Reform"

• Amendments to IFRS 16 "COVID-19-Related Rent Concessions"

(b) The impact of IFRS issued by the FSC but not yet effective

The Bank and subsidiaries' adoption of the new amendments, effective for annual period beginning on January 1, 2021, are expected to have the following impacts:

129

• (i) Amendments to IFRS 9, IAS39, IFRS7, IFRS 4 and IFRS 16 "Interest Rate Benchmark Reform － Phase 2

The amendments address issues that might affect financial reporting as a result of the reform of an interest rate benchmark, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative benchmark rate. The amendments provide practical relief from certain requirements in IFRS 9, IAS 39, IFRS7, IFRS 4 and IFRS 16 relating to:

• The amendments will require an entity to account for a change in the basis for determining the contractual cash flows of a financial asset or financial liability that is required by interest rate benchmark reform by updating the effective interest rate of the financial asset or financial liability. On December 31, 2020, the Bank and subsidiaries has $107,322,000 sterling of bank assets, $1,461,000 sterling of bank loans and $11,802,000 sterling of the nominal amount of derivatives investments which are secured by LIBOR that will be subject to LIBOR reform. The Bank and subsidiaries expects that interest rate benchmark for these position will be changed to TAIFX and that no significant modification gain or loss will arise as a result of applying the amendments to these changes.

• 2) Disclosure

• The amendments will require the Bank and subsidiaries to disclose additional information about the entity's exposure to risks arising from interest rate benchmark reform and related risk management activities.

• 3) Transition

The Bank and subsidiaries plans to apply the amendments from January 1, 2021. Application will not impact amounts reported for 2020 or prior periods.

• (ii) Other amendments

• Amendments to IFRS 4 "Extension of the Temporary Exemption from Applying IFRS 9"

(c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

The following new and amended standards, which may be relevant to the Bank and subsidiaries, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

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Standards or Effective date
Content of amendment
Interpretations per IASB
Annual ● The amendments require a subsidiary that elects to apply paragraph D16(a) January 1,
Improvements to of IFRS 1 First-time Adoption of International Financial Reporting Standards to 2022
IFRS Standards measure the cumulative translation differences using the amounts reported by the
2018-2020 parent, based on the parent's date of transition to IFRSs.
●
In determining whether to derecognize a financial liability that has been modified
or exchanged, an entity assesses whether the terms are substantially different in
accordance with IFRS 9 Financial Instruments. The amendments clarify the fees
that an entity includes when assessing whether the terms of a new or modified
financial liability are substantially different from the terms of the original financial
liability.
● The amendments remove the illustration of payments from the lessor relating to
leasehold improvements of Illustrative Example 13 accompanying IFRS 16 Leases
to avoid any potential for confusion regarding the treatment of lease incentives
applying IFRS 16.
Amendments to The key amendments to IAS 1 include: January 1,
IAS 1 "Disclosure ● requiring companies to disclose their material accounting policies rather than their 2023
of Accounting significant accounting policies;
Policies" ● clarifying that accounting policies related to immaterial transactions, other events
or conditions are themselves immaterial and as such need not be disclosed; and
● clarifying that not all accounting policies that relate to material transactions, other
events or conditions are themselves material to a company's financial statements.
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Standards or Effective date
Content of amendment
Interpretations per IASB
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Amendments to IAS 8 "Defnition of Accounting Estimates"	The amendments introduce a new definition for accounting estimates: clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy.	January 1, 2023

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The Bank and subsidiaries is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its consolidated financial position and consolidated financial performance. The results thereof will be disclosed when the Bank and subsidiaries completes its evaluation.

The Bank and subsidiaries does not expect the following other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its consolidated financial statements:

• Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture"

• IFRS 17 " Insurance Contracts" and amendments to IFRS 17 " Insurance Contracts"

• Amendments to IAS 16 "Property, Plant and Equipmentt － Proceeds before Intended Use"

• Amendments to IAS 37 "Onerous Contracts －

• Amendments to IFRS 3 "Reference to the Conceptual Framework"

The following accounting policies were applied consistently throughout the periods presented in the consolidated

(A) Statement of compliance

the Preparation of Financial Reports by Public Held Banks (hereinafter referred to as the Regulation), the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed and issued into effect by the Financial Supervisory Commission (hereinafter referred to IFRS endorsed by the FSC).

(B) Basis of preparation

• (a) Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis except for the following material items in the statement of financial position:

• derivative instruments);

• (2) Financial instrument measured at fair value through other comprehensive income; and

• defined benefit obligation and the effect of the asset ceiling in Note 4(M).

branches and subsidiaries. The internal transactions within the headquarter, the domestic branches and the foreign branches are offset when preparing the consolidated financial statement.

• (c) Functional and presentation currency

The functional currency of each entities is determined based on the primary economic environment in which the entities operate. The consolidated financial statements are presented in New Taiwan Dollar,

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rounded to the nearest thousand.

(C) Basis of consolidation

(a) Subsidiary

in the consolidated financial statements from the date that control commences until the date that control ceases.

Gains or losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

(b) Elimination of intra-group transaction

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. The unrealized profits arising from the transactions with the investments under the equity method are eliminated to the extent of the percentage of shares possessed by the Bank over the investee. The unrealized losses are eliminated in the same way as the unrealized profit, but only under the circumstances that there are no evidences of impairment.

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----- Start of picture text -----

Shareholding(Holding %)
Established Main business December 31, December 31,
location scope 2020 2019
Taiwan Business Bank Insurance Taiwan Agent of personal Note 100
Agency Co., Ltd. insurance
Taiwan Business Bank Property Taiwan Agent of property Note 100
Insurance Agency Co., Ltd. insurance
TBB International Leasing Co., Ltd. Taiwan Leasing business 100 100
Taiwan Business Bank International China Leasing business 100 100
Leasing Co., Ltd.
TBB (Cambodia) Microfinance Cambodia Financial company 100 100
Institution Plc
TBB Venture Capital Co., Ltd. Taiwan Investing business 100 100
----- End of picture text -----

Note: A resolution was passed during the board meeting held on December 19, 2018 for the merger of the Bank's subsidiaries, Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance Agency Co., Ltd., with January 2, 2020 as the effective date. The relevant statutory registration procedures have since been approved by the Ministry of Economic Affairs on February 25, 2020.

(D) Foreign currency

• (a) Foreign currency transaction

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies on the end of each subsequent reporting period (hereinafter referred to as the reporting date) are retranslated to the functional currency at the exchange rate of Bank of Taiwan at 10 AM. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation. Foreign currency differences arising on retranslation are recognized in profit or loss, except for the equity instruments measured at fair value through other comprehensive income which are recognized in other comprehensive income arising on the retranslation.

(b) Foreign operations

The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Bank and subsidiaries' functional currency (not the currency under highly inflation economy) by the following procedures:

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• intensively, then it applies the exchange rate on the trade date);

• (3) Foreign currency differences are recognized in other comprehensive income.

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All the translation differences arising from above procedures are presented in the foreign currency translation reserve in equity. The exchange difference from translating net investments in foreign operations is recognized in other comprehensive income. When a foreign operation is wholly or partially disposed, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.

(E) Cash and cash equivalents

Cash and cash equivalent comprise cash on hand, petty cash, foreign currency on hand and cash in banks, but excludes those items which are designated for specific purposes or restricted by contracts and law.

(F) Financial Instruments

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Bank and subsidiaries becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

• (a) Financial assets

basis or a settlement date basis.

other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Bank and subsidiaries changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the next reporting period following the change in the business model.

• (1) Investment in debt instruments measured at amortized cost

designated as at FVTPL:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• and interest on the principal amount outstanding.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

• (2) Financial assets at fair value through other comprehensive income (FVOCI)

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL.

• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

• and interest on the principal amount outstanding.

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On initial recognition of an equity investment that is not held for trading, the Bank and subsidiaries may irrevocably elect to present subsequent changes in the investment's fair value in other comprehensive income. This election is made on an investment-by-investment basis.

Debt investments at FVOCI are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss.

receive payment is established.

FVTPL, including derivate financial assets. On initial recognition, the Bank and subsidiaries may irrevocably designate a financial asset, which otherwise meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

• (4) Discount and loans, net

Discount and loans are recorded as initial fair value including direct transaction cost, and the subsequent measurement recognizes interest income via effective interest rate method if there is not much difference then it can adopt straight line method and is booked as per amortized cost deducted by impairment loss. Interest accrual on discount and loans are suspended if either of the following occurs:

• Payment of principal or interest is very likely not to be redeemed as per contracts.

• Non-performing loans are categorized as overdue loans in six months after the settlement period ends.

measured at amortized cost, debt investments measured at FVOCI and loan commitments and financial guarantee contracts. Equity instrument investment does not need to recognize expected credit losses.

The Bank and subsidiaries measures loss allowances at an amount equal to lifetime expected credit loss (ECL), except for the following which are measured as 12-month ECL:

• debt securities that are determined to have low credit risk at the reporting date; and

• other debt securities, receivables, loan commitments and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instruments is less than 12 months).

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The maximum period considered when estimating ECLs is the maximum contractual period over which the Bank and subsidiaries is exposed to credit risk.

When determining whether the credit risk of financial asset has increased significantly since initial recognition and when estimating ECL, the Bank and subsidiaries considers reasonable and supportable information that is relevant and available (without undue cost or effort). This includes both quantitative and qualitative information and analysis, based on the Bank and subsidiaries' historical experience, informed credit assessment and including forward-looking information.

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ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls. The difference between the cash flows due to the Bank and subsidiaries expect to receive. ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Bank and subsidiaries assesses whether financial assets carried at amortized cost, debt securities at FVOCI, loan commitments and contracts of financial guarantee are credit-impaired. A financial asset is "credit-impaired" when one or move events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

• a breach of contract such as a default or being past due;

• the restructuring of a loan or advance by the borrowers on terms that the borrowers would not consider otherwise;

• have occurred.

amount of the assets. For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognized in other comprehensive income instead of reducing the carrying amount of the asset.

In addition to estimate the allowance for bad debts and guarantee liability provisions as above, according to "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans ", and considering the situation of their finance and the default of principal and interest payment, the credit assets are classified as below:

• 2% of the second class credit assets.

• 10% of the third class credit assets.

• 50% of the fourth class credit assets.

The allowance for bad debts and guarantee liability provisions were assessed by the previously stated method shall not be less than the amount regulated by " Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans.

Unrecoverable overdue loans and bad debts of the Bank and subsidiaries, which are not able to be recovered after the overdue collection process, are written-off after deducting the recoverable portion. Upon approval by the board of directors and notification to supervisors, the excess amount of written

• (b) Financial liabilities

• (1) Financial liabilities held for trading

or repurchasing it in the near term; on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. A derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument, is classified as instrument held for trading as well.

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Financial liabilities falling under this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes are measured at fair value and recognized in profit or loss. While for financial liabilities designated at fair value through profit or loss, the changes in fair value generated from credit risk should be recognized under other comprehensive income, except for avoiding accounting mismatch that should be recognized in profit or loss.

when changing the business model of managing financial assets. These changes are expected to be extremely infrequent. In addition, the Bank and subsidiaries must not reclassify any financial assets and liabilities of equity instruments.

the reclassification shall be postponed from the reclassification date, and any previously recognized gains, losses (including impairment losses or reversal of impairment loss) or interest shall not be restated.

flows from the financial asset expire or when the Bank and subsidiaries transfer substantially all the risks and rewards of ownership of the financial assets. A financial liability should be removed from the balance sheet when, and only when, it is extinguished, that is, when the obligation specified in the contract is either discharged or cancelled or expires. If the bonds or stocks are taken as collateral, shall not be derecognized because the Bank and subsidiaries have retained substantially all the risks and rewards of ownership. This is also applicable when the Bank and subsidiaries conduct securitization transactions and still retain some of the risks.

(e) Financial instruments offsetting

when, an entity has a legally enforceable right to set off the amounts; and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

(G) Impairment loss on non‑financial assets

The Bank and subsidiaries reviews the carrying amounts of its non-financial assets (other than contract assets and deferred tax assets) to determine whether there is any indication of impairment on the balance sheet date. If any such indication exists, then the asset's recoverable amount is estimated.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units (CGUs).

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

(H) Property and Equipment

(a) Recognition and measurement

Items of property and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

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as separate items (major components) of property, plant and equipment.

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(b) Subsequent expenditure

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with the expenditure will flow to the Bank and subsidiaries.

(c) Depreciation

loss on a straight-line basis over the estimated useful lives of each component of an item of property and equipment.

Land is not depreciated.

The estimated useful lives of property and equipment for current and comparative periods are as follows:

• (1) Buildings 35-50 years

• (2) Equipment 3-8 years

The Bank and subsidiaries reviews and adjusts the residual value and the useful lives of assets at the end of each fiscal year. Whenever there is evidence indicating that the carrying amount is unable to be recovered due to environmental activities or changes, the Bank and subsidiaries evaluate the impairment loss of assets.

(I)

• (a) Identifying a lease

At inception of a contract, the Bank and subsidiaries assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Bank and subsidiaries assesses whether:

• should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and

• the asset throughout the period of use; and

• the Bank and subsidiaries has the right to direct the use of the asset throughout the period of use only if either:

• (1) the Bank and subsidiaries has the right to direct how and for what purpose the asset is used throughout the period of use; or

• (2) the relevant decisions about how and for what purpose the asset is used are predetermined and:

  • the Bank and subsidiaries has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; or

  • the Bank and subsidiaries designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.

(b) As a lessee

The Bank and subsidiaries recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

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The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Bank and subsidiaries incremental borrowing rate. Generally, the Bank and subsidiaries uses its incremental borrowing rate as the discount rate.

• Lease payments included in the measurement of the lease liability comprise the following:

• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

• amounts expected to be payable under a residual value guarantee; and

• payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

• there is a change in future lease payments arising from the change in an index or rate; or

• there is a change in the Bank and subsidiaries estimate of the amount expected to be payable under a residual value guarantee; or

• there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or

• there is a change of its assessment on whether it will exercise an extension or termination option; or

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Bank and subsidiaries accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Bank and subsidiaries has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Bank and subsidiaries recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

• (c) As a lessor

When the Bank and subsidiaries acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Bank and subsidiaries makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Bank and subsidiaries considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

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(J) Deferred assets

The costs of installation for utilities, including electricity and water, as well as security facilities, are capitalized and amortized equally over 5 years.

(K) Collaterals

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The difference between the amount of claims and the Bank and subsidiaries received when creditors cannot meet obligations and the collaterals are auctioned off is recognized as bad debts expense. The amount that net realized value lower than book value is recognized as impairment loss. The selling price deducts the original book value of collateral assumed is recognized as gain or loss on sale of collateral assumed.

(L) Provisions

A provision is recognized if, as a result of a past event, the Bank and subsidiaries has a present legal or constructive obligation that can be estimated reliably, and it is probably that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. Amortization of the discount is recognized as interest expense.

(M) Employee benefit

the related service is provided.

plan. For the personnel of foreign offices, the Bank provides pension fund per the regulations of the local authorities.

Defined contribution plan refers to the plan that the Bank and subsidiaries annually provide certain amount of money to funds to fulfill the obligation. The Bank and subsidiaries provide pension based on compulsory obligation, contracts or voluntary will to public or private managed pension funds. If certain pension fund fails to pay the employees the benefit which they deserve for the service they provided, the Bank and subsidiaries does not hold legal or constructive obligation to pay additional provision. The Bank and subsidiaries recognizes the pension fund provided as current pension cost on accrual basis.

plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Bank's obligations and that are denominated in the same currency in which the benefits are expected to be paid.

the calculation results in a benefit to the Bank, the recognized asset is limited to the total of the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Bank and subsidiaries. An economic benefit is available to the Bank and subsidiaries if it is realizable during the life of the plan, or on settlement of the plan liabilities.

relating to past service by employees, is recognized immediately in profit or loss.

• (1) Actuarial gains and losses;

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with a corresponding debit or credit to retained earnings in the period in which they occur.

Gains or losses on the curtailment or settlement of a defined benefit plan are recognized when the curtailment or settlement occurs. The gain or loss on curtailment arises from any changes in the fair value of plan assets, any changes in the present value of the defined benefit obligation, and any related actuarial gains or losses and past service cost which had not previously been recognized.

The pension cost in the consolidated interim financial statements was calculated and disclosed on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior fiscal year, for the reporting period, the rate will be adjusted by material market volatility, material curtailment, reimbursement and settlement or other material one-time events.

• (c) Deposits with favorable rate

The Bank and subsidiaries provides deposits with favorable rate to employees, which include current employee fix amount deposits with favorable rate and retired employee fix amount deposits with favorable rate. The rate difference between the favorable rate and the market rate belongs to the category of employee benefit.

According to article 28 of "Regulations Governing the Preparation of Financial Report by Public Banks", the additional interests result from the difference between deposit with favorable rate and the deposits with market interest rate shall be calculated by actuary per the regulations related to defined benefit plan in IAS 19 . The parameters of actuarial assumptions shall follow the regulations of the competent authority.

matter for adopting IAS 19 with respect to the additional interest of employee deposits with favorable rate" issued by the Banking Bureau, the difference between the actual payment and the estimated retirement benefit obligation is deemed as changes in accounting estimate and is recognized in profit or loss.

committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. The Bank and subsidiaries recognize liabilities when a formal irrevocable termination project is undertaken or when benefit is provided for encouraging voluntary resignation. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value.

(N) Income tax

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date, and reflect uncertainty related to income taxes, if any.

Deferred tax assets and liabilities are offset against each other only if the following criteria are met by the Bank and subsidiaries:

• (a) the Taiwan Business Bank, Ltd. has a legally enforceable right to set off current tax assets against current tax liabilities; and

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• (b) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

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• (1) the same taxable entity; or

• (2) different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

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Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases shall be measured based on the tax rates that have been enacted or substantively enacted at the time of the asset or liability is recovered or settled, and be recognized directly in equity or other comprehensive income as tax expense.

(O) Revenue recognition

Interest is recognized according to interest method. Interest accrual is suspended from the date when the loan is reclassified to non-performing loan and only when the Bank and subsidiaries receive cash, the revenue is recognized.

completed. In addition, for the individual loan which does not belong to labor service and the handling fee is over 1% of the principal, the interest rate shall be adjusted from the original agreed interest rate to the effective interest rate. For the individual loan which does not belong to the service and the handling fee is less than 1% of the principal, the recognition of the revenue should be deferred and be recognized as revenue during the loan period.

(P) Earnings per share (EPS)

The Bank and subsidiaries discloses the basic and diluted earnings per share attributable to ordinary shareholders of the bank. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the bank divided by the weighted average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Bank divided by the weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as stock that issued for employee bonuses.

(Q) Operating segments

Operating segment is the component of the Bank and subsidiaries that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Bank and subsidiaries). The segment's operating results are reviewed regularly by the Bank's chief operating decision maker to make decisions pertaining to the allocation of resources to the segment and to assess the performance for which discrete financial information is available.

5. Significant accounting assumptions and judgments, and major sources of estimation uncertainty

by the FSC requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the following period.

amounts recognized in the consolidated financial statements is as follows:

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(A) Impairment losses on loans

The impairment of loans of the Bank and subsidiaries was evaluated by identifying the credit risk of those financial assets have significantly increased or not at the reporting date if the credit risk has not significant incurred, the 12-month expected credit loss should be adopted to evaluate, or the lifetime credit loss evaluation should be adopted.

To evaluate the expected credit losses for 12-month and lifetime, the Bank and subsidiaries considers the unfavorable changes of payment status or the economic conditions of the countries or areas related to the default loans. When analyzing expected cash flows, the estimates by the management are based on the pass losses experience from assets with similar credit risk characteristics. In order to reduce losses from the difference between estimated and actual amount, the Bank and subsidiaries has considered historical experience, current economic conditions and forward-looking information at the reporting date to determine the assumptions to be used in calculating the impairments and the select inputs.

(B) Retirement benefit

Any change of the assumptions may influence the carrying amount of the retirement benefit obligation.

The assumptions applied to determine net pension cost (revenue) include the discount rate. The Bank and subsidiaries determine the appropriate discount rate at the end of each year and apply it to calculate the present value of the future cash outflows which are to be paid to the retirement benefit obligation. To determine the appropriate discount rate, the Bank and subsidiaries should consider the interest rate of high-quality corporate bonds and government bonds. The currency of the retirement benefit shall be the same as that of the high-quality corporate bond or government bonds and the duration till maturity date shall comply with the duration of the related pension obligation. Other significant assumptions of retirement benefit obligation are based on the current market situation.

(A) Cash and cash equivalents

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----- Start of picture text -----

December 31, 2020 December 31, 2019
Petty cash and revolving funds $ 9,974,072 10,059,297
Foreign currencies on hand 953,700 899,964
Checks for clearing 3,212,602 2,663,951
Due from other banks 16,677,063 17,772,349
Total $ 30,817,437 31,395,561
----- End of picture text -----

(B) Due from the Central Bank and call loans to banks

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----- Start of picture text -----

December 31, 2020 December 31, 2019
Due from the Central Bank $ 46,325,385 65,301,416
Deposits transferred to Central Bank 55,339 105,769
Call loans to banks 67,814,944 60,024,331
Trust fund indemnity reserve deposited 90,000 80,000
Securities serving as trust fund indemnity reserve deposited (90,000 ) (80,000 )
Total $ 114,195,668 125,431,516
----- End of picture text -----

As of December 31, 2020 and 2019, in accordance with the Banking Law and the Central Bank Law, the required reserve deposited by the Bank with the Central Bank amounted to $45,813,518 and $64,836,250 of

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which $37,579,517 and $38,174,500 respectively, were restricted and such restriction may only be lifted when the required reserve is adjusted to a lower amount. The Bank and subsidiaries cooperated with the Central Bank to undertake financing loans for small and medium enterprises that are affected by the severe and the special infectious pneumonia epidemic, and are guaranteed by the excess reserve in the deposit reserve of the Central Bank as required, $30,000,000, please refer to 6(N) for the information of due to the Central Bank and banks.

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As of December 31, 2020 and 2019, the Bank's subsidiaries and overseas branches, in compliance with the Central Bank's reserve requirement set by local authorities, deposited $202,049 and $181,350 in reserve, of which $56,642 and $69,921 were restricted.

Effective December 2000, in accordance with the amended "Regulations Governing the Audit and Adjustment of Deposit and Other Liability Reserves of Financial Institutions", the Bank provides the required additional reserve on foreign currency deposits. As of December 31, 2020 and 2019, the required reserve with the Central Bank amounted to $309,818 and $283,816 respectively, and its use was unrestricted.

As of December 31, 2020 and 2019, deposits transferred to the Central Bank collected from the armed forces, prisons, and other treasury deposits were restricted.

Effective January 20, 2001, in accordance with the requirement of the Central Bank of China, the Bank complies with Clause 34 of the Trust Law to treat the discretionary trust of investments in overseas marketable securities as a default loss reserve. As of December 31, 2020 and 2019, the Bank deposited marketable securities of $90,000 and $80,000 as trust fund reserves.

(C) Financial assets at fair value through profit or loss

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----- Start of picture text -----

December 31, 2020 December 31, 2019
Financial assets designated at fair value through profit or loss:
Corporate bonds $ 84,377 120,240
Financial assets at fair value through profit or loss, mandatorily
measured at fair value :
Derivative instruments not used for hedging:
Foreign exchange forward contracts 55,129 23,843
Currency swap contracts 527,767 839,800
Foreign currency options-call 6,592 7,758
Stock index futures 72,747 65,784
Interest Rate Swap 28,623 13,611
Non-derivative financial assets
Commercial paper 12,414,244 21,037,165
Listed stocks 271,669 178,867
Unlisted stocks 310,620 145,901
Beneficiary certificates 267,054 108,890
Government bonds - 1,446,544
Convertible corporate bonds 51,700 -
Financial debentures 1,507,034 2,984,383
Total $ 15,597,556 26,972,786
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operating, financing and investing activities. The Bank and subsidiaries held derivative financial instruments which did not apply to hedge accounting are as follows ( reported as financial assets mandatorily measured at fair value through profit or loss and financial liabilities held for trading)

143

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December 31, 2020
Amount of contracts
(in thousands) Currency Matured duration
Foreign exchange forward contracts $ 2,700 EUR 2021/1/22~2021/5/28
Foreign exchange forward contracts 1,246,819 TWD 2021/1/4~2021/8/3
Foreign exchange forward contracts 35,033 USD 2021/1/4~2021/6/30
Foreign exchange forward contracts 500 GBP 2021/3/16
Foreign exchange forward contracts 22,780 AUD 2021/1/25~2021/5/28
Currency swap contracts 29,000 AUD 2021/1/8~2021/3/16
Currency swap contracts 1,865,917 CNY 2021/1/13~2021/12/8
Currency swap contracts 101,143 EUR 2021/1/4~2021/12/29
Currency swap contracts 6,239,610 JPY 2021/1/4~2021/6/11
Currency swap contracts 31,000 NZD 2021/1/27~2021/2/23
Currency swap contracts 28,607,271 TWD 2021/1/4~2021/12/29
Currency swap contracts 3,886,801 USD 2021/1/4~2021/12/8
Currency swap contracts 2,053,433 ZAR 2021/1/6~2021/3/17
Currency swap contracts 8,832 SEK 2021/1/26
Option contracts call 4,500 AUD 2021/2/3~2021/2/19
Option contracts-call 800 EUR 2021/3/9
Option contracts-call 27,100 USD 2021/1/13~2021/10/19
Option contracts-put 4,500 AUD 2021/2/3~2021/2/19
Option contracts-put 800 EUR 2021/3/9
Option contracts-put 27,100 USD 2021/1/13~2021/10/19
December 31, 2019
Amount of contracts
(in thousands) Currency Matured duration
Foreign exchange forward contracts $ 2,800 EUR 2020/3/3~2020/3/17
Foreign exchange forward contracts 114,806 JPY 2020/1/6~2020/4/17
Foreign exchange forward contracts 1,210,190 TWD 2020/1/3~2020/6/24
Foreign exchange forward contracts 43,247 USD 2020/1/3~2020/3/30
Foreign exchange forward contracts 9,538 SEK 2020/1/3
Foreign exchange forward contracts 9,661 AUD 2020/3/9~2020/3/31
Foreign exchange forward contracts 70,878 ZAR 2020/1/3~2020/2/20
Currency swap contracts 28,940 AUD 2020/1/3~2020/3/12
Currency swap contracts 15,000 CAD 2020/2/21
Currency swap contracts 10,819,871 CNY 2020/1/2~2021/5/17
Currency swap contracts 142,340 EUR 2020/1/22~2020/11/16
Currency swap contracts 7,000 GBP 2020/1/9~2020/3/18
Currency swap contracts 3,513,405 JPY 2020/1/6~2020/7/16
Currency swap contracts 27,000 NZD 2020/1/21~2020/2/21
Currency swap contracts 38,599,637 TWD 2020/1/2~2020/12/21
Currency swap contracts 3,979,626 USD 2020/1/2~2021/5/17
Currency swap contracts 2,059,560 ZAR 2020/1/6~2020/3/11
Option contracts-call 5,000 AUD 2020/2/14~2020/3/12
Option contracts-call 6,300 EUR 2020/1/13~2020/3/9
Option contracts-call 31,200 USD 2020/1/7~2020/10/13
Option contracts-put 5,000 AUD 2020/2/14~2020/3/12
Option contracts-put 6,300 EUR 2020/1/13~2020/3/9
Option contracts-put 31,200 USD 2020/1/7~2020/10/13
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(D) Securities purchased under resell agreements

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December 31, 2020 December 31, 2019
Securities under resell agreements $ 6,132,162 13,399,113
Face amount 6,135,000 13,413,000
Resell period 2021.01.04~2021.01.25 2020.01.02~2020.01.20
Range of resell interest rate 0.23%~0.26% 0.52%~0.57%
Resell price $ 6,132,615 13,403,489
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(E) Receivables

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December 31, 2020 December 31, 2019
Interest receivable $ 2,517,204 3,432,360
Acceptances receivable 1,283,753 919,550
Accrued incomes 69,435 60,308
Accounts receivable 1,023,164 1,072,490
Accounts receivable factoring without recourse - 19,089
Spot exchange receivable-foreign currencies 35,719,388 19,401,208
Refinancing guaranty deposits 6,272 6,058
Guaranteed proceeds receivable from refinancing 6,360 5,776
Credit cards accounts receivable 1,090,030 1,297,722
Receivable price of securities purchased for customers 246,189 148,588
Settlement price 452,602 178,136
Installment receivables and leases 753,061 1,041,801
Other receivables 419,263 305,409
Sub-total 43,586,721 27,888,495
Less: Allowance for bad debts (138,564 ) (151,590 )
Total $ 43,448,157 27,736,905
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December 31, 2020 and 2019 were $81,728,304 and $78,979,351 respectively.

The change in allowance for bad debts was as follows:

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For the years ended December 31,
2020 2019
Beginning balance $ 151,590 135,730
Provision 5,071 61,655
Write-off (15,044 ) (43,492 )
Foreign exchange (3,053 ) (2,303 )
Ending balance $ 138,564 151,590
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145

(F) Discounts and loans, net

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December 31, 2020 December 31, 2019
Import/export bills negotiated $ 149,837 159,033
Bills and notes discounted 835,280 1,055,795
Overdrafts 22,354 30,564
Secured overdrafts 1,456,408 2,750,654
Short-term loans 142,677,907 150,304,834
Short-term secured loans 197,006,073 207,869,262
Margin loans receivable 2,504,189 2,230,213
Medium-term loans 154,862,508 155,727,045
Medium-term secured loans 260,308,203 175,918,159
Long-term loans 25,097,549 21,723,867
Long-term secured loans 433,675,772 425,203,483
Overdue loans 5,699,161 3,117,841
Sub-total 1,224,295,241 1,146,090,750
Less: Adjustment of discount and premium (253,001 ) (286,446 )
Less: Allowance for bad debts (14,326,157 ) (13,341,368 )
Total $ 1,209,716,083 1,132,462,936
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The change in allowance for bad debts was as follows:

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For the years ended December 31,
2020 2019
Beginning balance $ 13,341,368 13,034,151
Provision 4,046,672 2,422,135
Transfer out (16,268 ) (24,238 )
Write-off (4,008,562 ) (3,307,350 )
Write-off recovered 991,109 1,231,950
Foreign exchange (28,162 ) (15,280 )
Ending balance $ 14,326,157 13,341,368
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(G) Financial asset at fair value through other comprehensive income

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December 31, 2020 December 31, 2019
Investment in debt instruments measured at fair value through
other comprehensive income:
Government bonds $ 34,724,023 42,299,233
Corporate bonds 46,029,075 35,288,346
Financial debentures 23,339,038 13,505,601
Negotiable certificates of deposit - 150,031
Subtotal 104,092,136 91,243,211
Investment in equity instruments measured at fair value through
other comprehensive income:
Listed stocks 8,736,348 7,149,992
Unlisted stocks 4,478,071 4,154,137
Real Estate Investment Trust 49,295 49,804
Subtotal 13,263,714 11,353,933
Total $ 117,355,850 102,597,144
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1. Investment in debt instruments measured at fair value through other comprehensive income

The Bank and subsidiaries assessed that the above bond investments were held within a business model whose objective was achieved by both collecting contractual cash flows and selling financial assets. The bond investments have been classified as the financial asset measured at fair value through other comprehensive income. Some of the investment in debt instruments measured at fair value through other comprehensive income are used as resell condition. Please refer to Note 6 (P) for more details.

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1. Investment in equity instruments measured at fair value through other comprehensive income

The Bank and subsidiaries designated the investments shown above as equity securities as at fair value through other comprehensive income because these equity securities represent those investments intending to hold for long-term for strategic purpose.

The Bank and subsidiaries designated the investments shown above as equity instrument as at fair value through other comprehensive income, therefore, the Bank and subsidiaries recognized $511,208 and $408,485 as dividend revenue for the years ended December 31, 2020 and 2019. In which, the disposal equity instruments were recognized $117,041 and $58,330 as dividend revenue for the years ended December 31, 2020 and 2019.

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The Bank and subsidiaries sold the investments which were measured as at fair value through other comprehensive income due to assets allocation. The fair value of disposed investments are $2,610,237 and $1,287,678. And (loss) gains on disposal are $(1,350) and $52,427 for the years ended December 31, 2020 and 2019. Thus, accumulated gains on disposal were transferred from other equity to retained earnings.

1. Please refer to Note 6(AO) for the credit risk (including the impairment in debt instruments) and market risk information.

2. other comprehensive income as of December 31, 2020 and 2019. The changes in allowance for credit

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For the years ended December 31,
2020 2019
Beginning balance $ 52,299 33,765
Provision 14,630 18,676
Foreign exchange (475 ) (142 )
Ending balance $ 66,454 52,299
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(H) Investment in debt instruments at amortized cost

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December 31, 2020 December 31, 2019
Certificates of deposit with the Central Bank $ 161,705,000 174,880,000
Government bonds 29,584,857 32,061,168
Corporate bonds 13,464,156 17,968,480
Financial debentures 23,044,358 37,874,737
Negotiable certificates of deposit 280,925 362,868
Subtotal 228,079,296 263,147,253
Less:Accumulated impairment (75,964 ) (90,411 )
Total $ 228,003,332 263,056,842
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The Bank and subsidiaries assessed that these financial assets were held to collect the contractual cash flows, which consisted solely of payments of principal and interest on principal amount outstanding. Therefore,

1. Please refer to Note 6(AO) for credit risk.

2. The pledged assets provided by the above investment in debt instruments at amortized cost were shown follows:

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December 31, 2020 December 31, 2019
Reserve for provisional seizure by the court, international card $ 812,600 1,183,000
payment reserve, trust claim reserve and operating guaranty
funds
Overseas branches required reserve of overdraft guarantee - 62,979
Daylight overdraft guarantee (Certificates of deposit with the 2,000,000 2,000,000
Central Bank)
Guarantee for borrowing US dollars 23,000,000 23,000,000
Guarantee for borrowing JPY dollars 200,000 200,000
Total $ 26,012,600 26,445,979
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147

1. The Bank and subsidiaries assessed the impairment of investment in debt instruments at amortized cost as of December 31, 2020 and 2019. The changes in allowance for credit losses attribute to these financial assets were as follows:

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For the years ended December 31,
2020 2019
Beginning balance $ 90,411 93,128
Reversal (13,482 ) (2,346 )
Foreign exchange (965 ) (371 )
Ending balance $ 75,964 90,411
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1. Disposal gain (loss) on disposal investment in assets at amortized cost:

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For the year ended December 31, 2020
The carrying amount at the
date of derecognition Gain (Loss) on disposal
Corporate bonds $ 2,649,569 210,105
For the year ended December 31, 2019
The carrying amount at the
date of derecognition Gain (Loss) on disposal
Corporate bonds $ 116,822 980
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measured at amortized cost, 1) the advanced redemption of the issuer; 2) the increase of credit risk; and 3) in order to strenghen the capital adequacy ratio.

In 2019, the main reason is due to the advanced redemption of the issuer.

(I) Other financial assets

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December 31, 2020 December 31, 2019
Overdue receivable $ 68,832 105,829
Less: Allowance for bad debts, overdue receivable (55,051 ) (85,901 )
Total $ 13,781 19,928
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The change in allowance for bad debts was as follows:

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For the years ended December 31,
2020 2019
Beginning balance $ 85,901 87,249
Reversal (25,002 ) (25,452 )
Transfer in 16,268 24,238
Write-off (44,717 ) (22,009 )
Written-off recovered 22,601 21,875
Ending balance $ 55,051 85,901
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(J) Property and equipment, net

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Revaluation Accumulated Accumulated
December 31, 2020 Cost increment depreciation impairment Total
Land $ 6,743,535 2,986,161 - 14,031 9,715,665
Buildings 7,930,240 31,184 4,404,411 14,754 3,542,259
Machinery and equipment 2,273,606 - 1,771,978 - 501,628
Transportation equipment 275,438 - 232,974 - 42,464
Miscellaneous equipment 608,684 - 521,029 - 87,655
Leasehold improvements 168,234 - 69,460 - 98,774
Construction in progress 12,246 - - - 12,246
Prepayment for equipment 514,215 - - - 514,215
Total $ 18,526,198 3,017,345 6,999,852 28,785 14,514,906
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Revaluation Accumulated Accumulated
December 31, 2019 Cost increment depreciation impairment Total
Land $ 6,737,960 2,986,161 - 14,031 9,710,090
Buildings 7,862,521 31,184 4,213,708 14,754 3,665,243
Machinery and equipment 2,336,544 - 1,840,547 - 495,997
Transportation equipment 279,967 - 240,449 - 39,518
Miscellaneous equipment 582,107 - 493,441 - 88,666
Leasehold improvements 151,713 - 75,183 - 76,530
Construction in progress 16,346 - - - 16,346
Prepayment for real estate 120 - - - 120
Prepayment for equipment 405,727 - - - 405,727
Total $ 18,373,005 3,017,345 6,863,328 28,785 14,498,237
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Change of cost

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Foreign December 31,
January 1, 2020 Increase Decrease Exchange 2020
Land $ 9,724,121 5,575 - - 9,729,696
Buildings 7,893,705 67,719 - - 7,961,424
Machinery and equipment 2,336,544 193,108 251,684 (4,362 ) 2,273,606
Transportation equipment 279,967 16,522 20,998 (53 ) 275,438
Miscellaneous equipment 582,107 55,918 27,425 (1,916 ) 608,684
Leasehold improvements 151,713 53,122 34,028 (2,573 ) 168,234
Construction in progress 16,346 26,074 30,174 - 12,246
Prepayment for real estate 120 5,455 5,575 - -
Prepayment for equipment 405,727 161,827 52,952 (387 ) 514,215
Total $ 21,390,350 585,320 422,836 (9,291 ) 21,543,543
Foreign December 31,
January 1, 2019 Increase Decrease Exchange 2019
Land $ 9,724,121 - - - 9,724,121
Buildings 7,855,599 38,106 - - 7,893,705
Machinery and equipment 2,094,860 297,985 57,806 1,505 2,336,544
Transportation equipment 277,877 16,054 15,477 1,513 279,967
Miscellaneous equipment 579,568 25,756 22,682 (535 ) 582,107
Leasehold improvements 138,783 21,191 7,200 (1,061 ) 151,713
Construction in progress 31,065 1,179 15,898 - 16,346
Prepayment for real estate - 120 - - 120
Prepayment for equipment 171,807 292,324 57,797 (607 ) 405,727
Total $ 20,873,680 692,715 176,860 815 21,390,350
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Change of depreciation

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Foreign December 31,
January 1, 2020 Increase Decrease Exchange 2020
Buildings $ 4,213,708 190,703 - - 4,404,411
Machinery and equipment 1,840,547 184,922 250,178 (3,313 ) 1,771,978
Transportation equipment 240,449 13,533 20,822 (186 ) 232,974
Miscellaneous equipment 493,441 55,851 27,172 (1,091 ) 521,029
Leasehold improvements 75,183 28,381 32,656 (1,448 ) 69,460
Total $ 6,863,328 473,390 330,828 (6,038 ) 6,999,852
Foreign December 31,
January 1, 2019 Increase Decrease Exchange 2019
Buildings $ 4,027,738 185,970 - - 4,213,708
Machinery and equipment 1,739,374 159,803 57,364 (1,266 ) 1,840,547
Transportation equipment 242,753 12,498 15,345 543 240,449
Miscellaneous equipment 492,179 24,226 22,186 (778 ) 493,441
Leasehold improvements 55,180 28,097 7,200 (894 ) 75,183
Total $ 6,557,224 410,594 102,095 (2,395 ) 6,863,328
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149

Accumulated impairment

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January 1, 2020 Increase Decrease Foreign Exchange December 31, 2020
Land $ 14,031 - - - 14,031
Buildings 14,754 - - - 14,754
Total $ 28,785 - - - 28,785
January 1, 2019 Increase Decrease Foreign Exchange December 31, 2019
Land $ 14,031 - - - 14,031
Buildings 14,754 - - - 14,754
Total $ 28,785 - - - 28,785
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the regulation of GAAP of R.O.C as the original cost on the transition date.

As of December 31, 2020 and 2019, the appreciation from revaluation of properties all amounted to $3,017,345. Reserve for land incremental tax all amounted to $879,056 (Recognized under deferred tax liabilities).

As of December 31, 2020 and 2019, land which was illegally occupied all amounted to $5,496. Except for a portion of the land that was still under negotiation with the occupant; in addition, the Bank intends to participate in land auction, urban renewal or by other appropriate means in due course.

(K) Right‑of‑use assets, net

The Bank and subsidiaries leases many assets including buildings, machinery and transportation equipment. Information about leases on costs, depreciation and impairment for which the Bank and subsidiaries as a lessee is presented below:

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Accumulated Accumulated
December 31, 2020 Cost depreciation impairment Total
Buildings $ 1,538,073 503,033 - 1,035,040
Machinery and equipment 43,406 40,895 - 2,511
Transportation equipment 67,794 36,156 - 31,638
Miscellaneous equipment 7,603 3,035 - 4,568
Total $ 1,656,876 583,119 - 1,073,757
Accumulated Accumulated
December 31, 2019 Cost depreciation impairment Total
Buildings $ 1,299,279 301,019 - 998,260
Machinery and equipment 74,915 64,743 - 10,172
Transportation equipment 60,417 21,514 - 38,903
Miscellaneous equipment 5,729 1,505 - 4,224
Total $ 1,440,340 388,781 - 1,051,559
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Change of cost

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January 1, 2020 Increase Decrease Foreign Exchange December 31, 2020
Buildings $ 1,299,279 420,428 180,267 (1,367 ) 1,538,073
Machinery and equipment 74,915 2 31,493 (18 ) 43,406
Transportation equipment 60,417 14,520 7,089 (54 ) 67,794
Miscellaneous equipment 5,729 2,347 473 - 7,603
Total $ 1,440,340 437,297 219,322 (1,439 ) 1,656,876
January 1, 2019 Increase Decrease Foreign Exchange December 31, 2019
Buildings $ 854,180 533,901 86,364 (2,438 ) 1,299,279
Machinery and equipment 75,518 88 691 - 74,915
Transportation equipment 54,202 6,998 660 (123 ) 60,417
Miscellaneous equipment 3,456 2,521 248 - 5,729
Total $ 987,356 543,508 87,963 (2,561 ) 1,440,340
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Change of depreciation

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January 1, 2020 Increase Decrease Foreign Exchange December 31, 2020
Buildings $ 301,019 379,398 176,359 (1,025 ) 503,033
Machinery and equipment 64,743 7,645 31,493 - 40,895
Transportation equipment 21,514 21,765 7,089 (34 ) 36,156
Miscellaneous equipment 1,505 2,003 473 - 3,035
Total $ 388,781 410,811 215,414 (1,059 ) 583,119
January 1, 2019 Increase Decrease Foreign Exchange December 31, 2019
Buildings $ - 386,632 84,770 (843 ) 301,019
Machinery and equipment 53,451 11,983 691 - 64,743
Transportation equipment - 22,199 660 (25 ) 21,514
Miscellaneous equipment - 1,753 248 - 1,505
Total $ 53,451 422,567 86,369 (868 ) 388,781
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(L) Other assets, net

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December 31, 2020 December 31, 2019
Office supplies $ 29,165 28,531
Prepayments 6,229,552 4,269,431
Operating guarantee deposits and settlement fund 28,319 30,066
Guarantee deposits paid 1,773,855 1,222,379
Deferred assets 166 9
Proceeds of settlement and margin trading 180,047 2,034
Total $ 8,241,104 5,552,450
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(M) Deposits from the Central Bank and banks

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December 31, 2020 December 31, 2019
Deposits from the Central Bank $ 281,121 175,101
Due from the Central Bank 11,802,000 10,796,400
Deposits from banks 619,499 93,229
Call loans from banks 36,445,088 24,197,994
Overdrafts on banks 777,971 1,118,477
Deposits transferred from Chunghwa Post Co., Ltd. 68,275,360 68,412,411
Total $ 118,201,039 104,793,612
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(N) Due to the Central Bank and banks

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December 31, 2020
Currency Interest Rate Maturity Date Original Amount NTD Amount
Central Bank TWD 0.10% 2021.12.31 28,450,000 $ 28,450,000
Taichung Commercial Bank Co., Ltd. USD 2.26% 2021.5.28 3,000 84,300
(OBU)
Sunny Commercial Bank (OBU) USD 1.76% 2021.8.27 6,000 168,600
Bank of Kaohsiung Co.,Ltd. (OBU) USD 1.77% 2023.6.10 12,000 337,200
Total $ 29,040,100
Unused credit lines $ 2,262,400
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December 31, 2019
Currency Interest Rate Maturity Date Original Amount NTD Amount
Agricultural Bank of Taiwan TWD 0.86% 2020.1.30 90,000 $ 90,000
Hua Nan Commercial Bank, Ltd. TWD 1.00% 2020.1.20 500 500
Chang Hwa Commercial Bank, Ltd. CNY 4.99% 2020.6.22~ 7,417 31,855
(Kunshan) 2021.2.13
Taichung Commercial Bank Co., Ltd. USD 3.89%~3.91% 2021.5.28 15,000 449,850
(OBU)
Sunny Commercial Bank (OBU) USD 3.30% 2020.8.7 6,000 179,940
Total $ 752,145
Unused credit lines $ 1,170,105
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151

(O) Financial liabilities at fair value through profit or loss

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December 31, 2020 December 31, 2019
Financial liabilities designated at fair value through profit or loss:
Financial debentures $ 8,411,020 8,949,182
Financial liabilities held for trading:
Derivative instruments not used for hedging
Foreign exchange forward contracts 3,768 13,364
Currency swap contracts 181,994 395,909
Foreign currency option-put 6,599 7,763
Interest rate contract 35,621 27,118
Total $ 8,639,002 9,393,336
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Please refer to 6(C) for the nominal amount of unsettled financial derivatives instrument contracts of December 31, 2020 and 2019.

(P) Notes and bonds issued under repurchase agreement

	December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2020
Assets	Par value	Selling Price (Recognized in securities sold under repurchase agreements)	Designated repurchase amount	Designated repurchase date
Financial assets at fair value through other comprehensive income	$ 2,131,570	2,055,991	2,062,593	Prior to August 24, 2023
	December 31, 2019
Assets	Par value	Selling Price (Recognized in securities sold under repurchase agreements)	Designated repurchase amount	Designated repurchase date
Financial assets at fair value through other comprehensive income	$ 784,600	868,581	869,623	Prior to May 8, 2020

(Q) Payables

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December 31, 2020 December 31, 2019
Accrued interest $ 2,372,962 2,623,479
Accounts payable 3,229,502 3,107,765
Acceptances 1,303,348 946,338
Accrued expenses 2,559,675 2,808,411
Collection payable 690,663 774,995
Deposits received from securities borrowers 112,416 101,709
Guaranteed price deposits received from securities borrowers 150,740 110,417
Accounts payable factoring - 19,089
Spot exchange payable, foreign currencies 35,716,094 19,400,371
Other payables 944,149 825,924
Prices payable of securities sold for customers 683,596 319,966
Others 23,930 19,220
Total $ 47,787,075 31,057,684
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(R) Deposits and remittances

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December 31, 2020 December 31, 2019
Savings deposits $ 679,271,179 642,739,224
Time deposits 337,823,523 405,886,922
Demand deposits 375,308,422 361,341,496
Checking account deposits 25,741,910 24,775,707
Remittances 426,966 306,198
Total $ 1,418,572,000 1,435,049,547
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152

Taiwan Business Bank Annual Report 2020

Ⅵ

(S) Bank notes payable

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Terms of Transactions Bond Issued
Amount
Maturity December December
Bonds Issue date date Interest Rate & repayment Type 31, 2020 31, 2019
2010-1P A 09/23/2010 None The debentures bear annual interest rate which is the Perpetual non- $ - 3,200,000
Chunghwa post's board average interest rate for 1-year accumulated
time deposit plus 1.34% for the ten years after the issue subordinated
date. The interest rate will be the Chunghwa post's board financial
interest rate for 1-year time deposit plus 2.34% from the debentures
eleventh year. The debentures are redeemable per face
value plus accrued interest at the interest payment date
after ten years from the issue date under the consent of
the competent authority.
2010-1P B 09/23/2010 None The debentures bear an interest rate of 3.05% for the 〞 - 800,000
first ten years after the issue date. The interest rate will
be 4.05% from the eleventh year. The debentures are
redeemable per face value plus accrued interest at the
interest payment date after ten years from the issue date
under the consent of the competent authority.
2013-1 03/25/2013 03/25/2020 The debentures bear an annual interest rate of 1.68%. Unsecured - 5,000,000
Simple interest is accrued and paid annually. The principal subordinated
will be repaid in full at maturity. long-term
financial
debentures
〞
2013-2A 11/25/2013 11/25/2020 (A) The debentures bear annual interest rate, which is the - 3,100,000
index rate plus 0.52%. The index rate is the average
offer of 90-days CP which is indicated in Reuter's page
6165 at 11 A.M Taipei time, 2 operation days prior to
the interest commencement date.
(B) Since January 1, 2015 according to various indicators
of interest rate changes during the value date two
business days before the pricing (FIXING) Bank of
the Republic of China Business Association National
Union RCAs website "Taipei fixing the financial sector
call loan rate (TAIBOR)" three-month interest rate
fixing. Simple interest rate is accrued four times a year
and paid annually. The principal will be repaid in full at
maturity.
2013-2B 11/25/2013 11/25/2020 The debentures bear an annual interest rate of 1.92%. Unsecured - 2,900,000
Simple interest is accrued and paid annually. The principal subordinated
will be repaid in full at maturity. long-term
financial
debentures
2015-1P 06/18/2015 None The debenture bear an annual interest rate of 3.9%. Simple Perpetual non- - 5,000,000
interest is accrued and paid annually. The debentures are accumulated
redeemable per face value plus accrued interest at interest subordinated
payment date after five years from the issued date under financial
the consent of the competent authority. debentures
2015-2A 08/31/2015 08/31/2023 The debentures bear an annual interest rate of 2.05%. Unsecured 4,700,000 4,700,000
Simple interest is accrued and paid annually. The principal subordinated
will be repaid in full at maturity. long-term
financial
debentures
2015-2B 08/31/2015 08/31/2025 The debentures bear an annual interest rate of 2.10%. 〞 300,000 300,000
Simple interest is accrued and paid annually. The principal
will be repaid in full at maturity.
2016-1P 09/20/2016 None The debentures bear an annual interest rate of 3.2%. Perpetual non- 8,000,000 8,000,000
Simple interest is accrued and paid annually. The accumulated
debentures are redeemable per face value plus accrued subordinated
interest at interest payment date after five years and three financial
months from the issued date under the consent of the debentures
competent authority
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153

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Terms of Transactions Bond Issued
Amount
Maturity December December
Bonds Issue date date Interest Rate & repayment Type 31, 2020 31, 2019
2016-2 12/20/2016 12/20/2023 The debentures bear an annual interest rate of 1.40%. Unsecured $ 2,700,000 2,700,000
Simple interest is accrued and paid annually. The principal subordinated
will be repaid in full at maturity. long-term
financial
debentures
2017-1A 03/28/2017 03/28/2024 The debentures bear an annual interest rate of 1.50%. 〞 390,000 390,000
Simple interest is accrued and paid annually. The principal
will be repaid in full at maturity.
2017-1B 03/28/2017 03/28/2025 The debentures bear an annual interest rate of 1.60%. 〞 250,000 250,000
Simple interest is accrued and paid annually. The principal
will be repaid in full at maturity.
2017-1C 03/28/2017 03/28/2027 The debentures bear an annual interest rate of 1.85%. 〞 3,360,000 3,360,000
Simple interest is accrued and paid annually. The principal
will be repaid in full at maturity.
2017-2 05/23/2017 05/23/2027 The debentures bear an annual interest rate of 1.85%. 〞 1,300,000 1,300,000
Simple interest is accrued and paid annually. The principal
will be repaid in full at maturity.
2018-1 01/05/2018 01/05/2021 The debentures bear an annual interest rate of 0.7%. Unsecured 1,000,000 1,000,000
Simple interest is accrued and paid annually. The principal senior
will be repaid in full at maturity. long-term
financial
debentures
2018-2 08/20/2018 08/20/2028 The debentures bear an annual interest rate of 1.45%. Unsecured 5,450,000 5,450,000
Simple interest is accrued and paid annually. The principal subordinated
will be repaid in full at maturity. long-term
financial
debentures
2019-1A 03/21/2019 03/21/2026 The debentures bear an annual interest rate of 1.20%. 〞 1,000,000 1,000,000
Simple interest is accrued and paid annually. The principal
will be repaid in full at maturity.
2019-1B 03/21/2019 03/21/2029 The debentures bear an annual interest rate of 1.30%. 〞 4,800,000 4,800,000
Simple interest is accrued and paid annually. The principal
will be repaid in full at maturity.
2020-1 03/25/2020 03/25/2030 The debentures bear an annual interest rate of 0.8%. 〞 10,000,000 -
Simple interest is accrued and paid annually. The principal
will be repaid in full at maturity.
2020-2 08/13/2020 None The debentures bear an annual interest rate of 1.62%. Perpetual non- 10,000,000 -
Simple interest is accrued and paid annually. After accumulated
calculating the early redeemable bond is in line with the subordinated
capital adequacy ratio under the consent of the competent financial
authority, the debentures are redeemable per face value debentures
plus accrued interest at the interest payment date after five
years and a month from the issue date .
$ 53,250,000 53,250,000
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The Bank issued $120,000 thousand and $180,000 thousand dollar-denominated debentures with call option that can be executed on strike price after five years from the issued date. Without executing call options during the periods of debentures, the principal will be repaid in full at maturity. In order to avoid interest risk, the Bank buys interest rate swap contracts that are classified as financial assets at fair value through profit or loss. To eliminate the measurement or recognition inconsistency between IRSs and debentures, the Bank classified the debentures into financial liabilities at fair value through profit or loss. In addition, the Bank considers that the designated economic relationship is evaluated by the SLMM model method, if the amount of changes in the fair value of the corporate bonds attributable to changes in credit risk is listed in other comprehensive gains and losses, it will trigger or aggravate the accounting ratio of gains and losses. Therefore, the amount is reported in the profit and loss. The debentures are as follows:

154

Taiwan Business Bank Annual Report 2020

Ⅵ

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Terms of Transactions Bond Issued
Amount
Maturity December December
Bonds Issue date date Interest Rate & repayment Type 31, 2020 31, 2019
2017-3 10/27/2017 10/27/2047 The zero-coupon debentures with call options can be Unsecured $ 3,372,000 $ 3,598,800
executed on strike price after five years from the issued dollar-
date. Without executing call options during the periods of denominated
debentures, the principal will be repaid in full at maturity. senior financial
debentures
2018-3 09/27/2018 09/27/2048 The zero-coupon debentures with call options can be 〞 5,058,000 5,398,200
executed on strike price after five years from the issued
date. Without executing call options during the periods of
debentures, the principal will be repaid in full at maturity.
Valuation (18,980 ) (47,818 )
adjustment
$ 8,411,020 8,949,182
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as follows:

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December 31, 2020 December 31, 2019
Fair value of corporate bonds $ 8,411,020 8,949,182
Fair value increase (decrease) not attributable to changes in 55,154 113,183
market conditions that give rise to market risk
Difference between the carrying value and the amount payable at (18,980 ) (47,818 )
the end of the contract term
(T) Other financial liabilities
December 31, 2020 December 31, 2019
Cumulative earnings on appropriated loans fund $ 5,492,366 6,835,084
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(T) Other financial liabilities

Cumulative earnings on appropriated loan fund is the project contract signed by National Development Fund, Executive Yuan, Small and Medium Enterprise Administration, Ministry of Economic Affairs, and the Bank. The Bank appropriates the fund to the companies which meet the conditions for loans. The fund is classified as principal account, interest yielding account, loaned account and un-loaned account. These accounts are used for transferring accounts and paying the deposit interests for each project contract.

(U) Provisions

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December 31, 2020 December 31, 2019
Provision for guarantee liabilities $ 218,351 200,948
Provision for loan commitments 52,831 31,498
Provision for employee benefits 3,122,235 2,925,557
Total $ 3,393,417 3,158,003
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Change of provision

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January 1, Foreign December
2020 Increase Decrease Use exchange 31, 2020
Provision for guarantee liabilities $ 200,948 17,634 - - (231 ) 218,351
Provision for loan commitments 31,498 21,379 - - (46 ) 52,831
Provision for employee benefits 2,925,557 430,399 181,318 52,403 - 3,122,235
Total $ 3,158,003 469,412 181,318 52,403 (277 ) 3,393,417
January 1, Increase Decrease Use Foreign December
2019 exchange 31, 2019
Provision for guarantee liabilities $ 215,383 - 14,340 - (95 ) 200,948
Provision for loan commitments 73,753 - 42,171 - (84 ) 31,498
Provision for employee benefits 3,276,591 217,584 490,438 78,180 - 2,925,557
Total $ 3,565,727 217,584 546,949 78,180 (179 ) 3,158,003
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155

(V) Lease liabilities

Lease liabilities as follows:

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December 31, 2020 December 31, 2019
Less than one year $ 336,968 362,818
More than one year $ 725,053 678,365
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For the years ended December 31,
2020 2019
Interest on lease liabilities $ 16,868 15,129
Expenses relating to short-term leases $ 4,485 4,034
Expenses relating to leases of low-value assets, excluding short- $ 13,325 12,757
term leases of low-value assets
The amounts recognized in the statement of cash flows were as follows:
For the years ended December 31,
2020 2019
Total cash outflow for leases $ 446,391 446,253
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(a) Real estate leases

the lease for an additional period of the same duration after the end of the contract term.

Some leases provide for additional rent payments that are based on changes in local price indices. Some also require the Bank and subsidiaries to make payments that relate to the property taxes levied on the lessor and insurance payments made by the lessor; these amounts are generally determined monthly.

(b) Other leases

The Bank and subsidiaries leased machinery and transportation equipment with lease terms of one to four years. In some cases, the Bank and subsidiaries has options to purchase the assets at the end of the contract term; in other cases, it guarantees the residual value of the leased assets at the end of the contract term.

The Bank and subsidiaries has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short term.

(W) Other liabilities

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December 31, 2020 December 31, 2019
Advance interest receipts $ 2,707 5,231
Unearned revenue 254,962 178,283
Other advance receipts 86,658 84,080
Guarantee deposits received 1,600,690 1,302,117
Temporary receipts and suspense accounts 2,625,821 1,711,940
Others 7,821 7,830
Total $ 4,578,659 3,289,481
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(X) Equity

• (a) Common stock

As of December 31, 2020 and 2019, the Bank's authorized capital were $80,000,000 and the paid-in capital for common shares of the Bank were $74,885,834 and $71,319,842, the face value of each share is NTD $10. The outstanding shares were 7,488,584 and 7,131,985 thousand shares, respectively.

156

Taiwan Business Bank Annual Report 2020

Ⅵ

Pursuant to the resolution approved by the regular stockholders' meeting of the Bank on May 29, 2020, the Bank increased its capital from the retained earnings by $3,565,992 and issued 356,599 thousand shares. The capital increase has been approved by Financial Supervisory Commission and came into effect on July 6, 2020. The record date of the capital increase is set on July 28, 2020. The Bank has completed the alteration of the registered capital amount on August 26, 2020.

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Pursuant to the resolution approved by the regular stockholders' meeting of the Bank on June 14, 2019, the Bank increased its capital from the retained earnings by $3,196,940 and issued 319,694 thousand shares. The capital increase has been approved by Financial Supervisory Commission and came into effect on July 25, 2019. The record date of the capital increase is set on August 20, 2019. The Bank has completed the alteration of the registered capital amount on September 9, 2019.

A resolution was passed during the regular shareholders' meetings held on June 14, 2019 for the issuance of ordinary shares for cash within a year under private placement, with the number of shares issued to not exceed 1,000,000 thousand. Subsequently, a resolution was passed during the board meeting held on August 19, 2019 for the issuance of 418,410 thousand ordinary shares under private placement at $11.95 per share, amounting to $5,000,000, August 30, 2019 as the record date of cash capital increase. The relevant statutory registration procedures have been completed. The remaining quota of this private placement (581,590 thousand shares) was no longer processed by a resolution of the interim board of directors on April 22, 2020. The situation regarding the handling of privately placed ordinary shares was reported to the regular shareholders' meeting on May 29, 2020.

The aforementioned private placement of ordinary shares and the transfer of any subsequently issuance bonus shares would be subject to section 43-8 requirements under the Securities and Exchange Act. The Bank can only list these shares to be traded on the Taiwan Stock Exchange after a three-year period has elapsed from the delivery date of the private placement securities (November 1, 2019), and after applying for a public offering with the Financial Supervisory Commission.

(b) Capital surplus

Sources and statement of the Bank's capital surplus were as follows:

		December 31, 2020		December 31, 2019
Additional paid-in capital		$ 815,900		815,900

realized capital surplus can be used to increase the common stock or be distributed as cash dividends based on the shareholder's initial number of shares. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring capital surplus in excess of par value should not exceed 10% of the total common stock outstanding.

(c) Earnings distribution and dividend policy

Under the Bank's Articles of Incorporation, earnings are used initially to pay for income taxes and restore cumulative losses, and 30% of the remaining earnings is set aside as legal reserve. Special reserve is appropriated from or reversed to earnings per other regulations. Add accumulated retained earnings from previous years as distributable dividends and the amount of dividends is resolved by the annual stockholders' meeting according to the proposal submitted by the Board of Directors.

In order to continuously expand scale and increase profitability, the Bank based on the future capital budget plan, adopts residual dividend policy and primarily distributes stock dividend to ensure the capital is sufficient. When there is surplus of capital, the remaining capital can be distributed by cash dividend. Cash dividend shall not be lower than 10% of the total dividend distributed. If the cash dividend distributed per share is lower than NTD$ 0.1, except for otherwise resolved by the shareholder's meeting, it is not distributed. If there is any situation conforms to that is regulated in article 44 item 1 of the Banking Act of The Republic of China, the Bank is not allowed to distribute earnings by cash or purchase shares outstanding. The maximum cash earning distribution is not allowed to be over 15% of the total paid in capital unless the legal reserve reaches the total paid-in capital.

157

In compliance with the Company Act, if the Company incurs no loss, under the consent of the shareholder's meeting, the Company is allowed to distribute new shares or cash dividends from legal reserve to the extent that the legal reserve issued is the surplus exceeding 25% of the paid in capital.

Under the Ruling No. 1010012865 issued on April 6, 2012 by the FSC, special reserve is appropriated from retained earnings based on the equivalent amounts of the contra accounts in equity. This special reserve may not be distributed as dividends to stockholders until the balances of these contra accounts in equity are reversed.

The Bank resolved the earning distribution for the earnings of 2019 and 2018 in the shareholder's meeting on May 29, 2020 and June 14, 2019, respectively. The dividends distributed were as follows:

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2019 2018
Distribution rate Distribution rate
(NT dollar) Amount (NT dollar) Amount
Dividends to common shareholders
Stock dividends $ 0.50 3,565,992 0.50 3,196,940
Cash dividends 0.20 1,426,397 0.30 1,918,164
Total $ 4,992,389 5,115,104
(d) Other equity interest
Unrealized gains
from financial assets Exchange
measured at fair differences on
value through other translation of
comprehensive foreign financial
income statements Total
January 1, 2020 $ 4,541,167 (862,866) 3,678,301
Investment in debt instruments measured at fair value
through other comprehensive income
- Unrealized amount 1,232,785 - 1,232,785
- Realized amount (587,478 ) - (587,478 )
Foreign currency translation difference － Exchange
difference - (613,905 ) (613,905 )
Disposal of investments in equity instruments measured
at fair value through other comprehensive income 1,350 - 1,350
December 31, 2020 $ 5,187,824 (1,476,771 ) 3,711,053
January 1, 2019 $ 3,447,786 (541,122 ) 2,906,664
Investment in debt instruments measured at fair value
through other comprehensive income
- Unrealized amount 1,351,243 - 1,351,243
- Realized amount (205,435 ) - (205,435 )
Foreign currency translation difference － Exchange
difference - (321,744 ) (321,744 )
Disposal of investments in equity instruments
measured at fair value through other comprehensive
income (52,427 ) - (52,427 )
December 31, 2019 $ 4,541,167 (862,866 ) 3,678,301
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• (d) Other equity interest

158 Taiwan Business Bank Annual Report 2020

Ⅵ

(Y) Income taxes

• (a) The income tax expenses were as follows:

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For the years ended December 31,
2020 2019
Current tax expense
Current period $ 761,365 1,155,149
Adjustment for prior period (53,347 ) 61,825
Additional surtax on undistributed retained earnings - 17,803
708,018 1,234,777
Deferred tax expense (income)
Origination and reversal of temporary differences (24,532 ) 96,650
Income tax expenses $ 683,486 1,331,427
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• (b) The income tax expenses (income) recognized under other comprehensive income were as follows:

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For the years ended December 31,
2020 2019
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans $ (41,199 ) 5,899
For the years ended December 31,
2020 2019
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign financial $ (153,476 ) (80,436 )
statements
Unrealized gains (losses) on valuation of financial assets 13,145 7,698
measured at fair value through other comprehensive income
$ (140,331 ) (72,738 )
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The reconciliation between the income tax expense (income) and net income before tax of the Bank and subsidiaries for 2020 and 2019 is as follows:

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For the years ended December 31,
2020 2019
Income tax computed on net income before tax $ 1,072,385 1,615,820
Cessation tax of gains derived from the securicies (76,220 ) (14,615 )
transactions
Net income from off shore banking unit (416,797 ) (244,523 )
Recognized loss from financial assets and liabilities measured 24,413 (68,437 )
at fair value through profit or loss
Cash Dividend (103,473 ) (82,357 )
Overseas branch income tax expenses 150,365 35,258
Surtax on undistributed retained earnings - 17,803
(Overestimate) underestimate prior income tax expense (53,347 ) 61,825
Current-year losses for which no deferred tax asset was (4,294 ) 9,446
recognized
Change in unrecognized temporary differences (4,282 ) 58
Income basic tax 90,282 -
Other 4,454 1,149
Income tax expense $ 683,486 1,331,427
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159

(c) Changes in deferred tax assets and liabilities of the Bank and subsidiaries are as follows:

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For the year ended December 31, 2020
Recognized
in other
Beginning Recognized in comprehensive
balance profit or loss income Others Ending balance
Temporary difference
Deferred tax assets resulted from $ 685,791 19,002 - (25 ) 704,768
allowance for bad debts exceeding
the limit regulated in Tax Law
Loss on assets impairment 56,828 230 - - 57,058
Reserve for employee benefit 386,009 7,413 - - 393,422
liabilities
Land value increment tax (879,056 ) - - - (879,056 )
Exchange differences from the 215,715 - 153,476 - 369,191
translation of financial statements
of foreign operations
Unrealized loss on valuation of (9,380 ) - (13,145 ) - (22,525 )
financial assets measured
at fair value through other
comprehensive income
Actuarial gains and losses 275,177 - 41,199 - 316,376
Other 3,661 (3,438 ) - 2 225
Subtotal 734,745 23,207 181,530 (23 ) 66,839
Losses carried forward 1,470 1,325 - - 2,795
Net deferred tax assets (liabilities) $ 736,215 24,532 181,530 (23 ) 942,254
The information stated on the balance
sheet is as follows:
Deferred tax assets $ 1,624,651 1,843,835
Deferred tax liabilities $ 888,436 901,581
For the year ended December 31, 2019
Recognized
in other
Beginning Recognized in comprehensive
balance profit or loss income Others Ending balance
Temporary difference
Deferred tax assets resulted from $ 730,229 (44,221 ) - (217 ) 685,791
allowance for bad debts exceeding
the limit regulated in Tax Law
Loss on assets impairment 53,562 3,266 - - 56,828
Reserve for employee benefit 443,319 (57,310 ) 386,009
liabilities
Land value increment tax (879,056 ) - - - (879,056 )
Exchange differences from the 135,279 - 80,436 - 215,715
translation of financial statements
of foreign operations
Unrealized loss on valuation of (1,682 ) - (7,698 ) - (9,380 )
financial assets measured
at fair value through other
comprehensive income
Actuarial gains and losses 281,076 - (5,899 ) - 275,177
Other 251 3,420 - (10 ) 3,661
Subtotal 762,978 (94,845 ) 66,839 (227 ) 734,745
Losses carried forward 3,275 (1,805 ) - - 1,470
Net deferred tax assets (liabilities) $ 766,253 (96,650 ) 66,839 (227 ) 736,215
The information stated on the balance
sheet is as follows:
Deferred tax assets $ 1,646,991 1,624,651
Deferred tax liabilities $ 880,738 888,436
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160 Taiwan Business Bank Annual Report 2020

Ⅵ

(d) Uncertainty over income tax treatments

For tax returns that have not yet been assessed, the Bank and subsidiaries have assessed relevant factors, including relevant IFRIC interpretations and historical experience, and believe that sufficient income tax liabilities have been estimated.

• (e) The Bank's income tax returns through 2017 have been assessed by the Tax Authority.

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• (f) The income tax returns of the subsidiaries TBB Venture Capital Co., Ltd., and TBB International Leasing Co., Ltd. have been assessed until 2018 by the Tax Authority.

(Z) Provision for employee benefit

As of December 31, 2020 and 2019, the balance of provision for employee benefit of the Bank and subsidiaries were as follows:

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December 31, 2020 December 31, 2019
Defined benefit plan $ 2,190,568 2,022,067
Employee deposits with favorable rate 931,667 903,490
$ 3,122,235 2,925,557
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benefit plan assets of the Bank and subsidiaries as follows:

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December 31, 2020 December 31, 2019
Present value of defined benefit obligation $ 7,217,819 7,177,326
Less: Fair value of defined benefit plan assets (5,027,251 ) (5,155,259 )
$ 2,190,568 2,022,067
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of Taiwan that provides pensions for employees upon retirement. The plans (covered by the Labour Standards Law) entitle a retired employee to receive an annual payment based on years of service and average salary for the six months prior to retirement.

• (1) Composition of plan assets

The Bank and subsidiaries allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Labour Pension Fund Supervisory Committee. With regard to the utilization of the funds, minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with interest rates offered by local banks.

The Bank of Taiwan labour pension reserve account balance for the Bank and subsidiaries amounted to $5,027,251 and $5,155,259 on December 31, 2020 and 2019. For information on the utilisation of the labour pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labour Fund, Ministry of Labor.

follows:

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For the years ended December 31
2020 2019
Defined benefit obligation on January 1 $ 7,177,326 7,385,323
Current service and interest cost 231,891 258,070
Remeasurements of the net defined benefit liability
－ Actuarial loss on experience adjustment 154,633 35,900
－ Actuarial loss on financial assumptions changed 226,001 117,062
Benefits paid by the plan (572,032 ) (619,029 )
Defined benefit obligation on December 31 $ 7,217,819 7,177,326
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161

follows:

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For the years ended December 31
2020 2019
Fair value of plan assets on Junuary 1 $ 5,155,259 4,978,970
Interest income 35,665 44,245
Remeasurements of the net defined benefit liability
－ plan assets revenue (excluded of current interest) 174,638 182,455
Contributions made 233,721 568,618
Benefits paid by the plan (572,032 ) (619,029 )
Fair value of plan assets on December 31 $ 5,027,251 5,155,259
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For the years ended December 31
2020 2019
Current service costs $ 183,017 193,360
Net interest on the net defined benefit liability 13,209 20,465
$ 196,226 213,825
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Remeasurements of the net defined benefit liability recognized in other comprehensive income for the years ended December 31, 2020 and 2019 were as follows:

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For the years ended December 31
2020 2019
Amount on January 1 $ 1,375,889 1,405,382
Recognized during the period 205,996 (29,493 )
Amount on December 31 $ 1,581,885 1,375,889
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(6) Actuarial assumptions

the reporting date as follow :

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----- Start of picture text -----

December 31, 2020 December 31, 2019
Discount rate 0.30% 0.70%
Future salary increase rate 1.50% 1.50%
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the one year period after the reporting date is $270,000.

(7) Sensitivity analysis

The effects of changes in major actuarial assumptions adopted in defined benefit obligation on December 31, 2020 and 2019 were as follows :

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----- Start of picture text -----

Influence of defined benefit plan obligation
Increase 0.25% Decrease 0.25%
----- End of picture text -----

	Infuence of defned beneftplan obligation	Infuence of defned beneftplan obligation
	Increase 0.25%	Decrease 0.25%
December 31, 2020 Discount rate(Change 0.25%) Future salary increase rate(Change 0.25%) December 31, 2019 Discount rate(Change 0.25%) Future salaryincrease rate(Change 0.25%)	(1.98)% 1.94% (2.03)% 2.01%	2.04% (1.89)% 2.10% (1.96)%

162 Taiwan Business Bank Annual Report 2020

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Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2020 and 2019.

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The Bank and subsidiaries allocates 6% of each employee's monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Bank and subsidiaries allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation. Employees based abroad are contributed in accordance with the local government's regulations.

The pension costs incurred from the contributions to the Bureau of the Labor Insurance, oversea branches, and local authorities responsible for the Bank's subsidiaries amounted to $142,798 and $135,839 for the years ended December 31, 2020 and 2019, respectively.

• (c) Employee deposit with favorable rate

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December 31, 2020 December 31, 2019
Present value of defined benefit obligation $ 931,667 903,490
- -
Less: Fair value of defined benefit plan assets
Net defined benefit liability $ 931,667 903,490
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The Bank and subsidiaries conducted the obligation of time deposit with favorable rate for retired and current employees based on the internal regulation "Saving Deposits for Employees".

ended December 31, 2020 and 2019, were as follows:

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For the years ended December 31
2020 2019
Defined benefit obligation on January 1 $ 903,490 870,238
Interest cost 34,226 32,938
Remeasurements of the net defined benefit liability
-current actuarial gains and losses 193,072 190,460
Benefits paid by the plan (199,121 ) (190,146 )
Defined benefit obligation on December 31 $ 931,667 903,490
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follows:

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----- Start of picture text -----

For the years ended December 31
2020 2019
Fair value of plan assets on January 1 $ - -
Contributions made 199,121 190,146
Benefits paid by the plan (199,121 ) (190,146 )
Fair value of plan assets on December 31 $ - -
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		For the years ended December 31	For the years ended December 31	For the years ended December 31
		2020		2019
Net interest on the net defned beneft liability		$ 227,298		223,398

163

(4) Actuarial assumption

the reporting date were as follow :

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----- Start of picture text -----

December 31, 2020 December 31, 2019
Discount rate of employee deposit with favorable rate 4.00% 4.00%
Rate of return for capital deposited 2.00% 2.00%
Annual diminishing rate of account balance 1.00% 1.00%
Possibility that employee deposit with favorable rate be 50.00% 50.00%
modified
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(AA) Earnings per share

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----- Start of picture text -----

For the years ended December 31
2020 2019
Net income $ 4,701,775 6,734,253
Weighted average number of common stock shares outstanding (in 7,488,584 7,198,505
thousands) (Note 1)
Basic earnings per shares (in dollars) $ 0.63 0.94
Dilutive potential common shares (in thousands) (Note 1,2) 22,343 32,053
Weighted average number of shares outstanding for diluted EPS (in 7,510,927 7,230,558
thousands) (Note 1)
Diluted earnings per shares (in dollars) $ 0.63 0.93
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Note 1: The earnings per share for the year ended December 31, 2019 has applied retrospective adjustments. Note 2: The shares were calculated based on the stock price on the balance sheet date.

(AB) Employees and directors' remuneration

compensation and less than 0.6% as directors' remuneration when there is profit for the year. However, if the Bank has accumulated deficits, the profit should be reserved to offset the deficit.

For the years ended December 31, 2020 and 2019, the estimated employee remuneration were $217,393 and $384,639, and the estimated directors' remuneration were $33,748 and $50,456, the estimates are based on pre-tax net profit for the period, before deducting employees and directors' remuneration, multiplied by the elaboration of the Bank's Articles of Association of employees and the directors remuneration ratio, and recognized as operating cost. If the board's meeting decides to release stock dividends as employees' bonuses, the total number of employees bonus stocks to be issued shall be determined by the common stock closing price of the day before the meeting date.

The amounts, as stated in the consolidated financial statements, are identical to those of the actual distributions for 2019. Related information would be available at the Market Observation Post System website.

(AC) Net interest revenue

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For the years ended December 31
2020 2019
Interest income:
Loans $ 5,693,883 7,614,716
Secured loans 14,592,394 15,546,779
Bills negotiated 2,204 5,837
Bank overdrafts 12,545 20,559
Discounts 14,492 40,582
Time deposit from Central Bank 699,147 1,027,935
Due from the Central Bank 100,458 142,115
Call loans to banks 596,548 1,045,536
Bonds 2,503,696 2,914,954
International credit card 44,897 54,275
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164

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For the years ended December 31
2020 2019
Overdue loans $ 225,840 141,027
Bills 39,668 81,563
Due from Banks 230,960 447,300
Others 270,052 361,792
Subtotal 25,026,784 29,444,970
Interest expense:
Deposits 7,241,616 10,203,271
Deposits from banks 7,543 200
Call loans from banks 378,000 1,030,771
Financial debentures 1,153,012 1,108,192
Notes and bond issued under repurchase agreement 5,138 14,042
Others 49,258 57,381
Subtotal 8,834,567 12,413,857
Total $ 16,192,217 17,031,113
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(AD) Net service fee revenue

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For the years ended December 31
2020 2019
Service fee income:
Remittance service fee $ 69,845 84,379
Import bills negotiated service fee 36,908 50,220
Export bills negotiated service fee 11,589 15,477
Letter of credit service fee 8,020 8,715
Certification service fee 2,482 2,481
Acceptance service fee 1,182 2,022
Trust service fee 805,291 555,679
Guarantee service fee 210,864 211,914
Agency service fee 89,355 94,169
Interbank service fee 88,721 77,895
Card service fee 116,043 145,666
Commission revenue of insurance premium 573,846 1,536,455
Custodian service fee 169,816 168,961
Foreign currency service fee 91,386 103,059
Commission of futures 5,375 4,582
Loan service fee 755,839 685,756
Miscellaneous fees 135,359 146,247
Subtotal 3,171,921 3,893,677
Service fee expense:
Foreign currency service fee 29,226 38,901
Interbank service fee 157,912 146,266
Trust service fee 1,040 1,794
Agency service fee 1,588 2,136
IC card service fee 64,121 71,736
Check clearing service fee 9,526 9,847
Remittance service fee 4,920 4,817
Custodian service fee 53,948 52,219
Call loans service fee 7,921 11,413
Futures option fee 1,149 288
Miscellaneous fees 19,119 17,414
Subtotal 350,470 356,831
Total $ 2,821,451 3,536,846
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165

(AE) Gain (loss) on financial assets or liabilities measured at fair value through profit or loss

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For the years ended December 31
2020 2019
Valuation gains (losses):
Government bonds $ (5,051 ) 5,174
Corporate bonds 683 (3,666 )
Financial debentures (419,086 ) (440,883 )
Listed stocks (26,611 ) 9,564
Unlisted stocks 14,623 9,959
Beneficiary certificates 15,007 4,579
Private fund 9,948 (1,850 )
Commercial paper (1,435 ) (3,026 )
Derivative financial instruments (57,191 ) 327,073
Subtotal (469,113 ) (93,076 )
Disposal gains (losses):
Government bonds 29,832 13,699
Corporate bonds 23,553 1,589
Financial debentures (5,425 ) 17,250
Listed stocks (23,015 ) 13,455
Beneficiary certificates 16,896 700
Commercial paper (4,111 ) 15
Derivative financial instruments 1,178,721 1,219,809
Subtotal 1,216,451 1,266,517
Dividend revenue 6,158 3,302
Interest income 116,795 174,671
Total $ 870,291 1,351,414
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(AF) Realized gain on financial assets at fair value through other comprehensive income

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For the years ended December 31
2020 2019
Gain on disposal of government bonds $ 530,996 203,348
Gain on disposal of corporate bonds 4,239 2,381
Gain (loss) on disposal of financial debentures 52,243 (294 )
Dividend revenue 511,208 408,485
Total $ 1,098,686 613,920
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• (AG) (Impairment losses on assets) reversal of impairment loss on assets

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For the years ended December 31
2020 2019
Investment in debt instrument measured at fair value through $ (14,630 ) (18,676 )
other comprehensive income
Investment in debt instrument measured at amortized cost 13,482 2,346
Total $ (1,148 ) (16,330 )
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(AH) Net other revenue other than interest income

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For the years ended December 31
2020 2019
Rental revenue of operating assets $ 9,500 9,658
Rental expense of operating assets (1,614 ) (1,869 )
Loss on disposal and retirement of property and equipment (1,799 ) (693 )
Loss of account error (641 ) (78 )
Gold deposit book 4,638 2,056
Other operating expense (56,917 ) (55,694 )
Other miscellaneous income 262,942 161,988
Total $ 216,109 115,368
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Taiwan Business Bank Annual Report 2020

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(AI) Other miscellaneous revenue

		For the years ended December 31	For the years ended December 31	For the years ended December 31
		2020		2019
Overpaid business tax returned		$ -		138,999

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(AJ) Bad debts expenses, commitment and guarantee liability provision

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For the years ended December 31
2020 2019
Discounted and loans $ 4,046,672 2,422,135
Call loans to banks (11,083 ) 15,850
Due from banks, debit 69 -
Receivables and other financial assets (19,931 ) 36,203
Subtotal 4,015,727 2,474,188
Provisions for guarantee liabilities 17,634 (14,340 )
Provisions for loan commitments 21,379 (42,171 )
Total $ 4,054,740 2,417,677
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(AK) Employee benefits expenses

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For the years ended December 31
2020 2019
Salary expense $ 6,446,629 6,606,956
Labor and health insurance 478,116 486,003
Pension expense 338,270 348,910
Director's remuneration 48,732 65,132
Other employee benefits 625,919 597,118
Total $ 7,937,666 8,104,119
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(AL) Depreciation and amortization expense

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For the years ended December 31
2020 2019
Depreciation
Property and equipment $ 439,921 410,594
Right-of-use assets 410,811 422,567
Amortization
Computer software 141,776 124,700
Other deferred charges 5 2
Total $ 992,513 957,863
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167

(AM) Other general and administrative expense

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For the years ended December 31
2020 2019
Compensation loss $ 164 193
Utilities fee 90,933 95,247
Postage and telecommunication fee 239,651 229,515
Transportation fee 30,597 50,625
Printing and advertisement fee 162,883 165,651
Repair and maintenance fee 254,974 241,480
Insurance fee 333,024 331,501
Professional service fee 243,961 256,984
Materials and supplies 105,716 178,545
Rental expenses 17,810 16,791
Duties and levies 1,192,482 1,350,183
Membership, donation and partaking 615,169 537,718
Storage, packing and processing fee 54,788 44,069
Cash transit fee 83,484 93,887
Others 73,626 72,214
Total $ 3,499,262 3,664,603
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(AN) Financial Instruments

• (a) Fair value information

• (1) General description

  • Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The financial instruments are record as fair value when original recognizing, usually refer to the transaction price in many circumstances. Except some amortized cost financial instruments, the financial instruments are measured in fair value. A quoted market price in an active market provides the most reliable evidence of fair value. If financial instruments are without active market, the Bank and subsidiaries adopted the value technique, refer to Bloomberg, Reuters or the price at which the asset could be bought or sold in a current transaction between willing parties.

A. Level 1

active market is a market in which transactions for the homogenous assets or liabilities take place with sufficient frequency and volume to provide pricing information. The stock of listed company and the beneficiary certificates, government bonds and the derivative financial instruments with public quote inactive market processed by the Bank and subsidiaries belong to Level 1.

• B. Level 2

The input of this level is other than quoted market 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). The investments with lower trade volume such as government bonds, corporate bonds, financial debentures, convertible corporate bonds and derivative instruments, including financial debentures the Bank and subsidiaries issued are belong to Level 2.

C. Level 3

The input is unobservable for the asset or liability in market or counterparty prices. Unobservable inputs like: Option pricing model using the historical volatility. Because the historical volatility cannot represent the future volatility expected value of whole market participants. The input parameter used to measure the fair value of this level is not based on data that can be obtained in the market but using a combination of complex market prices to estimate their values. The assets have been categorized as a Level 3, due to their fair market value cannot be directly calculated. The equity instruments with no active market which the Bank and subsidiaries invested are Level 3.

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(3) Based on fair value measurement

• A. The fair value hierarchy of information

of information were as follows:

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December 31, 2020
Assets and Liabilities Total Level 1 Level 2 Level 3
Instruments measured at fair value on a recurring basis
Non‑derivative financial assets and liabilities:
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss,
mandatorily measure at fair value
Security Investments $ 582,289 271,669 - 310,620
Bond Investments 1,558,734 1,307,034 251,700 -
Others 12,681,298 162,556 12,414,244 104,498
Financial assets designated at fair value through profit or loss 84,377 - 84,377 -
Financial assets at fair value through other comprehensive
income
Security Investments 13,214,419 8,736,348 - 4,478,071
Bond Investments 104,092,136 67,247,661 36,844,475 -
Others 49,295 49,295 - -
Financial liabilities at fair value through profit or loss
Financial liabilities designated at fair value through profit or 8,411,020 - 8,411,020 -
loss
Derivative financial assets and liabilities
Assets:
Financial assets at fair value through profit or loss 690,858 72,747 618,111 -
Liabilities:
Financial liabilities at fair value through profit or loss 227,982 - 227,982 -
December 31, 2019
Assets and Liabilities Total Level 1 Level 2 Level 3
Instruments measured at fair value on a recurring basis
Non‑derivative financial assets and liabilities:
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss,
mandatorily measure at fair value
Security Investments $ 324,768 178,867 - 145,901
Bond Investments 4,430,927 4,230,927 200,000 -
Others 21,146,055 60,740 21,037,165 48,150
Financial assets designated at fair value through profit or loss 120,240 - 120,240 -
Financial assets at fair value through other comprehensive
income
Security Investments 11,304,129 7,149,992 - 4,154,137
Bond Investments 91,243,211 66,578,857 24,664,354 -
Other 49,804 49,804 - -
Financial liabilities at fair value through profit or loss
Financial liabilities designated at fair value through profit or 8,949,182 - 8,949,182 -
loss
Derivative financial assets and liabilities
Assets:
Financial assets at fair value through profit or loss 950,796 65,784 885,012 -
Liabilities:
Financial liabilities at fair value through profit or loss 444,154 - 444,154 -
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169

its fair value.

If the financial instruments of quoted price, which are from the Stock Exchange, Brokers, Pricing service agencies or Government institutions, are timely and frequently, and reflects the actual price, then the financial instruments have a quoted price in an active market. If the above conditions are not fulfilled, the market is inactive.

price in an active market for the financial asset, its fair value is estimated on the basis of the result of a valuation technique that refers to quoted prices considered the identical financial instrument with same characteristics and essential terms of transaction, Discounted-Cash-Flow model and other valuation techniques including the model using market information to be made of the calculation at the balance sheet date (e.g. Taipei Exchange reference yield curve, Reuters quoted the average commercial paper rate, the Taipei Financial industry call loan rate fixing TAIBOR).

Bank and subsidiaries adopted that refers to quoted prices provided by financial institutions. Ask (bid) is used to evaluate the selling (buying) position by the Bank and subsidiaries if the quoted price include ask and bid price. If there is not a quoted price for the financial asset, transaction price close to the balance sheet date is the fair value.

Fair value of financial derivatives is the amount of cash to be paid or to be received by the Bank and subsidiaries, assuming that the contract will be terminated on the balance sheet date. The Bank and subsidiaries adopts mark-to-model prices which are usually adopted among the banking industry, such as Discounted-Cash-Flow model and Black-Scholes model. The Bank and subsidiaries adopts the price data from Reuters and Bloomberg to calculate the fair value of the holding position. The aforesaid price data is based upon the middle price and used consistently by the Bank. Furthermore, the fair value of the embedded financial derivatives is calculated based upon the quote from the counterparty, and separately calculated in accordance with the contracts.

• C. Adjustment for fair value

• a. The restraint of evaluation model and uncertain inputs

Bank's all related factors. Therefore, the estimated value of the evaluation model will be appropriately adjusted according to the extra parameters such as model risk or liquidity risk. Information and price parameters used in the evaluation process after careful assessment, and appropriately adjusted according to the current market situation.

• b. Credit risk value adjustment

The Bank and subsidiaries' credit risk value adjustment of OTC transaction derivative instruments can be divided to Credit value adjustments (CVA) and debit value adjustments (DVA). To reflect the fair value of the counterparty or the default, and the Bank and subsidiaries may not be received or paid full market value of trading possibilities.

The Bank and subsidiaries would calculate credit valuation adjustment (CVA) by assessing probability of default (PD) and loss given default (LGD) of the counterparty before multiplying exposure at default (EAD) of the counterparty. On the contrary, debit valuation adjustment (DVA).

The Bank and subsidiaries assess the probability of default on the assumption of 60%, but at the risk of the nature and circumstances of available data, we may use other loss given default assumptions.

D. Transfers between Level 1 and Level 2

There were no transfers between Level 1 and Level 2 for the years ended December 31, 2020 and 2019.

170 Taiwan Business Bank Annual Report 2020

Ⅵ

• Changes of financial assets categorized in Level 3 :

				For theyear ended December 31, 2020	For theyear ended December 31, 2020	For theyear ended December 31, 2020	For theyear ended December 31, 2020
			Valuationproft and loss		Increase		Decrease
Name	Beginning balance		Recognized in proft or loss	Recognized in other comprehensive income	Purchase or issue	Transfer in of Level 3	Sale Disposition or Settlement	Transfer out of Level 3	Ending balance
Financial assets at fair value	$	194,051	23,296	-	201,371	-	3,600	-	415,118
through proft or loss
Investments in equity instruments measured at fair value through		4,154,137	-	321,007	2,927	-	-	-	4,478,071
other comprehensive income

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			For theyear ended December 31, 2019	For theyear ended December 31, 2019	For theyear ended December 31, 2019
		Valuationproft and loss		Increase Decrease
Name Financial assets at fair value through proft or loss Investments in equity instruments measured at fair value through other comprehensive income	Beginning balance $ 250,000 4,212,027	Recognized in proft or loss 8,109 -	Recognized in other comprehensive income - ( 57,890 )	Purchase or issue 135,942 -	Transfer in of Level 3 Sale Disposition or Settlement - - - -	Transfer out of Level 3 200,000 -	Ending balance 194,051 4,154,137

• Current gain (loss) and other comprehensive income of holding assets are as follow:

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For the years ended December 31,
2020 2019
Recognized on profit and loss (reported as unrealized gain (loss) from investments $ 23,296 8,109
instruments measured at fair value through profit and loss)
Recognized on other comprehensive income (reported as unrealized gain (loss) 321,007 (57,890 )
from investments instruments measured at fair value through other comprehensive
income)
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assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. Except the financial asset at fair value through other comprehensive income amounted to $2,927 hasn't been evaluated, since it was purchased in December 2020. Others, without active market quotation, the Bank and subsidiaries take professional financial information vendors and widely used by market participants for evaluation or counterparty quotation as reference. The unobservable inputs are as follows :

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December 31, 2020
inter-relationship between significant
significant unobservable inputs and fair value
fair value valuation methods unobservable inputs range measurement
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	fair value	valuation methods	significant unobservable inputs	range	range
Financial assets at fair value through profit or loss Private fund Unlisted stocks Financial assets at fair value through other comprehensive income Unlisted stocks	$ 104,498 310,620 4,475,144	assets approach market approach market approach assets approach income approach	liquidity discount liquidity discount liquidity discount sustainable growth rate cost of equity	10% 0%~34.47% 8.94%~34.79% 0%~1.45% 8.30%~11.51%	The higher market liquidity discount, the lower fair value. The higher market liquidity discount, the lower fair value. The higher market liquidity discount, the lower fair value. The higher sustainable growth rate, the higher fair value. The higher rate of cost of equity, the lower fair value.

171

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December 31, 2019
inter-relationship between significant
significant unobservable inputs and fair value
fair value valuation methods unobservable inputs range measurement
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	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019
	fair value	valuation methods	significant unobservable inputs	range	inter-relationship between significant unobservable inputs and fair value measurement
Financial assets at fair value through profit or loss Private fund Unlisted stocks Financial assets at fair value through other comprehensive income Unlisted stocks	$ 48,150 145,901 4,154,137	assets approach market approach market approach assets approach income approach	liquidity discount liquidity discount liquidity discount sustainable growth rate cost of equity	10% 21.75%~22.82% 9.05%~34.97% 0%~1.58% 8.62%~11.89%	The higher market liquidity discount, the lower fair value. The higher market liquidity discount, the lower fair value. The higher market liquidity discount, the lower fair value. The higher sustainable growth rate, the higher fair value. The higher rate of cost of equity, the lower fair value.

• H. Sensitivity analysis of reasonably possible alternative assumptions for fair value measurement in Level 3.

are appropriate. However, the use of different valuation models or inputs could lead to different outcomes of fair value measurements. The following are the impact on the other comprehensive profit and loss if using different assumptions:

• a. Assets approach/ Market approach

on the market approach or the assets approach. If the liquidity discount changes by 5% upwards or downwards, the impact on the other comprehensive profit and loss is as follows:

	the effects to other comprehensive income	the effects to other comprehensive income
	Favorable changes (-5%)	Unfavorable changes (5%)
December 31, 2020 Financial assets at fair value through proft or loss Unlisted stocks and private fund Financial assets at fair value through other comprehensive income Unlisted stocks	$ 17,067 247,738	(17,067 ) (247,774)
	the effects to other comprehensive income
	Favorable changes (-5%)	Unfavorable changes (5%)
December 31, 2019 Financial assets at fair value through proft or loss Unlisted stocks and private fund Financial assets at fair value through other comprehensive income Unlisted stocks	$ 6,296 242,309	(6,296 ) (242,309)

b. Income approach

evaluation parameters are divided into sustainable growth rate and cost of equity capital. The effects of the two evaluation parameters on the other comprehensive profit and loss are as follows:

• 1) sustainable growth rate

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the effects to other comprehensive income
Favorable Unfavorable changes
changes (0.3%) (-0.3%)
December 31, 2020
Financial assets at fair value through other comprehensive
income
Unlisted stocks $ 6,616 (6,074)
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the effects to other comprehensive income
Favorable Unfavorable changes
changes (0.3%) (-0.3%)
December 31, 2019
Financial assets at fair value through other comprehensive
income
Unlisted stocks $ 5,154 (4,709)
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• 2) cost of equity

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the effects to other comprehensive income
Favorable Unfavorable changes
changes (-3%) (3%)
December 31, 2020
Financial assets at fair value through other comprehensive
income
Unlisted stocks $ 141,859 (53,302)
the effects to other comprehensive income
Favorable Unfavorable changes
changes (-3%) (3%)
December 31, 2019
Financial assets at fair value through other comprehensive
income
Unlisted stocks $ 104,670 (43,331)
The favorable and unfavorable effects represent the changes in fair value, and fair value is based on a
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the effects of changes in a single input, and it does not include the interrelationships with another input.

(4) Not based on fair value measurement

A. Fair value information

subsidiaries. Except those items, others' fair value is reasonably approximate value, the Bank and subsidiaries does not disclosure their fair value.

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December 31, 2020
Book value Fair value
Debt instruments measured at amortized cost $ 228,003,332 229,803,196
December 31, 2019
Book value Fair value
Debt instruments measured at amortized cost $ 263,056,842 264,518,564
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B. The fair value hierarchy of information

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December 31, 2020
Quoted prices in Significant
active markets for Significant other unobservable
identical assets observable inputs inputs
Assets and Liabilities Total (Level 1) (Level 2) (Level 3
Debt instruments measured at amortized cost $ 229,803,196 43,000,581 186,802,615 -
December 31, 2019
Quoted prices in Significant
active markets for Significant other unobservable
identical assets observable inputs inputs
Assets and Liabilities Total (Level 1) (Level 2) (Level 3
Debt instruments measured at amortized cost $ 264,518,564 49,044,285 215,474,279 -
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C. Valuation techniques

instruments were as follows:

• a. Cash and cash equivalents, due from Central Bank and call loans to banks, securities purchased under resell agreements, receivables, overdue receivables, exchange bills negotiated guarantee deposits paid, temporary payments and suspense accounts, proceeds of settlement and credit transaction, deposits from Central Bank and other banks, securities sold under repurchase agreements, payables, other financial liabilities, guarantee deposits received and temporary receipts and suspense accounts: since these instruments have short maturities, the book value is adopted as a reasonable basis in estimating the fair value.

• b. Discounts and loans (including non-performing loans): the interest rate of bank loans, dependent on the benchmark interest rate which plus or minus the input value (i.e. motorized interest rate), said market rates, therefore, the book value of financial assets is equivalent to their fair value. Among the case of fixed interest rate, the estimated fair value of long-term loans using the discounted value of its expected cash flows, but this is minority, so the book value of financial assets is equivalent to their fair value.

• c. Investment in debt instruments at amortized cost: the quoted price is regarded as its fair value. If there is no quoted price in an active market for the financial asset, its fair value is estimated on the basis of the result of a valuation technique.

• 1) Central Government Securities (NTD): using the comment of "Bonds a fair price for each of times" from Taipei Exchange.

• 2) Corporate bonds and bank debentures (NTD): the present value or fair price of Taipei Exchange determined using the future cash flow of yield curve discounting evaluation.

• d. Deposits and remittance: to determine the fair value, considered Banking industry characteristics, the market interest rates (i.e. market price) is the fair value. And deposits are mostly due within one year, the carrying amounts is the fair value of reasonable basis. The fixed interest rate of long-term deposits should be estimated by the discounted value of its expected cash flows at fair value, and its maturity date no longer than three years, so its estimated fair value of the carrying amount is considered reasonable.

• e. Bank debentures payable: The bank debentures payable, issued by the Bank and subsidiaries, whose stated rate was equal the effective rate, using discounted cash flow projections to estimate the fair value, equivalent to its book value.

(AO) Financial Risk Information

(a) General description

taking customer service, financial business operating target, overall risk tolerance and external limitation of laws into consideration and provide benefit to customers, shareholders and employees.

The Bank's Financial Risk Management policy is to establish a risk management mechanism in terms of risk identification, risk measurement, risk monitoring, and risk control and to construct the overall risk management system. It is to facilitate the business model with appropriate risk management and to control the rationality between risks and rewards under the premise of legal capital ratio in order to achieve operating targets and increase the value of the Bank for the shareholders. The scope covers the management of credit risk, market risk, operation risk, banking book interest rate risk, capital liquidity risk, and capital adequacy.

• (b) Risk management organization structure

• (1) Risk Management Committee

The chairperson of the Risk Management Committee is appointed by the president. The chairpersons include general manager, deputy general manager of the non-regulatory compliance in head office

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Committee is set up for the purpose of establishing a sound risk management system, strengthening risk management and the implementation of the Bank's risk management and monitoring. The meeting will be held once a month in principle. The meeting can be held by the chairman of the Committee when it necessary. The duties are as follows:

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• and industrial risk management occur.

• B. Risk management report of various risk exposure and agenda processing.

• C. The processing of examination of the risk management relevant policy of the Bank and limitations, management indices and the response project when the risk exceeds the limitations.

• D. Supervise the Bank and subsidiaries' capital adequacy management.

• E. Conduct or supervise the issues that have to report to Risk Management Committee according to the regulations drawn by the competent authority at home and abroad.

• F. Conduct or supervise other risk management related issues.

Risk Management Department is the assistant unit of the Risk Management Committee. The responsibility of the Risk Management Department is to execute preparing sittings agenda, convening sittings, agenda processing, taking meeting minutes and tracking resolution and regularly report the important resolution and various risk exposure to the board of (executive) directors.

• (2) Assets and Liabilities Management Committee

The chairperson of the Assets and Liabilities Management Committee is the general manager, and the members are formed by the vice assistant general manager and the department heads of deposit, loan, financial transaction, capital deployment and risk management units. The responsibility of the Assets and Liabilities Management Committee is to monitor and manage the banking book interest rate risk and capital liquidity risk and convenes meetings regularly, to approve the analyzing and measurement methods of the capital liquidity risk and banking book interest rate risk exposure, to examine the capital liquidity risk and banking book interest rate risk management policy as well as the relevant limitations and management indices, to receive interest rate risk and capital liquidity risk exposure reports and adjust the assets and liabilities interest rate duration structure and capital maturity structure.

• (3) Credit Examination Committee

The convener of the Credit Examination Committee is the assistant general manager supervising Risk Management Center. The Committee in principle convenes weekly to examine the modification and establishment of the regulations (including main points, measures and procedures) for significant loans, foreign exchange and guarantee cases.

• (4) Overdue Loans Clearing Committee

The convener of the Overdue Loans Clearing Committee is the supervising vice president. The convener holds meetings as needed to discuss measures on reducing non-performing loans and approaches to handle overdue loans.

• (5) Cyber Security Management Committee

The Cyber Security Management Committee is convened by the supervising vice president who oversees the implementation and coordination of the Bank's cyber security policies. The committee holds meetings as needed to examine matters related to cyber security.

• (c) Credit risk

deteriorating financial status of trade counterparties, pessimistic external economic situation or other factors. The primary source of the credit risk of the Bank is the loan business, such as loans of various

175

terms, guarantees and letters of credit, loan commitments, etc., in addition, other sources of credit risk include call loans from banks, securities investments, derivative financial instrument transactions, etc.

• (2) Credit risk management policy

In order to control the credit risk to a tolerable scope, the Bank continuously conduct below operations:

• A. Fully understand the credit status and ratings of loan customers and trade counterparties as well as the purposes and payments of loans.

• B. Prudently evaluates the credit risk status of loan customers and trade counterparties and consider the adequacy of collaterals and guarantees to assess risk and profit.

• C. Establish credit rating mechanism for loan customers or apply the ratings from outside credit rating institutions as the reference for undertaking credit cases or interest rate determination.

• D. Modify relevant regulations to control the credit risk to a tolerable extent for the Bank.

The credit risk management procedure and measurement methods of the Bank's major business are as follows:

• A. Credit Business (Including loan commitments and guarantees)

• The categorization and credit quality rating of credit assets are as follows:

• a. Categorization of credit assets

classified as the first category, others are classified, based on the assurance status and the time overdue, as second category (need attention), third category (possible to recover), fourth category (difficult to retrieve) and the fifth category (unable to retrieve). In order to manage creditor's rights, the Bank established "Regulations Governing the Procedures to Evaluate Assets and Deal with Non-performing/Non-accrual Loans", "Regulations Governing the Reconciliation of Non-performing/Non-accrual Loans" and its operating procedure "Operating procedure Governing the Collection of Non-performing/Non-accrual Loans" and "Code of Conduct to Deal With Non-Performing Loans" to serve as the guidelines for dealing with non-performing credit and overdue loans collection.

• b. Categorization of credit quality

Based on historical default data, the Bank established internal credit rating model and completed internal rating system to serve as a reference to credit risk control.

In order to develop an appropriate credit rating model for the Bank to evaluate the credit risk for corporate banking customers and private banking customers, it applied statistical methods, professional expert judgments and relevant customer information to fulfill the requirements. The Bank examined whether the internal credit rating model is in conformity with the actual scenario based on practical default data quarterly and adjusted all parameters to optimize the estimated results.

• B. Due from other banks and call loans to banks

The Bank evaluates the credit status of counterparties before transaction and takes the rating information from domestic and foreign credit rating institutions into consideration to determine various credit risk facilities for the counterparties.

The Bank manages credit risk of debt instruments through credit rating data of external institutions, credit quality of bonds, geographic situations and counterparties' risk so as to identify credit risk.

quality and are controlled based on the trade amount (including loans at call). Counterparties which do not have credit rating or which are of low quality shall be examined individually. For

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counterparties which are general customers, the Bank controls the credit risk exposure based on the derivative instrument risk facilities and conditions approved by general credit procedures.

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At each reporting date, the Bank and subsidiaries shall assess the change in the risk of a default occurring over the expected life of the various credit assets and financial assets to determine whether the credit risk has increased significantly since initial recognition. To make that assessment, the Bank and subsidiaries consider reasonable and supportable information (including forward-looking information) that is indicative of significant increases in credit risk since initial recognition. The main considerations include:

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A. credit assets

  - a. The borrowers failed to pay the principal and interest overdue for more than 30 days, less than 90 days;

  - b. When the Bank and subsidiaries conduct review or follow-up review of the relevant management procedures after loan, it knows that the financial report of the borrowers have been issued by the accountant and it has issued opinions of the significant doubt on the ability to continue as a going concern;

  - c. The deposits and assets of borrowers are compulsorily executed, besides, the deposits are compulsorily executed because of tax arrears. However, the borrowers that have enough deposit to bear the cost that assessed by the Bank and subsidiaries are except;

  - d. The bank knows (if it has received the notice from court) that the collaterals are compulsory executed by other banks;

  - f. The letter of credit insurance fund notice due to the related company's overdue debt in other bank, the creditor to stop the delivery;

  - g. Because the borrowers have been involved in litigation and unfavorable judgments, their ability of credit performance is affected;

  - aware by others.

• B. Debt instrument investments

  • a. The latest credit rating on the report date was non-investment grade and fell more than two levels than the original rating, or;

  • b. Investment target evaluation loss is up to 30% of investment cost.

the risk of default for any credit asset during the expected duration of existence or a low credit risk. The amount of expected credit losses was not taken as the change of credit risk, if the credit risk of the credit asset was low on the report date, it also assumes that the credit risk of the credit asset has not increased significantly since the initial recognition. The credit assets with low credit risk refer to the low default risk and the borrower's ability to perform its contractual cash flow obligations in the near term. No significant increase in risk relates to the borrower. The absence of economic, operational, and adverse changes in financial conditions and other bad debt conditions did not affect their ability to fulfill their contractual cash flow obligations. Financial assets on investment-grade or not on investment-grade but the ratings are not significantly reduced are also considered to be low-risk areas.

• estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired not only the borrower defaults the loan more than 90 days, it also includes observable data as follows:

177

A. Credit assets

  - b. A breach of contract, such as a default or past due event ;

  - c. The lender(s) of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;

  - d. It is becoming probable that the borrower will enter bankruptcy or other financial reorganization;

  - f. The purchase or origination of a financial asset at a considerable amount of discount that reflects the incurred credit losses;

• B. Debt instrument investments

  • c. The purchase or origination of a financial asset at a considerable amount of discount that

  • d. Counterparty defaulting on agreement of other financial instruments (e.g. transactions settlement failure, a bank decide to execute early termination of transactions, or loans originated from derivatives settlement failure).

• (6) Write-off policy

during the board of directors' meeting; particularly, the portion that is deemed uncollectible.

• A. The borrowers fail to recover all or part of the debt due to dissolution, escape, settlement, bankruptcy or other reasons.

• B. After the collateral and the assets of the principal and subordinate debtors have been priced low or deducted from the first-order mortgage, they cannot be repaid, the execution costs are close or may exceed the Bank's reimbursable amount, and the implementation is not beneficial.

• C. The collateral and the property of the principal and subordinate debtors were auctioned off at no cost and were not bought by anyone, and there was no one have substantial benefits.

• D. Overdue loan and non-accrual loan have exceeded the liquidation period for two years.

The Bank and subsidiaries, whose written-off claims may still have ongoing recourse, continues to follow laws and regulations to pursue the proceedings.

The Bank and subsidiaries may revise the contractual cash flow of the credit asset due to the borrower's financial difficulties in negotiating, increasing the recovery rate of the borrowers that have problems, or maintaining the customer relationship. The modification of the contractual terms of the credit asset may include extending the contract period, modifying the payment time of interest, and modifying agreement rate and so on. If the contractual cash flow modification of the credit asset is due to the financial difficulty of the borrower, it is deemed as an impairment of the financial asset. If the contractual cash flow modification is not due to the financial difficulties of the borrower, the existing or projected unfavorable changes in the operating, financial or economic conditions under the borrower's performance or the borrower's ability to make the borrower's ability to perform its debt obligations vary significantly. The cause of anomalies or other bad debts is supplemented by an assessment of whether the credit risk of financial assets has increased significantly.

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(8) Measuring the expected credit losses

• A. Adoption of methods and assumptions

experience, internal historical data or the information from external credit rating agency is used to estimate the Probability of default (PD), Loss given default (LGD), Exposure at default (EAD) and other credit risk components.

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In order to assess the expected credit losses of credit assets, the Bank and subsidiaries are divided into the following combinations depending on the credit risk characteristics such as the identity of borrowers, products, and type of collateral:

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----- Start of picture text -----

Government and public institution
Financial institution (including banks, ticket companies, securities finance
companies)
The guarantee of the credit guarantee mechanism
Corporate banking Large Enterprise Secured
Non-secured
The guarantee of the credit guarantee mechanism
Medium and small
Secured
enterprises
Non-secured
Mortgage
Microcredit
Private banking
Other-Secured
Other-Non-secured
The guarantee of the credit guarantee mechanism
Entrepreneurship Secured
Non-secured
----- End of picture text -----

credit asset has low credit risk at the reporting date, the Bank and subsidiaries shall measure the allowance for impairment using the 12-month expected credit losses; if the credit risk on a financial instrument has increased significantly or credit-impaired since initial recognition, the Bank and subsidiaries shall measure the allowance for impairment using the lifetime expected credit losses.

In order to measure expected credit losses, the Bank and subsidiaries considers the default probability (Probability of default, "PD") of borrowers, and loss given default rate ("LGD") multiplying the exposure at default ("EAD"), taking into account the time value of money as well evaluate 12-month and lifetime loss.

Default probability is the default probability of the borrower (default and credit impairment of financial assets), and the loss given default rate is the rate of loss caused by default by the borrower. The default probability and default loss rate used in the impairment assessment of the credit business are based on internal historical information of each group, and adjusted based on current observable information and forward-looking general economic information.

The Bank and subsidiaries measures the EAD based on the book value of loans at reporting date. When estimating the 12-month and lifetime expected credit losses of the loan commitments and financial guarantee contracts, the definition of the credit risk increasing significantly and the credit-impaired assets are based on the rules mentioned above. Additionally, in order to determine the EAD used to calculate expected credit loss of off-balance sheet items, the Bank and subsidiaries adopts the credit conversion factor (CCF) of standardized approach in credit risk which is legislated in the regulation of Proprietary Capital and Risk Capital of Banks.

179

B. Consideration of forward-looking information

The Bank and subsidiaries obtains forward-looking information which it takes into consideration when determining whether the credit risk of financial instruments has increased significantly since initial recognition and assessing the expected credit losses. The Bank and subsidiaries identified the relevant macroeconomic factors for credit risk of each portfolio by analyzing the historically data. These macroeconomic factors include Taiwan GDP (not seasonally adjusted), Taiwan's actual industrial production index, Taiwan's annual growth rate of retail sales, Taiwan's real sales price index, unemployment rate (seasonally adjusted), Cathay National Real Estate Index (national), Taiwan's real consumer price index (Not seasonally adjusted) and Taiwan's annual growth in retail sales or other factors. The various economic factors and their impacts on Probability of Default ("PD") are different depending on the type of financial instruments.

In order to determine the credit risk of investment in debt instruments at amortized cost and at fair value through other comprehensive income has increased significantly, the Bank and subsidiaries uses the changes of external ratings published by international credit rating agencies as the quantitative indicators, while the assessment of expected credit losses are calculated by using the external ratings, as well as PD and Loss Given Default ("LGD"), published by Moody's. Since the international credit rating agencies have already considered the forward-looking information while evaluating the credit ratings, which the Bank and subsidiaries considered to be appropriate after its assessment, the credit ratings will be included in the Bank and subsidiaries' assessment of related expected credit losses.

• (9) Credit risk hedging or diminishing.

A. Collaterals

The Bank adopts a series of policies and procedures to mitigate credit risk and enhance credit risk tolerance. The method applied most is to request customers to provide collaterals. The Bank established collateral accreditation code of conduct in term of collateral management and total loan amount to regulate the scope of collaterals and the accreditation method and regularly inspects the collaterals. When the collaterals devaluate or the concern of devaluation occurs, the Bank shall increase collaterals or retrieve part of the loans to ensure the creditor's right is intact.

• B. Limit of credit risk and the control of credit risk concentration

• a. In order to avoid the situation that the credit risk of single customer being too high, the credit limit of an individual, a related party or a related enterprise shall be in conformity with "Authorization method for subsection 3 of Article 33 of the Banking Act of the Republic of China" and the credit limit authorization steps are regulated in the Key Points of Credit Engagement Authorization and the Key Points of Credit Engagement Authorization for Overseas Branches of the Bank.

• b. To enhance the risk concentration management, the Bank established regulations in terms of countries, financial institutions, industries and group enterprises. The relevant limits are reviewed and approved annually and the usage of the credit is monitored on a daily basis. In addition, the results are reported regularly.

• C. General agreement of net amount settlement

The transactions of the Bank are mostly settled with gross amount. Part of the transactions agreed on net amount settlement. When a default occurs, the Bank terminates all the transactions with the counterparty and settles by net amount to further lower credit risk.

D. Enhancement of other credit

The assessment of credit business applies to credit 5P principles, credit risk is offset by dividing self-liquidating loan commitments as the main, and set the accounts to master the repayment of cash flow. Also, in terms of the credit agreement stipulates the offset. (i.e. all kinds of deposits, except prohibition of low or the party's agreement, the Bank can set off all the debts), thus to reduce the loan amount, shorter loan repayment period or are considered part or all of expiration of acceleration clauses. To strengthen the protection of creditor and reduce credit risk, using qualified and effective enhancement, such as the requirement of real property, personal property, demand deposits, time

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deposits, securities and the guarantee of financial institution or the credit guarantee mechanism approved by government. (e.g. R.O.C SMEG, Agricultural Credit Guarantee Fund, Overseas Credit Guarantee Fund)

collateral for mitigating potential losses are as follows:

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December 31, 2020	Carrying amount	Allowance impairment	Exposure (measured at amortized cost)	Value of collateral
Impairment fnancial assets: Receivables Accounts receivables Interest receivable Discounts and loans Overdue receivable Total impairment fnancial assets		27,269 5,304 5,219,221 23,121 5,274,915	- 21,383 20,156,345 45,711 20,223,439	26,575 - 26,211,067 - 26,237,642
	$ 27,269
	26,687
	25,375,566
	68,832
	$ 25,498,354
December 31, 2019	Carrying amount	Allowance impairment	Exposure (measured at amortized cost)	Value of collateral
Impairment fnancial assets: Receivables Accounts receivables Interest receivable Discounts and loans Overdue receivable Total impairment fnancial assets		57,390 10,123 5,722,768 53,947 5,844,228	6,797 28,639 13,680,279 51,882 13,767,597	41,632 - 20,769,101 - 20,810,733
	$ 64,187
	38,762
	19,403,047
	105,829
	$ 19,611,825

Note: The value of collateral is the real estate appraisal information and credit guarantee agency guarantee amount levied by the Bank and subsidiaries' credit assets.

(11) Credit risk concentration

The Bank and subsidiaries does not conduct significant transaction with single customer or single trade counterparty. The total amount of discounts and loans, overdue loans in terms of individual customer or individual trade counterparty is not significant. The information of credit risk concentration of the Bank's discounts and loans and overdue loans are divided by industries, geographic areas and collaterals and listed as follows:

A. By industry

Distribution of discounts and loans, overdue loans based on industries.

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December 31, 2020 December 31, 2019
Industry Amount % Amount %
Private business $ 777,673,749 63.52% 698,913,482 60.98%
Public business 10,940,025 0.89% 4 -%
Government institution 53,863,302 4.40% 75,701,806 6.61%
Nonprofit organization 2,868,681 0.23% 2,984,867 0.26%
Individual 305,732,834 24.98% 293,998,770 25.65%
Foreign financial institution 3,721,990 0.30% 3,992,809 0.35%
Foreign non-financial institution 67,672,995 5.53% 66,451,574 5.80%
Foreign individual 1,821,665 0.15% 4,047,438 0.35%
Total $ 1,224,295,241 100.00% 1,146,090,750 100.00%
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B. By geographic area

Distribution of discounts and loans, overdue loans based on geographic area.

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----- Start of picture text -----

December 31, 2020 December 31, 2019
Area Amount % Amount %
Domestic $ 1,151,078,591 94.02% 1,071,598,929 93.50%
Foreign 73,216,650 5.98% 74,491,821 6.50%
Total $ 1,224,295,241 100.00% 1,146,090,750 100.00%
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C. By collateral

Distribution of discounts and loans, overdue loans based on collateral.

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----- Start of picture text -----

December 31, 2020 December 31, 2019
Collateral Amount % Amount %
Unsecured $ 225,320,364 18.40% 242,592,802 21.17%
Stocks 9,175,475 0.75% 8,425,118 0.73%
Bonds 19,544,832 1.60% 19,411,907 1.69%
Real estate 754,931,145 61.66% 721,629,891 62.96%
Chattel 18,785,101 1.53% 17,950,096 1.57%
Notes receivable 3,724,442 0.30% 3,962,549 0.35%
Guarantees 183,962,821 15.04% 120,774,302 10.54%
Others 8,851,061 0.72% 11,344,085 0.99%
Total $ 1,224,295,241 100.00% 1,146,090,750 100.00%
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Note: Secured credit are categorized in its respective item per the type of the collaterals. Non‑secured credit (no collateral provided) is classified in unsecured. If the credit amount is higher than the accreditation value, the credit amount within the accreditation is classified in the respective item, the credit amount exceeds the accreditation value is classified in unsecured. The accreditation value is the value calculated per the accreditation regulations of the Bank and subsidiaries, not the discounted value of the signed contract.

• (12) Maximum credit risk exposure

• A. The maximum credit exposure of the assets in the consolidated financial statement is approximately the book value when not considering collaterals or other credit enhancement instruments. The maximum credit exposure off the consolidated balance sheet (when not considering collaterals or other credit enhancement instruments and not revocable) was as follows:

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Maximum credit risk exposure
Off balance sheet items December 31, 2020 December 31, 2019
Issued and irrevocable loan commitments $ 61,833,395 55,259,927
Irrevocable credit card loan commitments 20,067,204 20,072,907
Letters of credit issued yet unused 8,892,012 7,156,747
Various guarantee proceeds 20,636,932 18,400,367
Total $ 111,429,543 100,889,948
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The Management of the Bank and subsidiaries evaluated the credit risk exposure and believed that it is able to continuously control and minimize the off-balance sheet credit risk exposure due to its strict appraisal process and regular subsequent examination.

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a. Credit quality analysis of discounts and loans, receivables, guarantee and commitments

	12-month ECL	12-month ECL	12-month ECL	12-month ECL	12-month ECL	12-month ECL	12-month ECL	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－impaired
December 31, 2020	Excellent	Good	Medium	Acceptable	Under standard	No rating	Subtotal	Excellent	Good	Medium	Acceptable	Under standard	No rating	Subtotal	High risk	Allowance impairment	Total
Receivable Credit card Acceptances receivable Other receivables Discounts and loans Private banking Corporate banking Other fnancial assets Overdue receivable Total Guarantee and commitments	$ 465,192 271,727 200,365 114,964,176 159,077,810 - $ 274,979,270 $ 26,160,471	151,235 689,404 1,071,736 108,069,036 276,441,887 - 386,423,298 14,889,757	203,982 111,845 443,197 66,948,050 269,775,572 - 337,482,646 5,567,518	21,460 5,812 38,386 4,917,753 33,545,450 - 38,528,861 945,234	1,927 12,400 9,723 990,763 9,752,131 - 10,766,944 330,756	240,049 192,565 2,606,887 5,026,892 107,943,286 - 116,009,679 62,931,925	1,083,845 1,283,753 4,370,294 300,916,670 856,536,136 - 1,164,190,698 110,825,661	1,568 - 2,344 5,485 2,615,868 - 2,625,265 44,927	717 - 19,338 172,716 14,235,894 - 14,428,665 37,019	3,049 - 11,165 157,123 13,636,440 - 13,807,777 40,993	215 - 7,828 31,627 6,744,478 - 6,784,148 14	138 - 1,395 148,272 1,197,555 - 1,347,360 -	498 - 81,438 693 2,520,718 - 2,603,347 433,734	6,185 - 123,508 515,916 40,950,953 - 41,596,562 556,687	- - 53,956 6,121,914 19,253,652 68,832 25,498,354 47,195	2,045 12,837 123,682 3,467,633 10,858,524 55,051 14,519,772 271,182	1,087,985 1,270,916 4,424,076 304,086,867 905,882,217 13,781 1,216,765,842 111,158,361
	12-month ECL Lifetime ECL－not impaired Lifetime ECL－impaired
December 31, 2019	Excellent	Good	Medium	Acceptable	Under standard	No rating	Subtotal	Excellent	Good	Medium	Acceptable	Under standard	No rating	Subtotal	High risk	Allowance impairment	Total
Receivable Credit card Acceptances receivable Accounts receivable factoring Other receivables Discounts and loans Private banking Corporate banking Other fnancial assets Overdue receivable Total Guarantee and commitments	$ 565,022 196,869 - 274,150 114,510,252 172,479,816 - $ 288,026,109 $ 29,738,327	133,458 496,036 - 1,428,023 100,852,540 260,682,892 - 363,592,949 9,577,042	233,637 105,120 - 311,286 68,662,021 218,425,945 - 287,738,009 3,310,453	31,938 32,197 - 43,556 4,831,469 36,941,972 - 41,881,132 878,885	3,428 - - 6,867 1,126,572 4,249,047 - 5,385,914 50,764	321,592 89,328 19,089 3,274,831 2,982,316 133,618,335 - 140,305,491 57,139,021	1,289,075 919,550 19,089 5,338,713 292,965,170 826,398,007 - 1,126,929,604 100,694,492	1,965 - - 310 42,853 402,500 - 447,628 68,030	1,826 - - 969 229,741 36,161 - 268,697 38,417	3,426 - - 5,485 276,231 3,443,874 - 3,729,016 523	807 - - 500 61,477 191,431 - 254,215 33	389 - - 2,655 133,295 2,457,788 - 2,594,127 148	234 - - 2,943 112 49,063 - 52,352 1,422	8,647 - - 12,862 743,709 6,580,817 - 7,346,035 108,573	- - - 102,949 4,337,330 15,065,717 105,829 19,611,825 86,883	3,341 9,195 191 138,863 3,469,485 9,871,883 85,901 13,578,859 232,446	1,294,381 910,355 18,898 5,315,661 294,576,724 838,172,658 19,928 1,140,308,605 100,657,502

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b. Debt instruments

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Lifetime
12-month ECL Lifetime ECL－not impaired ECL－impaired
Accumulated
Sub Sub impairment
December 31, 2020 Investment investment High risk No rating Subtotal Investment investment High risk No rating Subtotal High risk Total (Note)
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	Investment	Sub investment	High risk	No rating	Subtotal	Investment	Sub investment	High risk	No rating	Subtotal	High risk	Total	Total
Investment in debt instruments measured at fair value through other comprehensive income Overseas bonds NT bonds Investment in debt instruments at amortized cost Overseas bonds NT bonds Certifcates of deposit with the Central Bank Negotiable certifcates of deposit Total	$ 36,844,475 67,247,661 24,555,550 41,537,821 161,705,000 280,925 $ 332,171,432	- - - - - - -	- - - - - - -	- - - - - - -	36,844,475 67,247,661 24,555,550 41,537,821 161,705,000 280,925 332,171,432	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	36,844,475 67,247,661 24,555,550 41,537,821 161,705,000 280,925 332,171,432	11,599 54,855 - 10,790 17,333 47,754 87 142,418

183

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Lifetime
12-month ECL Lifetime ECL－not impaired ECL－impaired
Accumulated
Sub Sub impairment
December 31, 2019 Investment investment High risk No rating Subtotal Investment investment High risk No rating Subtotal High risk Total (Note)
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December 31, 2019	12-month ECL	12-month ECL	12-month ECL	12-month ECL	12-month ECL	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－impaired
	Investment	Sub investment	High risk	No rating	Subtotal	Investment	Sub investment	High risk	No rating	Subtotal	High risk	Total	Accumulated impairment (Note)
Investment in debt instruments measured at fair value through other comprehensive income Overseas bonds NT bonds Investment in debt instruments at amortized cost Overseas bonds NT bonds Certifcates of deposit with the Central Bank Negotiable certifcates of deposit Total	$ 24,664,354 66,578,857 39,453,717 48,150,744 174,880,000 362,868 $ 354,090,540	- - 299,924 - - - 299,924	- - - - - - -	- - - - - - -	24,664,354 66,578,857 39,753,641 48,150,744 174,880,000 362,868 354,390,464	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	24,664,354 66,578,857 39,753,641 48,150,744 174,880,000 362,868 354,390,464	6,045 46,254 15,963 22,691 51,645 112 142,710

recognized as other equity.

follows:

December 31, 2020	Maximum credit risk exposure	Collateral	Enhancement of other credit
Financial assets at fair value through proft or loss －Debt investments －Commercial paper －Listed stocks －Unlisted stocks －Benefciary certifcates －Derivative instruments	$ 1,643,111 12,414,244 271,669 310,620 267,054 690,858	- - - - - 882,623	- - - - - 700,109
December 31, 2019	Maximum credit risk exposure	Collateral	Enhancement of other credit
Financial assets at fair value through proft or loss －Debt investments －Commercial paper －Listed Stocks －Unlisted Stocks －Benefciary certifcates －Derivative instruments	$ 4,551,167 21,037,165 178,867 145,901 108,890 950,796	- - - - - 484,712	- - - - - 468,795

184

Taiwan Business Bank Annual Report 2020

Ⅵ

(13) Changes in the expected credit losses of the Bank and subsidiaries

A. Receivables

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For the year ended December 31, 2020
Impairment difference of
"Regulations Governing the
Procedures for Banking
Institutions to Evaluate Assets
Lifetime ECL － not Lifetime ECL － and Deal with Non-Performing
12-month ECL impaired impaired Impaired (IFRS9) and Non-Accrual Loans " Total
Beginning balance $ 42,858 1,456 67,513 111,827 39,763 151,590
Changes in financial instruments that have
been identified at the beginning of the period:
－ Transferred to 12-months ECL 182 (76 ) (106 ) - -
－ Transferred to lifetime ECL (97 ) 119 (22 ) - -
－
Transferred to the credit-impaired financial
assets (18 ) (115 ) 133 - -
－
The financial assets that have been
derecognized (21,074 ) (1,016 ) (8,619 ) (30,709 ) (30,709 )
New financial assets originated or purchased 20,823 124 2,978 23,925 23,925
Write-off - - (15,044 ) (15,044 ) (15,044 )
Other changes (4,660 ) 3,075 (14,260 ) (15,845 ) (15,845 )
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and Deal with
Non-Performing and Non-Accrual Loans " - - - - 24,647 24,647
Ending balance $ 38,014 3,567 32,573 74,154 64,410 138,564
For the year ended December 31, 2019
Impairment difference of
"Regulations Governing the
Procedures for Banking
Institutions to Evaluate Assets
Lifetime ECL － not Lifetime ECL － and Deal with Non-Performing
12-month ECL impaired impaired Impaired (IFRS9) and Non-Accrual Loans " Total
Beginning balance $ 38,464 12,808 41,204 92,476 43,254 135,730
Changes in financial instruments that have
been identified at the beginning of the period:
－ Transferred to 12-months ECL 136 (48 ) (88 ) - -
－ Transferred to lifetime ECL (134 ) 44 90 - -
－
Transferred to the credit-impaired financial
assets (27 ) (63 ) 90 - -
－
The financial assets that have been
derecognized (10,110 ) (1,224 ) (4,188 ) (15,522 ) (15,522 )
New financial assets originated or purchased 24,852 154 22,189 47,195 47,195
Write-off - - (43,492 ) (43,492 ) (43,492 )
Other changes (10,323 ) (10,215 ) 51,708 31,170 31,170
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and Deal with
- - - -
Non-Performing and Non-Accrual Loans " (3,491 ) (3,491 )
Ending balance $ 42,858 1,456 67,513 111,827 39,763 151,590
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185

B. Discounts and loans

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For the year ended December 31, 2020
Impairment difference of
"Regulations Governing
the Procedures for Banking
Institutions to Evaluate Assets
Lifetime ECL － not Lifetime ECL － and Deal with Non-Performing
12-month ECL impaired impaired Impaired (IFRS9) and Non-Accrual Loans " Total
Beginning balance $ 2,197,066 197,473 5,722,768 8,117,307 5,224,061 13,341,368
Changes in financial instruments that have been
identified at the beginning of the period:
－ Transferred to 12-months ECL 126,863 (41,278 ) (85,585 ) - -
－ Transferred to lifetime ECL (66,262 ) 68,751 (2,489 ) - -
－
Transferred to the credit-impaired financial
assets (15,145 ) (57,177 ) 72,322 - -
－
The financial assets that have been
derecognized (1,126,499 ) (22,230 ) (1,132,117 ) (2,280,846 ) (2,280,846 )
New financial assets originated or purchased 1,888,013 216,028 450,914 2,554,955 2,554,955
Write-off - - (3,841,168 ) (3,841,168 ) (3,841,168 )
Other changes 129,179 589,443 4,034,576 4,753,198 4,753,198
Impairment difference of "Regulations Governing
the Procedures for Banking
Institutions to Evaluate Assets and Deal with
- - - -
Non-Performing and Non-Accrual Loans " (201,350 ) (201,350 )
Ending balance $ 3,133,215 951,010 5,219,221 9,303,446 5,022,711 14,326,157
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For the year ended December 31, 2019
Impairment difference of
"Regulations Governing
the Procedures for Banking
Institutions to Evaluate Assets
Lifetime ECL － not Lifetime ECL － and Deal with Non-Performing
12-month ECL impaired impaired Impaired (IFRS9) and Non-Accrual Loans " Total
Beginning balance $ 2,774,377 66,416 4,659,004 7,499,797 5,534,354 13,034,151
Changes in financial instruments that have been
identified at the beginning of the period:
－ Transferred to 12-months ECL 68,543 (11,251 ) (57,292 ) - -
－ Transferred to lifetime ECL (15,688 ) 18,916 (3,228 ) - -
－
Transferred to the credit-impaired financial
assets (19,820 ) (15,298 ) 35,118 - -
－
The financial assets that have been
derecognized (1,413,191 ) (18,785 ) (979,822 ) (2,411,798 ) (2,411,798 )
New financial assets originated or purchased 1,312,987 29,338 707,320 2,049,645 2,049,645
Write-off - - (469,404 ) (469,404 ) (469,404 )
Other changes (510,142 ) 128,137 1,831,072 1,449,067 1,449,067
Impairment difference of "Regulations Governing
the Procedures for Banking
Institutions to Evaluate Assets and Deal with
Non-Performing and Non-Accrual Loans " - - - - (310,293 ) (310,293 )
Ending balance $ 2,197,066 197,473 5,722,768 8,117,307 5,224,061 13,341,368
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186

Taiwan Business Bank Annual Report 2020

Ⅵ

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For the year ended December 31, 2020
Impairment difference of
"Regulations Governing
the Procedures for
Banking
Institutions to Evaluate
Assets and Deal with
Lifetime ECL － Lifetime ECL － Non-Performing and
12-month ECL not impaired impaired Impaired (IFRS9) Non-Accrual Loans " Total
Beginning balance $ - - 53,947 53,947 31,954 85,901
New financial assets originated or
purchased - - 13,908 13,908 13,908
Write-off - - (44,249 ) (44,249 ) (44,249 )
- -
Other changes (485 ) (485 ) (485 )
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and
Deal with Non-Performing and Non-
Accrual Loans " - - - - (24 ) (24 )
Ending balance $ - - 23,121 23,121 31,930 55,051
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For the year ended December 31, 2019
Impairment difference of
"Regulations Governing
the Procedures for
Banking
Institutions to Evaluate
Assets and Deal with
Lifetime ECL － Lifetime ECL － Non-Performing and
12-month ECL not impaired impaired Impaired (IFRS9) Non-Accrual Loans " Total
Beginning balance $ - - 54,231 54,231 33,018 87,249
Changes in financial instruments that
have been identified at the beginning
of the period:
－
The financial assets that have
- -
been derecognized (59 ) (59 ) (59 )
New financial assets originated or
purchased - - 21,784 21,784 21,784
Write-off - - (22,009 ) (22,009 ) (22,009 )
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and
Deal with Non-Performing and Non-
Accrual Loans " - - - - (1,064 ) (1,064)
Ending balance $ - - 53,947 53,947 31,954 85,901
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187

D. Guarantee and commitments

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For the year ended December 31, 2020
Impairment difference of
"Regulations Governing
the Procedures for
Banking Institutions to
Evaluate Assets and Deal
Lifetime ECL － Lifetime ECL － with Non-Performing and
12-month ECL not impaired impaired Impaired (IFRS9) Non-Accrual Loans" Total
Beginning balance $ 59,045 338 17,220 76,603 155,843 232,446
Changes in financial instruments that
have been identified at the beginning
of the period:
－ Transferred to 12-months ECL 25 (25 ) - - -
－ Transferred to lifetime ECL (367 ) 367 - - -
－ Transfer to the credit-impaired
financial assets (57 ) - 57 - -
－
The financial assets that have
been derecognized (21,828 ) (278 ) (14,118 ) (36,224 ) (36,224 )
New financial assets originated or
purchased 52,185 378 652 53,215 53,215
Other changes 17,667 100 2,888 20,655 20,655
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and
Deal with Non-Performing and Non-
Accrual Loans " - - - - 1,090 1,090
Ending balance $ 106,670 880 6,699 114,249 156,933 271,182
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For the year ended December 31, 2019
Impairment difference of
"Regulations Governing
the Procedures for
Banking Institutions to
Evaluate Assets and Deal
Lifetime ECL － Lifetime ECL － with Non-Performing and
12-month ECL not impaired impaired Impaired (IFRS9) Non-Accrual Loans" Total
Beginning balance $ 106,141 418 28,523 135,082 154,054 289,136
Changes in financial instruments that
have been identified at the beginning
of the period:
－ Transfer to lifetime ECL (67 ) 67 - - -
－ Transferred to the credit-impaired
financial assets (28 ) (27 ) 55 - -
－
The financial assets that have
been derecognized (49,068 ) (161 ) (27,395 ) (76,624 ) (76,624 )
New financial assets originated or
purchased 26,117 24 14,718 40,859 40,859
Other changes (24,050 ) 17 1,319 (22,714 ) (22,714 )
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and
Deal with Non-Performing and Non-
Accrual Loans " - - - - 1,789 1,789
Ending balance $ 59,045 338 17,220 76,603 155,843 232,446
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188

Taiwan Business Bank Annual Report 2020

Ⅵ

E. Debts investments

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For the year ended December 31, 2020
Lifetime ECL － Lifetime ECL －
12-month ECL not impaired impaired Total
Beginning balance $ 142,710 - - 142,710
Additions 69,437 - - 69,437
- -
Derecognition (69,680 ) (69,680 )
- -
Other changes (49 ) (49 )
Ending balance $ 142,418 - - 142,418
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For the year ended December 31, 2019
Lifetime ECL － Lifetime ECL －
12-month ECL not impaired impaired Total
Beginning balance $ 126,893 - - 126,893
Additions 67,834 - - 67,834
- -
Derecognition (50,664 ) (50,664 )
Other changes (1,353 ) - - (1,353 )
Ending balance $ 142,710 - - 142,710
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(14) Collateral management policy

• A. Collaterals are recognized under the account of other assets per the rules of "Regulations Governing the Preparation of Financial Reports by Public Banks".

B. Details were as follows:

Collaterals refer to the collaterals provided by clients as guarantee which are undertaken through public auction when the debtor is not able to fulfill its obligation. The collaterals assumed are recognized using the prices undertaken per the rules of "Regulations Governing the Preparation of Financial Reports by Public Banks" and measured by the book value or the fair value deducted by cost of sale, whichever is lower, at the end of the period. Collaterals will be sold when they are available to be sold and the proceeds received will be used to reduce the book amount of collaterals.

• (d) Liquidity risk

finance to fulfill the financial obligation which is going to mature with sufficient fund, such as early rescind of time deposits, the channels and terms to call loan from other bank are deteriorated due to the influence of specific markets and the default of loan customers worsen and it is harder for the Bank to receive payments and liquidate financial instruments. The abovementioned situations may diminish the source of cash for the Bank to undertake loan business, trades and investment activities. Under some extreme circumstances, the lack of liquidity may increase the potential possibility of reduction of the overall position of consolidated financial statement, sale of assets and inability to fulfill loan obligation. Liquidity risk is an inherent risk of bank operations and is influenced by specific or overall events in various markets. Those events include but not limited to: Credit event, merger or buyout, systematic strike and natural disaster.

189

• (2) The management policy, process and measurement of liquidity risk

• A. Policy

  • a. In accordance with the target and limit for liquidity risk management approved by the board of directors and monitor all liquidity risk positions.

  • b. Established "Directions Governing the Capital Liquidity Risk Management of Taiwan Business Bank" and "Remarks Governing the Capital Liquidity Risk Management of Taiwan Business Bank" to serve as guidance to effectively control capital liquidity risk.

  • c. Overseas branches shall regulate the code of conduct for liquidity risk management based on business characteristics and the regulations of local authorities. After being approved by the general manager, the Risk Management Department will be in charge of monitoring liquidity risk.

• B. Process

  • a. Finance Department is in charge of daily capital deployment to ensure that the capital is sufficient to cope with various demands for capital.

  • b. Risk Management Department is in charge of the identification, measurement, supervision and control of capital liquidity risk to establish a firm operation process and structure.

  • c. Risk Management Department reports the result of capital liquidity risk measurement to the Assets and Liabilities Management Committee on a monthly basis and reports the results of capital liquidity risk and pressure test to the board of directors quarterly.

• C. Measurement

  • based on the remaining days to maturity and calculate the gap of capital of each time zone in order to measure the capital deficiency of each time zone.

  • b. Loan-deposit ratio: To calculate the deposits the Bank received which are used to conduct loan business. In other words, the percentage of the total loan amount accounts for the total deposit amount.

  • c. Capital concentration and stability: In order to prevent the Bank from over-relying on single trade counterparty, product or market, the Bank observes several aspects such as the changes in large time deposit customers, the percentage of demand deposits and the continuity of deposits.

  • d. Pressure test: Except for monitoring the capital demand under normal circumstances, the Bank conducts pressure test regularly in order to evaluate the capital liquidity under abnormal circumstances and ensure that the Bank is equipped with sufficient capital.

• (3) Financial assets possessed for managing liquidity risk and maturity analysis for non-derivative financial liability

• A. Financial assets possessed for managing liquidity risk

The Bank and subsidiaries possesses cash and other high liquidity interest yielding assets to cope with payment obligations and potential emergent capital demands in the market. The assets possessed for managing liquidity risk include cash and cash equivalent, due from the Central Bank and call loans to banks, financial assets at fair value through profit or loss, discounts and loans, financial assets measured at fair value through other comprehensive income and investment in debt instruments at amortized cost.

possessed by the Bank and subsidiaries based on the remaining days from the consolidated financial statement date to the contract maturity date. The amount disclosed is based on the cash

190

Taiwan Business Bank Annual Report 2020

Ⅵ

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December 31, 2020
0-30 days 31-90 days 91days-1 year 1-5 years Over 5 years Total
Major matured cash outflow $ 949,614,285 166,776,471 425,441,692 59,010,406 37,614,645 1,638,457,499
Deposits from the Central Bank 900,620 - - - - 900,620
and banks
Overdrafts on banks 777,971 - - - - 777,971
Call loans from the Central Bank 33,177,364 12,082,474 2,987,250 - - 48,247,088
and banks
Due to the Central Bank and - - 28,702,900 337,200 - 29,040,100
banks
Financial liabilities designated at - - - - 8,411,020 8,411,020
fair value through profit or loss
Notes and bonds issued under 488,948 185,344 594,313 787,386 - 2,055,991
repurchase agreement
Interest payable 550,776 891,394 872,656 58,128 8 2,372,962
Deposits transferred from 10,800,000 20,120,150 37,355,210 - - 68,275,360
Chunghwa Post Co., Ltd.
Demand deposits 813,419,351 - - - - 813,419,351
Time deposits 88,025,858 133,435,966 346,582,629 36,679,797 1,433 604,725,683
Remittance 426,966 - - - - 426,966
Bank notes payable 1,000,000 - 8,000,000 18,340,000 25,910,000 53,250,000
Cumulative earnings on 250 6,670 110,420 2,220,250 3,154,776 5,492,366
appropriated loan fund
Lease liabilities 46,181 54,473 236,314 587,645 137,408 1,062,021
December 31, 2019
0-30 days 31-90 days 91days-1 year 1-5 years Over 5 years Total
Major matured cash outflow $ 904,142,429 193,155,772 423,123,774 63,934,641 29,806,197 1,614,162,813
Deposits from the Central Bank 268,330 - - - - 268,330
and banks
Overdrafts on banks 1,118,477 - - - - 1,118,477
Call loans from the Central Bank 24,703,175 8,444,072 1,847,147 - - 34,994,394
and banks
Due to the Central Bank and 90,500 - 186,740 474,905 - 752,145
banks
Financial liabilities designated at - - - - 8,949,182 8,949,182
fair value through profit or loss
Notes and bonds issued under 60,390 172,381 635,810 - - 868,581
repurchase agreement
Interest payable 449,550 803,258 1,291,095 79,568 8 2,623,479
Deposits transferred from 11,200,000 24,312,411 32,900,000 - - 68,412,411
Chunghwa Post Co., Ltd.
Demand deposits 755,384,107 - - - - 755,384,107
Time deposits 110,515,249 154,358,207 370,847,890 43,619,659 18,237 679,359,242
Remittance 306,198 - - - - 306,198
Bank notes payable - 5,000,000 15,000,000 16,790,000 16,460,000 53,250,000
Cumulative earnings on 2,500 - 161,670 2,412,080 4,258,834 6,835,084
appropriated loan fund
Lease liabilities 43,953 65,443 253,422 558,429 119,936 1,041,183
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191

The derivative instruments of the Bank and subsidiaries whose possession are settled by net amount include foreign derivative instruments, such as non-delivery forward contracts and net-delivery foreign exchange option. After evaluation the Bank concluded that the maturity date is the basic element to comprehend all the derivative financial instruments listed in the consolidated financial statement. The amount disclosed is based on the cash flows of the contracts and thus part of the amount disclosed may not correspond to the amount disclosed in the consolidated financial statement. As of December 31, 2020, the Bank and subsidiaries had no derivative financial instruments settled by net amount. As of December 31, 2019, maturity analysis for the derivative financial liabilities settled by net amount are as follows:

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December 31, 2019
0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Derivative financial liabilities at fair
value through profit or loss
－ Foreign exchange derivative $ - - - 560 - 560
instrument
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The derivative instruments of the Bank's possession settled by gross amount include the following:

• a. Foreign exchange derivative financial instrument: Foreign exchange options settled by gross amount, foreign exchange forward contracts and currency swap contracts.

are settled by gross amount based on the remaining days from the consolidated financial statement date to the contract maturity date. The amount disclosed is based on the cash flow of the contracts and thus part of the amount disclosed may not correspond to the amount disclosed in the consolidated financial statement. The maturity analysis for derivative financial liabilities settled by gross amount is as follows:

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December 31, 2020 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Derivative financial instruments at fair
value through profit or loss
Foreign exchange derivative
instruments
Cash outflow $ 18,587,554 20,742,526 14,038,845 8,411,846 - 61,780,771
Cash inflow 18,999,896 21,036,931 14,267,128 8,406,666 - 62,710,621
Interest rate derivative instrument
Cash outflow - 7,903 14,547 9,222 18,690 50,362
Cash inflow 671 1,071 6,907 6,513 15,276 30,438
Total cash outflow 18,587,554 20,750,429 14,053,392 8,421,068 18,690 61,831,133
Total cash inflow 19,000,567 21,038,002 14,274,035 8,413,179 15,276 62,741,059
Net cash flow $ (413,013 ) (287,573 ) (220,643 ) 7,889 3,414 (909,926 )
December 31, 2019 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Derivative financial instruments at fair
value through profit or loss
Foreign exchange derivative
instruments
Cash outflow $ 54,733,698 32,548,928 71,226,616 56,264,496 1,799,400 216,573,138
Cash inflow 55,106,820 32,263,313 70,476,718 56,270,898 1,802,371 215,920,120
Interest rate derivative instrument
Cash outflow - 15,820 22,689 35,707 52,623 126,839
Cash inflow 6,336 3,951 26,496 38,679 44,908 120,370
Total cash outflow 54,733,698 32,564,748 71,249,305 56,300,203 1,852,023 216,699,977
Total cash inflow 55,113,156 32,267,264 70,503,214 56,309,577 1,847,279 216,040,490
Net cash flow $ (379,458 ) 297,484 746,091 (9,374 ) 4,744 659,487
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(5) Maturity analysis of off-balance sheet items

The table below shows the maturity analysis of the off-balance sheet items of the Bank based on the remaining days from the consolidated financial statement date to the contract maturity date. For the financial guarantee contracts issued, the maximum amount of the guarantee is listed in the earliest time zone that the guarantee may be executed. The amount disclosed is based on the cash flows of the contracts and thus part of the amount disclosed may not correspond to the amount disclosed in the consolidated financial statement.

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December 31, 2020 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Issued and irrevocable loan $ 31,953 338,189 4,349,374 27,261,664 29,852,215 61,833,395
commitments
Irrevocable credit card loan 180 336 300,316 1,150,378 18,615,994 20,067,204
commitments
Letters of credit issued yet unused 2,473,524 5,464,898 604,705 258,636 90,249 8,892,012
Other guarantees 2,148,633 2,859,595 1,189,714 3,635,884 10,803,106 20,636,932
Total $ 4,654,290 8,663,018 6,444,109 32,306,562 59,361,564 111,429,543
December 31, 2019 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Issued and irrevocable loan $ 80,600 470,300 240,778 4,151,688 50,316,561 55,259,927
commitments
Irrevocable credit card loan 426 8,850 244,874 1,383,874 18,434,883 20,072,907
commitments
Letters of credit issued yet unused 2,331,015 3,904,555 668,520 218,697 33,960 7,156,747
Other guarantees 1,013,082 2,595,282 1,160,466 1,590,609 12,040,928 18,400,367
Total $ 3,425,123 6,978,987 2,314,638 7,344,868 80,826,332 100,889,948
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(6) Maturity analysis of lease contract commitments

The Bank and subsidiaries only has operating lease contract, operating lease commitment refers to, when the Bank and subsidiaries is the lessor or lessee and under the irrevocable operating lease conditions, the minimum total future rent payment. Below tables show the maturity analysis of the Bank and subsidiaries operating lease contract commitments:

December 31, 2020	Below 1 year	1-5 years	Over 5 years	Total
Operating lease income (lessor)	$ 660	-	-	660
December 31, 2019 Below 1 year 1-5 years Over 5 years Total
Operating lease income (lessor)	$ 2,270	449	-	2,719

The capital expenditure commitment of the Bank refers to the contract signed to obtain buildings and equipment. The maturity analysis of the capital expenditure commitment of the Bank is as follows:

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December 31, 2020 Below 1 year 1-5 years Over 5 years Total
Machinery and equipment $ 1,478,133 - - 1,478,133
Transportation equipment 2,986 - - 2,986
Right-of-use assets 1,260 805 - 2,065
Miscellaneous equipment 26,900 - - 26,900
Total $ 1,509,279 805 - 1,510,084
December 31, 2019 Below 1 year 1-5 years Over 5 years Total
Machinery and equipment $ 1,226,830 - - 1,226,830
Transportation equipment 130 - - 130
Right-of-use assets 7,358 5,435 - 12,793
Miscellaneous equipment 8,899 - - 8,899
Total $ 1,243,217 5,435 - 1,248,652
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193

(e) Market risk

Market risk refers to the possible loss of the Bank's business in or off the balance sheet results from the disadvantageous fluctuation in market price in terms of interest rates, stock prices, foreign exchange rates and commodity prices.

• (2) Policies and procedures of market risk management

A. Strategy

• a. To carry out market risk management, achieve operation target and maintain healthy capital adequacy by following "Directions Governing the Market Risk Management of Taiwan Business Bank" and other relevant regulations.

• b. Under the risk tolerance approved by the board of directors or board of executive directors, the Bank applies various risk control mechanism to effectively deploy and manage capital in order to maintain the market risk exposure within the tolerable extent and achieve earning target.

B. Policies and procedures

In order to establish the market risk management mechanism and ensure that the market risk is within the tolerable extent, the Bank set up directions governing the market risk management, remarks governing the limit of market risk and financial product valuation procedures as the primary management guidance. Other than what is stated above, the Bank also establish limit control mechanism in terms of trade positions, stop-limit, suspensions and lines of alert based on the operation notices and procedures of different financial instruments, including fix income instruments, equity securities, foreign exchange transaction and derivative financial instruments.

• (3) Process for market risk management

In accordance with the rules of "Directions Governing the Market Risk Management of Taiwan Business Bank", the Bank shall conduct appropriate market risk evaluation and document the process for later review before financial instruments are promoted. The content of evaluation includes risk factors identification, evaluation methods, cost-benefit analysis, market liquidity, risk strategy, adequacy of risk management mechanism and the influence on the Bank for undertaking market risk.

B. Risk measurement

• a. Annually based on the business development of transaction units and submit to the board of directors or board of executive directors for approval. For the units which the positions and limits remain unchanged after evaluation, they can put the positions and limits into practice after receiving the approval from the general manager.

• through different information systems. For the market data and parameters of the models applied for evaluation, they shall be random inspected regularly to determine the rationality.

C. Risk monitoring

• and serve as the guidance for daily risk management operation.

• b. All financial transactions are equipped with different regulations in terms of limit of loss and stop-limit. Provided that the valuation loss amount is over the limit, a stop-limit, suspension and subsequent risk control will be executed.

D. Risk report

Risk management department report current market risk management status of the Bank to directors, executive directors and executives to facilitate them to control the risk exposure status and adjust management procedures properly.

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• (4) Scope and method of market risk management

• A. Foreign exchange risk management

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• Foreign exchange risk refers to the potential profit or loss of the foreign currency financial instruments which results from the transition among fluctuating currencies.

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b. Applicable scope

involve in foreign currencies.

• c. Purpose for foreign exchange risk management

To avoid loss of earnings or deterioration of financial status due to intensive fluctuation of foreign exchange and to increase capital deployment efficiency and business operation integrity.

• d. Procedures of foreign exchange risk management

• 1) In order to control foreign exchange transaction risk, the Bank established trade position authorization standard for financial transaction operations, trade units and traders in current regulations. In addition, for non-commercial business foreign exchange operation, all trade units submit the required amounts of position annually based on operation status. Risk management department will evaluated the requirement and submit to the board of directors' (executive directors) for approval. The demand will be executed after the board of directors approved. For the units which the positions remain unchanged after evaluation, they can put the positions into practice after receiving the approval from the general manager.

• 2) The trade units conduct various foreign financial product business, they shall fully understand the content of commodities, the risk tolerance and trade purpose. Trade units shall establish financial products trading strategies based on market status in the meeting every morning and submit the risk-benefit evaluation in the meeting minutes for the department heads to review. The trading shall follow the relevant authorization rules of the Bank and the stop-limit of all trade positions shall be executed reliably.

• e. Process of foreign exchange risk management

  • transactions to effectively identify risk factors and market risk resources. In addition, the financial transactions which the Bank and subsidiaries conducts deal with simple type financial products. For complex financial products, the Bank and subsidiaries conducts back-to-back hedge covering to effectively avoid market risk.

  • rate for held-for-trading spot exchange and exchange rate derivative and setup Greek's sensitivity allowance, according to the yearly demand of trade units, the state of utilization, and monitor the load of fluctuation of exchange rate in each acceptable range.

  • C) Positions of the trading book shall be evaluated daily where the positions of the banking book shall be evaluated monthly. When there are public quotes for financial instruments, the quotes shall be the prior evaluation prices. If the financial instruments are evaluated by models, then they shall be evaluated by mathematic models prudently and the assumptions and parameters of the models shall be reviewed regularly.

195

2) Monitoring and report

  - A) When the evaluation loss of non-commercial foreign exchange transactions is over the limit, the trade units shall execute a stop-limit per the regulations. If the loss amount reaches the suspension warning line or suspension limit of the financial transaction, risk management units shall report to the general manager. Provided that the loss amount reaches the annual suspension line, risk management department shall report to the board of directors or executive directors.

  - B) Reports of operation results shall be prepared and submitted to the department heads for approval on a daily basis.

• B. Equity security risk management

The market risks of the equity securities possessed by the Bank include the individual risk results from the market price fluctuation of individual equity security and the general market risk results from overall market price fluctuation.

• b. Applicable scope

Financial instruments similar to equity security in all trading books.

• c. Purpose of equity security risk management

To avoid loss of earnings or deterioration of financial status due to intensive fluctuation of equity securities and to increase capital deployment efficiency and business operation integrity.

• d. Procedures of equity security risk management

• 1) All trade units submit the required amounts of position annually base on operation status. Risk management department will evaluate the requirement and submit to the board of directors or executive directors. The demand will be executed after approved by the board of directors.

• 2) The trade units shall predict the possible trend of domestic stock market based on the information of foreign and domestic security markets so as to set up the operation strategies and directions. The traders shall pay close attention to the market trend when the market opens so as to conduct security transactions and the operations as well as the meeting minutes shall be submitted to the department heads to review.

• e. Process of equity security risk management

  • A) The risk management department apply Value at Risk models to measure the market risk of equity security investment. Furthermore, based on the trade units' operation demand and the risk limit established by the Bank's risk tolerance, the risk management units effectively control the variation of risk factors under an acceptable extent.

  • B) Trading book position shall be evaluated daily. When there is a public quote in the market, the quote shall be adopted as the prior evaluation price. If the transaction is in secondary market and the liquidity is high, the closing price can be adopted as the evaluation price. If the financial instruments are evaluated by models, then they shall be evaluated by mathematic models prudently and the assumptions and parameters of the models shall be reviewed regularly.

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2) Monitoring and report

• A) When the evaluation loss of equity security investment is over the limit, the trade units shall execute a stop-limit per regulations. If the loss amount reaches the suspension warning line or suspension limit of the financial transaction, risk management units shall report to the general manager. Provided that the loss amount reaches the annual suspension line, risk management department shall report to the board of directors or executive directors.

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  - B) Transaction reports shall be prepared and submitted to the department heads for approval on a daily basis. And the investment gains or losses shall report to the board of directors or executive directors regularly for future reference.

• C. Interest rate risk management

Interest rate risk refers to the price decline of the Bank's financial products which contain interest risk factors due to the disadvantageous changes in interest rate.

• b. Applicable scope

Financial instruments which contain interest rate factors in all trading books.

• c. Purpose of interest rate risk management

To avoid loss of earnings or deterioration of financial status due to intensive fluctuation of interest rate and to increase capital deployment efficiency and business operation integrity.

• d. Procedures of interest rate risk management

• 1) In order to control interest rate risk, the Bank established trade position authorization standard for financial transaction operations, trade units and trade counterparties in current regulations. In addition, for the positions held for trading, all trade units submit the required amounts of position annually based on operation status. Risk management department will evaluate the requirement and submit to the board of directors or executive directors for approval. The demand will be executed after the board of directors approved.

• 2) The trade units shall consider safety, liquidity and profitability and gather market information to assess the potential risk and benefit. In additional, the trade units shall choose investment target prudently through analyzing the issuers' credit, financial status, country risks and interest rate trends.

• e. Process of interest rate risk management

• transaction to effectively identify risk factors and market risk resources. In addition, the financial transactions which the Bank conducts deal with simple type financial products. For complex financial products, the Bank conducts back-to-back hedge covering to effectively avoid market risk.

• B) Position of the trading book shall be evaluated daily. When there are public quotes for financial instruments, the quotes shall be the prior evaluation prices. If the financial instruments are evaluated by models, then they shall be evaluated by mathematic models prudently and the assumptions and parameters of the models shall be reviewed regularly.

197

2) Monitoring and report

     - A) The risk management department apply DV01 to measure to what extent the trading book bond positions are influenced by the interest rate risk and set up interest rate sensitivity limit base on the requirements of the trade units and the risk tolerance of the Bank annually.

     - B) The trade units shall prepare the income assessment tables of trade positions and traders for the department heads to review. In addition, when the evaluation loss of the position is over the limit, the trade units shall execute a stop-limit per the regulations. If the loss amount reaches the suspension warning line or suspension limit of the financial transaction, risk management department shall report to the general manager. Provided that the loss amount reaches the annual suspension line, risk management units shall report to the board of directors or executive directors.

• D. Concentration management

  • over concentrated and enhance credit risk management, the Bank established financial institution credit risk limit based on the world ranking of Level 1 capital and credit ratings from The Banker. The trade units shall also pay attention to the changes of the credit status of individual financial institution as well as the changes of the national credit rating to conduct the transaction prudently.

  • b. For equity security investments, the Bank set up limits for single institution and single related party.

• (5) Interest rate risk management of the banking book

  • a. The interest rate risk of the banking book refers to the negative effect towards the future net interest income or economic value of equity results from the fluctuation of interest rate. Net Interest Income (hereafter NII) is the total amount of interest revenue deducted by the total amount of interest expense; Economic Value of Equity (hereafter EVE) is the total discounted future cash inflow from assets deducted by the total discounted future cash outflow from liabilities.

  • b. The management purpose of the interest rate risk management of the banking book is to control the negative effect from the interest rate risk fluctuation towards NII or EVE within the approved limit extent.

• B. The process for the interest rate risk management of the banking book

curve risk, basis risk and option characteristic risk and measures the possible influence on the earnings and economic value results from interest rate fluctuation.

• b. Monitoring and report

The Bank established limits of the ratio between interest-rate-sensitivity assets and interest-rate-sensitivity liabilities, the effect to NII in 1 year when the market interest rate parallel changes 1 BP and the effect to EVE when the market interest rate parallel changes 200 BP to control the banking book interest rate risk. The results of interest rate risk measurement are reported to the Assets and Liabilities Management Committee monthly and to the board of directors or executive directors quarterly. When the measurement result is over the limit, relevant units shall be convened to establish responding plan and the plan shall be submitted to the Assets and Liabilities Management Committee for discussion. After the plan

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is approved by the general manager, it shall be executed by the relevant business units and report to the board of directors or executive directors.

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• (6) Value at Risk

• A. Description of Value at Risk

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Value at Risk (VaR) is a statistical amount used to evaluate the maximum possible loss of portfolio results from the changes of market risk factors within a certain period of time and a fixed

• B. Value at Risk models and assumptions

market risk for the equity security position of the trading book. Based on the historical information of the last 1 year and applies Historical Simulation Method (with the confidence interval being 99% and the duration of possession being 1 day), the Bank calculates and monitors the trend of Value at Risk.

• C. The limit of Value at Risk model

  • Value at Risk is a tool to measure market risk under normal circumstance. The limits of the model are listed below:

  • liquidity risk.

  • b. Value at Risk measures the possible loss of the position on hand at the end of the transaction day, but it cannot reflect the distribution of the part which actual loss exceeds Value at Risk.

  • c. Value at Risk model is based on historical data to evaluate the amount, and therefore it may not be able to predict the future changes of risk factors, especially for those exceptions result from significant market fluctuation.

• (7) Foreign exchange risk disclosure and sensitivity analysis

• A. Foreign exchange risk exposure

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Significant net positions of foreign currencies (Market risk)
December 31, 2020
Foreign currency
Currency amount (in thousands) NT$ amount
USD $ 440,115 12,367,232
JPY 2,022,710 551,188
CNY 66,291 286,709
EUR 5,401 186,821
AUD 5,013 108,531
Significant net positions of foreign currencies (Market risk)
December 31, 2019
Foreign currency
Currency amount (in thousands) NT$ amount
USD $ 411,606 12,344,064
JPY 4,142,819 1,143,832
EUR 10,906 366,878
AUD 16,808 353,220
ZAR 70,508 149,477
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Note 2: Net foreign currency is the absolute value of the net positions of each foreign currency.

199

b. Assets and liabilities of foreign currency

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December 31, 2020
Monetary financial assets Monetary financial liabilities
Foreign Foreign
currency currency
amount amount
Currency (in thousands) Spot rate NTD amount (in thousands) Spot rate NTD amount
USD $ 12,821,180 28.1000 360,420,744 12,222,317 28.1000 343,447,108
AUD 4,711,447 21.6500 102,002,828 4,634,864 21.6500 100,344,806
CNY 10,341,263 4.3250 44,725,962 10,135,870 4.3250 43,837,638
JPY 85,399,458 0.2725 23,271,352 84,061,617 0.2725 22,906,791
HKD 5,621,662 3.6240 20,372,903 5,236,467 3.6240 18,976,956
EUR 362,909 34.5900 12,553,022 363,008 34.5900 12,556,447
ZAR 4,526,436 1.9210 8,695,284 4,524,811 1.9210 8,692,162
NZD 62,764 20.3200 1,275,364 62,734 20.3200 1,274,755
GBP 26,234 38.3500 1,006,074 26,199 38.3500 1,004,732
CAD 17,894 22.0600 394,742 17,894 22.0600 394,742
SGD 7,292 21.2700 155,101 7,483 21.2700 159,163
SEK 34,592 3.4300 118,651 33,662 3.4300 115,461
Others (Note) - - 83,141 - - 93,168
Non-monetary financial assets Non-monetary financial liabilities
USD 5,181 28.1000 145,586 - - -
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Note: Consolidated disclosure is applied for other currencies not over $100,000.

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December 31, 2019
Monetary financial assets Monetary financial liabilities
Foreign Foreign
currency currency
amount amount
Currency (in thousands) Spot rate NTD amount (in thousands) Spot rate NTD amount
USD $ 14,982,151 29.9900 449,314,708 14,424,396 29.9900 432,587,636
AUD 4,212,685 21.0150 88,529,575 4,146,043 21.0150 87,129,094
CNY 36,499,479 4.2950 156,765,262 36,306,922 4.2950 155,938,230
JPY 53,452,970 0.2761 14,758,365 52,141,895 0.2761 14,396,377
HKD 6,170,963 3.8510 23,764,379 5,791,786 3.8510 22,304,168
EUR 394,078 33.6400 13,256,784 394,201 33.6400 13,260,922
ZAR 4,442,764 2.1200 9,418,660 4,443,233 2.1200 9,419,654
NZD 58,418 20.2000 1,180,044 58,414 20.2000 1,179,963
GBP 30,508 39.3800 1,201,405 30,488 39.3800 1,200,617
CAD 32,029 22.9800 736,026 32,075 22.9800 737,084
SGD 6,067 22.2600 135,051 6,156 22.2600 137,033
SEK 36,065 3.2200 116,129 35,768 3.2200 115,173
THB 172,762 1.0081 174,161 176,909 1.0081 178,342
CHF - - - 4,030 30.9750 124,829
Others (Note) - - 62,198 - - -
Non-monetary financial assets Non-monetary financial liabilities
USD 2,025 29.9900 60,730 - - -
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Note: Consolidated disclosure is applied for other currencies not over $100,000.

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B. Foreign exchange risk sensitivity analysis (Change by 1%)

Foreign exchange risk sensitivity analysis is the analysis that given other conditions remain the same, the influence on profit or loss and equity when each respective currency depreciate or appreciate by 1%.

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December 31, 2020
Depreciate by 1% Appreciate by 1%
Currency Income Equity Income Equity
USD $ (94,813 ) (54,119 ) 94,813 54,119
AUD 4,317 (20,838 ) (4,317 ) 20,838
HKD 2,844 (16,090 ) (2,844 ) 16,090
JPY 2 (3,839 ) (2 ) 3,839
GBP (32 ) - 32 -
SGD 41 - (41 ) -
ZAR (33 ) - 33 -
SEK (32 ) - 32 -
CHF 41 - (41 ) -
THB 59 - (59 ) -
EUR 24 - (24 ) -
NZD (14 ) - 14 -
CNY (50,706 ) - 50,706 -
Total $ (138,302 ) (94,886 ) 138,302 94,886
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December 31, 2019
Depreciate by 1% Appreciate by 1%
Currency Income Equity Income Equity
USD $ (1,676 ) (55,313 ) 1,676 55,313
AUD 7,410 (18,231 ) (7,410 ) 18,231
HKD 2,979 (17,543 ) (2,979 ) 17,543
JPY 5,572 (3,766 ) (5,572 ) 3,766
GBP 125 - (125 ) -
SGD 20 - (20 ) -
ZAR 7 - (7 ) -
SEK (10 ) - 10 -
CHF 626 - (626 ) -
CAD 42 - (42 ) -
THB 42 - (42 ) -
EUR (119 ) - 119 -
NZD (8 ) - 8 -
CNY (2,189 ) - 2,189 -
Total $ 12,821 (94,853 ) (12,821 ) 94,853
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201

(8) Interest rate risk disclosure and sensitivity analysis

A. Interest rate sensitivity analysis

The assumption of interest rate sensitivity analysis is, under the circumstance that other conditions remain the same, the yield of the market increase or decrease by 1 basis point (1 bp).

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December 31, 2020
Interest rate increases by 1 bp Interest rate decreases by 1 bp
Currency Income Equity Income Equity
Trading book
TWD $ (131 ) (4,161 ) 131 4,161
Banking book
TWD - (43,732 ) - 43,732
USD (2 ) (10,477 ) 2 10,477
AUD - (639 ) - 639
HKD - (35 ) - 35
CNY - (2,587 ) - 2,587
ZAR - (284 ) - 284
Total $ (133 ) (61,915 ) 133 61,915
December 31, 2019
Interest rate increases by 1 bp Interest rate decreases by 1 bp
Currency Income Equity Income Equity
Trading book
TWD $ (660 ) (5,211 ) 660 5,211
Banking book
TWD - (49,215 ) - 49,215
USD 9 (13,057 ) (9 ) 13,057
AUD - (647 ) - 647
HKD - (78 ) - 78
CNY - (1,423 ) - 1,423
ZAR - (80 ) - 80
Total $ (651 ) (69,711 ) 651 69,711
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December 31, 2020
Effect on NII in 1 year Effect on EVE
Scenario TWD USD TWD USD
Interest rate increases by 100 bp 3,709,697 (28,815 ) (823,603 ) (50,085 )
Interest rate decreases by 100 bp (4,860,513 ) 4,141 3,263,342 40,109
December 31, 2019
Effect on NII in 1 year Effect on EVE
Scenario TWD USD TWD USD
Interest rate increases by 100 bp 3,000,869 (21,189 ) (2,668,734 ) (59,485 )
Interest rate decreases by 100 bp (5,575,295 ) 8,698 4,298,253 65,845
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(9) Equity security risk disclosure and sensitivity analysis

• A. Equity security sensitivity analysis (Changes by 1%)

The assumption of equity security sensitivity analysis is, under the circumstance that other conditions remain the same, the price of equity security increased or decreased by 1%.

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		December 31, 2020	December 31, 2020
Change	Currency	Income	Equity
Equity security price increases by 1 % Equity security price decreases by 1 %	TWD USD TWD USD	2,053 52 (2,053 ) (52 )	- - - -

		December 31, 2019	December 31, 2019
Change	Currency	Income	Equity
Equity security price increases by 1 % Equity security price decreases by 1 %	TWD USD TWD USD	1,789 20 (1,789 ) (20 )	- - - -

B. Value at Risk of equity security

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From the year ended December 31,2020
Value at Risk Average Maximun Minimun
Equity security risk 6,749 15,917 1,668
For the year ended December 31, 2019
Value at Risk Average Maximun Minimun
Equity security risk 3,255 7,623 94
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subsidiaries conduct during daily operation mostly involve securities lending in accordance to repurchase agreements. Since the right to receive contractual cash flow has been transferred to others and the Bank and subsidiaries' obligation to repurchase the transferred assets for a fixed price at a future date is recognized under liability, for these transactions, the Bank and subsidiaries cannot use, sell or pledge those transferred financial assets in availability period, the Bank and subsidiaries have interest rate risk and credit risk, the said transferred assets are not fully derecognized.

derecognized.

The Bank and subsidiaries have an exercisable master netting arrangement or similar agreement in place with counterparties. When both parties reach a consensus regarding net settlement, the aforesaid exercisable master netting arrangement or similar agreement can be net settled by offsetting financial assets and financial liabilities. If not, the transaction can be settled at total amount. In the event of default involving one of the parties, the other party can have the transaction net settled.

203

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December 31, 2020
Financial assets under offsetting or general agreement of net amount settlement or similar norm
Gross amounts of Net amount of Amounts not set off in the
Gross amounts financial liabilities financial assets balance sheet (d)
of recognized offset in the presented in the Financial
financial assets balance sheet balance sheet instruments Cash collateral Net amount
Item (a) (b) (c)=(a)-(b) (Note) received (e)=(c)-(d)
Derivative financial
instruments $ 391,191 - 391,191 700,109 882,623 (1,191,541)
December 31, 2020
Financial liabilities under offsetting or general agreement of net amount settlement or similar norm
Gross amounts of Net amount of Amounts not set off in the
Gross amounts of financial assets financial liabilities balance sheet (d)
recognized offset in the presented in the Financial
financial liabilities balance sheet balance sheet instruments Cash collateral Net amount
Item (a) (b) (c)=(a)-(b) (Note) pledged (e)=(c)-(d)
Derivative financial
instruments $ 101,929 - 101,929 - 1,531,091 (1,429,162)
December 31, 2019
Financial assets under offsetting or general agreement of net amount settlement or similar norm
Gross amounts of Net amount of Amounts not set off in the
Gross amounts financial liabilities financial assets balance sheet(d)
Item of recognized offset in the presented in the Financial
financial assets balance sheet balance sheet instruments Cash collateral Net amount
(a) (b) (c)=(a)-(b) (Note) received (e)=(c)-(d)
Derivative financial
instruments $ 370,369 - 370,369 468,795 484,712 (583,138)
December 31, 2019
Financial liabilities under offsetting or general agreement of net amount settlement or similar norm
Gross amounts of Net amount of Amounts not set off in the
Gross amounts of financial assets financial liabilities balance sheet(d)
Item recognized offset in the presented in the Financial
financial liabilities balance sheet balance sheet instruments Cash collateral Net amount
(a) (b) (c)=(a)-(b) (Note) pledged (e)=(c)-(d)
Derivative financial
instruments $ 131,733 - 131,733 - 969,900 (838,167)
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(AP) Capital Management

• (a) The Bank takes business development and risk control into consideration and calculates capital adequacy per "Regulations Governing the Capital Adequacy Ratio and Capital Category of Banks" and "Calculation Methods and Forms of Proprietary Capital and Risk Capital of Banks". The ratio between proprietary capital and risk capital shall remain above the regulated minimum ratio.

• (b) In order to maintain adequate capital and reach a balance between risk control and business development, the Bank established "Directions Governing Capital Adequacy" as the guidance for controlling capital adequacy. The scope of the directions includes, except for the least capital requirements for credit risk, market risk and operation risk, significant risk such as banking book interest rate risk, liquidity risk and concentration risk. In addition, in order to link business strategies, capital and risk management, the Bank sets up capital management plan annually for the president's approval and reports to Risk Management Committee and the board of directors quarterly about relevant risks and capital control status.

• relevant rules of competent authority regarding credit risk, market risk, operation risk, interest rate risk of the banking book, and liquidity risk so as to be familiar with current business environment and monitors and adjusts capital adequacy effectively.

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• (d) To cope with the implementation of new Basel Accord, the Bank set up complete risk management system, risk management operation tracking procedures to provide the management with appropriate risk management information for making decisions. Therefore, the Bank is able to maintain adequate capital within the tolerable extent and to ensure the provision of proprietary capital of the Bank corresponds with the overall operating risk characteristics of the Bank.

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• (1) Tier 1 capital

• A. Common stock equity: The item includes common stock deducted by treasury stock, goodwill and other intangible assets, deferred tax assets based on future profit status of the Bank, unrealized gain on financial assets measured at fair value through other comprehensive income, operating reserve and deficiency of allowance for bad debts, real estate retained earning increment arising from applying the fair value or the revaluation reserve as the deemed cost when first adopting IFRSs, and 25% of the major

• by the major investment on financial related business.

• (2) Tier 2 capital

The item includes perpetual accumulated subordinated financial debentures, long term subordinated debenture, real estate retained earning increment arising from applying the fair value or the revaluation reserve as the deemed cost when first adopting IFRSs, 45% of unrealized gain on financial assets measured at fair value through other comprehensive income, and 50% of the major investment on financial related business.

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Item December 31, 2020 December 31, 2019
Common stock equity 93,119,841 88,212,592
Other tier 1 capital 17,504,060 12,708,443
Eligible capital
Tier 2 capital 40,329,291 32,082,995
Eligible Capital 150,953,192 133,004,030
Standardized approach 1,058,435,685 992,799,980
Credit risk Internal ratings-based approach - -
Securitization - -
Basic indicator approach - -
Risk-weighted Operational Standardized approach/selective 38,142,417 38,286,712
assets risk standardized approach
Advanced measurement approach - -
Standardized approach 28,041,588 19,565,088
Market risk
Internal model approach - -
Total risk-weighted assets 1,124,619,690 1,050,651,780
Capital adequacy ratio 13.42% 12.66%
Common stock equity/ Risk-weighted assets ratio 8.28% 8.40%
Tier 1 capital / Risk-weighted assets ratio 9.84% 9.61%
Leverage ratio 5.90% 5.53%
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The formulas of the table are listed as follows:

• A. The eligible capital, risk-weighted assets and exposure are calculated per "Regulations Governing the Capital Adequacy and Capital Category of Banks" and "The Calculation and Forms of Eligible Capital and Risk Assets of Banks".

• disclose the capital adequacy of this period and last period and additionally disclose the capital adequacy of the previous period ended December 31.

• C. Note 1. Eligible Capital = Common stock equity ＋ Other Tier 1 Capital ＋ Tier 2 Capital

• Note 2. Total risk-weighted assets = Credit risk weighted asset ＋ (operational risk charge ＋ market risk charge) × 12.5

Note 3. Capital adequacy ratio= Eligible Capital ÷ Risk weighted asset.

Note 4. Common stock equity / Risk-weighted assets ratio= Common stock equity / total risk weighted assets Note 5. Tier 1 capital / Risk-weighted assets ratio = (Common stock equity ＋ other tier 1 capital)/ Risk-weighted assets

• Note 6. Leverage ratio = Net Tier 1 capital / Total risk exposure.

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(AQ) Investing and financing activities not affecting current cash flow

December 31, 2020 and 2019 were carried out to acquire right-of-use assets under leases. Please refer to Note 6(K).

						Non-cash changes	Non-cash changes	Non-cash changes	Non-cash changes
	January 1, 2020			cash fows		Foreign exchange rate movement		Fair value changes		Other changes	December 31, 2020
Financial liabilities at fair value through proft or loss Bank notes payable Lease liabilities Total liabilities from fnancing activities		$ 8,949,182 53,250,000 1,041,183 $ 63,240,365		- - (428,581 ) (428,581)		(567,000 ) - (4,729 ) (571,729)		28,838 - - 28,838		- - 454,148 454,148		8,411,020 53,250,000 1,062,021 62,723,041

						Non-cash changes	Non-cash changes	Non-cash changes	Non-cash changes
	January 1, 2019			cash fows		Foreign exchange rate movement		Fair value changes		Other changes		December 31, 2019
Financial liabilities at fair value through proft or loss Bank notes payable Lease liabilities Total liabilities from fnancing activities		$ 9,162,841 47,450,000 912,342 $ 57,525,183		- 5,800,000 (429,462 ) 5,370,538		(223,500 ) - (333 ) (223,833)		9,841 - - 9,841		- - 558,636 558,636		8,949,182 53,250,000 1,041,183 63,240,365

(AR) Structured entities that not included in consolidated financial reports

(a) The table below presents the types of structured entities that the Bank and subsidiaries do not include in consolidated financial reports but in which they hold an interest:

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Types of structured entities Nature and purpose Interests held by the Bank and subsidiaries
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Types of structured entities	Nature and purpose	Interests held by the Bank and subsidiaries
Private fund	Investing in funds that cannot be freely traded on the open market	Investing in units or limited partnership interests issued by these funds.
Asset securitization product	Investing in commercial real estate assets securitization products	Investment in asset-backed securities issued by unconsolidated structured entities

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December 31, 2020 December 31, 2019
Private fund $ 104,498 48,150
Asset securitization product 819,768 1,530,429
Total $ 924,266 1,578,579
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(c) The carrying amounts of interests held by the Bank and subsidiaries in these structured entities were as follows:

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Assets held by the Bank and subsidiaries December 31, 2020 December 31, 2019
Financial assets at fair value through profit or loss $ 104,498 48,150
Financial assets at fair value through other comprehensive 415,351 784,228
income
Investments in debt instruments at amortized cost 404,417 746,201
Total $ 924,266 1,578,579
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The maximum amount of risk exposure to the Bank and subsidiaries endure to a loss incurred from special purpose entities that are not included in consolidated financial reports is the carrying amount of interests held by the Bank and subsidiaries.

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its special purpose entities that are not included in consolidated financial reports.

7. RELATED-PARTY TRANSACTIONS

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• (A) Names of related parties and relationship

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Name of related party Relationship with the Bank and subsidiaries
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Bank of Taiwan	Corporate director of the Bank
Ministry of Finance, R.O.C	Corporate director of the Bank
Land Bank of Taiwan	Corporate director of the Bank
Taiwan Business Bank Guild	Corporate director of the Bank
Small and Medium Enterprise Credit Guarantee Fund of Taiwan	Substantive related parties
Others	Management and other related parties of the Bank

(B) Significant related party transactions

• (a) Due from banks

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December 31, 2020
Amount %
Bank of Taiwan $ 140,960 0.85
Land Bank of Taiwan 12,734 0.08
Total $ 153,694 0.93
December 31, 2019
Amount %
Bank of Taiwan $ 207,228 1.17
Land Bank of Taiwan 4,952 0.03
Total $ 212,180 1.20
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Interest rates are the same as those with regular clients.

• (b) Deposits from banks

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December 31, 2020
Amount %
Land Bank of Taiwan $ 1,999 0.32
December 31, 2019
Amount %
Land Bank of Taiwan $ 1,813 1.94
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Interest rates are the same as those with regular clients.

(c) Call loans to banks

Interest rates are the same as those with regular clients.

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For the year ended Annual
December 31, 2020 Maximum balance December 31, 2020 Interest income interest rate
Bank of Taiwan $ 2,847,979 - 3,854 0.14%~3.12%
Land Bank of Taiwan 8,391,529 - 3,839 0.05%~2.81%
Total $ 11,239,508 - 7,693
For the years ended Annual
December 31, 2019 Maximum balance December 31, 2019 Interest income interest rate
Bank of Taiwan $ 8,404,583 429,500 8,671 0.17%~3.40%
Land Bank of Taiwan 4,667,730 - 8,259 1.4%~3.7%
Total $ 13,072,313 429,500 16,930
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Interest rates are the same as those with regular clients.

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(d) Call loans from banks

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For the year ended Annual
December 31, 2020 Maximum balance December 31, 2020 Interest Expense interest rate
Bank of Taiwan $ 7,977,147 4,309,375 14,256 0.09%~3.35%
Land Bank of Taiwan 4,512,609 - 2,100 0.1%~6%
Total $ 12,489,756 4,309,375 16,356
For the year ended Annual
December 31, 2019 Maximum balance December 31, 2019 Interest Expense interest rate
Bank of Taiwan $ 11,554,385 1,157,025 22,902 0.07%~3.35%
Land Bank of Taiwan 10,744,942 1,214,735 26,016 0.15%~3.5%
Total $ 22,299,327 2,371,760 48,918
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Interest rates are the same as those with regular clients.

(e) Deposits

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December 31, 2020
Amount %
Others $ 1,241,158 0.09
December 31, 2019
Amount %
Others $ 1,067,540 0.07
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Interest rates are the same as those with regular clients.

(f) Credit

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December 31, 2020
Performing situations
Number of Transaction terms
clients or name of Highest Ending Performing Non-performing are different to regular
Category related party balance balance loan Loans Collaterals clients
Employee 32 15,037 12,405 12,405 - none none
consumer loans
Self-use home 101 443,328 409,569 409,569 - real estate none
mortgages loans
Others Natural person 461,382 450,128 450,128 - real estate none
December 31, 2019
Performing situations
Number of Transaction terms
clients or name of Highest Ending Performing Non-performing are different to regular
Category related party balance balance loan Loans Collaterals clients
Employee 140 438,488 404,626 404,626 - none/real none
consumer loans estate
Self-use home 113 501,692 461,965 461,965 - real estate none
mortgages loans
Others Natural person 18,810 16,849 16,849 - real estate none
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(g) Donation:

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For the years ended December 31,
2020 2019
Small and Medium Enterprise Credit Guarantee Fund of $ 329,928 304,987
Taiwan
Taiwan Business Bank Guild 2,500 2,500
Total $ 332,428 307,487
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(h) Guarantees: None.

• (i) Service fees: None.

• (j) Rental revenue: None.

• (l) Sales of Non–Performing Loans Transactions: None.

• (C) Major management salary information

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For the years ended December 31,
2020 2019
Salary and other short-term employee benefits $ 94,965 116,814
Post-employment benefits 2,642 2,971
Total $ 97,607 119,785
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8. Pledged assets : Please refer to notes 6(H) for more details.

• (A) Significant commitments and contingencies were as follows:

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December 31, 2020 December 31, 2019
Marketable securities held for custody $ 10,522,496 12,065,026
Bills collected for others 43,458,651 44,164,781
Bills lent for others 32,385,246 30,006,439
Guarantees and letters of credit 29,528,944 25,557,114
Collaterals received 426 426
Trust liabilities 174,773,364 167,127,065
Travelers' check in custody for sale - 50,163
Items held for custody 1,138,192 3,995,489
Registered government bonds for sale 57,191,300 66,587,300
Registered short-term bills for sale 2,050,801 1,584,150
Guarantee notes payable 26,061,610 26,383,110
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(B) Unrecognized contractual commitments:

As of December 31, 2020 and 2019, major constructions in progress and purchases amounted to $1,067,016 and $1,097,821 respectively, of which $528,273 and $546,673 respectively, remained unpaid.

(C) The Bank's trust department plans, manages, and operates trust services in accordance with the Banking Law and Trust Law. Special purpose funds are used to invest in market‑ able securities and the Bank also manages trust funds. The trust information as of De‑ cember 31, 2020 and 2019 is as follows:

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Trust Balance Sheet

December 31, 2020 and 2019

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Trust Assets December 31, 2020 December 31, 2019
Cash in Bank $ 5,306,469 2,834,268
Stocks 607,416 358,857
Funds 60,203,034 53,466,368
Bonds 1,484,021 1,306,250
Real estate 15,077,574 18,005,658
Securities custody 91,543,361 90,554,050
Other assets 551,489 601,614
Total trust assets $ 174,773,364 167,127,065
Trust Liabilities December 31, 2020 December 31, 2019
Payables $ 81 12
Securities held for custody 91,543,361 90,554,050
Trust capital 83,159,467 76,519,480
Accumulated loss (2,069,258 ) (1,758,213 )
Net income 2,139,713 1,811,736
Total trust liabilities $ 174,773,364 167,127,065
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Trust Property Accounts

December 31, 2020 and 2019

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Investment in December 31, 2020 December 31, 2019
Cash in bank $ 5,306,469 2,834,268
Stocks 607,416 358,857
Funds 60,203,034 53,466,368
Bonds 1,484,021 1,306,250
Real estate
Land 12,813,550 13,465,100
Buildings 26,976 47,869
Construction in progress 2,237,048 4,492,689
Securities in custody 91,543,361 90,554,050
Other assets 551,489 601,614
Total $ 174,773,364 167,127,065
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Note: As of December 31, 2020 and 2019, the amounts above included OBU transaction on "foreign currency designated trust funds investment in foreign negotiable securities business" amounting to $1,055,223 and $1,088,678, respectively.

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Trust Income Statement

For the years ended December 31, 2020 and 2019

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For the years ended December 31,
Investment items 2020 2019
Trust Revenue
Interest income $ 69,057 39,595
Realized capital gain-fund 1,539,602 -
Realized gain-stocks 3,525 5,196
Realized gain-bonds 38,519 14,928
Dividend revenue 1,981,361 2,120,878
Gains on property transaction - 816,160
Other revenues 15,493 1,976
Sub-total 3,647,557 2,998,733
Trust Expense
Administrative expenses 63,520 55,189
Postage and telecommunication expense 1,048 276
Duties 61 46
Realized loss-stocks - 1,045
Realized loss-bonds 4,021 218
Loss on disposal of property 1,433,447 1,129,157
Capital fee 422 -
Other expenses 5,305 1,032
Sub-total 1,507,824 1,186,963
Income before income tax 2,139,733 1,811,770
Income tax expense (20 ) (34 )
Net income $ 2,139,713 1,811,736
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(D) In 1996, the Bank's World Trade Center Branch was sued for handling a letter of credit export collection from Chin Seen Industrial Co., which allegedly used a forged export document and failed to ship the goods to the importer, the International Comagnie de Commercialization et d'Invertissement (I.C.C.I.) of the Republic of Zaire, suffered a loss thereon. In November 1998, I.C.C.I. initiated a case with the Court of Commerce of Brussels in Belgium, requested the L/C opening bank (Banque Bruxelles Lambert, or BBL) and the Bank to jointly pay compensation of USD$7,830 thousand plus interest, losses, and expenses for the L/C. On August 31, 2005, the Court of Commerce of Brussels rendered its judgment which the Bank has to make compensation of USD$7,674 thousand plus interest to I.C.C.I.. The Bank has engaged a local attorney in Belgium to formally file an appeal. In February 2011, Court of Appeal in Brussels had made an intermediate adjudication which I.C.C.I and the Bank are both responsible for the offense. Furthermore, on November 16, 2011, the judgment of the court indicated that the Bank should be responsible for 90% of the negligence proportion. In terms of the judgment of the court of the second instance, the Bank has filed an appeal on November 3, 2011. On February 6, 2013, the court overruled the Bank's appeal and the Bank lost the case. However, the Bank and I.C.C.I couldn't reach an agreement on the exchange rate and the calculation of the compensation. In October 2016, I.C.C.I initiated a case with the Court of Frankfurt in Germany, applied for seizing the Bank account in Germany, and the Bank lodged guaranty money of EUR $13,200 thousand to the court to rescind the order for attachment.

In July 2017, I.C.C.I applied for compulsory execution to the guaranty money, the court has transferred the guaranty money to I.C.C.I. The Bank then filed a lawsuit objecting to the debt through the attorney. The case was dismissed by the Court of Frankfurt in November 2018, and remanded back to trial court in November 2019 after the Bank's appeal was granted by the High Court of Frankfurt. I.C.C.I. has filed a statement of grounds for objection to the German Federal Court on March 16, 2019. And request to revoke the "Return

211

against I.C.C.I. of objections before July 16, 2019. The Bank has appointed a lawyer to act as an attorney in the German Federal Court and raised a pleading. In October and November 2019, the Bank received subpoenas from the court of the Democratic Republic of Congo by a third person Star Marine, who demanded I.C.C.I to pay USD$1,130 thousand in compensation and held the Bank as jointly liable, and by I.C.C.I, which demanded the Bank to pay USD$20,060 thousand less its reimbursed amount to make a security deposit of EUR$14,000 thousand. The Bank has engaged local attorneys to represent itself in court. The Court of Congo will merge the two cases for court, and the next court session is undetermined. As of December 31, 2020, the Bank has accrued the compensation of $185,016 and EUR$8,000 thousand.

• (E) Among the private equity fund contracts signed by the Bank and subsidiaries, the maxi‑ mum amount of committed investment that has not been invested is:

		December 31, 2020		December 31, 2019
New Taiwan Dollar		$ -		50,000

Note: The committed investment amount that has not been invested does not include the portion of the notified transaction that has not yet been delivered.

A resolution was passed during the subsidiary TBB Venture Capital Co., Ltd.'s board meeting held on December 24, 2020 for the issuance of 40,000 thousand ordinary shares, amounting to $400,000 and were subscribed by the Bank with January 7, 2021 as the date of capital increase.

12. Others

(A) Information on loan quality, concentration of credit extensions, interest rate‑sensitivity, profitability and maturity analysis

(a) Loan quality:

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Month/Year December 31, 2020
Non-performing Non-performing Allowance for
Items Total loans Coverage ratio
loans loan ratio credit losses
Corporate Secured 4,333,608 619,478,813 0.70% 7,001,414 161.56%
finance Unsecured 646,422 309,604,313 0.21% 3,946,125 610.46%
Residence 409,214 139,113,318 0.29% 1,557,182 380.53%
mortgages(Note 4)
Consumer Cash cards - 7 -% - -%
finance
Microcredit (Note 5) 14,757 495,713 2.98% 16,518 111.93%
Others Secured 667,825 145,483,951 0.46% 1,645,541 246.40%
(Note 6) Unsecured 61,010 10,119,126 0.60% 159,377 261.23%
total loan business 6,132,836 1,224,295,241 0.50% 14,326,157 233.60%
Overdue Total Delinquency Allowance for
Coverage ratio
receivables receivables ratio credit losses
Credit cards business 1.143 1,123,919 0.10% 22,154 1,938.23%
Account receivable factoring-without - - -% - -%
recourse (Note 7)
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Month/Year December 31, 2019
Non-performing Non-performing Allowance for
Items Total loans Coverage ratio
loans loan ratio credit losses
Corporate Secured 1,796,696 541,634,128 0.33% 6,116,645 340.44%
finance Unsecured 765,400 316,615,157 0.24% 3,901,681 509.76%
Residence 339,607 144,607,596 0.23% 1,630,514 480.12%
mortgages(Note 4)
Consumer Cash cards - 13 -% - -%
finance
Microcredit(Note 5) 18,908 656,886 2.88% 18,524 97.97%
Others Secured 656,766 134,365,005 0.49% 1,542,832 234.91%
(Note 6) Unsecured 50,301 8,211,965 0.61% 131,172 260.77%
total loan business 3,627,678 1,146,090,750 0.32% 13,341,368 367.77%
Overdue Total Delinquency Allowance for
Coverage ratio
receivables receivables ratio credit losses
Credit cards business 2,557 1,336,358 0.19% 25,851 1,010.99%
Accounts receivable factoring-without - 19,089 -% 191 -%
recourse (Note 7)
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Note 1 Non-performing loans represent the amount of overdue loans as reported in accordance with the "Regulations on the Procedures for Banking Institutions to Evaluate Assets and Deal with Past Due/Non-performing Loans". The credit card overdue loans represent the amount of overdue loans as reported in accordance with Jin-Kuan-Yin-(4)-Zi No. 0944000378, dated July 6, 2005.

Note 2 Non-performing loan ratio = Non-performing loans ÷ total loans; Credit card delinquency ratio = Overdue receivables ÷

receivables

• Note 3 Coverage ratio for loans = allowance for credit losses ÷ non-performing loans; Coverage ratio for credit card business = allowance for credit losses ÷ overdue receivables.

• Note 4 For residential mortgage loans, a borrower provides his/her (or spouse's or minor child's) house as collateral in full and pledges it to the financial institution for the purpose of obtaining funds to purchase property and to construct or repair a house.

• cards or cash cards.

• loans, and microcredit loans, and do not include credit cards.

• Note 7 In accordance with Jin-Kuan-Yin-(5)-Zi No. 0945000494, dated July 19, 2005, the amounts of without-recourse factoring will

• compensate the loss.

Overdue loans and receivables exempted from reporting

	December 31, 2020	December 31, 2020	December 31, 2019	December 31, 2019
	Loans may be exempted from reporting as a non-performing loan	Receivables may be exempted from reporting as overdue receivables	Loans may be exempted from reporting as a non-performing loan	Receivables may be exempted from reporting as overdue receivables
Pursuant to a contract under a debt negotiation plan (Note1) Pursuant to a contract under a debt liquidation plan and a debt relief plan (Note 2) Total	$ 536 63,956 $ 64,492	2,135 30,612 32,747	833 66,053 66,886	2,906 33,173 36,079

Note 1: In accordance with Jin-Kuan-Yin-(1)-Zi No. 09510001270, dated April 25, 2006, a bank is required to make supplemental disclosure of credit information which was approved under the debt coordination mechanism of unsecured consumer debts by the Bankers Association of the R.O.C.

Note 2: In accordance with Jin-Kuan-Yin-(1)-Zi No. 09700318940, dated September 15, 2008 and Jin-Kuan-Yin-Fa-Zi No. 10500134790, dated September 20, 2016, a bank is required to make supplemental disclosure of credit information once debtors apply for pre-negotiation, pre-conciliation, relief and liquidation under the "Consumer Debt Clearance Act."

213

(b) Concentration of credit extensions

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December 31, 2020
Credit amount to
Ranking Group enterprise Credit amount
equity ratio (%)
1 A company. (Railway transportation) 25,103,282 25.44%
2 B group. (Steel rolling and extruding) 9,422,041 9.55%
3 C group. (Real estate for sale and rental with own or leased property) 9,011,609 9.13%
4 D group. (Real estate development) 8,203,992 8.32%
5 E group. (Computers manufacturing) 7,704,593 7.81%
6 F group. (Other holding) 7,339,697 7.44%
7 G group. (Real estate development) 6,311,017 6.40%
8 H group. (Air transportation) 5,723,286 5.80%
9 I group. (Real estate development) 5,118,016 5.19%
10 J group. (Liquid crystal panel and components manufacturing) 4,954,000 5.02%
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December 31, 2019
Credit amount to
Ranking Group enterprise Credit amount
equity ratio (%)
1 A company. (Railway transportation) 26,912,468 28.18%
2 B group. (Steel rolling and extruding) 9,036,247 9.46%
3 D group. (Real estate development) 8,752,192 9.16%
4 F group. (Other holding) 7,897,098 8.27%
5 C group. (Real estate for sale and rental with own or leased property) 6,865,922 7.19%
6 H group. (Air transportation) 6,370,151 6.67%
7 E group. (Computer manufacturing) 6,158,068 6.45%
8 G group. (Real estate development) 5,576,407 5.84%
9 K group. (Chemical raw materials manufacturing) 4,843,526 5.07%
10 I group. (Real estate development) 4,775,225 5.00%
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Note 1 The top ten enterprise groups other than government or stated-owned enterprises are ranked according to their total outstanding credit amount. If the borrowers belong to an enterprise group, the aggregate credit balance of the enterprise should be calculated and disclosed as a code number for each such borrower together with an indication of the borrowers' line of business. In addition, if the borrowers are enterprise groups, the enterprise group's industry sector with the maximum exposure to credit risk in its main industry sector should be disclosed, along with the "class" of the industry, in compliance with the Standard Industrial Classification System of the R.O.C. posted by the Directorate-General of Budget, Accounting and Statistics, Executive Yuan, R.O.C.

Rules for Review of Securities Listings".

Note 3 Consists of loans (import/export bills negotiated, bills and notes discounted, overdrafts, short-term loans, short-term secured loans, margin loans receivable, medium-term loans, medium-term secured loans, long-term loans, long-term secured loans, overdue loans), exchange bills negotiated, accounts receivable factoring without recourse, bankers' acceptance receivable, guarantees proceeds.

The Foreign bank should be calculated in the net value of Taiwan branch.

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(c) Interest rate-sensitivity information

(1) Analysis of interest rate-sensitive assets and liabilities (New Taiwan dollars)

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Unit : %

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December 31, 2020
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 1,261,749,950 15,575,973 23,133,404 119,785,773 1,420,245,100
Interest rate-sensitive liabilities 1,093,425,439 56,606,354 112,485,169 51,050,064 1,313,567,026
Interest rate sensitivity gap 168,324,511 (41,030,381 ) (89,351,765 ) 68,735,709 106,678,074
Net worth 98,658,749
Ratio of interest rate-sensitive assets to liabilities (%) 108.12
Ratio of interest rate-sensitive gap to net worth (%) 108.13
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December 31, 2019
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 1,173,468,027 48,183,340 32,004,069 127,788,145 1,381,443,581
Interest rate-sensitive liabilities 1,083,476,198 86,252,494 111,628,016 38,899,834 1,320,256,542
Interest rate sensitivity gap 89,991,829 (38,069,154 ) (79,623,947 ) 88,888,311 61,187,039
Net worth 95,516,766
Ratio of interest rate-sensitive assets to liabilities (%) 104.63
Ratio of interest rate-sensitive gap to net worth (%) 64.06
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Note 1 Listed amount refers to the Bank's amount of N.T. dollars and does not include contingent assets or liabilities.

Note 2 Interest rate-sensitive assets and liabilities refer to revenues or costs of interest–yielding assets and interest–bearing liabilities, which are affected by interest rate fluctuations.

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 (New Taiwan dollars interest-rate-sensitive assets and New Taiwan dollars interest-rate-sensitive liabilities).

(2) Analysis of the interest-sensitive assets and liabilities (US dollars)

Unit : In Thousands of US Dollars, %

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December 31, 2020
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 5,310,244 469,273 77,166 536,289 6,392,972
Interest rate-sensitive liabilities 6,181,947 966,658 747,211 - 7,895,816
Interest rate sensitivity gap (871,703 ) (497,385 ) (670,045 ) 536,289 (1,502,844 )
Net worth 3,510,988
Ratio of interest rate-sensitive assets to liabilities (%) 80.97
Ratio of interest rate-sensitive gap to net worth (%) (42.80 )
December 31, 2019
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 4,947,261 485,765 388,815 634,245 6,456,086
Interest rate-sensitive liabilities 4,908,555 740,209 949,016 - 6,597,780
Interest rate sensitivity gap 38,706 (254,444 ) (560,201 ) 634,245 (141,694 )
Net worth 3,184,954
Ratio of interest rate-sensitive assets to liabilities (%) 97.85
Ratio of interest rate-sensitive gap to net worth (%) (4.45 )
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Note 1 Listed amount refers to the Bank's amount of US dollars and does not include contingent assets or liabilities.

Note 2 Interest rate-sensitive assets and interest rate-sensitive liabilities refer to the interest yielding assets and interest-bearing liabilities which the revenue and cost are affected by interest rate fluctuation.

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 (US dollars interest-rate-sensitive assets and US dollars interest-rate-sensitive liabilities).

215

Unit: %

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Item December 31, 2020 December 31, 2019
Before income tax 0.30 0.48
The ratio of return on assets
After income tax 0.27 0.40
Before income tax 5.55 8.94
The ratio of return on equity
After income tax 4.84 7.47
Net income ratio 21.50 29.01
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Note 1 The ratio of return on assets = Income before (after) income tax expense ÷ average assets. Note 2 The ratio of return on equity = Income before (after) income tax expense ÷ average equity. Note 3 Net income ratio = Net income after income tax expense ÷ Net revenue.

Note 4 Income before (after) income tax expense refers to income accumulated from January of the current year to the current period end.

(e) Maturity analysis for assets and liabilities

• (1) Maturity analysis in New Taiwan dollars

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December 31, 2020
Amount during the maturity period from the balance sheet date to due date
Total 0-10days 11-30days 31-90days 91-180days 181days-1year Over 1 year
Major maturity $ 1,528,946,546 132,138,936 166,645,095 136,163,423 178,254,748 125,643,908 790,100,436
capital inflow
Major maturity 1,894,385,819 52,672,688 103,498,741 201,839,259 212,757,375 336,728,244 986,889,512
capital outflow
Gap (365,439,273 ) 79,466,248 63,146,354 (65,675,836 ) (34,502,627 ) (211,084,336 ) (196,789,076 )
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Note: Listed amounts are denominated in New Taiwan dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow $357,529,991.

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December 31, 2019
Amount during the maturity period from the balance sheet date to due date
Total 0-10days 11-30days 31-90days 91-180days 181days-1year Over 1 year
Major maturity $ 1,501,890,612 179,367,254 151,213,247 134,502,252 184,976,030 129,089,921 722,741,908
capital inflow
Major maturity 1,874,702,427 55,886,586 112,153,255 218,860,212 230,190,070 355,711,629 901,900,675
capital outflow
Gap (372,811,815 ) 123,480,668 39,059,992 (84,357,960 ) (45,214,040 ) (226,621,708 ) (179,158,767 )
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Note: Listed amounts are denominated in New Taiwan dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow $364,510,276.

(2) Maturity analysis in US dollars

Unit : In Thousands of US Dollars

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December 31, 2020
Amount during the maturity period from the balance sheet date to due date
Total 0-30days 31-90days 91-180days 181days-1year Over 1 year
Major maturity $ 13,175,860 4,313,385 2,837,011 1,570,635 1,179,663 3,275,166
capital inflow
Major maturity 13,753,689 4,085,099 2,691,982 1,883,298 1,626,015 3,467,295
capital outflow
Gap (577,829 ) 228,286 145,029 (312,663 ) (446,352 ) (192,129 )
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Note: Listed amounts are denominated in US dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow US $779,907.

216

Taiwan Business Bank Annual Report 2020

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December 31, 2019
Amount during the maturity period from the balance sheet date to due date
Total 0-30days 31-90days 91-180days 181days-1year Over 1 year
Major maturity $ 15,355,895 3,358,162 2,608,973 3,107,881 2,619,737 3,661,142
capital inflow
Major maturity 16,092,017 3,851,126 2,573,777 3,475,166 3,026,241 3,165,707
capital outflow
Gap (736,122 ) (492,964 ) 35,196 (367,285 ) (406,504 ) 495,435
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Note: Listed amounts are denominated in US dollars of the Bank and subsidiaries, including loan commitments of credit agreement and estimates to outflow US $948,394.

(B) Merger of Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance Agency Co., Ltd.

As of January 2, 2020, the Bank merged its wholly owned subsidiaries, Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance Agency Co., Ltd. without consideration involved. The increase in assets arising from the merger will be used for the Bank's future operation and no major assets have been planned to be disposed of.

In addition, the operating results of Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance Agency Co., Ltd. have been consolidated in the Bank's income statement for the year ended December 31, 2019.

13. Other disclosures

(A) Information on significant transactions:

• (a) Cumulative purchase or sale of the same investee's capital stock up to $300,000 or 10% of paid-in capital: None.

• (b) Acquisition of real estate amounting to over $300,000 or 10% of paid-in capital: None.

• (c) Disposal of real estate amounting to over $300,000 or 10% of paid-in capital: None.

• (d) Discount of commissions fees with related parties amounting to over $5,000: None.

• (e) Receivables from related parties amounting to over $300,000 or 10% of paid-in capital: None.

• (f) Sale of non-performing loans information: None.

• (g) Types of securitization instruments and related information approved by financial assets securitization rules or real estate securitization rules: None.

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Transaction status for the nine months ended September 30, 2020
Percentage
accounted for
consolidated net
No Relationship revenue or total
(Note1) Trader Counterparty (Note 2) Account Amount Terms assets
0 Taiwan Business TBB International 1 Deposits and 29,733 No difference with -%
Bank, Ltd. Leasing Co., Ltd. remittances non-related parties
1 TBB International Taiwan Business 2 Right-to-use 1,583 No difference with -%
Leasing Co., Ltd. Bank, Ltd. assets non-related parties
1 TBB International Taiwan Business 2 Lease 1,597 No difference with -%
Leasing Co., Ltd. Bank, Ltd. liabilities non-related parties
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217

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Transaction status for the nine months ended September 30, 2020
Percentage
accounted for
consolidated net
No Relationship revenue or total
(Note1) Trader Counterparty (Note 2) Account Amount Terms assets
0 Taiwan Business TBB International 1 Net revenue 691 No difference with -%
Bank, Ltd. Leasing Co., Ltd. other than non-related parties
interest
0 Taiwan Business TBB Venture 1 Deposits and 5,530 No difference with -%
Bank, Ltd. Capital Co., Ltd. remittances non-related parties
2 TBB Venture Taiwan Business 2 Right-to-use 882 No difference with -%
Capital Co., Ltd. Bank, Ltd. assets non-related parties
2 TBB Venture Taiwan Business 2 Lease 896 No difference with -%
Capital Co., Ltd. Bank, Ltd. liabilities non-related parties
0 Taiwan Business TBB Venture 1 Net revenue 354 No difference with -%
Bank, Ltd. Capital Co., Ltd. other than non-related parties
interest
0 Taiwan Business Taiwan Business 1 Deposits and 96,219 No difference with 0.01%
Bank, Ltd. Bank International remittances non-related parties
Leasing Co., Ltd.
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Note: 1. The meaning of the number is as follows.

(1) Zero stands for the parent company

(2) Subsidiaries are numbered in a sequence of Arabic numerals from 1 based on company category.

1. There are three kinds of relationships with counterparty

(1) Parent company to subsidiary

(2) Subsidiary to parent company

(3) Between subsidiaries

statements users: None.

(B) Information of investees:

(a) The following is the information on investees (excluding investment in mainland China):

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(Unit : thousand shares)
The cross holding of the Bank and its related
parties
Total Note
Main Number Number of
Name of business Shareholding Book Investment of proforma Number of Shareholding
investee Location scope ratio value gain (loss) shares shares shares ratio
TBB Taiwan Leasing 100.00% 1,431,596 61,463 150,000 - 150,000 100.00% Already written-off
International business when preparing
Leasing Co., the consolidated
Ltd. financial
statements
TBB Cambodia SMEs and 100.00% 552,164 33,725 20 - 20 100.00% 〞
(Cambodia) personal
Microfinance finance
Institution Plc business
TBB Venture Taiwan Investing 100.00% 585,083 (11,349) 60,000 - 60,000 100.00% 〞
Capital Co., Ltd. business
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218

Taiwan Business Bank Annual Report 2020

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(b) Loans to others:

NO.	Creditor	Debtor	Interaction Account	Related party	Highest Amount	Ending balance	Actual drawdown amount	Range of interest rate	Nature of the loan	Dealing amount	The necessary reason for short-term loans	Allowance for bad debts	Guarantee	Guarantee	Limited amount for individual object	Total limited amount for loan
													Name	Value
1	TBB International Leasing Co.,Ltd.	Xi Quan Restaurant Co., Ltd	Financial receivables	No	53,540	53,540	53,540	2%-10%	2	-	To the lender for buying goods	1,478	None	-	357,895	1,431,582
1	TBB International Leasing Co.,Ltd.	Chao Yang International Co., Ltd	Financial receivables	No	44,804	15,198	30,000	2%-10%	2	-	To the lender for buying goods	425	None	-	357,895	1,431,582
1	TBB International Leasing Co.,Ltd.	Hsin Chuan Construction Co., Ltd	Financial receivables	No	129,357	54,488	100,000	2%-10%	2	-	To the lender for buying goods	1,442	None	-	357,895	1,431,582
1	TBB International Leasing Co.,Ltd.	Sian Shang Frozen Food Co.,Ltd	Financial receivables	No	46,815	16,446	30,000	2%-10%	2	-	To the lender for buying goods	461	None	-	357,895	1,431,582
1	TBB International Leasing Co.,Ltd.	Hsin Dan Co.,Ltd	Financial receivables	No	33,000	33,000	33,000	2%-10%	2	-	To the lender for buying goods	911	None	-	357,895	1,431,582
Note1: The meaning of the number is as follows. (1) Zero stands for issuer. (2) Investee companies are numbered in a sequence of Arabic numerals from 1 based on company category. Note2: The amount of loans is still valid up to now. Note3: The nature of the loan nature is as follows. (1) 1 stands for business relation. (2) 2 stands for the necessity for short-term loans. Note4: Limited amount for individual object:25% net worth of the latest TBB International Leasing Co.,Ltd's audited fnancial statements. Note5: Total limited amount for loan: 100% net worth of the latest TBB International Leasing Co.,Ltd.'s audited fnancial statements.

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(c) Endorsements and guarantee for others: None

• (d) Acquisition of securities:

				At the end of the period	At the end of the period	At the end of the period	At the end of the period
Company acquired	Type and name of the security	Relationship with the security issuer	Account	Number of shares	Carrying amount	Share proportion (Note 2)	Market price (Note 1)	Note
Taiwan Business Bank International Leasing Co., Ltd.	Unlisted	The investee under the equity method of the subsidiary TBB International Leasing Co.,Ltd.	Investment under equity method	-	878,739	100.00%	878,739	The transaction has been written off when preparing the consolidated fnancial statements.
Note 1: Listed companies apply the market price to calculate the net worth of the shares possessed. Unlisted companies apply the proportion of shares calculate the net worth of the shares possessed. The net worth of preferred stock is calculated based on the liquidation price plus dividends in arrears.

Note 2: The proportion of shares the preferred stock is calculated based on the shares the Bank possessed divided by the shares issued.

(e) Accumulative purchases or sales of the same investee companies amounting to over $300,000 or 10% of paid-in capital: None.

(f) Acquisition of real estate amounting to over $300,000 or 10% of paid-in capital: None.

(g) Disposition of real estate amounting to over $300,000 or 10% of paid-in capital: None.

219

• (h) Discount of commissions and handling fees with related parties amounting to over $5,000: None.

• (i) Receivables from related parties amounting to over $300,000 or 10% of paid-in capital: None.

• (k) Sale of non-performing loans information: None.

• (l) Types of securitization instruments and related information approved by financial assets securitization rules or real estate securitization rules: None.

• (m) Other significant transactions that might have substantial influence over the decision making of the

(C) Information on investments in Mainland China:

• (a) Name and major business item of the investee in China:

Name of investee company in Mainland China				Accumulated	Investment transferred out or recovered	Investment transferred out or recovered	Accumulated amount transferred from Taiwan, end of the period	The current proft or loss of the investee (Note 2)	Shares directly or indirectly possessed by the Bank	Investment income for the period (Notes 2 and 4)	Ending carring value of investment	Accumulated inward remittance of earnings as of the end of period
	Major business	Paid-in capital	Investment method (Note 1)	amount transferred from Taiwan, beginning of the period	**Transferred out **	Recovered
Taiwan Business Bank , Ltd. Shanghai branch	Banking business	3,910,537 ( CNY 800 million ) ( Operating capital)	(c)	3,910,537 ( CNY 800 million )	-	-	3,910,537 ( CNY 800 million )	-	Shanghai branch of the Bank, not an investee company	Note 4	3,937,727	None
Taiwan Business Bank , Ltd. Wuhan branch	Banking business	3,942,815 ( CNY 800 million ) ( Operating capital)	(c)	3,942,815 ( CNY 800 million )	-	-	3,942,815 ( CNY 800 million )	-	Wuhan branch of the Bank, not an investee company	Note 4	3,795,735	"
Taiwan Business Bank International Leasing Co., Ltd.	Leasing business	838,305 ( CNY 170 million ) ( Operating capital)	(a)	838,305 ( CNY 170 million )	-	-	838,305 ( CNY 170 million )	33,612 2(a)	100%	33,612 2(a)	878,739	"

Note 1: Investment method is divided into three categories and are listed as follows:

• (a) Directly invest in Mainland China.

• (b) Investment in Mainland China companies through a third region.

• (c) Others: establishment of oversea branches

Note 2: The column of "Investment gains (losses)":

1. If the company is still in the preparation process, and does not have any investment gain or loss, please specify.

2. The bases for recognition of investment income or loss have three methods, please specify.

3. to an accounting firm in Taiwan.

4. c. Others

5. Please specify if information regarding current gains or losses of an investee is not retrievable.

Note 3: The number is expressed in New Taiwan Dollars.

Note 4: The operating result of Shanghai and Wuhan branch have been included in the Bank.

(b) Limit of investment in China:

Name of Company	Accumulated outfow of investment from Taiwan to Mainland China, as of the end of period	Investment amount authorized by Investment Commission, MOEA	Upper limit on investment authorized by Investment Commission, MOEA
Taiwan Business Bank, Ltd. (Note)	8,691,657 (CNY 1,770 million)	8,691,657 (CNY 1,770 million)	59,195,249

Note: The investment amount in China of the subsidiary TBB International Leasing Co, Ltd is included.

220

Taiwan Business Bank Annual Report 2020

Ⅵ

(D) Information of major shareholders:

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Shareholding
Shares Percentage
Shareholder's Name
Bank of Taiwan 1,214,173,562 16.21%
National Development Fund, Executive Yuan 439,330,543 5.86%
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14. SEGMENT INFORMATION

(A) General information

The chief operating decision maker is the general manager of the Bank and subsidiaries who is in charge of all major projects' approval, budget review and performance measurement. In order to express operating activities legitimately, the reportable segments of the Bank are Bank segment, Securities segment, Trust segment, Insurance agency segment and Others. Securities segment, Trust segment, Insurance agency segment and Other segments don't meet the quantitative thresholds, therefore regarded as the same reporting segment. The main operations of the banking segment are engaged in the deposits, remittance and loans in New Taiwanese Dollars or foreign currencies, as well as securities investments. The major operating activities of securities segment are securities brokerage, financing, ancillary business of futures trading and providing clients a platform for securities investment. The trust segment mainly provides customers relevant financial services, including securities under writing, custodian bank service, new type trust business and specific trust funds investing in domestic or foreign securities. Insurance agency segment primarily provides life and property insurance products to clients. Other segments include all the business of subsidiaries, which main operations are leasing, financing, and venture capital. The profit or loss of the operating segments of the Bank and subsidiaries is measured by income from continuing operation before tax. The reported amount is consistent with the financial statements which were provided to the chief operating decision maker in order to use it as the base of resource allocation and performance measurement.

(B) Segment information

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For the year ended December Banking Segment Securities, Trust, Adjustment and Total
31, 2020 Insurance agent and Elimination
Others
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Net interest revenue Net revenue other than interest Net revenue Bad debt expense, commitment and guarantee liability provision Operating expenses Income from continuing operation before tax Total assets Total liabilities		$ 15,902,031 4,962,154 20,864,185 (4,072,866 ) (11,883,295 ) $ 4,908,024 $ 1,777,226,304 $ 1,681,334,677		290,152 799,965 1,090,117 18,126 (547,167 ) 561,076 17,111,628 11,775,663		34 (84,894 ) (84,860 ) - 1,021 (83,839 ) (2,702,879 ) (134,036 )		16,192,217 5,677,225 21,869,442 (4,054,740 ) (12,429,441 ) 5,385,261 1,791,635,053 1,692,976,304

221

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Securities, Trust,
For the year ended December Insurance agent and Adjustment and
31, 2019 Banking Segment Others Elimination Total
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For the year ended December 31, 2019	Banking Segment	Banking Segment	Securities, Trust, Insurance agent and Others	Securities, Trust, Insurance agent and Others	Adjustment and Elimination	Adjustment and Elimination	Total	Total
Net interest revenue Net revenue other than interest Net revenue Bad debt expense, commitment and guarantee liability provision Operating expenses Income from continuing operation before tax Total assets Total liabilities		$ 16,706,175 5,478,077 22,184,252 (2,345,700 ) (12,174,432 ) $ 7,664,120 $ 1,730,989,136 $ 1,638,064,196		324,892 684,550 1,009,442 (71,977 ) (553,173 ) 384,292 17,661,101 12,852,898		46 16,202 16,248 - 1,020 17,268 (2,497,423 ) (281,046 )		17,031,113 6,178,829 23,209,942 (2,417,677 ) (12,726,585 ) 8,065,680 1,746,152,814 1,650,636,048

(C) Geographic information:

The Bank and subsidiaries, based on the geographic location of foreign operating segments, to disclose the information as below:

Net income before tax:

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For the years ended December 31
Area 2020 2019
Taiwan $ 4,372,730 6,807,209
USA 262,091 304,915
Hong Kong 105,357 465,103
Australia 222,374 294,615
China 391,211 241,767
Cambodia 34,640 (2,192 )
Japan (3,142 ) (45,737 )
Total $ 5,385,261 8,065,680
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Non-current assets:

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----- Start of picture text -----

Area December 31, 2020 December 31, 2019
Taiwan $ 23,905,214 21,178,179
USA 49,834 39,744
Hong Kong 109,863 61,617
Australia 20,196 30,038
China 42,986 47,178
Cambodia 37,952 51,277
Japan 38,730 46,589
Total $ 24,204,775 21,454,622
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(D) Significant client information:

No single customer represents 10% or more of the Bank and subsidiaries' operating revenue. Therefore, no disclosure of major customer information is required.

222 Taiwan Business Bank Annual Report 2020

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7. Independent Auditors' Report for 2020 Individual Financial Statements

Independent Auditors' Report

To the Board of Directors of Taiwan Business Bank, Ltd.:

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Opinion

as of December 31, 2020 and 2019, the statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

Bank as of December 31, 2020 and 2019, 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 Held Banks, and with the Regulation Governing the Preparation of Financial Reports by Securities Firms.

Basis for Opinion

of Financial Statements by Certified Public Accountants, Jin-Kuan-Yin-Zi No.10802731571 and the auditing standards generally accepted in the Republic of China.Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

financial statements of the current period. 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.

1. The assessment of loans impairment

Please refer to Note(4) (E) "Financial Instruments" for related accounting policy, Note 5 (A) for accounting assumptions and estimates, and Note 6 (F) "Discount and loans–net" and Note 6 (AQ) "Financial Risk Information" for details of loans impairment, respectively.

The management of the Bank assess the impairment of loans by determining if there is any observable evidence indicating impairment, and dividing them into collective assessment and individual assessment based on the materiality levels to measure by different impairment method. For the individual assessment with objective evidence of impairment, the measurement is based on expected future cash flow. For the collective assessment with objective evidence of impairment, the Bank needs to calculate the recovery rate of each group to measure the impairment amount. For the collectively assessed loans without objective evidence of impairment, the impairment is calculated by establishing an impairment model using the pass loss experience on assets with similar credit risk characteristic to form basic estimation. Besides the methods mentioned above, the management of the Bank should inspect weather the amount of impairment is in compliance with the minimum level made by the authority. Both the evaluation of impairment evidences and its methods, as well as the uses of assumptions, such as the expected recovery rates and default rates, which are applied to determine the future cash flow, involved significant judgements and estimations. Therefore, the assessment on the impairment of loans has been identified as a key audit matter in our audit.

How the matter was addressed in our audit

Our principal audit procedures included: understanding the methodology and related control procedure about how the management assesses and measures the impairment amount of loans. For individual assessment, we used sampling test to evaluate the use of the original effective interest rate, the appropriateness of the estimation of future recoverable amounts and value of collateral. For collective assessment, we assessed the impairment model adopted by the management and reviewed the appropriated of the calculation of the impairment parameters and

223

evaluated whether the relevant expected credit impairment parameters have been adjusted due to the impact of the epidemic. Meanwhile, we assessed whether allowance for the loans meets the requirements.

Other Matters

Refer to the Note 12 (B), Taiwan Business Bank merged Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance Agency Co., Ltd. at January 2, 2020. Because the essence of the merger was reorganization, it is deemed to have been merged from the beginning and required to restate the financial report of 2019.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Regulations Governing the Preparation of Financial Reports by Public Held 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.

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.

reporting process.

Auditors' Responsibilities for the Audit of the Financial Statements

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 the 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:

• 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.

• 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 the Bank's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• 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 the Bank'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 the Bank to cease to continue as a going concern.

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Taiwan Business Bank Annual Report 2020

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• whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient and appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on this financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

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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.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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 of the current period 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 CHUNG, TAN TAN and CHEN, CHUN KUANG.

KPMG

Taipei, Taiwan (Republic of China) March 10, 2021

Notes to Readers

The accompanying financial statements are intended only to present the financial position, financial performance and cash flows in accordance with the 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 accepted and applied in the Republic of China.

The independent auditors' report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors' report and financial statements, the Chinese version shall prevail.

225

• Financial Statements and Accompanying Notes

(English Translation of Financial Statements Originally Issued in Chinese.)

TAIWAN BUSINESS BANK, LTD.

Balance Sheets

December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

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(Restatement)
December 31, 2020 December 31, 2019
Assets Amount ％ Amount ％
11000 Cash and cash equivalents (Notes 6(A) and 7) $ 30,319,952 2 31,193,337 2
11500 Due from the Central Bank and call loans to
banks (Notes 6(B) and 7) 114,078,284 6 125,357,393 7
12000 Financial assets at fair value through profit or
loss (Note 6(C)) 15,003,571 1 26,626,885 2
12100 Financial assets at fair value through other
comprehensive income (Notes 6(G) and (Q)) 117,352,923 7 102,597,144 6
12200 Investment in debt instruments at amortized cost
(Note 6(H)) 228,003,332 13 263,056,842 15
12500 Securities purchased under resell agreements
(Note 6(D)) 6,047,187 - 13,399,113 1
13000 Receivables (Note 6(E)) 41,709,998 2 25,662,450 1
13200 Current tax assets 302,967 - - -
13500 Discounts and loans, net (Notes 6(F) and 7) 1,209,716,083 68 1,132,462,936 65
15000 Investments measured by equity method, net
(Note 6(I)) 2,568,843 - 2,216,377 -
15500 Other financial assets (Note 6(J)) 13,781 - 19,928 -
18500 Property and equipment, net (Note 6(K)) 14,512,022 1 14,493,529 1
18600 Right-of-use assets, net (Note 6(L)) 1,066,732 - 1,037,377 -
19000 Intangible assets, net 374,263 - 351,476 -
19300 Deferred tax assets (Note 6(Z)) 1,815,778 - 1,591,851 -
19500 Other assets, net (Note 6(M)) 8,209,863 - 5,514,283 -
Total assets $ 1,791,095,579 100 1,745,580,921 100
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226

Taiwan Business Bank Annual Report 2020

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(Restatement)
December 31, 2020 December 31, 2019
Liabilities and equity Amount ％ Amount ％
Liabilities
21000 Deposits from the Central Bank and banks
(Notes 6(N) and 7) $ 118,201,039 7 104,793,612 6
21500 Due to the Central Bank and banks (Note 6(O)) 28,450,000 2 - -
22000 Financial liabilities at fair value through profit or
loss (Notes 6(P) and (T)) 8,639,002 1 9,393,336 1
22500 Notes and bonds issued under repurchase
agreement (Note 6(Q)) 2,055,991 - 868,581 -
23000 Payables (Note 6(R)) 47,767,380 3 31,039,875 2
23200 Current tax liabilities - - 257,687 -
23500 Deposits and remittances (Notes 6(S) and 7) 1,418,703,482 79 1,435,332,094 82
24000 Bank notes payable (Note 6(T)) 53,250,000 3 53,250,000 3
25500 Other financial liabilities (Note 6(U)) 5,492,366 - 6,835,084 1
25600 Provisions (Notes 6(V) and (AA)) 3,393,417 - 3,158,003 -
26000 Lease liabilities (Note 6(W)) 1,054,665 - 1,026,667 -
29300 Deferred tax liabilities (Note 6(Z)) 901,581 - 888,436 -
29500 Other liabilities (Note 6(X)) 4,527,907 - 3,220,780 -
Total liabilities 1,692,436,830 95 1,650,064,155 95
Equity
31101 Common stock (Note 6(Y)) 74,885,834 4 71,319,842 4
31500 Capital surplus (Note 6 (Y)) 815,900 - 815,900 -
Retained earnings:
32001 Legal reserve (Note 6(Y)) 14,332,452 1 12,312,175 1
32003 Special reserve (Note 6(Y)) 185,128 - 223,331 -
32005 Unappropriated retained earnings (Note
6(Y)) 4,728,382 - 7,167,217 -
32500 Other equity interest 3,711,053 - 3,678,301 -
Total equity 98,658,749 5 95,516,766 5
Total liabilities and equity $ 1,791,095,579 100 1,745,580,921 100
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227

(English Translation of Financial Statements Originally Issued in Chinese.)

TAIWAN BUSINESS BANK, LTD.

Statements of Comprehensive Income

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Common Share)

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For the year ended December 31,
(Restatement) Percent
2020 2019 Change
Amount ％ Amount ％ %
41000 Interest income (Notes 6(AD) and 7) $ 24,884,487 114 29,270,949 127 (15 )
51000 Less: Interest expenses (Notes 6(AD) and 7) (8,822,210 ) (40 ) (12,384,142 ) (54 ) (29 )
Net interest revenue 16,062,277 74 16,886,807 73 (5 )
Net revenue other than interest
49100 Net service fee revenue (Notes 6(AE) and 13) 2,814,547 13 3,523,450 15 (20 )
49200 Gains on financial assets or liabilities measured at fair
value through profit or loss (Note 6(AF)) 860,028 4 1,333,055 6 (35 )
49310 Realized gain on financial assets at fair value through
other comprehensive income (Note 6(AG)) 1,098,686 5 613,920 3 79
49450 Gains arising from derecognition of financial assets
measured at amortized cost (Note 6(H)) 210,105 1 980 - 21,339
49600 Foreign exchange gain 103,667 - 228,669 1 (55 )
49700 Reversal of impairment loss on assets (impairment loss
- -
on assets) (Note 6(AH)) (1,148 ) (16,330 ) (93 )
49750 Share of profit (loss) of associates and joint ventures
accounted for using equity method (Note 6(I) and (AI)) 83,839 - (17,268 ) - (586 )
49800 Net other revenue other than interest income (Note
6(AJ)) 183,425 1 114,886 - 60
49831 Net securities brokering revenue 358,520 2 210,077 1 71
49899 Other miscellaneous revenue (expense) (Note 6(AK)) - - 138,999 1 (100 )
Net revenue 21,773,946 100 23,017,245 100 (5 )
58200 Bad debts expense, commitment and guarantee liability
provision (Note 6(AL)) (4,072,168 ) (19 ) (2,349,480 ) (10 ) 73
Operating expenses
58500 Employee benefits expenses (Notes 6(AM)) (7,861,658 ) (36 ) (8,024,695 ) (35 ) (2 )
59000 Depreciation and amortization expenses (Notes 6(AN) (983,655 ) (4 ) (947,756 ) (4 ) 4
59500 Other general and administrative expenses (Note 6(AO)) (3,482,955 ) (16 ) (3,638,767 ) (16 ) (4 )
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228 Taiwan Business Bank Annual Report 2020

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For the year ended December 31,
(Restatement) Percent
2020 2019 Change
Amount ％ Amount ％ %
Total operating expenses $ (12,328,268 ) (56 ) (12,611,218 ) (55 ) (2 )
61001 Income from continuing operation before tax 5,373,510 25 8,056,547 35 (33 )
61003 Less: Income tax expenses (Note 6(Z)) 671,735 3 1,322,294 6 (49 )
Net income 4,701,775 22 6,734,253 29 (30 )
65000 Other comprehensive income:
65200 Components of other comprehensive income that will
not be reclassified to profit or loss
65201 Remeasurements of defined benefit plans (205,996 ) (1 ) 29,493 - (798 )
65204 Revaluation (losses) gains on investments in equity
instruments measured at fair value through other
comprehensive income (312,557 ) (1 ) 851,684 4 (137 )
65220 Less: Income tax related to components of other
comprehensive income that will not be reclassified
to profit or loss(Note 6(Z)) (41,199 ) - 5,899 - (798 )
Components of other comprehensive income that
will not be reclassified to profit or loss (477,354 ) (2 ) 875,278 4 (155 )
65300 Components of other comprehensive income that will be
reclassified to profit or loss
65301 Exchange difference on translation (768,654 ) (4 ) (395,385 ) (2 ) 94
65308 Gains (losses) from investments in debt
instruments measured at fair value through other
comprehensive income 971,009 4 301,822 2 222
65320 Less: Income tax related to components of other
comprehensive income that will be reclassified to
profit or loss(Note 6(Z)) (141,604 ) (1 ) (65,943 ) - 115
Components of other comprehensive income that
will be reclassified to profit or loss 343,959 1 (27,620 ) - (1,345 )
65000 Other comprehensive income (133,395 ) (1 ) 847,658 4 (116 )
Total comprehensive income $ 4,568,380 21 7,581,911 33 (40 )
Earnings per share (in NT dollar)(Note 6 (AB))
Basic earnings per share (in NT dollar) $ 0.63 0.94
Diluted earnings per share (in NT dollar) $ 0.63 0.93
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229

(English Translation of Financial Statements Originally Issued in Chinese.) TAIWAN BUSINESS BANK, LTD.

Statements of Changes in Equity

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

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Other equity interest
Unrealized
gains on
Exchange financial assets
differences on measured at fair
Share Capital Retained earnings translation value
Unappropriated of foreign through other
retained financial comprehensive
Common stock Capital surplus Legal reserve Special reserve earnings Total statements income Total
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Balance at January 1, 2019 Net income for the year ended December 31, 2019 Other comprehensive income (losses) for the year ended December 31, 2019 Total comprehensive income for the year ended December 31, 2019 Appropriation and distribution of retained earnings : Legal reserve appropriated Reversal of special reserve Cash dividends of ordinary share Stock dividends of ordinary share Issue of shares Disposal of investments in equity instruments designated at fair value through other comprehensive income Balance at December 31, 2019 Net income for the year ended December 31, 2020 Other comprehensive income (losses) for the year ended December 31, 2020 Total comprehensive income for the year ended December 31, 2020 Appropriation and distribution of retained earnings: Legal reserve appropriated Reversal of special reserve Cash dividends of ordinary share Stock dividends of ordinary share Disposal of investments in equity instruments designated at fair value through other comprehensive income Balance at December 31, 2020	$ 63,938,802 - - - - - - 3,196,940 4,184,100 - 71,319,842 - - - - - - 3,565,992 - $74,885,834	- - - - - - - - 815,900 - 815,900 - - - - - - - - 815,900	10,020,013 - - - 2,292,162 - - - - - 12,312,175 - - - 2,020,277 - - - - 14,332,452	516,555 - -	7,470,985 6,734,253 23,594	18,007,553 6,734,253 23,594	(541,122 ) - (321,744)	3,447,786 - 1,145,808	84,853,019 6,734,253 847,658 7,581,911 - - (1,918,164 ) - 5,000,000 - 95,516,766 4,701,775 (133,395) 4,568,380 - - (1,426,397 ) - - 98,658,749
				-	6,757,847	6,757,847	(321,744)	1,145,808
				- (293,224 ) - - - -	(2,292,162 ) 293,224 (1,918,164 ) (3,196,940 ) - 52,427	- - (1,918,164 ) (3,196,940 ) - 52,427	- - - - - -	- - - - - (52,427)
				223,331 - -	7,167,217 4,701,775 (164,797)	19,702,723 4,701,775 (164,797)	(862,866 ) - (613,905)	4,541,167 - 645,307
				-	4,536,978	4,536,978	(613,905)	645,307
				- (38,203 ) - - -	(2,020,277 ) 38,203 (1,426,397 ) (3,565,992 ) (1,350)	- - (1,426,397 ) (3,565,992 ) (1,350)	- - - - -	- - - - 1,350
				185,128	4,728,382	19,245,962	(1,476,771)	5,187,824

230

Taiwan Business Bank Annual Report 2020

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(English Translation of Financial Statements Originally Issued in Chinese.)

TAIWAN BUSINESS BANK, LTD.

Statements of Cash Flows

For the years ended December 31, 2020 and 2019

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(Expressed in Thousands of New Taiwan Dollars)

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For the years ended December 31,
(Restatement)
2020 2019
Cash flows from operating activities:
Net income before tax $ 5,373,510 8,056,547
Adjustments:
Income and expenses items:
Depreciation expenses 842,138 823,411
Amortization expenses 141,517 124,345
Provision for bad debt expenses 4,033,155 2,405,991
Net loss on financial assets or liabilities at fair value through profit or
loss 467,059 103,035
Interest expenses 8,822,210 12,384,142
Net gain arising from derecognition of financial assets measured at
amortized cost (210,105 ) (980 )
Interest income (24,884,487 ) (29,270,949 )
Net change in provisions for guarantee liabilities 17,634 (14,340 )
Net change in other provisions 21,379 (42,171 )
Share of loss (profit) of associates and joint ventures accounted for
using equity method (83,839 ) 17,268
Loss on disposal of property and equipment 1,796 693
Property and equipment transferred to expenses 5,719 -
Impairment loss on financial assets 1,148 16,330
Total adjustments to reconcile profit (10,824,676 ) (13,453,225 )
Changes in Operating Assets and Liabilities:
Changes in Operating Assets:
Decrease (increase) in due from the Central Bank and call loans to
banks 11,291,521 (38,392,298 )
Decrease (increase) in financial assets at fair value through profit or
loss 11,668,480 (18,470,402 )
Decrease (increase) in securities purchased under resell agreements 7,351,926 (11,012,595 )
(Increase) decrease in receivables (16,991,419 ) 18,196,756
Increase in discounts and loans (81,221,944 ) (60,243,206 )
Decrease (increase) in other financial assets 14,881 (743 )
Increase in other assets (2,870,507 ) (295,274 )
Total changes in operating assets (70,757,062 ) (110,217,762 )
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231

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For the years ended December 31,
(Restatement)
2020 2019
Changes in Operating Liabilities:
Increase in deposits from the Central Bank and banks $ 13,407,427 13,479,069
Decrease in financial liabilities at fair value through profit or loss (1,266,559 ) (1,270,852 )
Increase (decrease) in notes and bonds issued under repurchase
agreement 1,187,410 (789,125 )
Increase (decrease) in payable 16,784,639 (29,297,349 )
(Decrease) increase in deposits and remittances (16,628,612 ) 123,858,749
Decrease in other financial liabilities (1,342,718 ) (651,610 )
Decrease in provisions for employee benefits (9,318 ) (321,541 )
Total Changes in Operating Liabilities 12,132,269 105,007,341
Total Changes in Operating Assets and Liabilities (58,624,793 ) (5,210,421 )
Total adjustments (69,449,469 ) (18,663,646 )
Cash outflow generated from operations (64,075,959 ) (10,607,099 )
Interest received 25,772,520 29,163,184
Interest paid (9,073,731 ) (11,944,938 )
Income tax paid (1,065,981 ) (657,528 )
Net cash flow (used in) generated from operating activities (48,443,151 ) 5,953,619
Cash flows from investing activities:
Acquisition of financial assets at fair value through other comprehensive
income (14,111,482 ) (28,297,971 )
-
Acquisition of financial assets at amortized cost (1,582,649 )
Proceeds from disposal of financial assets at amortized cost 35,278,062 -
Acquisition of property and equipment (500,273 ) (657,874 )
Proceeds from disposal of property and equipment 137 378
Increase in refundable deposits (558,449 ) (364,676 )
Acquisition of intangible assets (139,678 ) (155,355 )
Net cash flows generated from (used in) investing activities 19,968,317 (31,058,147 )
Cash flows from financing activities:
Increase in due to the Central Bank and banks 28,450,000 -
Proceeds from issuing bank notes payable 20,000,000 5,800,000
-
Repayments of bank notes payable (20,000,000 )
Increase in guarantee deposits received 325,119 478,257
Payments of lease liabilities (405,013 ) (407,455 )
Increase in other liabilities 981,843 1,653,679
Cash dividends paid (1,426,397 ) (1,918,164 )
Proceeds from issuing shares - 5,000,000
Acquisition of ownership interests in subsidiaries (300,000 ) -
Net cash flows generated from financing activities 27,625,552 10,606,317
Effect of exchange rate changes on cash and cash equivalents (24,103 ) (14,816 )
Net decrease in cash and cash equivalents (873,385 ) (14,513,027 )
Cash and cash equivalents at beginning of period 31,193,337 45,706,364
Cash and cash equivalents at end of period $ 30,319,952 31,193,337
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232 Taiwan Business Bank Annual Report 2020

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(English Translation of Financial Statements Originally Issued in Chinese.)

TAIWAN BUSINESS BANK, LTD. Notes to the Financial Statements

For the years ended December 31, 2020 and 2019

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1. Company history

TAIWAN BUSINESS BANK, LTD. (the "Bank") was formerly a general savings union known as "Taiwan Mutual Financing Bank" or "Tai-Shio Mutual Financing Bank" when it was established in 1915. After several mergers and acquisitions, it was renamed as Taiwan Business Bank, Ltd. in order to finance and provide banking assistance to small and medium-size businesses on July 1, 1976. The Bank's major lines of business are the following:

• (A) As prescribed by the Banking Law, provides professional services tailored to the needs of small and medium -size businesses;

• (B) Trust and securities brokerage businesses as approved by the relevant authority;

• (C) International banking business; and

• (D) Other relevant businesses as authorized by the relevant authority in-charge.

As of December 31, 2020, the Bank not only sets up the business dept., international dept., securities dept. and trust dept. under head office but also has 124 domestic branches, 1 offshore banking unit, 8 overseas branches, 1 oversea representative office and 16 securities brokerage locations.

The Bank became listed on the Taiwan Stock Exchange on January 3, 1998.

Under the "Statute for Privatization of State Enterprises" and upon the approval of Taiwan Province Government, the shares of the Bank owned by the provincial government were sold to the public. In line with privatization of the three other major Taiwan province government owned run commercial banks, the Bank had completed its own privatization on January 22, 1998.

As of December 31, 2020 and 2019, the Bank has 5,369 and 5,347 employees, respectively.

3. New standards, amendments and interpretations adopted:

(a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

financial statements, from January 1, 2020:

• Amendments to IFRS 3 "Definition of a Business"

• Amendments to IFRS 9, IAS39 and IFRS7 "Interest Rate Benchmark Reform"

• Amendments to IAS 1 and IAS 8 "Definition of Material"

• Amendments to IFRS 16 "COVID-19-Related Rent Concessions"

(b) The impact of IFRS issued by the FSC but not yet effective

The Bank's adoption of the new amendments, effective for annual period beginning on January 1, 2021, are expected to have the following impacts:

• (i) Amendments to IFRS 9, IAS39, IFRS 7, IFRS 4 and IFRS 16 "Interest Rate Benchmark Reform － Phase 2

233

The amendments address issues that might affect financial reporting as a result of the reform of an interest rate benchmark, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative benchmark rate. The amendments provide practical relief from certain requirements in IFRS 9, IAS 39, IFRS7, IFRS 4 and IFRS 16 relating to:

• The amendments will require an entity to account for a change in the basis for determining the contractual cash flows of a financial asset or financial liability that is required by interest rate benchmark reform by updating the effective interest rate of the financial asset or financial liability.

On December 31, 2020, the Bank has $107,280,000 sterling of bank assets and $11,802,000 sterling of the nominal amount of derivatives investments which are secured by LIBOR that will be subject to LIBOR reform. The Bank expects that interest rate benchmark for these position will be changed to TAIFX and that no significant modification gain or loss will arise as a result of applying the amendments to these changes.

• 2) Disclosure

  • The amendments will require the Bank to disclose additional information about the entity's exposure to risks arising from interest rate benchmark reform and related risk management activities.

• 3) Transition

  • The Bank plans to apply the amendments from January 1, 2021. Application will not impact amounts reported for 2020 or prior periods.

• (ii) Other amendments

The following amendments are not expected to have a significant impact on the Bank's financial statements.

Amendments to IFRS 4 "Extension of the Temporary Exemption from Applying IFRS 9"

(c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

The following new and amended standards, which may be relevant to the Bank, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

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Standards or Effective date
Content of amendment
Interpretations per IASB
Annual • The amendments require a subsidiary that elects to apply paragraph D16(a) of IFRS 1 First- January 1, 2022
Improvements to time Adoption of International Financial Reporting Standards to measure the cumulative
IFRS Standards translation differences using the amounts reported by the parent, based on the parent's date
2018-2020 of transition to IFRSs.
• In determining whether to derecognize a financial liability that has been modified or
exchanged, an entity assesses whether the terms are substantially different in accordance
with IFRS 9 Financial Instruments. The amendments clarify the fees that an entity includes
when assessing whether the terms of a new or modified financial liability are substantially
different from the terms of the original financial liability.
• The amendments remove the illustration of payments from the lessor relating to leasehold
improvements of Illustrative Example 13 accompanying IFRS 16 Leases to avoid any potential
for confusion regarding the treatment of lease incentives applying IFRS 16.
Amendments to The key amendments to IAS 1 include: January 1, 2023
IAS 1 "Disclosure • requiring companies to disclose their material accounting policies rather than their significant
of Accounting accounting policies;
Policies" • clarifying that accounting policies related to immaterial transactions, other events or
conditions are themselves immaterial and as such need not be disclosed; and
• clarifying that not all accounting policies that relate to material transactions, other events or
conditions are themselves material to a company's financial statements.
Amendments to The amendments introduce a new definition for accounting estimates: clarifying that they are January 1, 2023
IAS 8 "Definition monetary amounts in the financial statements that are subject to measurement uncertainty.
of Accounting The amendments also clarify the relationship between accounting policies and accounting
Estimates" estimates by specifying that a company develops an accounting estimate to achieve the
objective set out by an accounting policy.
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234

Taiwan Business Bank Annual Report 2020

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The Bank is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its financial position and financial performance. The results thereof will be disclosed when the Bank completes its evaluation.

The Bank does not expect the following other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its financial statements:

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• Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture"

• IFRS 17 " Insurance Contracts" and amendments to IFRS 17 " Insurance Contracts"

• Amendments to IAS 1 "Classification of Liabilities as Current or Non-current"

• Amendments to IAS 16 "Property, Plant and Equipment － Proceeds before Intended Use"

• Amendments to IAS 37 "Onerous Contracts － Cost of Fulfilling a Contract"

• Amendments to IFRS 3 "Reference to the Conceptual Framework"

(A) Statement of compliance

These financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Public Held Banks (hereinafter referred to as the Regulation) and the Regulations Governing the Preparation of Financial Reports by Securities Firms.

(B) Basis of preparation

• (a) Basis of measurement

items in the statement of financial position:

• derivative instruments);

• (2) Financial instrument measured at fair value through other comprehensive income; and

• defined benefit obligation and the effect of the asset ceiling in Note 4(M).

The internal transactions within the headquarter, the domestic branches and the foreign branches are offset when preparing the financial statement.

• (c) Functional and presentation currency

The functional currency of the Bank is determined based on the primary economic environment in operating. The financial statements are presented in New Taiwan Dollar, which is the Bank's functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand.

(C) Foreign currency

(a) Foreign currency transaction

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies on the end of each subsequent reporting period (hereinafter referred to as the reporting date) are retranslated to the functional currency at the exchange rate of Bank of Taiwan at 10 AM. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary

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items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation. Foreign currency differences arising on retranslation are recognized in profit or loss, except for the equity instruments measured at fair value through other comprehensive income which are recognized in other comprehensive income arising on the retranslation.

• (b) Foreign operations

The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Bank's functional currency (not the currency under highly inflation economy) by the following procedures:

• intensively, then it applies the exchange rate on the trade date);

• (3) Foreign currency differences are recognized in other comprehensive income.

All the translation differences arising from above procedures are presented in the foreign currency translation reserve in equity. The exchange difference from translating net investments in foreign operations is recognized in other comprehensive income. When a foreign operation is wholly or partially disposed, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.

(D) Cash and cash equivalents

Cash and cash equivalent comprise cash on hand, petty cash, foreign currency on hand and cash in banks, but excludes those items which are designated for specific purposes or restricted by contracts and law.

(E) Financial Instruments

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Bank becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

• (a) Financial assets

basis or a settlement date basis.

other comprehensive income (FVOCI) – debt investment, FVOCI – equity investment, or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Bank changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the next reporting period following the change in the business model.

• (1) Investment in debt instruments measured at amortized cost

designated as at FVTPL:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• and interest on the principal amount outstanding.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

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(2) Financial assets at fair value through other comprehensive income (FVOCI)

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL.

• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

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• and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Bank may irrevocably elect to present subsequent changes in the investment's fair value in other comprehensive income. This election is made on an investment-by-investment basis.

Debt investments at FVOCI are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Bank's right to receive payment is established.

FVTPL, including derivate financial assets. On initial recognition, the Bank may irrevocably designate a financial asset, which otherwise meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

(4) Discount and loans, net

Discount and loans are recorded as initial fair value including direct transaction cost, and the subsequent measurement recognizes interest income via effective interest rate method if there is not much difference then it can adopt straight line method and is booked as per amortized cost deducted by impairment loss. Interest accrual on discount and loans are suspended if either of the following occurs:

• Payment of principal or interest is very likely not to be redeemed as per contracts.

• Non-performing loans are categorized as overdue loans in six months after the settlement period ends.

The Bank recognize loss allowances for expected credit losses on financial assets measured at amortized cost, debt investments measured at FVOCI and loan commitments and financial guarantee contracts. Equity instrument investment does not need to recognize expected credit losses.

The Bank measures loss allowances at an amount equal to lifetime expected credit loss (ECL), except for the following which are measured as 12-month ECL:

• debt securities that are determined to have low credit risk at the reporting date; and

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other debt securities, receivables, loan commitments and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instruments is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Bank is exposed to credit risk.

recognition and when estimating ECL, the Bank considers reasonable and supportable information that is relevant and available (without undue cost or effort). This includes both quantitative and qualitative information and analysis, based on the Bank's historical experience, informed credit assessment and including forward-looking information.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls. The difference between the cash flows due to the Bank expects to receive.

securities at FVOCI, loan commitments and contracts of financial guarantee are credit-impaired. A financial asset is "credit-impaired" when one or move events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

• a breach of contract such as a default or being past due;

• the restructuring of a loan or advance by the borrowers on terms that the borrowers would not consider otherwise;

• have occurred.

amount of the assets. For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognized in other comprehensive income instead of reducing the carrying amount of the asset.

In addition to estimate the allowance for bad debts and guarantee liability provisions as above, according to "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual-Loans" , and considering the situation of their finance and the default of principal and interest payment, the credit assets are classified as below:

• 2% of the second class credit assets.

• 10% of the third class credit assets.

• 50% of the fourth class credit assets.

The allowance for bad debts and guarantee liability provisions were assessed by the previously stated method shall not be less than the amount regulated by " Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans.

Unrecoverable overdue loans and bad debts of the Bank, which are not able to be recovered after the overdue collection process, are written-off after deducting the recoverable portion. Upon approval by

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• (b) Financial liabilities

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(1) Financial liabilities held for trading

or repurchasing it in the near term; on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. A derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument, is classified as instrument held for trading as well.

Financial liabilities falling under this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes are measured at fair value and recognized in profit or loss. While for financial liabilities designated at fair value through profit or loss, the changes in fair value generated from credit risk should be recognized under other comprehensive income, except for avoiding accounting mismatch that should be recognized in profit or loss.

the business model of managing financial assets. These changes are expected to be extremely infrequent. In addition, the Bank must not reclassify any financial assets and liabilities of equity instruments.

shall be postponed from the reclassification date, and any previously recognized gains, losses (including impairment losses or reversal of impairment loss) or interest shall not be restated.

The Bank shall derecognize a financial asset when the contractual rights to the cash flows from the financial asset expire or when the Bank transfer substantially all the risks and rewards of ownership of the financial assets. A financial liability should be removed from the balance sheet when, and only when, it is extinguished, that is, when the obligation specified in the contract is either discharged or cancelled or expires. If the bonds or stocks are taken as collateral, shall not be derecognized because the Bank have retained substantially all the risks and rewards of ownership. This is also applicable when the Bank conducts securitization transactions and still retain some of the risks.

(e) Financial instruments offsetting

when, an entity has a legally enforceable right to set off the amounts; and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

(F) Impairment loss on non‑financial assets

tax assets) to determine whether there is any indication of impairment on the balance sheet date. If any such indication exists, then the asset' s recoverable amount is estimated.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units (CGUs).

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

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An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

(G) Investment in associates

Under the equity method, the profit or loss and other comprehensive income are the same as the allocated amount of those attributable to owners of parent in the consolidated financial statements, and owners' equity are the same as the equity attributable to owners of parent in the consolidated financial statements. Changes in the Bank's ownership interest in a subsidiary that do not result in a loss of control of a subsidiary are equity transactions with owners.

(H) Property and Equipment

• (a) Recognition and measurement

Items of property and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

as separate items (major components) of property, plant and equipment.

• (b) Subsequent expenditure

with the expenditure will flow to the Bank and subsidiaries.

• (c) Depreciation

loss on a straight-line basis over the estimated useful lives of each component of an item of property and equipment.

Land is not depreciated.

The estimated useful lives of property and equipment for current and comparative periods are as follows:

• (1) Buildings 35-50 years

• (2) Equipment 3-8 years

year. Whenever there is evidence indicating that the carrying amount is unable to be recovered due to environmental activities or changes, the Bank and subsidiaries evaluate the impairment loss of assets.

(I) Lease

• (a) Identifying a lease

At inception of a contract, the Bank assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Bank assesses whether:

• should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and

• the Bank has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

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• the Bank has the right to direct the use of the asset throughout the period of use only if either:

• (1) the Bank has the right to direct how and for what purpose the asset is used throughout the period of use; or

• (2) the relevant decisions about how and for what purpose the asset is used are predetermined and:

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• the Bank has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; or

• the Bank designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.

• (b) As a lessee

The Bank recognizes a right-of-use asset and a lease liability at the lease commencement date. The rightof-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Bank incremental borrowing rate. Generally, the Bank uses its incremental borrowing rate as the discount rate.

• Lease payments included in the measurement of the lease liability comprise the following:

• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

• amounts expected to be payable under a residual value guarantee; and

• payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

• there is a change in future lease payments arising from the change in an index or rate; or

• there is a change in the Bank estimate of the amount expected to be payable under a residual value guarantee; or

• there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or

• there is a change of its assessment on whether it will exercise an extension or termination option; or

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Bank accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

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The Bank has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Bank recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

• (c) As a lessor

lease or an operating lease. To classify each lease, the Bank makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Bank considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

(J) Deferred assets

The costs of installation for utilities, including electricity and water, as well as security facilities, are capitalized and amortized equally over 5 years.

(K) Collaterals

The difference between the amount of claims and the Bank received when creditors cannot meet obligations and the collaterals are auctioned off is recognized as bad debts expense. The amount that net realized value lower than book value is recognized as impairment loss. The selling price deducts the original book value of collateral assumed is recognized as gain or loss on sale of collateral assumed.

(L) Provisions

A provision is recognized if, as a result of a past event, the Bank has a present legal or constructive obligation that can be estimated reliably, and it is probably that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. Amortization of the discount is recognized as interest expense.

(M) Employee benefit

the related service is provided.

personnel of foreign offices, the Bank provides pension fund per the regulations of the local authorities.

Defined contribution plan refers to the plan that the Bank annually provide certain amount of money to funds to fulfill the obligation. The Bank provide pension based on compulsory obligation, contracts or voluntary will to public or private managed pension funds. If certain pension fund fails to pay the employees the benefit which they deserve for the service they provided, the Bank does not hold legal or constructive obligation to pay additional provision. The Bank recognizes the pension fund provided as current pension cost on accrual basis.

plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Bank's obligations and that are denominated in the same currency in which the benefits are expected to be paid.

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the calculation results in a benefit to the Bank, the recognized asset is limited to the total of the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Bank. An economic benefit is available to the Bank if it is realizable during the life of the plan, or on settlement of the plan liabilities.

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relating to past service by employees, is recognized immediately in profit or loss.

(1) Actuarial gains and losses;

with a corresponding debit or credit to retained earnings in the period in which they occur.

Gains or losses on the curtailment or settlement of a defined benefit plan are recognized when the curtailment or settlement occurs. The gain or loss on curtailment arises from any changes in the fair value of plan assets, any changes in the present value of the defined benefit obligation, and any related actuarial gains or losses and past service cost which had not previously been recognized.

by using the actuarially determined pension cost rate at the end of the prior fiscal year, for the reporting period, the rate will be adjusted by material market volatility, material curtailment, reimbursement and settlement or other material one-time events.

(c) Deposits with favorable rate

deposits with favorable rate and retired employee fix amount deposits with favorable rate. The rate difference between the favorable rate and the market rate belongs to the category of employee benefit.

According to article 28 of "Regulations Governing the Preparation of Financial Report by Public Banks", the additional interests result from the difference between deposit with favorable rate and the deposits with market interest rate shall be calculated by actuary per the regulations related to defined benefit plan in IAS 19 . The parameters of actuarial assumptions shall follow the regulations of the competent authority.

matter for adopting IAS 19 with respect to the additional interest of employee deposits with favorable rate" issued by the Banking Bureau, the difference between the actual payment and the estimated retirement benefit obligation is deemed as changes in accounting estimate and is recognized in profit or loss.

realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. The Bank recognize liabilities when a formal irrevocable termination project is undertaken or when benefit is provided for encouraging voluntary resignation. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value.

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(N) Income tax

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date, and reflect uncertainty related to income taxes, if any.

Deferred tax assets and liabilities are offset against each other only if the following criteria are met by the Bank.

• (a) the Taiwan Business Bank, Ltd. has a legally enforceable right to set off current tax assets against current tax liabilities; and

• (b) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

• (1) the same taxable entity; or

• (2) different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

and their respective tax bases shall be measured based on the tax rates that have been enacted or substantively enacted at the time of the asset or liability is recovered or settled, and be recognized directly in equity or other comprehensive income as tax expense.

(O) Revenue recognition

Interest is recognized according to interest method. Interest accrual is suspended from the date when the loan is reclassified to non-performing loan and only when the Bank receives cash, the revenue is recognized.

completed. In addition, for the individual loan which does not belong to labor service and the handling fee is over 1% of the principal, the interest rate shall be adjusted from the original agreed interest rate to the effective interest rate. For the individual loan which does not belong to the service and the handling fee is less than 1% of the principal, the recognition of the revenue should be deferred and be recognized as revenue during the loan period.

(P) Earnings per share (EPS)

The Bank discloses the basic and diluted earnings per share attributable to ordinary shareholders of the bank. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the bank divided by the weighted average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Bank divided by the weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as stock that issued for employee bonuses.

(Q) Operating segments

Segment information is disclosed in the consolidated financial statements by the Bank and therefore not

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5. Significant accounting assumptions and judgments, and major sources of estimation uncertainty

The preparation of the financial statements in conformity with the Regulations requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

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The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the following period.

amounts recognized in the financial statements is as follows :

(A) Impairment losses on loans

significantly increased or not at the reporting date if the credit risk has not significant incurred, the 12-month expected credit loss should be adopted to evaluate, or the lifetime credit loss evaluation should be adopted.

To evaluate the expected credit losses for 12-month and lifetime, the Bank considers the unfavorable changes of payment status or the economic conditions of the countries or areas related to the default loans. When analyzing expected cash flows, the estimates by the management are based on the pass losses experience from assets with similar credit risk characteristics. In order to reduce losses from the difference between estimated and actual amount, the Bank has considered historical experience, current economic conditions and forward-looking information at the reporting date to determine the assumptions to be used in calculating the impairments and the select inputs.

(B) Retirement benefit

Any change of the assumptions may influence the carrying amount of the retirement benefit obligation.

The assumptions applied to determine net pension cost (revenue) include the discount rate. The Bank determine the appropriate discount rate at the end of each year and apply it to calculate the present value of the future cash outflows which are to be paid to the retirement benefit obligation. To determine the appropriate discount rate, the Bank should consider the interest rate of high quality corporate bonds and government bonds. The currency of the retirement benefit shall be the same as that of the high quality corporate bond or government bonds and the duration till maturity date shall comply with the duration of the related pension obligation. Other significant assumptions of retirement benefit obligation are based on the current market situation.

(A) Cash and cash equivalents

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----- Start of picture text -----

(Restatement)
December 31, 2020 December 31, 2019
Petty cash and revolving funds $ 9,974,006 10,056,325
Foreign currencies on hand 953,700 899,964
Checks for clearing 3,212,602 2,663,951
Due from other banks 16,179,644 17,573,097
Total $ 30,319,952 31,193,337
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(B) Due from the Central Bank and call loans to banks

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----- Start of picture text -----

December 31, 2020 December 31, 2019
Due from the Central Bank $ 46,208,001 65,227,293
Deposits transferred to Central Bank 55,339 105,769
Call loans to banks 67,814,944 60,024,331
Trust fund indemnity reserve deposited 90,000 80,000
Securities serving as trust fund indemnity reserve deposited (90,000 ) (80,000 )
Total $ 114,078,284 125,357,393
----- End of picture text -----

As of December 31, 2020 and 2019, in accordance with the Banking Law and the Central Bank Law, the required reserve deposited by the Bank with the Central Bank amounted to $45,813,518 and $64,836,250 of which $37,579,517 and $38,174,500 respectively, were restricted and such restriction may only be lifted when the required reserve is adjusted to a lower amount.The Bank cooperated with the Central Bank to undertake financing loans for small and medium enterprises that are affected by the severe and the special infectious pneumonia epidemic, and are guaranteed by the excess reserve in the deposit reserve of the Central Bank as required, $30,000,000, please refer to 6(O) for the information of due to the Central Bank and banks.

As of December 31, 2020 and 2019, the Bank's overseas branches, in compliance with the Central Bank's reserve requirement set by local authorities, deposited $84,665 and $107,227 in reserve, of which $56,642 and $69,921 were restricted.

Effective December 2000, in accordance with the amended "Regulations Governing the Audit and Adjustment of Deposit and Other Liability Reserves of Financial Institutions", the Bank provides the required additional reserve on foreign currency deposits. As of December 31, 2020 and 2019, the required reserve with the Central Bank amounted to $309,818 and $283,816 respectively, and its use was unrestricted.

As of December 31, 2020 and 2019, deposits transferred to the Central Bank collected from the armed forces, prisons, and other treasury deposits were restricted.

Effective January 20, 2001, in accordance with the requirement of the Central Bank of China, the Bank complies with Clause 34 of the Trust Law to treat the discretionary trust of investments in overseas marketable securities as a default loss reserve. As of December 31, 2020 and 2019, the Bank deposited marketable securities of $90,000 and $80,000 as trust fund reserves.

(C) Financial assets at fair value through profit or loss

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December 31, 2020 December 31, 2019
Financial assets designated at fair value through profit or loss:
Corporate bonds $ 84,377 120,240
Financial assets at fair value through profit or loss, mandatorily
measured at fair value :
Derivative instruments not used for hedging:
Foreign exchange forward contracts 55,129 23,843
Currency swap contracts 527,767 839,800
Foreign currency options-call 6,592 7,758
Stock index futures 72,747 65,784
Interest rate swap 28,623 13,611
Non-derivative financial assets
Commercial paper 12,414,244 21,037,165
Listed stocks 188,304 178,867
Beneficiary certificates 267,054 108,890
Government bonds - 1,446,544
Convertible corporate bonds 51,700 -
Financial debentures 1,307,034 2,784,383
Total $ 15,003,571 26,626,885
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Derivative financial instruments are used for hedging foreign exchange risk and interest rate risk arising from operating, financing and investing activities. The Bank held derivative financial instruments which did not apply to hedge accounting are as follows (reported as financial assets mandatorily measured at fair value through profit or loss and financial liabilities held for trading)

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December 31, 2020
Amount of contracts
(in thousands) Currency Matured duration
Foreign exchange forward contracts $ 2,700 EUR 2021/1/22~2021/5/28
Foreign exchange forward contracts 1,246,819 TWD 2021/1/4~2021/8/3
Foreign exchange forward contracts 35,033 USD 2021/1/4~2021/6/30
Foreign exchange forward contracts 500 GBP 2021/3/16
Foreign exchange forward contracts 22,780 AUD 2021/1/25~2021/5/28
Currency swap contracts 29,000 AUD 2021/1/8~2021/3/16
Currency swap contracts 1,865,917 CNY 2021/1/13~2021/12/8
Currency swap contracts 101,143 EUR 2021/1/4~2021/12/29
Currency swap contracts 6,239,610 JPY 2021/1/4~2021/6/11
Currency swap contracts 31,000 NZD 2021/1/27~2021/2/23
Currency swap contracts 28,607,271 TWD 2021/1/4~2021/12/29
Currency swap contracts 3,886,801 USD 2021/1/4~2021/12/8
Currency swap contracts 2,053,433 ZAR 2021/1/6~2021/3/17
Currency swap contracts 8,832 SEK 2021/1/26
Option contracts-call 4,500 AUD 2021/2/3~2021/2/19
Option contracts-call 800 EUR 2021/3/9
Option contracts-call 27,100 USD 2021/1/13~2021/10/19
Option contracts-put 4,500 AUD 2021/2/3~2021/2/19
Option contracts-put 800 EUR 2021/3/9
Option contracts-put 27,100 USD 2021/1/13~2021/10/19
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December 31, 2019
Amount of contracts
(in thousands) Currency Matured duration
Foreign exchange forward contracts $ 2,800 EUR 2020/3/3~2020/3/17
Foreign exchange forward contracts 114,806 JPY 2020/1/6~2020/4/17
Foreign exchange forward contracts 1,210,190 TWD 2020/1/3~2020/6/24
Foreign exchange forward contracts 43,247 USD 2020/1/3~2020/3/30
Foreign exchange forward contracts 9,538 SEK 2020/1/3
Foreign exchange forward contracts 9,661 AUD 2020/3/9~2020/3/31
Foreign exchange forward contracts 70,878 ZAR 2020/1/3~2020/2/20
Currency swap contracts 28,940 AUD 2020/1/3~2020/3/12
Currency swap contracts 15,000 CAD 2020/2/21
Currency swap contracts 10,819,871 CNY 2020/1/2~2021/5/17
Currency swap contracts 142,340 EUR 2020/1/22~2020/11/16
Currency swap contracts 7,000 GBP 2020/1/9~2020/3/18
Currency swap contracts 3,513,405 JPY 2020/1/6~2020/7/16
Currency swap contracts 27,000 NZD 2020/1/21~2020/2/21
Currency swap contracts 38,599,637 TWD 2020/1/2~2020/12/21
Currency swap contracts 3,979,626 USD 2020/1/2~2021/5/17
Currency swap contracts 2,059,560 ZAR 2020/1/6~2020/3/11
Option contracts-call 5,000 AUD 2020/2/14~2020/3/12
Option contracts-call 6,300 EUR 2020/1/13~2020/3/9
Option contracts-call 31,200 USD 2020/1/7~2020/10/13
Option contracts-put 5,000 AUD 2020/2/14~2020/3/12
Option contracts-put 6,300 EUR 2020/1/13~2020/3/9
Option contracts-put 31,200 USD 2020/1/7~2020/10/13
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247

(D) Securities purchased under resell agreements

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December 31, 2020 December 31, 2019
Securities under resell agreements $ 6,047,187 13,399,113
Face amount 6,050,000 13,413,000
Resell period 2021.1.4~2021.1.25 2020.1.2~2020.1.20
Range of resell interest rate 0.23%~0.26% 0.52%~0.57%
Resell price $ 6,047,636 13,403,489
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(E) Receivables

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(Restatement)
December 31, 2020 December 31, 2019
Interest receivable $ 2,500,082 3,421,561
Acceptances receivable 1,283,753 919,550
Accrued incomes 69,435 60,308
Accounts receivable 3,600 17,175
Accounts receivable factoring without recourse - 19,089
Spot exchange receivable-foreign currencies 35,719,388 19,401,208
Refinancing guaranty deposits 6,272 6,058
Guaranteed proceeds receivable from refinancing 6,360 5,776
Credit cards accounts receivable 1,090,030 1,297,722
Receivable price of securities purchased for customers 246,189 148,588
Settlement price 452,602 178,136
Other receivables 416,449 249,047
Sub-total 41,794,160 25,724,218
Less: Allowance for bad debts (84,162 ) (61,768 )
Total $ 41,709,998 25,662,450
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December 31, 2020 and 2019 were $81,683,160 and $78,926,674 respectively.

The change in allowance for bad debts was as follows:

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For the years ended December 31,
2020 2019
Beginning balance $ 61,768 68,435
Provision (reversal) 22,568 (6,542 )
Foreign exchange (174 ) (125 )
Ending balance $ 84,162 61,768
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(F) Discounts and loans, net

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December 31, 2020 December 31, 2019
Import/export bills negotiated $ 149,837 159,033
Bills and notes discounted 835,280 1,055,795
Overdrafts 22,354 30,564
Secured overdrafts 1,456,408 2,750,654
Short-term loans 142,677,907 150,304,834
Short-term secured loans 197,006,073 207,869,262
Margin loans receivable 2,504,189 2,230,213
Medium-term loans 154,862,508 155,727,045
Medium-term secured loans 260,308,203 175,918,159
Long-term loans 25,097,549 21,723,867
Long-term secured loans 433,675,772 425,203,483
Overdue loans 5,699,161 3,117,841
Sub-total 1,224,295,241 1,146,090,750
Less: Adjustment of discount and premium (253,001 ) (286,446 )
Less: Allowance for bad debts (14,326,157 ) (13,341,368 )
Total $ 1,209,716,083 1,132,462,936
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The change in allowance for bad debts was as follows:

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For the years ended December 31,
2020 2019
Beginning balance $ 13,341,368 13,034,151
Provision 4,046,672 2,422,135
Transfer out (16,268 ) (24,238 )
Write-off (4,008,562 ) (3,307,350 )
Write-off recovered 991,109 1,231,950
Foreign exchange (28,162 ) (15,280 )
Ending balance $ 14,326,157 13,341,368
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(G) Financial assets at fair value through other comprehensive income

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December 31, 2020 December 31, 2019
Investment in debt instruments measured at fair value through
other comprehensive income:
Government bonds $ 34,724,023 42,299,233
Corporate bonds 46,029,075 35,288,346
Financial debentures 23,339,038 13,505,601
Negotiable certificates of deposit - 150,031
Subtotal 104,092,136 91,243,211
Investment in equity instruments measured at fair value through
other comprehensive income:
Listed stocks 8,736,348 7,149,992
Unlisted stocks 4,475,144 4,154,137
Real estate investment trust 49,295 49,804
Subtotal 13,260,787 11,353,933
Total $ 117,352,923 102,597,144
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1. Investment in debt instruments measured at fair value through other comprehensive income

The Bank assessed that the above bond investments were held within a business model whose objective was achieved by both collecting contractual cash flows and selling financial assets. The bond investments have been classified as the financial asset measured at fair value through other comprehensive income. Some of the investment in debt instruments measured at fair value through other comprehensive income are used as resell condition. Please refer to Note 6 (P) for more details.

1. Investment in equity instruments measured at fair value through other comprehensive income

The Bank designated the investments shown above as equity securities as at fair value through other comprehensive income because these equity securities represent those investments intending to hold for long-term for strategic purpose.

The Bank designated the investments shown above as equity instrument as at fair value through other comprehensive income, therefore, the Bank recognized $511,208 and $408,485 as dividend revenue for the years ended December 31, 2020 and 2019. In which, the disposal equity instruments were recognized $117,041 and $58,330 as dividend revenue for the years ended December 31, 2020 and 2019.

The Bank sold the investments which were measured as at fair value through other comprehensive income due to assets allocation. The fair value of disposed investments are $2,610,237 and $1,287,678 and (losses) gains on disposal are $(1,350) and $52,427 for the years ended December 31, 2020 and 2019. Thus, accumulated gains on disposal were transferred from other equity to retained earnings.

1. Please refer to Note 6(AQ) for the credit risk (including the impairment in debt instruments) and market risk information.

249

1. The Bank assessed the impairment of financial assets measured at fair value through other comprehensive income as of December 31, 2020 and 2019. The changes in allowance for credit losses

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For the years ended December 31,
2020 2019
Beginning balance $ 52,299 33,765
Provision 14,630 18,676
Foreign exchange (475 ) (142 )
Ending balance $ 66,454 52,299
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(H) Investment in debt instruments at amortized cost

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December 31, 2020 December 31, 2019
Certificates of deposit with the Central Bank $ 161,705,000 174,880,000
Government bonds 29,584,857 32,061,168
Corporate bonds 13,464,156 17,968,480
Financial debentures 23,044,358 37,874,737
Negotiable certificates of deposit 280,925 362,868
Subtotal 228,079,296 263,147,253
Less: Accumulated impairment (75,964 ) (90,411 )
Total $ 228,003,332 263,056,842
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The Bank assessed that these financial assets were held to collect the contractual cash flows, which consisted solely of payments of principal and interest on principal amount outstanding. Therefore, these

1. Please refer to Note 6(AQ) for credit risk.

2. The pledged assets provided by the above investment in debt instruments at amortized cost were shown follows:

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December 31, 2020 December 31, 2019
Reserve for provisional seizure by the court, international $ 812,600 1,183,000
card payment reserve, trust claim reserve and operating
guaranty funds
Overseas branches required reserve of overdraft guarantee - 62,979
Daylight overdraft guarantee (Certificates of deposit with the 2,000,000 2,000,000
Central Bank)
Guarantee for borrowing US dollars 23,000,000 23,000,000
Guarantee for borrowing JPY dollars 200,000 200,000
Total $ 26,012,600 26,445,979
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1. The Bank assessed the impairment of investment in debt instruments at amortized cost as of December 31, 2020 and 2019. The changes in allowance for credit losses attribute to these financial assets were as follows:

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For the years ended December 31,
2020 2019
Beginning balance $ 90,411 93,128
Reversal (13,482 ) (2,346 )
Foreign exchange (965 ) (371 )
Ending balance $ 75,964 90,411
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1. Disposal gain(loss) on disposal investment in assets at amortized cost:

		For theyear ended December 31, 2020	For theyear ended December 31, 2020	For theyear ended December 31, 2020
		The carrying amount at the date of derecognition	Gain (Loss) on disposal
Corporate bonds		$ 2,649,569		210,105

250

Taiwan Business Bank Annual Report 2020

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		For the year ended December 31, 2019	For the year ended December 31, 2019	For the year ended December 31, 2019
		The carrying amount at the date of derecognition	Gain (Loss) on disposal
Corporate bonds		$ 116,822		980

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measured at amortized cost, 1) the advanced redemption of the issuer; 2) the increase of credit risk; and 3) in order to strengthen the capital adequacy ratio.

In 2019, the main reason is due to the advanced redemption of the issuer.

(I) Investment measured by equity method, net

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(Restatement)
December 31, 2020 December 31, 2019
Subsidiary Amount % Amount %
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	Amount	Amount	%	Amount	Amount	Amount
Investment measured by equity method TBB International Leasing Co., Ltd. －initial investment $400,000 thousand TBB (Cambodia) Microfnance Institution Plc －initial investment USD $10,000 thousand TBB Venture Capital Co., Ltd. －initial investment $300,000 thousand Total		$ 1,431,596 552,164 585,083 $ 2,568,843	100.00 100.00 100.00		1,365,039 554,905 296,433 2,216,377	100.00 100.00 100.00

ended December 31, 2020 and 2019 are $83,839 and $(17,268) respectively.

The board of directors of the Bank agreed on participating in the capital increase by cash of NTD$400,000, on December 24, 2020 in subsidiary TBB Venture Capital Co., Ltd. The capital increase is fully acquired by the Bank, and the base date of the capital increase is set on January 7, 2021.

The board of directors of the Bank agreed on participating in the capital increase by cash of NTD$300,000, on December 26, 2019 in subsidiary TBB Venture Capital Co., Ltd. The capital increase is fully acquired by the Bank, and the base date of the capital increase is set on January 7, 2020.

Pursuant to the resolution approved by the board of directors of the Bank on December 19, 2018, the Bank will merge subsidiaries Taiwan Business Bank Insurance Agency Co.,Ltd and Taiwan Business Bank Property Insurance Agency Co.,Ltd at January 2, 2020. The merger will be approved by The Ministry of Economic Affairs, R.O.C. by February 25, 2020.

(J) Other financial assets

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December 31, 2020 December 31, 2019
Overdue receivable $ 68,832 105,829
Less: Allowance for bad debts, overdue receivable (55,051 ) (85,901 )
Total $ 13,781 19,928
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The change in allowance for bad debts was as follows:

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For the years ended December 31,
2020 2019
Beginning balance $ 85,901 87,249
Reversal (25,002 ) (25,452 )
Transfer in 16,268 24,238
Write-off (44,717 ) (22,009 )
Written-off recovered 22,601 21,875
Ending balance $ 55,051 85,901
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251

(K) Property and equipment, net

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Revaluation Accumulated Accumulated
December 31, 2020 Cost increment depreciation impairment Total
Land $ 6,743,535 2,986,161 - 14,031 9,715,665
Buildings 7,930,240 31,184 4,404,411 14,754 3,542,259
Machinery and equipment 2,270,278 - 1,769,070 - 501,208
Transportation equipment 275,177 - 232,756 - 42,421
Miscellaneous equipment 605,359 - 518,100 - 87,259
Leasehold improvements 158,863 - 62,114 - 96,749
Construction in progress 12,246 - - - 12,246
Prepayment for equipment 514,215 - - - 514,215
Total $ 18,509,913 3,017,345 6,986,451 28,785 14,512,022
(Restatement) Revaluation Accumulated Accumulated
December 31, 2019 Cost increment depreciation impairment Total
Land $ 6,737,960 2,986,161 - 14,031 9,710,090
Buildings 7,862,521 31,184 4,213,708 14,754 3,665,243
Machinery and equipment 2,332,789 - 1,837,298 - 495,491
Transportation equipment 279,687 - 240,266 - 39,421
Miscellaneous equipment 578,667 - 490,638 - 88,029
Leasehold improvements 141,903 - 68,841 - 73,062
Construction in progress 16,346 - - - 16,346
Prepayment for real estate 120 - - - 120
Prepayment for equipment 405,727 - - - 405,727
Total $ 18,355,720 3,017,345 6,850,751 28,785 14,493,529
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Change of cost
January 1, Foreign December 31,
2020 Increase Decrease Exchange 2020
Land $ 9,724,121 5,575 - - 9,729,696
Buildings 7,893,705 67,719 - - 7,961,424
Machinery and equipment 2,332,789 193,084 251,674 (3,921 ) 2,270,278
Transportation equipment 279,687 16,522 20,997 (35 ) 275,177
Miscellaneous equipment 578,667 55,918 27,425 (1,801 ) 605,359
Leasehold improvements 141,903 53,123 34,030 (2,133 ) 158,863
Construction in progress 16,346 26,074 30,174 - 12,246
Prepayment for real estate 120 5,455 5,575 - -
Prepayment for equipment 405,727 161,827 52,952 (387 ) 514,215
Total $ 21,373,065 585,297 422,827 (8,277 ) 21,527,258
(Restatement) (Restatement)
January 1, Foreign December 31,
2019 Increase Decrease Exchange 2019
Land $ 9,724,121 - - - 9,724,121
Buildings 7,855,599 38,106 - - 7,893,705
Machinery and equipment 2,091,269 297,740 57,806 1,586 2,332,789
Transportation equipment 277,590 16,054 15,477 1,520 279,687
Miscellaneous equipment 576,240 25,568 22,682 (459 ) 578,667
Leasehold improvements 128,753 21,191 7,200 (841 ) 141,903
Construction in progress 31,065 1,179 15,898 - 16,346
Prepayment for real estate - 120 - - 120
Prepayment for equipment 171,807 292,324 57,797 (607 ) 405,727
Total $ 20,856,444 692,282 176,860 1,199 21,373,065
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252

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Change of depreciation

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----- Start of picture text -----

January 1, Foreign December 31,
2020 Increase Decrease Exchange 2020
Buildings $ 4,213,708 190,703 - - 4,404,411
Machinery and equipment 1,837,298 184,631 250,170 (2,689 ) 1,769,070
Transportation equipment 240,266 13,484 20,822 (172 ) 232,756
Miscellaneous equipment 490,638 55,629 27,172 (995 ) 518,100
Leasehold improvements 68,841 27,062 32,655 (1,134 ) 62,114
Total $ 6,850,751 471,509 330,819 (4,990 ) 6,986,451
(Restatement) (Restatement)
January 1, Foreign December 31,
2019 Increase Decrease Exchange 2019
Buildings $ 4,027,738 185,970 - - 4,213,708
Machinery and equipment 1,736,483 159,367 57,364 (1,188 ) 1,837,298
Transportation equipment 242,631 12,432 15,345 548 240,266
Miscellaneous equipment 489,708 23,828 22,186 (712 ) 490,638
Leasehold improvements 50,311 26,468 7,200 (738 ) 68,841
Total $ 6,546,871 408,065 102,095 (2,090 ) 6,850,751
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Accumulated impairment

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January 1, Foreign December 31,
2020 Increase Decrease Exchange 2020
Land $ 14,031 - - - 14,031
Buildings 14,754 - - - 14,754
Total $ 28,785 - - - 28,785
January 1, Foreign December 31,
2019 Increase Decrease Exchange 2019
Land $ 14,031 - - - 14,031
Buildings 14,754 - - - 14,754
Total $ 28,785 - - - 28,785
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GAAP of R.O.C as the original cost on the transition date.

As of December 31, 2020 and 2019, the appreciation from revaluation of properties all amounted to $3,017,345. Reserve for land incremental tax all amounted to $879,056 (Recognized under deferred tax liabilities).

As of December 31, 2020 and 2019, land which was illegally occupied all amounted to $5,496. Except for a portion of the land that was still under negotiation with the occupant; in addition, the Bank intends to participate in land auction, urban renewal or by other appropriate means in due course.

(L) Right‑of‑use assets, net

The Bank leases many assets including buildings, machinery and transportation equipment. Information about leases on costs, depreciation and impairment for which the Bank as a lessee is presented below:

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Accumulated Accumulated
December 31, 2020 Cost depreciation impairment Total
Buildings $ 1,522,533 493,055 - 1,029,478
Machinery and equipment 43,406 40,895 - 2,511
Transportation equipment 64,316 34,141 - 30,175
Miscellaneous equipment 7,603 3,035 - 4,568
Total $ 1,637,858 571,126 - 1,066,732
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253

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Accumulated Accumulated
December 31, 2019 Cost depreciation impairment Total
Buildings $ 1,282,927 296,132 - 986,795
Machinery and equipment 74,915 64,743 - 10,172
Transportation equipment 56,885 20,699 - 36,186
Miscellaneous equipment 5,729 1,505 - 4,224
Total $ 1,420,456 383,079 - 1,037,377
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Change of cost

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----- Start of picture text -----

January 1, Foreign December 31,
2020 Increase Decrease Exchange 2020
Buildings $ 1,282,927 420,428 180,267 (555 ) 1,522,533
Machinery and equipment 74,915 2 31,493 (18 ) 43,406
Transportation equipment 56,885 14,520 7,089 - 64,316
Miscellaneous equipment 5,729 2,347 473 - 7,603
Total $ 1,420,456 437,297 219,322 (573 ) 1,637,858
January 1, Foreign December 31,
2019 Increase Decrease Exchange 2019
Buildings $ 839,963 530,584 85,636 (1,984 ) 1,282,927
Machinery and equipment 75,518 88 691 - 74,915
Transportation equipment 53,376 3,554 45 - 56,885
Miscellaneous equipment 3,456 2,521 248 - 5,729
Total $ 972,313 536,747 86,620 (1,984 ) 1,420,456
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Change of depreciation

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----- Start of picture text -----

January 1, Foreign December 31,
2020 Increase Decrease Exchange 2020
Buildings $ 296,132 373,919 176,359 (637 ) 493,055
Machinery and equipment 64,743 7,645 31,493 - 40,895
Transportation equipment 20,699 20,531 7,089 - 34,141
Miscellaneous equipment 1,505 2,003 473 - 3,035
Total $ 383,079 404,098 215,414 (637 ) 571,126
January 1, Foreign December 31,
2019 Increase Decrease Exchange 2019
Buildings $ - 380,866 84,042 (692 ) 296,132
Machinery and equipment 53,451 11,983 691 - 64,743
Transportation equipment - 20,744 45 - 20,699
Miscellaneous equipment - 1,753 248 - 1,505
Total $ 53,451 415,346 85,026 (692 ) 383,079
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(M) Other assets, net

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(Restatement)
December 31, 2020 December 31, 2019
Office supplies $ 29,165 28,531
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Offce supplies	December 31, 2020 $ 29,165	December 31, 2020 $ 29,165	(Restatement) December 31, 2019 28,531	(Restatement) December 31, 2019 28,531
Prepayments Operating guarantee deposits and settlement fund Guarantee deposits paid Deferred assets Proceeds of settlement and margin trading Total		6,229,349 28,319 1,742,817 166 180,047 $ 8,209,863		4,269,275 30,066 1,184,368 9 2,034 5,514,283

254

Taiwan Business Bank Annual Report 2020

Ⅵ

(N) Deposits from the Central Bank and banks

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December 31, 2020 December 31, 2019
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Deposits from the Central Bank Due from the Central Bank Deposits from banks Call loans from banks Overdrafts on banks Deposits transferred from Chunghwa Post Co., Ltd. Total		$ 281,121 11,802,000 619,499 36,445,088 777,971 68,275,360 $ 118,201,039		175,101 10,796,400 93,229 24,197,994 1,118,477 68,412,411 104,793,612

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(O) Due to the Central Bank and banks

Due to the Central	Bank and banks	Bank and banks	Bank and banks	Bank and banks	Bank and banks
Central Bank Unused credit lines	December 31, 2020
	Currency	Interest Rate	Maturity Date	Original Amount		金 額
	TWD	0.1%	2021.12.31	28,450,000		$ 28,450,000 $ 1,550,000

(P) Financial liabilities at fair value through profit or loss

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December 31, 2020 December 31, 2019
Financial liabilities designated at fair value through profit or loss:
Financial debentures $ 8,411,020 8,949,182
Financial liabilities held for trading:
Derivative instruments not used for hedging
Foreign exchange forward contracts 3,768 13,364
Currency swap contracts 181,994 395,909
Foreign currency option-put 6,599 7,763
Interest rate contract 35,621 27,118
Total $ 8,639,002 9,393,336
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Please refer to 6(C) for the nominal amount of unsettled financial derivatives instrument contracts of December 31, 2020 and 2019.

(Q) Notes and bonds issued under repurchase agreement

	December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2020
Assets	Par value	Selling Price (Recognized in securities sold under repurchase agreements)	Designated repurchase amount	Designated repurchase date
Financial assets at fair value through other comprehensive income	$ 2,131,570	2,055,991	2,062,593	Prior to August 24, 2023
	December 31, 2019
Assets	Par value	Selling Price (Recognized in securities sold under repurchase agreements)	Designated repurchase amount	Designated repurchase date
Financial assets at fair value through other comprehensive income	$ 784,600	868,581	869,623	Prior to May 8, 2020

255

(R) Payables

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(Restatement)
December 31, 2020 December 31, 2019
Accrued interest $ 2,370,890 2,622,411
Accounts payable 3,229,071 3,107,749
Acceptances 1,303,348 946,338
Accrued expenses 2,543,515 2,793,017
Collection payable 690,136 773,915
Deposits received from securities borrowers 112,416 101,709
Guaranteed price deposits received from securities borrowers 150,740 110,417
Accounts payable factoring - 19,089
Spot exchange payable, foreign currencies 35,716,094 19,400,371
Other payables 944,149 825,924
Prices payable of securities sold for customers 683,596 319,966
Others 23,425 18,969
Total $ 47,767,380 31,039,875
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(S) Deposits and remittances

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(Restatement)
December 31, 2020 December 31, 2019
Savings deposits $ 679,271,179 642,739,224
Time deposits 337,910,931 405,934,922
Demand deposits 375,352,496 361,576,043
Checking account deposits 25,741,910 24,775,707
Remittances 426,966 306,198
Total $ 1,418,703,482 1,435,332,094
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(T) Bank notes payable

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Terms of Transactions Bond Issued
Amount
Maturity December 31, December 31,
Bonds Issue date date Interest Rate & repayment Type 2020 2019
2010-1P A 09/23/2010 None The debentures bear annual interest rate which is the Chunghwa Perpetual $ - 3,200,000
post's board average interest rate for 1-year time deposit plus non-accumul
1.34% for the ten years after the issue date. The interest rate ated
will be the Chunghwa post's board interest rate for 1-year time subordinated
deposit plus 2.34% from the eleventh year. The debentures are financial
redeemable per face value plus accrued interest at the interest debentures
payment date after ten years from the issue date under the
consent of the competent authority.
2010-1P B 09/23/2010 None The debentures bear an interest rate of 3.05% for the first ten 〞 - 800,000
years after the issue date. The interest rate will be 4.05% from
the eleventh year. The debentures are redeemable per face value
plus accrued interest at the interest payment date after ten years
from the issue date under the consent of the competent authority.
2013-1 03/25/2013 03/25/2020 The debentures bear an annual interest rate of 1.68%. Simple Unsecured - 5,000,000
interest is accrued and paid annually. The principal will be repaid subordinated
in full at maturity. long-term
financial
debentures
2013-2A 11/25/2013 11/25/2020 (A) The debentures bear annual interest rate, which is the index Unsecured - 3,100,000
rate plus 0.52%. The index rate is the average offer of 90-days subordinated
CP which is indicated in Reuter's page 6165 at 11 A.M Taipei long-term
time, 2 operation days prior to the interest commencement financial
date.(B) Since January 1, 2015 according to various indicators debentures
of interest rate changes during the value date two business
days before the pricing (FIXING) Bank of the Republic of China
Business Association National Union RCAs website "Taipei fixing
the financial sector call loan rate (TAIBOR)" three-month interest
rate fixing. Simple interest rate is accrued four times a year and
paid annually. The principal will be repaid in full at maturity.
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Terms of Transactions Bond Issued
Amount
Maturity December 31, December 31,
Bonds Issue date date Interest Rate & repayment Type 2020 2019
〞
2013-2B 11/25/2013 11/25/2020 The debentures bear an annual interest rate of 1.92%. Simple $ - 2,900,000
interest is accrued and paid annually. The principal will be repaid
in full at maturity.
2015-1P 06/18/2015 None The debentures bear an annual interest rate of 3.9%. Simple Perpetual - 5,000,000
interest is accrued and paid annually. The debentures are non-accumulated
redeemable per face value plus accrued interest at interest subordinated
payment date after five years from the issued date under the financial
consent of the competent authority. debentures
2015-2A 08/31/2015 08/31/2023 The debentures bear an annual interest rate of 2.05%. Simple Unsecured 4,700,000 4,700,000
interest is accrued and paid annually. The principal will be repaid subordinated
in full at maturity. long-term
financial
debentures
2015-2B 08/31/2015 08/31/2025 The debentures bear an annual interest rate of 2.10%. Simple 〞 300,000 300,000
interest is accrued and paid annually. The principal will be repaid
in full at maturity.
2016-1P 09/20/2016 None The debentures bear an annual interest rate of 3.2%. Simple Perpetual 8,000,000 8,000,000
interest is accrued and paid annually. The debentures is non-accumulated
redeemable per face value plus accrued interest at interest subordinated
payment date after five years and three months from the issued financial
date under the consent of the competent authority debentures
2016-2 12/20/2016 12/20/2023 The debentures bear an annual interest rate of 1.40%. Simple Unsecured 2,700,000 2,700,000
interest is accrued and paid annually. The principal will be repaid subordinated
in full at maturity. long-term
financial
debentures
2017-1A 03/28/2017 03/28/2024 The debentures bear an annual interest rate of 1.50%. Simple 〞 390,000 390,000
interest is accrued and paid annually. The principal will be repaid
in full at maturity.
2017-1B 03/28/2017 03/28/2025 The debentures bear an annual interest rate of 1.60%. Simple 〞 250,000 250,000
interest is accrued and paid annually. The principal will be repaid
in full at maturity.
2017-1C 03/28/2017 03/28/2027 The debentures bear an annual interest rate of 1.85%. Simple 〞 3,360,000 3,360,000
interest is accrued and paid annually. The principal will be repaid
in full at maturity.
2017-2 05/23/2017 05/23/2027 The debentures bear an annual interest rate of 1.85%. Simple 〞 1,300,000 1,300,000
interest is accrued and paid annually. The principal will be repaid
in full at maturity.
2018-1 01/05/2018 01/05/2021 The debentures bear an annual interest rate of 0.7%. Simple Unsecured 1,000,000 1,000,000
interest is accrued and paid annually. The principal will be repaid senior long-term
in full at maturity. financial
debentures
2018-2 08/20/2018 08/20/2028 The debentures bear an annual interest rate of 1.45%. Simple Unsecured 5,450,000 5,450,000
interest is accrued and paid annually. The principal will be repaid subordinated
in full at maturity. long-term
financial
debentures
2019-1A 03/21/2019 03/21/2026 The debentures bear an annual interest rate of 1.20%. Simple 〞 1,000,000 1,000,000
interest is accrued and paid annually. The principal will be repaid
in full at maturity.
2019-1B 03/21/2019 03/21/2029 The debentures bear an annual interest rate of 1.30%. Simple 〞 4,800,000 4,800,000
interest is accrued and paid annually. The principal will be repaid
in full at maturity.
〞
2020-1 03/25/2020 03/25/2030 The debentures bear an annual interest rate of 0.8%. Simple 10,000,000 -
interest is accrued and paid annually. The principal will be repaid
in full at maturity.
2020-2 08/13/2020 None The debentures bear an annual interest rate of 1.62%.Simple Perpetual 10,000,000 -
interest is accrued and paid annually. After calculating the early non-accumulated
redeemable bond is in line with the capital adequacy ratio under subordinated
the consent of the competent authority, the debentures are financial
redeemable per face value plus accrued interest at the interest debentures
payment date after five years and a monthfrom the issue date .
$ 53,250,000 53,250,000
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257

The Bank issued $120,000 thousand and $180,000 thousand dollar-denominated debentures with call option that can be executed on strike price after five years from the issued date. Without executing call options during the periods of debentures, the principal will be repaid in full at maturity. In order to avoid interest risk, the Bank buys interest rate swap contracts that are classified as financial assets at fair value through profit or loss. To eliminate the measurement or recognition inconsistency between IRSs and debentures, the Bank classified the debentures into financial liabilities at fair value through profit or loss. In addition, the Bank considers that the designated economic relationship is evaluated by the SLMM model method, if the amount of changes in the fair value of the corporate bonds attributable to changes in credit risk is listed in other comprehensive gains and losses, it will trigger or aggravate the accounting ratio of gains and losses. Therefore, the amount is reported in the profit and loss. The debentures are as follows:

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Terms of Transactions Bond Issued
Maturity
Bonds Issue date date Interest Rate & repayment Type Amount
December 31, December 31,
2020 2019
2017-3 10/27/2017 10/27/2047 The zero-coupon debentures with call options can be executed Unsecured $ 3,372,000 3,598,800
on strike price after five years from the issued date. Without dollar-denominated
executing call options during the periods of debentures, the senior financial
principal will be repaid in full at maturity. debentures
2018-3 09/27/2018 09/27/2048 The zero-coupon debentures with call options can be executed Unsecured 5,058,000 5,398,200
on strike price after five years from the issued date. Without dollar-denominated
executing call options during the periods of debentures, the senior financial
principal will be repaid in full at maturity. debentures
Valuation (18,980 ) (47,818 )
adjustment
$ 8,411,020 8,949,182
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as follows:

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December 31, 2020 December 31, 2019
Fair value of corporate bonds $ 8,411,020 8,949,182
Fair value increase (decrease) not attributable to changes in 55,154 113,183
market conditions that give rise to market risk
Difference between the carrying value and the amount payable at (18,980 ) (47,818 )
the end of the contract term
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(U) Other financial liabilities

		December 31, 2020		December 31, 2019
Cumulative earnings on appropriated loans fund		$ 5,492,366		6,835,084

Cumulative earnings on appropriated loan fund is the project contract signed by National Development Fund, Executive Yuan, Small and Medium Enterprise Administration, Ministry of Economic Affairs, and the Bank. The Bank appropriates the fund to the companies which meet the conditions for loans. The fund is classified as principal account, interest yielding account, loaned account and un-loaned account. These accounts are used for transferring accounts and paying the deposit interests for each project contract.

(V) Provisions

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December 31, 2020 December 31, 2019
Provision for guarantee liabilities $ 218,351 200,948
Provision for loan commitments 52,831 31,498
Provision for employee benefits 3,122,235 2,925,557
Total $ 3,393,417 3,158,003
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Change of provision

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January 1, Foreign December
2020 Increase Decrease Use exchange 31, 2020
Provision for guarantee liabilities $ 200,948 17,634 - - (231 ) 218,351
Provision for loan commitments 31,498 21,379 - - (46 ) 52,831
Provision for employee benefits 2,925,557 430,399 181,318 52,403 - 3,122,235
Total $ 3,158,003 469,412 181,318 52,403 (277 ) 3,393,417
January 1, Foreign December
2019 Increase Decrease Use exchange 31, 2019
Provision for guarantee liabilities $ 215,383 - 14,340 - (95 ) 200,948
Provision for loan commitments 73,753 - 42,171 - (84 ) 31,498
Provision for employee benefits 3,276,591 217,584 490,438 78,180 - 2,925,557
Total $ 3,565,727 217,584 546,949 78,180 (179 ) 3,158,003
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(W) Lease liabilities The carrying amount of lease liabilities were as follows:

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December 31, 2020 December 31, 2019
Less than one year $ 331,504 356,015
More than one year $ 723,161 670,652
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For the years ended December 31,
2020 2019
Interest on lease liabilities $ 16,379 14,437
Expenses relating to short-term leases $ 3,125 3,563
Expenses relating to leases of low-value assets, excluding short- $ 13,240 12,728
term leases of low-value assets
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		For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,
		2020		2019
Total cash outfow for leases		$ 437,757		438,183

(a) Real estate leases

additional period of the same duration after the end of the contract term.

Some leases provide for additional rent payments that are based on changes in local price indices. Some also require the Bank to make payments that relate to the property taxes levied on the lessor and insurance payments made by the lessor; these amounts are generally determined monthly.

(b) Other leases

The Bank leased machinery and transportation equipment with lease terms of one to four years. In some cases, the Bank has options to purchase the assets at the end of the contract term; in other cases, it guarantees the residual value of the leased assets at the end of the contract term.

The Bank has elected not to recognize right-of-use assets and lease liabilities for leases of low value assets and short term.

(X) Other liabilities

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(Restatement)
December 31, 2020 December 31, 2019
Advance interest receipts $ 2,707 5,231
Unearned revenue 246,588 178,112
Other advance receipts 84,298 81,934
Guarantee deposits received 1,571,036 1,245,752
Temporary receipts and suspense accounts 2,618,436 1,704,140
Others 4,842 5,611
Total $ 4,527,907 3,220,780
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259

(Y) Equity

(a) Common stock

As of December 31, 2020 and 2019, the Bank's authorized capital were $80,000,000 and the paid-in capital for common shares of the Bank were $74,885,834 and $71,319,842, the face value of each share is NTD $10. The outstanding shares were 7,488,584 and 7,131,985 thousand shares, respectively.

Pursuant to the resolution approved by the regular stockholders' meeting of the Bank on May 29, 2020, the Bank increased its capital from the retained earnings by $3,565,992 and issued 356,599 thousand shares. The capital increase has been approved by Financial Supervisory Commission and came into effect on July 6, 2020. The record date of the capital increase is set on July 28, 2020. The Bank has completed the alteration of the registered capital amount on August 26, 2020.

Pursuant to the resolution approved by the regular stockholders' meeting of the Bank on June 14, 2019, the Bank increased its capital from the retained earnings by $3,196,940 and issued 319,694 thousand shares. The capital increase has been approved by Financial Supervisory Commission and came into effect on July 25, 2019. The record date of the capital increase is set on August 20, 2019. The Bank has completed the alteration of the registered capital amount on September 9, 2019.

A resolution was passed during the regular shareholders' meetings held on June 14, 2019 for the issuance of ordinary shares for cash within a year under private placement, with the number of shares issued to not exceed 1,000,000 thousand. Subsequently, a resolution was passed during the board meeting held on August 19, 2019 for the issuance of 418,410 thousand ordinary shares under private placement at $11.95 per share, amounting to $5,000,000, August 30, 2019 as the record date of cash capital increase. The relevant statutory registration procedures have been completed. The remaining quota of this private placement (581,590 thousand shares) was no longer processed by a resolution of the interim board of directors on April 22, 2020. The situation regarding the handling of privately placed ordinary shares was reported to the regular shareholders' meeting on May 29, 2020.

The aforementioned private placement of ordinary shares and the transfer of any subsequently issuance bonus shares would be subject to section 43-8 requirements under the Securities and Exchange Act. The Bank can only list these shares to be traded on the Taiwan Stock Exchange after a three-year period has elapsed from the delivery date of the private placement securities (November 1, 2019), and after applying for a public offering with the Financial Supervisory Commission.

• (b) Capital surplus

Sources and statement of the Bank's capital surplus were as follows:

		December 31, 2020		December 31, 2019
Additional paid-in capital		$ 815,900		815,900

realized capital surplus can be used to increase the common stock or be distributed as cash dividends based on the shareholder's initial number of shares. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring capital surplus in excess of par value should not exceed 10% of the total common stock outstanding.

• (c) Earnings distribution and dividend policy

Under the Bank's Articles of Incorporation, earnings are used initially to pay for income taxes and restore cumulative losses, and 30% of the remaining earnings is set aside as legal reserve. Special reserve is appropriated from or reversed to earnings per other regulations. Add accumulated retained earnings from previous years as distributable dividends and the amount of dividends is resolved by the annual stockholders' meeting according to the proposal submitted by the Board of Directors.

In order to continuously expand scale and increase profitability, the Bank, based on the future capital budget plan, adopts residual dividend policy and primarily distributes stock dividend to ensure the capital is sufficient. When there is surplus of capital, the remaining capital can be distributed by cash dividend. Cash dividend shall not be lower than 10% of the total dividend distributed. If the cash dividend distributed

260

Taiwan Business Bank Annual Report 2020

Ⅵ

per share is lower than NTD$ 0.1, except for otherwise resolved by the shareholder's meeting, it is not distributed. If there is any situation conforms to that is regulated in article 44 item 1 of the Banking Act of The Republic of China, the Bank is not allowed to distribute earnings by cash or purchase shares outstanding. The maximum cash earning distribution is not allowed to be over 15% of the total paid in capital unless the legal reserve reaches the total paid-in capital.

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In compliance with the Company Act, if the Company incurs no loss, under the consent of the shareholder's meeting, the Company is allowed to distribute new shares or cash dividends from legal reserve to the extent that the legal reserve issued is the surplus exceeding 25% of the paid in capital.

Under the Ruling No. 1010012865 issued on April 6, 2012 by the FSC, special reserve is appropriated from retained earnings based on the equivalent amounts of the contra accounts in equity. This special reserve may not be distributed as dividends to stockholders until the balances of these contra accounts in equity are reversed.

The Bank resolved the earning distribution for the earnings of 2019 and 2018 in the shareholder's meeting on May 29, 2020 and June 14, 2019, respectively. The dividends distributed were as follows:

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2019 2018
Distribution rate Distribution rate
(NT dollar) Amount (NT dollar) Amount
Dividends to common shareholders
Stock dividends $ 0.50 3,565,992 0.50 3,196,940
Cash dividends 0.20 1,426,397 0.30 1,918,164
Total $ 4,992,389 5,115,104
(d) Other equity interest
Unrealized gains
from financial assets Exchange
measured at fair differences on
value through other translation of
comprehensive foreign financial
income statements Total
January 1, 2020 $ 4,541,167 (862,866 ) 3,678,301
Investment in debt instruments measured at fair
value through other comprehensive income
- Unrealized amount 1,232,785 - 1,232,785
- Realized amount (587,478 ) - (587,478 )
Foreign currency translation difference － Exchange
difference - (613,905 ) (613,905 )
Disposal of investments in equity instruments
measured at fair value through other
comprehensive income 1,350 - 1,350
December 31, 2020 $ 5,187,824 (1,476,771 ) 3,711,053
January 1, 2019 $ 3,447,786 (541,122 ) 2,906,664
Investment in debt instruments measured at fair
value through other comprehensive income
- Unrealized amount 1,351,243 - 1,351,243
- Realized amount (205,435 ) - (205,435 )
Foreign currency translation difference － Exchange
difference - (321,744 ) (321,744 )
Disposal of investments in equity instruments
measured at fair value through other
comprehensive income (52,427 ) - (52,427 )
December 31, 2019 $ 4,541,167 (862,866 ) 3,678,301
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• (d) Other equity interest

261

(Z) Income taxes

• (a) The income tax expenses were as follows:

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For the years ended December 31,
(Restatement)
2020 2019
Current tax expense
Current period $ 754,317 1,143,431
Adjustment for prior period (54,603 ) 61,798
Additional surtax on undistributed retained earnings - 17,803
699,714 1,223,032
Deferred tax expense (income)
Origination and reversal of temporary differences (27,979 ) 99,262
Income tax expenses $ 671,735 1,322,294
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• (b) The income tax expenses (income) recognized under other comprehensive income were as follows:

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For the years ended December 31,
2020 2019
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans $ (41,199 ) 5,899
For the years ended December 31,
2020 2019
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign financial $ (154,749 ) (73,641 )
statements
Unrealized gains (losses) on valuation of financial assets 13,145 7,698
measured at fair value through other comprehensive
income
$ (141,604 ) (65,943 )
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The reconciliation between the income tax expense (income) and net income before tax of the Bank and subsidiaries for 2020 and 2019 is as follows:

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For the years ended December 31,
(Restatement)
2020 2019
Income tax computed on net income before tax $ 1,074,702 1,611,309
Cessation tax of gains derived from the securities transactions (76,220 ) (14,615 )
Net income from off shore banking unit (416,797 ) (244,523 )
Recognized loss from financial assets and liabilities measured 24,002 (66,445 )
at fair value through profit or loss
Cash Dividend (102,641 ) (82,357 )
Share of profit (loss) of Associated and joint ventures (16,768 ) 3,454
accounted for using equity method
-
Change in unrecognized temporary differences (4,600 )
Overseas branch income tax expenses 150,365 35,258
Surtax on undistributed retained earnings - 17,803
(Overestimate) underestimate prior income tax expense (54,603 ) 61,798
Income basic tax 90,282 -
Others 4,013 612
Income tax expense $ 671,735 1,322,294
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Taiwan Business Bank Annual Report 2020

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(c) Changes in deferred tax assets and liabilities of the Bank are as follows:

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For the year ended December 31, 2020
Recognized
in other
Beginning Recognized in comprehensive
balance profit or loss income Others Ending balance
Temporary difference
Deferred tax assets resulted from allowance for bad $ 678,266 23,838 - - 702,104
debts exceeding the limit regulated in Tax Law
Loss on assets impairment 56,828 230 - - 57,058
Reserve for employee benefit liabilities 385,633 7,324 - - 392,957
Land value increment tax (879,056 ) - - - (879,056 )
Exchange differences from the translation of 192,534 - 154,749 - 347,283
financial statements of foreign operations
- -
Unrealized loss on valuation of financial (9,380 ) (13,145 ) (22,525 )
assets measured at fair value through other
comprehensive income
Actuarial gains and losses 275,177 - 41,199 - 316,376
Others 3,413 (3,413 ) - - -
Net deferred tax assets (liabilities) $ 703,415 27,979 182,803 - 914,197
The information stated on the balance sheet is as
follows:
Deferred tax assets $ 1,591,851 1,815,778
Deferred tax liabilities $ 888,436 901,581
For the year ended December 31, 2019
Recognized
in other
Beginning Recognized in comprehensive
balance profit or loss income Others Ending balance
Temporary difference
Deferred tax assets resulted from allowance for $ 726,855 (48,589 ) - - 678,266
bad debts exceeding the limit regulated in Tax
Law
Loss on assets impairment 53,562 3,266 - - 56,828
Reserve for employee benefit liabilities 442,985 (57,352 ) - - 385,633
Land value increment tax (879,056 ) - - - (879,056 )
Exchange differences from the translation of 118,893 - 73,641 - 192,534
financial statements of foreign operations
Unrealized loss on valuation of financial (1,682 ) - (7,698 ) - (9,380 )
assets measured at fair value through other
comprehensive income
Actuarial gains and losses 281,076 - (5,899 ) - 275,177
Other - 3,413 - - 3,413
Net deferred tax assets (liabilities) $ 742,633 (99,262 ) 60,044 - 703,415
The information stated on the balance sheet is as
follows:
Deferred tax assets $ 1,623,371 1,591,851
Deferred tax liabilities $ 880,738 888,436
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(d) Uncertainty over income tax treatments.

For tax returns that have not yet been assessed, the Bank has assessed relevant factors, including relevant IFRIC interpretations and historical experience, and believe that sufficient income tax liabilities have been estimated.

(e) The Bank's income tax returns through 2017 have been assessed by the Tax Authority.

263

(AA) Provision for employee benefit

As of December 31, 2020 and 2019, the balance of provision for employee benefit of the Bank and subsidiaries were as follows:

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December 31, 2020 December 31, 2019
Defined benefit plan $ 2,190,568 2,022,067
Employee deposits with favorable rate 931,667 903,490
$ 3,122,235 2,925,557
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benefit plan assets of the Bank as follows:

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----- Start of picture text -----

December 31, 2020 December 31, 2019
Present value of defined benefit obligation $ 7,217,819 7,177,326
Less: Fair value of defined benefit plan assets (5,027,251 ) (5,155,259 )
$ 2,190,568 2,022,067
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provides pensions for employees upon retirement. The plans (covered by the Labour Standards Law) entitle a retired employee to receive an annual payment based on years of service and average salary for the six months prior to retirement.

• (1) Composition of plan assets

The Bank allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Labour Pension Fund Supervisory Committee. With regard to the utilization of the funds, minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with interest rates offered by local banks.

The Bank of Taiwan labour pension reserve account balance for the Bank amounted to $5,027,251 and $5,155,259 on December 31, 2020 and 2019. For information on the utilization of the labour pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labour Funds, Ministry of Labor.

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For the years ended December 31,
2020 2019
Defined benefit obligation on January 1 $ 7,177,326 7,385,323
Current service and interest cost 231,891 258,070
Remeasurements of the net defined benefit liability
－ Actuarial loss on experience adjustment 154,633 35,900
－ Actuarial loss on financial assumptions changed 226,001 117,062
Benefits paid by the plan (572,032 ) (619,029 )
Defined benefit obligation on December 31 $ 7,217,819 7,177,326
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For the years ended December 31,
2020 2019
Fair value of plan assets on January 1 $ 5,155,259 4,978,970
Interest income 35,665 44,245
Remeasurements of the net defined benefit liability
－ plan assets revenue (excluded of current interest) 174,638 182,455
Contributions made 233,721 568,618
Benefits paid by the plan (572,032 ) (619,029 )
Fair value of plan assets on December 31 $ 5,027,251 5,155,259
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For the years ended December 31,
2020 2019
Current service costs $ 183,017 193,360
Net interest on the net defined benefit liability 13,209 20,465
$ 196,226 213,825
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Remeasurements of the net defined benefit liability recognized in other comprehensive income for the years ended December 31, 2020 and 2019 were as follows:

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For the years ended December 31,
2020 2019
Amount on January 1 $ 1,375,889 1,405,382
Recognized during the period 205,996 (29,493 )
Amount on December 31 $ 1,581,885 1,375,889
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(6) Actuarial assumptions

the reporting date as follow :

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----- Start of picture text -----

December 31, 2020 December 31, 2019
Discount rate 0.30% 0.70%
Future salary increase rate 1.50% 1.50%
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The expected allocation payment made by the Bank to the defined benefit plans in the one year period after the reporting date is $270,000.

(7) Sensitivity analysis

The effects of changes in major actuarial assumptions adopted in defined benefit obligation on December 31, 2020 and 2019 were as follows:

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Influence of defined benefit plan obligation
Increase 0.25% Decrease 0.25%
December 31, 2020
Discount rate (Change 0.25%) (1.98)% 2.04%
Future salary increase rate (Change 0.25%) 1.94% (1.89)%
December 31, 2019
Discount rate (Change 0.25%) (2.03)% 2.10%
Future salary increase rate (Change 0.25%) 2.01% (1.96)%
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Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2020 and 2019.

The Bank allocates 6% of each employee's monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Bank allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation. Employees based abroad are contributed in accordance with the local government's regulations.

265

The pension costs incurred from the contributions to the Bureau of the Labor Insurance, oversea branches, and local authorities responsible for the Bank's subsidiaries amounted to $141,257 and $134,089 for the years ended December 31, 2020 and 2019, respectively.

• (c) Employee deposit with favorable rate

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December 31, 2020 December 31, 2019
Present value of defined benefit obligation $ 931,667 903,490
- -
Less: Fair value of defined benefit plan assets
Net defined benefit liability $ 931,667 903,490
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The Bank conducted the obligation of time deposit with favorable rate for retired and current employees based on the internal regulation "Saving Deposits for Employees".

31, 2020 and 2019, were as follows:

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For the years ended December 31,
2020 2019
Defined benefit obligation on January 1 $ 903,490 870,238
Interest cost 34,226 32,938
Remeasurements of the net defined benefit liability
-current actuarial gains and losses 193,072 190,460
Benefits paid by the plan (199,121 ) (190,146 )
Defined benefit obligation on December 31 $ 931,667 903,490
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For the years ended December 31,
2020 2019
Fair value of plan assets on January 1 $ - -
Contributions made 199,121 190,146
Benefits paid by the plan (199,121 ) (190,146 )
Fair value of plan assets on December 31 $ - -
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		For the years ended December 31,	For the years ended December 31,	For the years ended December 31,
		2020		2019
Net interest on the net defned beneft liability		$ 227,298		223,398

• (4) Actuarial assumption

the reporting date were as follow :

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----- Start of picture text -----

December 31, 2020 December 31, 2019
Discount rate of employee deposit with favorable rate 4.00% 4.00%
Rate of return for capital deposited 2.00% 2.00%
Annual diminishing rate of account balance 1.00% 1.00%
Possibility that employee deposit with favorable rate be 50.00% 50.00%
modified
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(AB) Earnings per share

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For the years ended December 31,
2020 2019
Net income $ 4,701,775 6,734,253
Weighted average number of common stock shares outstanding (in 7,488,584 7,198,505
thousands) (Note 1)
Basic earnings per shares (in dollars) $ 0.63 0.94
Dilutive potential common shares (in thousands) (Note 1,2) 22,343 32,053
Weighted average number of shares outstanding for diluted EPS (in 7,510,927 7,230,558
thousands) (Note 1)
Diluted earnings per shares (in dollars) $ 0.63 0.93
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Note 1: The earnings per share for the year ended December 31, 2019 has applied retrospective adjustments. Note 2: The shares were calculated based on the stock price on the balance sheet date.

(AC) Employees and directors' remuneration

compensation and less than 0.6% as directors' remuneration when there is profit for the year. However, if the Bank has accumulated deficits, the profit should be reserved to offset the deficit.

For the years ended December 31, 2020 and 2019, the estimated employee remuneration were $217,393 and $384,639, and the estimated directors' remuneration were $33,748 and $50,456, the estimates are based on pre-tax net profit for the period, before deducting employees and directors' remuneration, multiplied by the elaboration of the Bank's Articles of Association of employees and the directors remuneration ratio, and recognized as operating cost. If the board's meeting decides to release stock dividends as employees' bonuses, the total number of employees bonus stocks to be issued shall be determined by the common stock closing price of the day before the meeting date.

Related information would be available at the Market Observation Post System website.

(AD) Net interest revenue

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For the years ended December 31,
(Restatement)
2020 2019
Interest income:
Loans $ 5,693,883 7,614,716
Secured loans 14,592,394 15,546,779
Bills negotiated 2,204 5,837
Bank overdrafts 12,545 20,559
Discounts 14,492 40,582
Time deposit from Central Bank 699,147 1,027,935
Due from the Central Bank 100,458 142,115
Call loans to banks 596,548 1,045,536
Bonds 2,503,696 2,914,954
International credit card 44,897 54,275
Overdue loans 225,840 141,027
Bills 39,550 81,463
Due from Banks 227,827 443,699
Others 131,006 191,472
Subtotal 24,884,487 29,270,949
Interest expense:
Deposits 7,246,864 10,206,619
Deposits from banks 7,543 200
Call loans from banks 378,000 1,030,771
Financial debentures 1,153,012 1,108,192
Notes and bond issued under repurchase agreement 5,138 14,042
Others 31,653 24,318
Subtotal 8,822,210 12,384,142
Total $ 16,062,277 16,886,807
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(AE) Net service fee revenue

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For the years ended December 31,
(Restatement)
2020 2019
Service fee income:
Remittance service fee $ 69,845 84,379
Import bills negotiated service fee 36,908 50,220
Export bills negotiated service fee 11,589 15,477
Letter of credit service fee 8,020 8,715
Certification service fee 2,482 2,481
Acceptance service fee 1,182 2,022
Trust service fee 805,291 555,679
Guarantee service fee 210,864 211,914
Agency service fee 89,355 94,169
Interbank service fee 88,721 77,895
Card service fee 116,043 145,666
Commission revenue of insurance premium 573,846 1,536,455
Custodian service fee 169,816 168,961
Foreign currency service fee 91,386 103,059
Commission of futures 5,375 4,582
Loan service fee 755,839 685,756
Miscellaneous fees 128,431 132,826
Subtotal 3,164,993 3,880,256
Service fee expense:
Foreign currency service fee 29,226 38,901
Interbank service fee 157,912 146,266
Trust service fee 1,040 1,794
Agency service fee 1,588 2,136
IC card service fee 64,121 71,736
Check clearing service fee 9,526 9,847
Remittance service fee 4,920 4,817
Custodian service fee 53,948 52,219
Call loans service fee 7,921 11,413
Futures option fee 1,149 288
Miscellaneous fees 19,095 17,389
Subtotal 350,446 356,806
Total $ 2,814,547 3,523,450
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(AF) Gains on financial assets or liabilities measured at fair value through profit or loss

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----- Start of picture text -----

For the years ended December 31,
2020 2019
Valuation gains (losses):
Government bonds $ (5,051 ) 5,174
Corporate bonds 683 (3,666 )
Financial debentures (419,086 ) (440,883 )
Listed stocks (9,934 ) 9,564
Beneficiary certificates 15,007 4,579
Private fund 9,948 (1,850 )
Commercial paper (1,435 ) (3,026 )
Derivative financial instruments (57,191 ) 327,073
Subtotal (467,059 ) (103,035 )
Disposal gains (losses):
Government bonds 29,832 13,699
Corporate bonds 23,553 1,589
Financial debentures (5,425 ) 17,250
Listed stocks (23,015 ) 13,455
Beneficiary certificates 16,896 700
Commercial paper (4,111 ) 15
Derivative financial instruments 1,178,721 1,219,809
Subtotal 1,216,451 1,266,517
Dividend revenue 1,996 3,302
Interest income 108,640 166,271
Total $ 860,028 1,333,055
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(AG) Realized gain on financial assets at fair value through other comprehensive income

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For the years ended December 31,
2020 2019
Gain on disposal of government bonds $ 530,996 203,348
Gain on disposal of corporate bonds 4,239 2,381
Gain (loss) on disposal of financial debentures 52,243 (294 )
Dividend revenue 511,208 408,485
Total $ 1,098,686 613,920
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(AH) (Impairment loss on assets) reversal of impairment loss on assets

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For the years ended December 31,
2020 2019
Investment in debt instrument measured at fair value through $ (14,630 ) (18,676 )
other comprehensive income
Investment in debt instrument measured at amortized cost 13,482 2,346
Total $ (1,148 ) (16,330 )
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(AI) Share of profit (loss) of associates and joint ventures accounted for using equity method

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----- Start of picture text -----

For the years ended December 31,
(Restatement)
2020 2019
Investment income- TBB International Leasing Co., Ltd. $ 61,463 (14,133 )
Investment income- TBB (Cambodia) Microfinance Institution Plc 33,725 (2,807 )
Investment income- TBB Venture Capital Co., Ltd. (11,349 ) (328 )
Total $ 83,839 (17,268 )
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(AJ) Net other revenue other than interest income

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----- Start of picture text -----

For the years ended December 31,
(Restatement)
2020 2019
Rental revenue of operating assets $ 10,546 10,704
Rental expense of operating assets (1,614 ) (1,869 )
Loss on disposal and retirement of property and equipment (1,796 ) (693 )
Loss of account error (641 ) (78 )
Gold deposit book 4,638 2,056
Other operating expense (56,915 ) (55,756 )
Other miscellaneous income 229,207 160,522
Total $ 183,425 114,886
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(AK) Other miscellaneous revenue

		For the years ended December 31,	For the years ended December 31,	For the years ended December 31,
		2020		2019
Overpaid business tax returned		$ -		138,999

(AL) Bad debts expenses, commitment and guarantee liability provision

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For the years ended December 31,
2020 2019
Discounted and loans $ 4,046,672 2,422,135
Call loans to banks (11,083 ) 15,850
Receivables and other financial assets (2,434 ) (31,994 )
Subtotal 4,033,155 2,405,991
Provision for guarantee liabilities 17,634 (14,340 )
Provision for loan commitments 21,379 (42,171 )
Total $ 4,072,168 2,349,480
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(AM) Employee benefit expenses

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For the years ended December 31,
(Restatement)
2020 2019
Salary expense $ 6,376,597 6,533,509
Labor and health insurance 475,473 483,310
Pension expense 336,729 347,160
Director's remuneration 47,160 64,187
Other employee benefits 625,699 596,529
Total $ 7,861,658 8,024,695
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(AN) Depreciation and amortization expenses

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For the years ended December 31,
(Restatement)
2020 2019
Depreciation
Property and equipment $ 438,040 408,065
Right-of-use assets 404,098 415,346
Amortization
Computer software 141,512 124,343
Other deferred charges 5 2
Total $ 983,655 947,756
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(AO) Other general and administrative expenses

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For the years ended December 31,
(Restatement)
2020 2019
Compensation loss $ 164 193
Utilities fee 90,248 94,429
Postage and telecommunication fee 238,948 228,655
Transportation fee 29,924 49,416
Printing and advertisement fee 162,403 164,480
Repair and maintenance fee 254,852 241,368
Insurance fee 333,024 331,501
Professional service fee 241,145 249,108
Materials and supplies 104,073 176,877
Rental expenses 16,365 16,291
Duties and levies 1,187,559 1,341,893
Membership, donation and partaking 614,525 537,039
Storage, packing and processing fee 54,788 44,069
Cash transit fee 83,484 93,887
Others 71,453 69,561
Total $ 3,482,955 3,638,767
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(AP) Financial Instruments

• (a) Fair value information

• (1) General description

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The financial instruments are record as fair value when original recognizing, usually refer to the transaction price in many circumstances. Except some amortized cost financial instruments, the financial instruments are measured in fair value. A quoted market price in an active market provides the most reliable evidence of fair value. If financial instruments are without active market, the Bank adopted the value technique, refer to Bloomberg, Reuters or the price at which the asset could be bought or sold in a current transaction between willing parties.

A. Level 1

active market is a market in which transactions for the homogenous assets or liabilities take place with sufficient frequency and volume to provide pricing information. The stock of listed company and the beneficiary certificates, government bonds and the derivative financial instruments with public quote inactive market processed by the Bank belong to Level 1.

B. Level 2

The input of this level is other than quoted market 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). The investments with lower trade volume such as government bonds, corporate bonds, financial debentures, convertible corporate bonds and derivative instruments, including financial debentures the Bank issued are belong to Level 2.

C. Level 3

The input is unobservable for the asset or liability in market or counterparty prices. Unobservable inputs like: Option pricing model using the historical volatility. Because the historical volatility cannot represent the future volatility expected value of whole market participants. The input parameter used to measure the fair value of this level is not based on data that can be obtained in the market but using a combination of complex market prices to estimate their values. The assets have been categorized as a Level 3, due to their fair market value cannot be directly calculated. The equity instruments with no active market which the Bank invested are Level 3.

271

(3) Based on fair value measurement

• A. The fair value hierarchy of information

value hierarchy of information were as follows:

	December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2020
Assets and Liabilities	Total	Level 1	Level 2	Level 3
Instruments measured at fair value on a recurring basis Non-derivative fnancial assets and liabilities: Financial assets at fair value through proft or loss Financial assets at fair value through proft or loss, mandatorily measure at fair value Security Investments Bond Investments Others Financial assets designated at fair value through proft or loss Financial assets at fair value through other comprehensive income Security Investments Bond Investments Others Financial liabilities at fair value through proft or loss Financial liabilities designated at fair value through proft or loss Derivative fnancial assets and liabilities Assets: Financial assets at fair value through proft or loss Liabilities: Financial liabilities at fair value throughproft or loss	$ 188,304 1,358,734 12,681,298 84,377 13,211,492 104,092,136 49,295 8,411,020 690,858 277,982	188,304 1,307,034 162,556 - 8,736,348 67,247,661 49,295 - 72,747 -	- 51,700 12,414,244 84,377 - 36,844,475 - 8,411,020 618,111 277,982	- - 104,498 - 4,475,144 - - - - -
	December 31, 2019
Assets and Liabilities	Total	Level 1	Level 2	Level 3
Instruments measured at fair value on a recurring basis Non-derivative fnancial assets and liabilities: Financial assets at fair value through proft or loss Financial assets at fair value through proft or loss, mandatorily measure at fair value Security Investments Bond Investments Others Financial assets designated at fair value through proft or loss Financial assets at fair value through other comprehensive income Security Investments Bond Investments Other Financial liabilities at fair value through proft or loss Financial liabilities designated at fair value through proft or loss Derivative fnancial assets and liabilities Assets: Financial assets at fair value through proft or loss Liabilities: Financial liabilities at fair value throughproft or loss	$ 178,867 4,230,927 21,146,055 120,240 11,304,129 91,093,180 199,835 8,949,182 $950,796 444,154	178,867 4,230,927 60,740 - 7,149,992 66,578,857 49,804 - 65,784 -	- - 21,037,165 120,240 - 24,514,323 150,031 8,949,182 885,012 444,154	- - 48,150 - 4,154,137 - - - - -

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Taiwan Business Bank Annual Report 2020

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its fair value.

If the financial instruments of quoted price, which are from the Stock Exchange, Brokers, Pricing service agencies or Government institutions, are timely and frequently, and reflects the actual price, then the financial instruments have a quoted price in an active market. If the above conditions are not fulfilled, the market is inactive.

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price in an active market for the financial asset, its fair value is estimated on the basis of the result of a valuation technique that refers to quoted prices considered the identical financial instrument with same characteristics and essential terms of transaction, Discounted-Cash-Flow model and other valuation techniques including the model using market information to be made of the calculation at the balance sheet date (e.g. Taipei Exchange reference yield curve, Reuters quoted the average commercial paper rate, the Taipei Financial industry call loan rate fixing TAIBOR).

the Bank adopted that refers to quoted prices provided by financial institutions. Ask (bid) is used to evaluate the selling (buying) position by the Bank if the quoted price include ask and bid price. If there is not a quoted price for the financial asset, transaction price close to the balance sheet date is the fair value.

Fair value of financial derivatives is the amount of cash to be paid or to be received by the Bank, assuming that the contract will be terminated on the balance sheet date. The Bank and subsidiaries adopts mark-to-model prices which are usually adopted among the banking industry, such as Discounted-Cash-Flow model and Black-Scholes model. The Bank adopts the price data from Reuters and Bloomberg to calculate the fair value of the holding position. The aforesaid price data is based upon the middle price and used consistently by the Bank. Furthermore, the fair value of the embedded financial derivatives are calculated based upon the quote from the counterparty, and separately calculated in accordance with the contracts.

C. Adjustment for fair value

a. The restraint of evaluation model and uncertain inputs

The estimates of output-based value using the evaluation model, which may not reflect the Bank's all related factors. Therefore the estimated value of the evaluation model will be appropriately adjusted according to the extra parameters such as model risk or liquidity risk. Information and price parameters used in the evaluation process after careful assessment, and appropriately adjusted according to the current market situation.

b. Credit risk value adjustment

The Bank's credit risk value adjustment of OTC transaction derivative instruments can be divided to Credit value adjustments (CVA) and debit value adjustments (DVA). To reflect the fair value of the counterparty or the default, and the Bank may not be received or paid full market value of trading possibilities.

The Bank would calculate credit valuation adjustment (CVA) by assessing probability of default (PD) and loss given default (LGD) of the counterparty before multiplying exposure at default (EAD) of the counterparty. On the contrary, debit valuation adjustment (DVA).

The Bank assess the probability of default on the assumption of 60%, but at the risk of the nature and circumstances of available data, we may use other loss given default assumptions.

D. Transfers between Level 1 and Level 2

There were no transfers between Level 1 and Level 2 for the years ended December 31, 2020 and 2019.

273

Changes of financial assets categorized in Level 3:

		For theyear ended December 31, 2020	For theyear ended December 31, 2020	For theyear ended December 31, 2020	For theyear ended December 31, 2020	For theyear ended December 31, 2020	For theyear ended December 31, 2020	For theyear ended December 31, 2020
		Valuationproft and loss		Increase		Decrease
Name	Beginning balance	Recognized in proft or loss	Recognized in other comprehensive income	Purchase or issue	Transfer into Level 3	Sale Disposition or Settlement	Transfer out from Level 3	Ending balance
Financial assets at fair value through proft or loss Investments in equity instruments measured at fair value through other comprehensive income	$ 48,150 4,154,137	9,948 - 50,000 - 3,600 - 104,498 - 321,007 - - - - 4,475,144 For theyear ended December 31, 2019
		Valuationproft and loss		Increase		Decrease
Name	Beginning balance	Recognized in proft or loss	Recognized in other comprehensive income	Purchase or issue	Transfer into Level 3	Sale Disposition or Settlement	Transfer out from Level 3	Ending balance
Financial assets at fair value through proft or loss Investments in equity instruments measured at fair value through other comprehensive income(Note)	$ 50,000 4,212,027	(1,850 ) -	- (57,890 )	- -	- -	- -	- -	48,150 4,154,137

Current gain (loss) and other comprehensive income of holding assets are as follow:

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----- Start of picture text -----

For the years ended December 31,
2020 2019
Recognized on profit and loss (reported as unrealized gain (loss) from investments instruments $ 9,948 (1,850 )
measured at fair value through profit and loss)
Recognized on other comprehensive income (reported as unrealized gain (loss) from investments 321,007 (57,890 )
instruments measured at fair value through other comprehensive income)
----- End of picture text -----

assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. Without active market quotation, the Bank take professional financial information vendors and widely used by market participants for evaluation or counterparty quotation as reference. The unobservable inputs are as follows :

	December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2020
	fair value	valuation methods	signifcant unobservable inputs	range	inter-relationship between signifcant unobservable inputs and fair value measurement
Financial asset at fair value through proft or loss
Private fund	$ 104,498	assets approach	liquidity discount	10.00%	The higher market liquidity discount, the lower fair value.
Financial asset at fair value through other comprehensive income
Unlisted stocks	4,475,144	market approach assets approach	liquidity discount	8.94%~34.79%.	The higher market liquidity discount, the lower fair value.
		income approach	sustainable growth rate cost of equity	0%~1.45% 8.30%~11.51%	The higher sustainable growth rate, the higher fair value. The higher rate of cost of equity, the lower fair value.

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	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019
	fair value	valuation methods	signifcant unobservable inputs	range	inter-relationship between signifcant unobservable inputs and fair value measurement
Financial asset at fair value through proft or loss
Private fund	$ 48,150	assets approach	liquidity discount	10.00%	The higher market liquidity discount, the lower fair value.
Financial asset at fair value through other comprehensive income
Unlisted stocks	4,154,137	market approach assets approach	liquidity discount	9.05%~34.97%	The higher market liquidity discount, the lower fair value.
		income approach	sustainable growth rate cost of equity	0%~1.58% 8.62%~11.89%	The higher sustainable growth rate, the higher fair value. The higher rate of cost of equity, the lower fair value.

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• H. Sensitivity analysis of reasonably possible alternative assumptions for fair value measurement in Level 3.

Valuation techniques used by the Bank for fair value measurements of financial instruments are appropriate. However, the use of different valuation models or inputs could lead to different outcomes of fair value measurements. The following are the impact on the other comprehensive profit and loss if using different assumptions:

a. Assets approach/ Market approach

market approach or the assets approach. If the liquidity discount changes by 5% upwards or downwards, the impact on the other comprehensive profit and loss is as follows

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the effects to net income and other
comprehensive income
Favorable Unfavorable
changes(-5%) changes(5%)
December 31, 2020
Financial assets at fair value through profit
or loss
Private fund $ 5,805 (5,805 )
Financial assets at fair value through other comprehensive income
Unlisted stocks 247,738 (247,774 )
the effects to net income and other
comprehensive income
Favorable Unfavorable
changes(-5%) changes(5%)
December 31, 2019
Financial assets at fair value through profit
or loss
Private fund $ 2,675 (2,675)
Financial assets at fair value through other comprehensive income
Unlisted stocks 242,309 (242,309)
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b. Income approach

Adopting the income approach to evaluate Level 3 financial instruments of the Bank. The evaluation parameters are divided into sustainable growth rate and cost of equity capital. The effects of the two evaluation parameters on the other comprehensive profit and loss are as follows:

275

1) sustainable growth rate

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the effects to other comprehensive income
Favorable changes Unfavorable changes
(0.3%) (-0.3%)
December 31, 2020
Financial assets at fair value through other comprehensive income
Unlisted stocks $ 6,616 (6,074)
the effects to other comprehensive income
Favorable changes Unfavorable changes
(0.3%) (-0.3%)
December 31, 2019
Financial assets at fair value through other comprehensive income
Unlisted stocks $ 5,154 (4,709)
2) cost of equity
the effects to other comprehensive income
Favorable changes Unfavorable changes
(-3%) (3%)
December 31, 2020
Financial assets at fair value through other comprehensive income
Unlisted stocks $ 141,859 (53,302)
the effects to other comprehensive income
Favorable changes Unfavorable changes
(-3%) (3%)
December 31, 2019
Financial assets at fair value through other comprehensive income
Unlisted stocks $ 104,670 (43,331)
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The favorable and unfavorable effects represent the changes in fair value, and fair value is based on a variety of unobservable inputs calculated using a valuation technique. The analysis above only reflects the effects of changes in a single input, and it does not include the interrelationships with another input.

• (4) Not based on fair value measurement

• A. Fair value information

Bank. Except those items, others' fair value is reasonably approximate value, the Bank does not disclosure their fair value.

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----- Start of picture text -----

December 31, 2020
Book value Fair value
Debt instruments measured at amortized cost $ 228,003,332 229,803,196
December 31, 2019
Book value Fair value
Debt instruments measured at amortized cost $ 263,056,842 264,518,564
B. The fair value hierarchy of information
December 31, 2020
Quoted prices in Significant other
active markets observable Significant
for identical inputs unobservable
Assets and Liabilities Total assets (Level 1) (Level 2) inputs (Level 3)
Debt instruments measured at amortized cost 229,803,196 43,000,581 186,802,615 -
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----- Start of picture text -----

December 31, 2019
Quoted prices in Significant other
active markets observable Significant
for identical inputs unobservable
Assets and Liabilities Total assets (Level 1) (Level 2) inputs (Level 3)
Debt instruments measured at amortized cost 264,518,564 49,044,285 215,474,279 -
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• C. Valuation techniques

Methods and assumptions used by the Bank for fair value evaluation of financial instruments were as follows:

• a. Cash and cash equivalents, due from Central Bank and call loans to banks, securities purchased under resell agreements, receivables, overdue receivables, exchange bills negotiated guarantee deposits paid, temporary payments and suspense accounts, proceeds of settlement and credit transaction, deposits from Central Bank and other banks, securities sold under repurchase agreements, payables, other financial liabilities, guarantee deposits received and temporary receipts and suspense accounts: since these instruments have short maturities, the book value is adopted as a reasonable basis in estimating the fair value.

• b. Discounts and loans (including non-performing loans): the interest rate of bank loans, dependent on the benchmark interest rate which plus or minus the input value (i.e. motorized interest rate), said market rates, therefore, the book value of financial assets is equivalent to their fair value. Among the case of fixed interest rate, the estimated fair value of long-term loans using the discounted value of its expected cash flows, but this is minority, so the book value of financial assets is equivalent to their fair value.

• c. Investment in debt instruments at amortized cost: the quoted price is regarded as its fair value. If there is no quoted price in an active market for the financial asset, its fair value is estimated on the basis of the result of a valuation technique.

• 1) Central Government Securities (NTD): using the comment of "Bonds a fair price for each of times" from Taipei Exchange.

• 2) Corporate bonds and bank debentures (NTD): the present value or fair price of Taipei Exchange determined using the future cash flow of yield curve discounting evaluation.

• d. Deposits and remittance: to determine the fair value, considered Banking industry characteristics, the market interest rates (i.e. market price) is the fair value. And deposits are mostly due within one year, the carrying amounts is the fair value of reasonable basis. The fixed interest rate of long-term deposits should be estimated by the discounted value of its expected cash flows at fair value, and its maturity date no longer than three years, so its estimated fair value of the carrying amount is considered reasonable.

• e. Bank debentures payable: The bank debentures payable, issued by the Bank, whose stated rate was equal the effective rate, using discounted cash flow projections to estimate the fair value, equivalent to its book value.

(AQ) Financial Risk Information

• (a) General description

taking customer service, financial business operating target, overall risk tolerance and external limitation of laws into consideration and provide benefit to customers, shareholders and employees.

The Bank's Financial Risk Management policy is to establish a risk management mechanism in terms of risk identification, risk measurement, risk monitoring, and risk control and to construct the overall risk management system. It is to facilitate the business model with appropriate risk management and to control the rationality between risks and rewards under the premise of legal capital ratio in order to achieve operating targets and increase the value of the Bank for the shareholders. The scope covers the

277

management of credit risk, market risk, operation risk, banking book interest rate risk, capital liquidity risk, and capital adequacy.

• (b) Risk management organization structure

• (1) Risk Management Committee

The chairperson of the Risk Management Committee is appointed by the president. The chairpersons include general manager, deputy general manager of the non-regulatory compliance in head office and department directors of head office (excluding the director of audit department in the Board). This Committee is set up for the purpose of establishing a sound risk management system, strengthening risk management and the implementation of the Bank's risk management and monitoring. The meeting will be held once a month in principle. The meeting can be held by the chairman of the Committee when it necessary. The duties are as follows:

• and industrial risk management occur.

• B. Risk management report of various risk exposure and agenda processing.

• C. The processing of examination of the risk management relevant policy of the Bank and limitations, management indices and the response project when the risk exceeds the limitations.

• D. Supervise the Bank's capital adequacy management.

• E. Conduct or supervise the issues that have to report to Risk Management Committee according to the regulations drawn by the competent authority at home and abroad.

• F. Conduct or supervise other risk management related issues.

Risk Management Department is the assistant unit of the Risk Management Committee. The responsibility of the Risk Management Department is to execute preparing sittings agenda, convening sittings, agenda processing, taking meeting minutes and tracking resolution and regularly report the important resolution and various risk exposure to the board of (executive) directors.

• (2) Assets and Liabilities Management Committee

The chairperson of the Assets and Liabilities Management Committee is the general manager, and the members are formed by the vice assistant general manager and the department heads of deposit, loan, financial transaction, capital deployment and risk management units. The responsibility of the Assets and Liabilities Management Committee is to monitor and manage the banking book interest rate risk and capital liquidity risk and convenes meetings regularly, to approve the analyzing and measurement methods of the capital liquidity risk and banking book interest rate risk exposure, to examine the capital liquidity risk and banking book interest rate risk management policy as well as the relevant limitations and management indices, to receive interest rate risk and capital liquidity risk exposure reports and adjust the assets and liabilities interest rate duration structure and capital maturity structure.

• (3) Credit Examination Committee

The convener of the Credit Examination Committee is the assistant general manager supervising Risk Management Center. The Committee in principle convenes weekly to examine the modification and establishment of the regulations (including main points, measures and procedures) for significant loans, foreign exchange and guarantee cases.

• (4) Overdue Loans Clearing Committee

The convener of the Overdue Loans Clearing Committee is the supervising vice president. The convener holds meetings as needed to discuss measures on reducing non-performing loans and approaches to handle overdue loans.

• (5) Cyber Security Management Committee

The Cyber Security Management Committee is convened by the supervising vice president who oversees the implementation and coordination of the Bank's cyber security policies. The committee holds meetings as needed to examine matters related to cyber security.

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(c) Credit risk

Credit risk refers to the default risk resulted from the inability to fulfill the contract obligations due to deteriorating financial status of trade counterparties, pessimistic external economic situation or other factors. The primary source of the credit risk of the Bank is the loan business, such as loans of various terms, guarantees and letters of credit, loan commitments, etc., in addition, other sources of credit risk include call loans from banks, securities investments, derivative financial instrument transactions, etc.

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(2) Credit risk management policy

In order to control the credit risk to a tolerable scope, the Bank continuously conduct below operations:

• A. Fully understand the credit status and ratings of loan customers and trade counterparties as well as the purposes and payments of loans.

• B. Prudently evaluates the credit risk status of loan customers and trade counterparties and consider the adequacy of collaterals and guarantees to assess risk and profit.

• C. Establish credit rating mechanism for loan customers or apply the ratings from outside credit rating institutions as the reference for undertaking credit cases or interest rate determination.

• D. Modify relevant regulations to control the credit risk to a tolerable extent for the Bank.

The credit risk management procedure and measurement methods of the Bank's major business are as follows:

• A. Credit Business (Including loan commitments and guarantees)

The categorization and credit quality rating of credit assets are as follows:

• a. Categorization of credit assets

as the first category, others are classified, based on the assurance status and the time overdue, as second category (need attention), third category (possible to recover), fourth category (difficult to retrieve) and the fifth category (unable to retrieve). In order to manage creditor's rights, the Bank established "Regulations Governing the Procedures to Evaluate Assets and Deal with Non-performing/ Non-accrual

Loans", "Regulations Governing the Reconciliation of Non-performing/Non-accrual Loans" and its operating procedure "Operating procedure Governing the Collection of Non-performing/Non-accrual Loans" and "Code of Conduct to Deal With Non-Performing Loans" to serve as the guidelines for dealing with non-performing credit and overdue loans collection.

• b. Categorization of credit quality

Based on historical default data, the Bank established internal credit rating model and completed internal rating system to serve as a reference to credit risk control.

In order to develop an appropriate credit rating model for the Bank to evaluate the credit risk for corporate banking customers and private banking customers, it applied statistical methods, professional expert judgments and relevant customer information to fulfill the requirements. The Bank examined whether the internal credit rating model is in conformity with the actual scenario based on practical default data quarterly and adjusted all parameters to optimize the estimated results.

• B. Due from other banks and call loans to banks

The Bank evaluates the credit status of counterparties before transaction and takes the rating information from domestic and foreign credit rating institutions into consideration to determine various credit risk facilities for the counterparties.

The Bank manages credit risk of debt instruments through credit rating data of external institutions, credit quality of bonds, geographic situations and counterparties' risk so as to identify credit risk.

279

and are controlled based on the trade amount (including loans at call). Counterparties which do not have credit rating or which are of low quality shall be examined individually. For counterparties which are general customers, the Bank controls the credit risk exposure based on the derivative instrument risk facilities and conditions approved by general credit procedures.

At each reporting date, the Bank shall assess the change in the risk of a default occurring over the expected life of the various credit assets and financial assets to determine whether the credit risk has increased significantly since initial recognition. To make that assessment, the Bank consider reasonable and supportable information (including forward-looking information) that is indicative of significant increases in credit risk since initial recognition. The main considerations include:

• A. credit assets

  • a. The borrowers failed to pay the principal and interest overdue for more than 30 days, less than 90 days;

  • b. When the Bank conducts review or follow-up review of the relevant management procedures after loan, it knows that the financial report of the borrowers have been issued by the accountant and it has issued opinions of the significant doubt on the ability to continue as a going concern;

  • c. The deposits and assets of borrowers are compulsorily executed, besides, the deposits are compulsorily executed because of tax arrears. However, the borrowers that have enough deposit to bear the cost that assessed by the Bank are except;

  • d. The bank knows (if it has received the notice from court) that the collaterals are compulsory executed by other banks;

  • f. The letter of credit insurance fund notice due to the related company's overdue debt in other bank, the creditor to stop the delivery;

  • g. Because the borrowers have been involved in litigation and unfavorable judgments, their ability of credit performance is affected;

  • others.

• B. Debt instrument investments

  • a. The latest credit rating on the report date was non-investment grade and fell more than two levels than the original rating, or;

  • b. Investment target evaluation loss is up to 30% of investment cost.

credit asset during the expected duration of existence or a low credit risk. The amount of expected credit losses was not taken as the change of credit risk, if the credit risk of the credit asset was low on the report date, it also assumes that the credit risk of the credit asset has not increased significantly since the initial recognition. The credit assets with low credit risk refer to the low default risk and the borrower's ability to perform its contractual cash flow obligations in the near term. No significant increase in risk relates to the borrower. The absence of economic, operational, and adverse changes in financial conditions and other bad debt conditions did not affect their ability to fulfill their contractual cash flow obligations. Financial assets on investment-grade or not on investment-grade but the ratings are not significantly reduced are also considered to be low-risk areas.

A financial asset is credit-impaired when one or more events that have a detrimental impact on the

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impaired not only the borrower defaults the loan more than 90 days, it also includes observable data as follows:

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• A. Credit assets

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  - b. A breach of contract, such as a default or past due event ;

  - c. The lender(s) of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;

  - the incurred credit losses;

• B. Debt instrument investments

  • the incurred credit losses.

  • failure, a bank decide to execute early termination of transactions, or loans originated from derivatives settlement failure).

• (6) Write-off policy

The integral part or the portion of the credit assets that needs to be written-off should first be approved during the board of directors' meeting; particularly, the portion that is deemed uncollectible.

• A. The borrowers fail to recover all or part of the debt due to dissolution, escape, settlement, bankruptcy or other reasons.

• B. After the collateral and the assets of the principal and subordinate debtors have been priced low or deducted from the first-order mortgage, they cannot be repaid, the execution costs are close or may exceed the Bank's reimbursable amount, and the implementation is not beneficial.

• C. The collateral and the property of the principal and subordinate debtors were auctioned off at no cost and were not bought by anyone, and there was no one have substantial benefits.

• D. Overdue loan and non-accrual loan have exceeded the liquidation period for two years.

  • The Bank, whose written-off claims may still have ongoing recourse, continues to follow laws and regulations to pursue the proceedings.

in negotiating, increasing the recovery rate of the borrowers that have problems, or maintaining the customer relationship. The modification of the contractual terms of the credit asset may include extending the contract period, modifying the payment time of interest, and modifying agreement rate and so on. If the contractual cash flow modification of the credit asset is due to the financial difficulty of the borrower, it is deemed as an impairment of the financial asset. If the contractual cash flow modification is not due to the financial difficulties of the borrower, the existing or projected unfavorable changes in the operating, financial or economic conditions under the borrower's performance or the borrower's ability to make the borrower's ability to perform its debt obligations vary significantly. The cause of anomalies or other bad debts is supplemented by an assessment of whether the credit risk of financial assets has increased significantly.

281

• (8) Measuring the expected credit losses

• A. Adoption of methods and assumptions

experience, internal historical data or the information from external credit rating agency is used to estimate the Probability of default (PD), Loss given default (LGD), Exposure at default (EAD) and other credit risk components.

In order to assess the expected credit losses of credit assets, the Bank is divided into the following combinations depending on the credit risk characteristics such as the identity of borrowers, products, and type of collateral:

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----- Start of picture text -----

Government and public institution
Financial institution(including banks, ticket companies, securities finance companies)
The guarantee of the credit guarantee mechanism
Large Enterprise Secured
Corporate banking
Non-secured
Medium The guarantee of the credit guarantee mechanism
and small Secured
enterprises Non-secured
Mortgage
Microcredit
Private banking
Other-Secured
Other-Non-secured
The guarantee of the credit guarantee mechanism
Entrepreneurship Secured
Non-secured
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credit asset has low credit risk at the reporting date, the Bank shall measure the allowance for impairment using the 12-month expected credit losses; if the credit risk on a financial instrument has increased significantly or credit-impaired since initial recognition, the Bank shall measure the allowance for impairment using the lifetime expected credit losses.

In order to measure expected credit losses, the Bank considers the default probability (Probability of default, "PD") of borrowers, and loss given default rate ("LGD") multiplying the exposure at default ("EAD"), taking into account the time value of money as well evaluate 12-month and lifetime loss.

Default probability is the default probability of the borrower (default and credit impairment of financial assets), and the loss given default rate is the rate of loss caused by default by the borrower. The default probability and default loss rate used in the impairment assessment of the credit business are based on internal historical information of each group, and adjusted based on current observable information and forward-looking general economic information.

The Bank measures the EAD based on the book value of loans at reporting date. When estimating the 12-month and lifetime expected credit losses of the loan commitments and financial guarantee contracts, the definition of the credit risk increasing significantly and the credit-impaired assets are based on the rules mentioned above. Additionally, in order to determine the EAD used to calculate expected credit loss of off-balance sheet items, the Bank adopts the credit conversion factor(CCF) of standardized approach in credit risk which is legislated in the regulation of Proprietary Capital and Risk Capital of Banks.

• B. Consideration of forward-looking information

The Bank obtains forward-looking information which it takes into consideration when determining whether the credit risk of financial instruments has increased significantly since initial recognition

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and assessing the expected credit losses. The Bank identified the relevant macroeconomic factors for credit risk of each portfolio by analyzing the historically data. These macroeconomic factors include Taiwan GDP (not seasonally adjusted), Taiwan's actual industrial production index, Taiwan's annual growth rate of retail sales, Taiwan's real sales price index, unemployment rate (seasonally adjusted), Cathay National Real Estate Index (national), Taiwan's real consumer price index (Not seasonally adjusted) and Taiwan's annual growth in retail sales or other factors. The various economic factors and their impacts on Probability of Default ("PD") are different depending on the type of financial instruments.

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In order to determine the credit risk of investment in debt instruments at amortized cost and at fair value through other comprehensive income has increased significantly, the Bank uses the changes of external ratings published by international credit rating agencies as the quantitative indicators, while the assessment of expected credit losses are calculated by using the external ratings, as well as PD and Loss Given Default("LGD"), published by Moody's. Since the international credit rating agencies have already considered the forward-looking information while evaluating the credit ratings, which the Bank considered to be appropriate after its assessment, the credit ratings will be included in the Bank's assessment of related expected credit losses.

• (9) Credit risk hedging or diminishing.

• A. Collaterals

The Bank adopts a series of policies and procedures to mitigate credit risk and enhance credit risk tolerance. The method applied most is to request customers to provide collaterals. The Bank established collateral accreditation code of conduct in term of collateral management and total loan amount to regulate the scope of collaterals and the accreditation method and regularly inspects the collaterals. When the collaterals devaluate or the concern of devaluation occurs, the Bank shall increase collaterals or retrieve part of the loans to ensure the creditor's right is intact.

• B. Limit of credit risk and the control of credit risk concentration

• a. In order to avoid the situation that the credit risk of single customer being too high, the credit limit of an individual, a related party or a related enterprise shall be in conformity with "Authorization method for subsection 3 of Article 33 of the Banking Act of the Republic of China" and the credit limit authorization steps are regulated in the Key Points of Credit Engagement Authorization and the Key Points of Credit Engagement Authorization for Overseas Branches of the Bank.

• b. To enhance the risk concentration management, the Bank established regulations in terms of countries, financial institutions, industries and group enterprises. The relevant limits are reviewed and approved annually and the usage of the credit is monitored on a daily basis. In addition, the results are reported regularly.

• C. General agreement of net amount settlement

The transactions of the Bank are mostly settled with gross amount. Part of the transactions agreed on net amount settlement. When a default occurs, the Bank terminates all the transactions with the counterparty and settles by net amount to further lower credit risk.

• D. Enhancement of other credit

The assessment of credit business applies to credit 5P principles, credit risk is offset by dividing self-liquidating loan commitments as the main, and set the accounts to master the repayment of cash flow. Also in terms of the credit agreement stipulates the offset. (i.e. all kinds of deposits, except prohibition of low or the party's agreement, the Bank can set off all the debts), thus to reduce the loan amount, shorter loan repayment period or are considered part or all of expiration of acceleration clauses. To strengthen the protection of creditor and reduce credit risk, using qualified and effective enhancement, such as the requirement of real property, personal property, demand deposits, time deposits, securities and the guarantee of financial institution or the credit guarantee mechanism approved by government. (e.g. R.O.C SMEG, Agricultural Credit Guarantee Fund, Overseas Credit Guarantee Fund)

283

mitigating potential losses are as follows:

December 31, 2020	Carrying amount	Allowance impairment	Exposure (measured at amortized cost)	Value of collateral
Impairment fnancial assets: Receivables Interest receivable Discounts and loans Overdue receivable Total impairment fnancial assets		5,304 5,219,221 23,121 5,247,646	21,383 20,156,345 45,711 20,223,439	- 26,211,067 - 26,211,067
	$ 26,687
	25,375,566
	68,832
	$ 25,471,085
December 31, 2019	Carrying amount	Allowance impairment	Exposure (measured at amortized cost)	Value of collateral
Impairment fnancial assets: Receivables Acceptances receivables Interest receivable Discounts and loans Overdue receivable Total impairment fnancial assets		264 10,123 5,722,768 53,947 5,787,102	546 28,639 13,680,279 51,882 13,761,346	- - 20,769,101 - 20,769,101
	$ 810
	38,762
	19,403,047
	105,829
	$ 19,548,448

Note: The value of collateral is the real estate appraisal information and credit guarantee agency guarantee amount levied by the Bank's credit assets.

(11) Credit risk concentration

The total amount of discounts and loans, overdue loans in terms of individual customer or individual trade counterparty is not significant. The information of credit risk concentration of the Bank's discounts and loans and overdue loans are divided by industries, geographic areas and collaterals and listed as follows:

A. By industry

Distribution of discounts and loans, overdue loans based on industries.

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December 31, 2020 December 31, 2019
Industry Amount % Amount %
Private business $ 777,673,749 63.52% 698,913,482 60.98%
Public business 10,940,025 0.89% 4 -%
Government institution 53,863,302 4.40% 75,701,806 6.61%
Nonprofit organization 2,868,681 0.23% 2,984,867 0.26%
Individual 305,732,834 24.98% 293,998,770 25.65%
Foreign financial institution 3,721,990 0.30% 3,992,809 0.35%
Foreign non-financial institution 67,672,995 5.53% 66,451,574 5.80%
Foreign individual 1,821,665 0.15% 4,047,438 0.35%
Total $ 1,224,295,241 100.00% 1,146,090,750 100.00%
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B. By geographic area

Distribution of discounts and loans, overdue loans based on geographic area.

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December 31, 2020 December 31, 2019
Area Amount % Amount %
Domestic $ 1,151,078,591 94.02% 1,071,598,929 93.50%
Foreign 73,216,650 5.98% 74,491,821 6.50%
Total $ 1,224,295,241 100.00% 1,146,090,750 100.00%
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C. By collateral

Distribution of discounts and loans, overdue loans based on collateral.

	December 31, 2020 December 31, 2019 Collateral Amount % Amount % Unsecured $ 225,320,364 18.40% 242,592,802 21.17% Stocks 9,175,475 0.75% 8,425,118 0.73% Bonds 19,544,832 1.60% 19,411,907 1.69% Real estate 754,931,145 61.66% 721,629,891 62.96% Chattel 18,785,101 1.53% 17,950,096 1.57% Notes receivable 3,724,442 0.30% 3,962,549 0.35% Guarantees 183,962,821 15.04% 120,774,302 10.54% Others 8,851,061 0.72% 11,344,085 0.99% Total $ 1,224,295,241 100.00% 1,146,090,750 100.00% Note: Secured credit are categorized in its respective item per the type of the collaterals. Non-secured credit (no collateral provided) is classified in unsecured. If the credit amount is higher than the accreditation value, the credit amount within the accreditation is classifed in the respective item, the credit amount exceeds the accreditation value is classifed in unsecured. The accreditation value is the value calculated per the accreditation regulations of the Bank, not the discounted value of the signed contract. (12) Maximum credit risk exposure A. The maximum credit exposure of the assets in the financial statement is approximately the book value when not considering collaterals or other credit enhancement instruments. The maximum credit exposure off the balance sheet (when not considering collaterals or other credit enhancement instruments and not revocable) was as follows: Maximum credit risk exposure Off balance sheet items December 31, 2020 December 31, 2019 Issued and irrevocable loan commitments $ 61,833,395 55,259,927 Irrevocable credit card loan commitments 20,067,204 20,072,907 Letters of credit issued yet unused 8,892,012 7,156,747 Various guarantee proceeds 20,636,932 18,400,367 Total $ 111,429,543 100,889,948 The Management of the Bank evaluated the credit risk exposure and believed that it is able to continuously control and minimize the off-balance-sheet credit risk exposure due to its strict appraisal process and regular subsequent examination. B. The credit quality analyses of the fnancial assets a. Credit quality analysis of discounts and loans, receivables, guarantee and commitments	December 31, 2020 December 31, 2019 Collateral Amount % Amount % Unsecured $ 225,320,364 18.40% 242,592,802 21.17% Stocks 9,175,475 0.75% 8,425,118 0.73% Bonds 19,544,832 1.60% 19,411,907 1.69% Real estate 754,931,145 61.66% 721,629,891 62.96% Chattel 18,785,101 1.53% 17,950,096 1.57% Notes receivable 3,724,442 0.30% 3,962,549 0.35% Guarantees 183,962,821 15.04% 120,774,302 10.54% Others 8,851,061 0.72% 11,344,085 0.99% Total $ 1,224,295,241 100.00% 1,146,090,750 100.00% Note: Secured credit are categorized in its respective item per the type of the collaterals. Non-secured credit (no collateral provided) is classified in unsecured. If the credit amount is higher than the accreditation value, the credit amount within the accreditation is classifed in the respective item, the credit amount exceeds the accreditation value is classifed in unsecured. The accreditation value is the value calculated per the accreditation regulations of the Bank, not the discounted value of the signed contract. (12) Maximum credit risk exposure A. The maximum credit exposure of the assets in the financial statement is approximately the book value when not considering collaterals or other credit enhancement instruments. The maximum credit exposure off the balance sheet (when not considering collaterals or other credit enhancement instruments and not revocable) was as follows: Maximum credit risk exposure Off balance sheet items December 31, 2020 December 31, 2019 Issued and irrevocable loan commitments $ 61,833,395 55,259,927 Irrevocable credit card loan commitments 20,067,204 20,072,907 Letters of credit issued yet unused 8,892,012 7,156,747 Various guarantee proceeds 20,636,932 18,400,367 Total $ 111,429,543 100,889,948 The Management of the Bank evaluated the credit risk exposure and believed that it is able to continuously control and minimize the off-balance-sheet credit risk exposure due to its strict appraisal process and regular subsequent examination. B. The credit quality analyses of the fnancial assets a. Credit quality analysis of discounts and loans, receivables, guarantee and commitments							December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2019
			Collateral						Amount			%			Amount					%
			Unsecured Stocks Bonds Real estate Chattel Notes receivable Guarantees Others Total						$ 225,320,364			18.40%			242,592,802 8,425,118 19,411,907 721,629,891 17,950,096 3,962,549 120,774,302 11,344,085 1,146,090,750					21.17% 0.73% 1.69% 62.96% 1.57% 0.35% 10.54% 0.99% 100.00%
									9,175,475			0.75%
									19,544,832			1.60%
									754,931,145			61.66%
									18,785,101			1.53%
									3,724,442			0.30%
									183,962,821			15.04%
									8,851,061			0.72%
									$ 1,224,295,241			100.00%
												Maximum credit						risk exposure
			Off balance sheet items									December 31, 2020						December 31, 2019
			Issued and irrevocable loan commitments Irrevocable credit card loan commitments Letters of credit issued yet unused Various guarantee proceeds Total									$ 61,833,395						55,259,927 20,072,907 7,156,747 18,400,367 100,889,948
												20,067,204
												8,892,012
												20,636,932
												$ 111,429,543
			The Management of the Bank evaluated the credit risk exposure and believed that it is able to continuously control and minimize the off-balance-sheet credit risk exposure due to its strict appraisal process and regular subsequent examination. The credit quality analyses of the fnancial assets a. Credit quality analysis of discounts and loans, receivables, guarantee and commitments
			12-month ECL						Lifetime ECL－not impaired										Lifetime ECL－ impaired
December 31, 2020	Excellent	Good		Medium	Acceptable	Under standard	No rating	Subtotal	Excellent	Good	Medium		Acceptable	Under standard	No rating	Subtotal			High risk		Allowance impairment	Total
Receivable Credit card Acceptances receivable Other receivables Discounts and loans Private banking Corporate banking Other fnancial assets Overdue receivable Total Guarantee and commitments	$ 465,192 271,727 200,365 114,964,176 159,077,810 - $ 274,979,270 $ 26,160,471	151,235 689,404 319,067 108,069,036 276,441,887 - 385,670,629 14,889,757		203,982 111,845 443,197 66,948,050 269,775,572 - 337,482,646 5,567,518	21,460 5,812 38,386 4,917,753 33,545,450 - 38,528,861 945,234	1,927 12,400 9,723 990,763 9,752,131 - 10,766,944 330,756	240,049 192,565 1,673,377 5,026,892 107,943,286 - 115,076,169 62,931,925	1,083,845 1,283,753 2,684,115 300,916,670 856,536,136 - 1,162,504,519 110,825,661	1,568 - 2,344 5,485 2,615,868 - 2,625,265 44,927	717 - 19,338 172,716 14,235,894 - 14,428,665 37,019	3,049 - 11,165 157,123 13,636,440 - 13,807,777 40,993		215 - 7,828 31,627 6,744,478 - 6,784,148 14	138 - 1,395 148,272 1,197,555 - 1,347,360 -	498 - 2,325 693 2,520,718 - 2,524,234 433,734	6,185 - 44,395 515,916 40,950,953 - 41,517,449 556,687			- - 26,687 6,121,914 19,253,652 68,832 25,471,085 47,195		2,045 12,837 69,280 3,467,633 10,858,524 55,051 14,465,370 271,182	1,087,985 1,270,916 2,685,917 304,086,867 905,882,217 13,781 1,215,027,683 111,158,361

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Lifetime ECL －
12-month ECL Lifetime ECL － not impaired impaired
(Restatement) Allowance
December 31, 2019 Excellent Good Medium Acceptable Under standard No rating Subtotal Excellent Good Medium Acceptable Under standard No rating Subtotal High risk impairment Total
----- End of picture text -----

(Restatement) December 31, 2019	12-month ECL	12-month ECL	12-month ECL	12-month ECL	12-month ECL	12-month ECL	12-month ECL	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－ impaired	Allowance impairment	Total
	Excellent	Good	Medium	Acceptable	Under standard	No rating	Subtotal	Excellent	Good	Medium	Acceptable	Under standard	No rating	Subtotal	High risk
Receivable Credit card Acceptances receivable Accounts receivable factoring Other receivables Discounts and loans Private banking Corporate banking Other fnancial assets Overdue receivable Total Guarantee and commitments	$ 565,022 196,869 - 274,150 114,510,252 172,479,816 - $ 288,026,109 $ 29,738,327	133,458 496,036 - 407,958 100,852,540 260,682,892 - 362,572,884 9,577,042	233,637 105,120 - 311,286 68,662,021 218,425,945 - 287,738,009 3,310,453	31,938 32,197 - 43,556 4,831,469 36,941,972 - 41,881,132 878,885	3,428 - - 6,867 1,126,572 4,249,047 - 5,385,914 50,764	321,592 89,328 19,089 2,250,595 2,982,316 133,618,335 - 139,281,255 57,139,021	1,289,075 919,550 19,089 3,294,412 292,965,170 826,398,007 - 1,124,885,303 100,694,492	1,965 - - 310 42,853 402,500 - 447,628 68,030	1,826 - - 969 229,741 36,161 - 268,697 38,417	3,426 - - 5,485 276,231 3,443,874 - 3,729,016 523	807 - - 500 61,477 191,431 - 254,215 33	389 - - 2,655 133,295 2,457,788 - 2,594,127 148	234 - - 41 112 49,063 - 49,450 1,422	8,647 - - 9,960 743,709 6,580,817 - 7,343,133 108,573	- - - 39,572 4,337,330 15,065,717 105,829 19,548,448 86,883	3,341 9,195 191 49,041 3,469,485 9,871,883 85,901 13,489,037 232,446	1,294,381 910,355 18,898 3,294,903 294,576,724 838,172,658 19,928 1,138,287,847 100,657,502

b. Debt instruments

	12-month ECL	12-month ECL	12-month ECL	12-month ECL	12-month ECL	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－ impaired	Total	Accumulated impairment (Note)
December 31, 2020	Investment	Sub investment	High risk	No rating	Subtotal	Investment	Sub investment	High risk	No rating	Subtotal	High risk
Investment in debt instruments measured at fair value through other comprehensive income Overseas bonds NT bonds Investment in debt instruments at amortized cost Overseas bonds NT bonds Certifcates of deposit with the Central Bank Negotiable certifcates of deposit Total	$ 36,844,475 67,247,661 24,555,550 41,537,821 161,705,000 280,925 $ 332,171,432	- - - - - - -	- - - - - - -	- - - - - - -	36,844,475 67,247,661 24,555,550 41,537,821 161,705,000 280,925 332,171,432	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	36,844,475 67,247,661 24,555,550 41,537,821 161,705,000 280,925 332,171,432	11,599 54,855 10,790 17,333 47,754 87 142,418
	12-month ECL					Lifetime ECL－not impaired					Lifetime ECL－ impaired	Total	Accumulated impairment (Note)
December 31, 2019	Investment	Sub investment	High risk	No rating	Subtotal	Investment	Sub investment	High risk	No rating	Subtotal	High risk
Investment in debt instruments measured at fair value through other comprehensive income Overseas bonds NT bonds Investment in debt instruments at amortized cost Overseas bonds NT bonds Certifcates of deposit with the Central Bank Negotiable certifcates of deposit Total	$ 24,664,354 66,578,857 39,453,717 48,150,744 174,880,000 362,868 $ 354,090,540	- - 299,924 - - - 299,924	- - - - - - -	- - - - - - -	24,664,354 66,578,857 39,753,641 48,150,744 174,880,000 362,868 354,390,464	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	24,664,354 66,578,857 39,753,641 48,150,744 174,880,000 362,868 354,390,464	6,045 46,254 15,963 22,691 51,645 112 142,710

as other equity.

286 Taiwan Business Bank Annual Report 2020

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C. The Maximum credit risk exposure for financial instruments are not subject to impairment regulations are as follows:

December 31, 2020	Maximum credit risk exposure	Collateral	Enhancement of other credit
Financial assets at fair value through proft or loss －Debt investments －Commercial paper －Listed stocks －Benefciary certifcates －Derivative instruments	$ 1,443,111 12,414,244 188,304 267,054 690,858	- - - - 882,623	- - - - 700,109
December 31, 2019	Maximum credit risk exposure	Collateral	Enhancement of other credit
Financial assets at fair value through proft or loss －Debt investments －Commercial paper －Listed stocks －Benefciary certifcates －Derivative instruments	$ 4,351,167 21,037,165 178,867 108,890 950,796	- - - - 484,712	- - - - 468,795

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(13) Changes in the expected credit losses of the Bank

A. Receivables

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For the year ended December 31, 2020
Impairment difference of
"Regulations Governing the
Procedures for Banking
Institutions to Evaluate Assets
Lifetime ECL － not Lifetime ECL － and Deal with Non-Performing
12-month ECL impaired impaired Impaired (IFRS9) and Non-Accrual Loans " Total
Beginning balance $ 10,249 1,369 10,387 22,005 39,763 61,768
Changes in financial instruments that have been
identified at the beginning of the period ：
－ Transferred to 12-months ECL 182 (76 ) (106 ) - -
－ Transferred to lifetime ECL (97 ) 119 (22 ) - -
－ Transferred to the credit-impaired financial assets (18 ) (115 ) 133 - -
－ The financial assets that have been derecognized (5,662 ) (1,016 ) (8,291 ) (14,969 ) (14,969 )
New financial assets originated or purchased 8,259 124 2,294 10,677 10,677
Other changes 295 835 909 2,039 2,039
Impairment difference of "Regulations Governing the
Procedures for Banking Institutions to Evaluate
Assets and Deal with Non-Performing and Non-
Accrual Loans " - - - - 24,647 24,647
Ending balance $ 13,208 1,240 5,304 19,752 64,410 84,162
For the year ended December 31, 2019
Impairment difference of
"Regulations Governing the
Procedures for Banking
Institutions to Evaluate Assets
Lifetime ECL － not Lifetime ECL － and Deal with Non-Performing
12-month ECL impaired impaired Impaired (IFRS9) and Non-Accrual Loans " Total
Beginning balance $ 14,420 2,391 8,370 25,181 43,254 68,435
Changes in financial instruments that have been
identified at the beginning of the period ：
－ Transferred to 12-months ECL 136 (48 ) (88 ) - -
－ Transferred to lifetime ECL (25 ) 44 (19 ) - -
－ Transferred to the credit-impaired financial assets (27 ) (63 ) 90 - -
－ The financial assets that have been derecognized (10,110 ) (1,224 ) (4,188 ) (15,522 ) (15,522 )
New financial assets originated or purchased 6,452 154 6,411 13,017 13,017
Other changes (597 ) 115 (189 ) (671 ) (671 )
Impairment difference of "Regulations Governing the
Procedures for Banking Institutions to Evaluate
Assets and Deal with Non-Performing and Non-
Accrual Loans " - - - - (3,491 ) (3,491 )
Ending balance $ 10,249 1,369 10,387 22,005 39,763 61,768
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287

B. Discounts and loans

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For the year ended December 31, 2020
Impairment difference of
"Regulations Governing
the Procedures for
Banking
Institutions to Evaluate
Lifetime Assets and Deal with
ECL-not Lifetime Non-Performing and Non-
12-month ECL impaired ECL-impaired Impaired (IFRS9) Accrual Loans " Total
Beginning balance $ 2,197,066 197,473 5,722,768 8,117,307 5,224,061 13,341,368
Changes in financial instruments that
have been identified at the beginning of
the period ：
－ Transferred to 12-months ECL 126,863 (41,278 ) (85,585 ) - -
－ Transferred to lifetime ECL (66,262 ) 68,751 (2,489 ) - -
－ Transferred to the credit-impaired
financial assets (15,145 ) (57,177 ) 72,322 - -
－
The financial assets that have been
derecognized (1,126,499 ) (22,230 ) (1,132,117 ) (2,280,846 ) (2,280,846 )
New financial assets originated or
purchased 1,888,013 216,028 450,914 2,554,955 2,554,955
Write-off - - (3,841,168 ) (3,841,168 ) (3,841,168 )
Other changes 129,179 589,443 4,034,576 4,753,198 4,753,198
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and Deal
with Non-Performing and Non-Accrual
Loans " - - - - (201,350 ) (201,350 )
Ending balance $ 3,133,215 951,010 5,219,221 9,303,446 5,022,711 14,326,157
For the year ended December 31, 2019
Impairment difference of
"Regulations Governing
the Procedures for
Banking
Institutions to Evaluate
Lifetime Assets and Deal with
ECL-not Lifetime Non-Performing and Non-
12-month ECL impaired ECL-impaired Impaired (IFRS9) Accrual Loans " Total
Beginning balance $ 2,774,377 66,416 4,659,004 7,499,797 5,534,354 13,034,151
Changes in financial instruments that
have been identified at the beginning of
the period ：
－ Transferred to 12-months ECL 68,543 (11,251 ) (57,292 ) - -
－ Transferred to lifetime ECL (15,688 ) 18,916 (3,228 ) - -
－ Transferred to the credit-impaired
financial assets (19,820 ) (15,298 ) 35,118 - -
－
The financial assets that have been
derecognized (1,413,191 ) (18,785 ) (979,822 ) (2,411,798 ) (2,411,798 )
New financial assets originated or
purchased 1,312,987 29,338 707,320 2,049,645 2,049,645
Write-off - - (469,404 ) (469,404 ) (469,404 )
Other changes (510,142 ) 128,137 1,831,072 1,449,067 1,449,067
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and Deal
with Non-Performing and Non-Accrual
Loans " - - - - (310,293 ) (310,293 )
Ending balance $ 2,197,066 197,473 5,722,768 8,117,307 5,224,061 13,341,368
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For the year ended December 31, 2020
Impairment difference of
"Regulations Governing
the Procedures for
Banking
Institutions to Evaluate
Lifetime Assets and Deal with
ECL-not Lifetime Non-Performing and
12-month ECL impaired ECL-impaired Impaired (IFRS9) Non-Accrual Loans " Total
Beginning balance $ - - 53,947 53,947 31,954 85,901
New financial assets originated or
purchased - - 13,908 13,908 13,908
Write-off - - (44,249 ) (44,249 ) (44,249 )
- -
Other changes (485 ) (485 ) (485 )
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and
Deal with Non-Performing and Non-
Accrual Loans " - - - - (24 ) (24 )
Ending balance $ - - 23,121 23,121 31,930 55,051
For the year ended December 31, 2019
Impairment difference of
"Regulations Governing
the Procedures for
Banking
Institutions to Evaluate
Lifetime Assets and Deal with
ECL-not Lifetime Non-Performing and
12-month ECL impaired ECL-impaired Impaired (IFRS9) Non-Accrual Loans " Total
Beginning balance $ - - 54,231 54,231 33,018 87,249
Changes in financial instruments that
have been identified at the beginning
of the period ：
－
The financial assets that have been
- -
derecognized (59 ) (59 ) (59 )
New financial assets originated or
purchased - - 21,784 21,784 21,784
Write-off - - (22,009 ) (22,009 ) (22,009 )
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and
Deal with Non-Performing and Non-
Accrual Loans " - - - - (1,064 ) (1,064)
Ending balance $ - - 53,947 53,947 31,954 85,901
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289

D. Guarantee and commitments

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For the year ended December 31, 2020
Impairment difference of
"Regulations Governing
the Procedures for
Banking
Institutions to Evaluate
Lifetime Assets and Deal with
ECL-not Lifetime Non-Performing and
12-month ECL impaired ECL-impaired Impaired (IFRS9) Non-Accrual Loans " Total
Beginning balance $ 59,045 338 17,220 76,603 155,843 232,446
Changes in financial instruments that
have been identified at the beginning
of the period ：
－ Transferred to 12-months ECL 25 (25 ) - - -
－ Transferred to lifetime ECL (367 ) 367 - - -
－ Transferred to the credit-impaired
financial assets (57 ) - 57 - -
－
The financial assets that have been
derecognized (21,828 ) (278 ) (14,118 ) (36,224 ) (36,224 )
New financial assets originated or
purchased 52,185 378 652 53,215 53,215
Other changes 17,667 100 2,888 20,655 20,655
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and
Deal with Non-Performing and Non-
Accrual Loans " - - - - 1,090 1,090
Ending balance $ 106,670 880 6,699 114,249 156,933 271,182
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For the year ended December 31, 2019
Impairment difference of
"Regulations Governing
the Procedures for
Banking
Institutions to Evaluate
Lifetime Assets and Deal with
ECL-not Lifetime Non-Performing and
12-month ECL impaired ECL-impaired Impaired (IFRS9) Non-Accrual Loans " Total
Beginning balance $ 106,141 418 28,523 135,082 154,054 289,136
Changes in financial instruments that
have been identified at the beginning
of the period:
－ Transferred to lifetime ECL (67 ) 67 - - -
－ Transferred to the credit-impaired
financial assets (28 ) (27 ) 55 - -
－
The financial assets that have been
derecognized (49,068 ) (161 ) (27,395 ) (76,624 ) (76,624 )
New financial assets originated or
purchased 26,117 24 14,718 40,859 40,859
Other changes (24,050 ) 17 1,319 (22,714 ) (22,714 )
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and
Deal with Non-Performing and Non-
Accrual Loans " - - - - 1,789 1,789
Ending balance $ 59,045 338 17,220 76,603 155,843 232,446
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E. Debts investments

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For the year ended December 31, 2020
Lifetime ECL － not Lifetime ECL －
12-month ECL impaired impaired Total
Beginning balance $ 142,710 - - 142,710
Additions 69,437 - - 69,437
- -
Derecognition (69,680 ) (69,680 )
- -
Other changes (49 ) (49 )
Ending balance $ 142,418 - - 142,418
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For the year ended December 31, 2019
Lifetime ECL － not Lifetime ECL －
12-month ECL impaired impaired Total
Beginning balance $ 126,893 - - 126,893
Additions 67,834 - - 67,834
- -
Derecognition (50,664 ) (50,664 )
Other changes (1,353 ) - - (1,353 )
Ending balance $ 142,710 - - 142,710
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• (14) Collateral management policy

• A. Collaterals are recognized under the account of other assets per the rules of "Regulations Governing the Preparation of Financial Reports by Public Banks".

• B. Details were as follows:

Collaterals refer to the collaterals provided by clients as guarantee which are undertaken through public auction when the debtor is not able to fulfill its obligation. The collaterals assumed are recognized using the prices undertaken per the rules of "Regulations Governing the Preparation of Financial Reports by Public Banks" and measured by the book value or the fair value deducted by cost of sale, whichever is lower, at the end of the period. Collaterals will be sold when they are available to be sold and the proceeds received will be used to reduce the book amount of collaterals.

(d) Liquidity risk

finance to fulfill the financial obligation which is going to mature with sufficient fund, such as early rescind of time deposits, the channels and terms to call loan from other bank are deteriorated due to the influence of specific markets and the default of loan customers worsen and it is harder for the Bank to receive payments and liquidate financial instruments. The abovementioned situations may diminish the source of cash for the Bank to undertake loan business, trades and investment activities. Under some extreme circumstances, the lack of liquidity may increase the potential possibility of reduction of the overall position of financial statement, sale of assets and inability to fulfill loan obligation. Liquidity risk is an inherent risk of bank operations and is influenced by specific or overall events in various markets. Those events include but not limited to: Credit event, merger or buyout, systematic strike and natural disaster.

291

• (2) The management policy, process and measurement of liquidity risk

A. Policy

  - a. In accordance with the target and limit for liquidity risk management approved by the board of directors and monitor all liquidity risk positions.

  - b. Established "Directions Governing the Capital Liquidity Risk Management of Taiwan Business Bank" and "Remarks Governing the Capital Liquidity Risk Management of Taiwan Business Bank" to serve as guidance to effectively control capital liquidity risk.

  - c. Overseas branches shall regulate the code of conduct for liquidity risk management based on business characteristics and the regulations of local authorities. After being approved by the general manager, the Risk Management Department will be in charge of monitoring liquidity risk.

• B. Process

  • a. Finance Department is in charge of daily capital deployment to ensure that the capital is sufficient to cope with various demands for capital.

  • b. Risk Management Department is in charge of the identification, measurement, supervision and control of capital liquidity risk to establish a firm operation process and structure.

  • c. Risk Management Department reports the result of capital liquidity risk measurement to the Assets and Liabilities Management Committee on a monthly basis and reports the results of capital liquidity risk and pressure test to the board of directors quarterly.

• C. Measurement

  • based on the remaining days to maturity and calculate the gap of capital of each time zone in order to measure the capital deficiency of each time zone.

  • b. Loan-deposit ratio: To calculate the deposits the Bank received which are used to conduct loan business. In other words, the percentage of the total loan amount accounts for the total deposit amount.

  • c. Capital concentration and stability: In order to prevent the Bank from over-relying on single trade counterparty, product or market, the Bank observes several aspects such as the changes in large time deposit customers, the percentage of demand deposits and the continuity of deposits.

  • d. Pressure test: Except for monitoring the capital demand under normal circumstances, the Bank conducts pressure test regularly in order to evaluate the capital liquidity under abnormal circumstances and ensure that the Bank is equipped with sufficient capital.

• (3) Financial assets possessed for managing liquidity risk and maturity analysis for non-derivative financial liability

• A. Financial assets possessed for managing liquidity risk

The Bank possesses cash and other high liquidity interest yielding assets to cope with payment obligations and potential emergent capital demands in the market. The assets possessed for managing liquidity risk include cash and cash equivalent, due from the Central Bank and call loans to banks, financial assets at fair value through profit or loss, discounts and loans, financial assets measured at fair value through other comprehensive income and investment in debt instruments at amortized cost.

possessed by the Bank based on the remaining days from the financial statement date to the contract maturity date. The amount disclosed is based on the cash flows of the contracts.

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December 31, 2020
0-30 days 31-90 days 91days-1 year 1-5 years Over 5 years Total
Major matured cash outflow $ 949,743,136 166,775,347 425,185,011 58,671,314 37,614,645 1,637,989,453
Deposits from the Central Bank 900,620 - - - - 900,620
and banks
Overdrafts on banks 777,971 - - - - 777,971
Call loans from the Central Bank 33,177,364 12,082,474 2,987,250 - - 48,247,088
and banks
Due to the Central Bank and banks - - 28,450,000 - - 28,450,000
Financial liabilities designated at - - - - 8,411,020 8,411,020
fair value through profit or loss
Notes and bonds issued under 488,948 185,344 594,313 787,386 - 2,055,991
repurchase agreement
Interest payable 548,704 891,394 872,656 58,128 8 2,370,890
Deposits transferred from 10,800,000 20,120,150 37,355,210 - - 68,275,360
Chunghwa Post Co., Ltd.
Demand deposits 813,463,426 - - - - 813,463,426
Time deposits 88,113,265 133,435,966 346,582,629 36,679,797 1,433 604,813,090
Remittance 426,966 - - - - 426,966
Bank notes payable 1,000,000 - 8,000,000 18,340,000 25,910,000 53,250,000
Cumulative earnings on 250 6,670 110,420 2,220,250 3,154,776 5,492,366
appropriated loan fund
Lease liabilities 45,622 53,349 232,533 585,753 137,408 1,054,665
December 31, 2019
0-30 days 31-90 days 91days-1 year 1-5 years Over 5 years Total
Major matured cash outflow $ 904,251,553 193,235,955 422,931,903 63,452,023 29,806,197 1,613,677,631
Deposits from the Central Bank 268,330 - - - - 268,330
and banks
Overdrafts on banks 1,118,477 - - - - 1,118,477
Call loans from the Central Bank 24,703,175 8,444,072 1,847,147 - - 34,994,394
and banks
Financial liabilities designated at - - - - 8,949,182 8,949,182
fair value through profit or loss
Notes and bonds issued under 60,390 172,381 635,810 - - 868,581
repurchase agreement
Interest payable 448,482 803,258 1,291,095 79,568 8 2,622,411
Deposits transferred from 11,200,000 24,312,411 32,900,000 - - 68,412,411
Chunghwa Post Co., Ltd.
Demand deposits 755,618,654 - - - - 755,618,654
Time deposits 110,481,949 154,439,507 370,847,890 43,619,659 18,237 679,407,242
Remittance 306,198 - - - - 306,198
Bank notes payable - 5,000,000 15,000,000 16,790,000 16,460,000 53,250,000
Cumulative earnings on 2,500 - 161,670 2,412,080 4,258,834 6,835,084
appropriated loan fund
Lease liabilities 43,398 64,326 248,291 550,716 119,936 1,026,667
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The derivative instruments of the Bank whose possession are settled by net amount include foreign derivative instruments, such as non-delivery forward contracts and net-delivery foreign exchange option. After evaluation the Bank concluded that the maturity date is the basic element to comprehend all the derivative financial instruments listed in the financial statement. The amount disclosed is based on the cash flows of the contracts and thus part of the amount

293

31, 2020, the Bank had no derivative financial instruments settled by net amount. As of December 31, 2019, maturity analysis for the derivative financial liabilities settled by net amount is as follows:

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December 31, 2019
0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Derivative financial liabilities at fair
value through profit or loss
Foreign exchange derivative $ - - - 560 - 560
instrument
----- End of picture text -----

The derivative instruments of the Bank's possession settled by gross amount include the following:

• amount, foreign exchange forward contracts and currency swap contracts.

settled by gross amount based on the remaining days from the financial statement date to the contract maturity date. The amount disclosed is based on the cash flow of the contracts and thus part of the amount disclosed may not correspond to the amount disclosed in the financial statement. The maturity analysis for derivative financial liabilities settled by gross amount is as follows:

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December 31, 2020 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Derivative financial instruments at fair
value through profit or loss
Foreign exchange derivative
instruments
Cash outflow $ 18,587,554 20,742,526 14,038,845 8,411,846 - 61,780,771
Cash inflow 18,999,896 21,036,931 14,267,128 8,406,666 - 62,710,621
Interest rate derivative instrument
Cash outflow - 7,903 14,547 9,222 18,690 50,362
Cash inflow 671 1,071 6,907 6,513 15,276 30,438
Total cash outflow 18,587,554 20,750,429 14,053,392 8,421,068 18,690 61,831,133
Total cash inflow 19,000,567 21,038,002 14,274,035 8,413,179 15,276 62,741,059
Net cash flow $ (413,013 ) (287,573 ) (220,643 ) 7,889 3,414 (909,926 )
December 31, 2019 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Derivative financial instruments at fair
value through profit or loss
Foreign exchange derivative
instruments
Cash outflow $ 54,733,698 32,548,928 71,226,616 56,264,496 1,799,400 216,573,138
Cash inflow 55,106,820 32,263,313 70,476,718 56,270,898 1,802,371 215,920,120
Interest rate derivative instrument
Cash outflow - 15,820 22,689 35,707 52,623 126,839
Cash inflow 6,336 3,951 26,496 38,679 44,908 120,370
Total cash outflow 54,733,698 32,564,748 71,249,305 56,300,203 1,852,023 216,699,977
Total cash inflow 55,113,156 32,267,264 70,503,214 56,309,577 1,847,279 216,040,490
Net cash flow $ (379,458 ) 297,484 746,091 (9,374 ) 4,744 659,487
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(5) Maturity analysis of off-balance sheet items

The table below shows the maturity analysis of the off-balance-sheet items of the Bank based on the remaining days from the financial statement date to the contract maturity date. For the financial guarantee contracts issued, the maximum amount of the guarantee is listed in the earliest time zone that the guarantee may be executed. The amount disclosed is based on the cash flows of the contracts and thus part of the amount disclosed may not correspond to the amount disclosed in the

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December 31, 2020 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Issued and irrevocable loan $ 31,953 338,189 4,349,374 27,261,664 29,852,215 61,833,395
commitments
Irrevocable credit card loan 180 336 300,316 1,150,378 18,615,994 20,067,204
commitments
Letters of credit issued yet 2,473,524 5,464,898 604,705 258,636 90,249 8,892,012
unused
Other guarantees 2,148,633 2,859,595 1,189,714 3,635,884 10,803,106 20,636,932
Total $ 4,654,290 8,663,018 6,444,109 32,306,562 59,361,564 111,429,543
December 31, 2019 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Issued and irrevocable loan $ 80,600 470,300 240,778 4,151,688 50,316,561 55,259,927
commitment
Irrevocable credit card loan 426 8,850 244,874 1,383,874 18,434,883 20,072,907
commitment
Letters of credit issued yet 2,331,015 3,904,555 668,520 218,697 33,960 7,156,747
unused
Other guarantees 1,013,082 2,595,282 1,160,466 1,590,609 12,040,928 18,400,367
Total $ 3,425,123 6,978,987 2,314,638 7,344,868 80,826,332 100,889,948
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(6) Maturity analysis of lease contract commitments

The Bank only has operating lease contract, operating lease commitment refers to, when the Bank is the lessor or lessee and under the irrevocable operating lease conditions, the minimum total future rent payment. Below tables show the maturity analysis of the Bank operating lease contract commitments:

December 31, 2020	Below 1 year	1-5 years	Over 5 years	Total
Operating lease income (lessor)	$ 660	-	-	660
December 31, 2019 Below 1 year 1-5 years Over 5 years Total
Operating lease income (lessor)	$ 2,270	449	-	2,719

The capital expenditure commitment of the Bank refers to the contract signed to obtain buildings and equipment. The maturity analysis of the capital expenditure commitment of the Bank is as follows:

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December 31, 2020 Below 1 year 1-5 years Over 5 years Total
Machinery and equipment $ 1,478,133 - - 1,478,133
Transportation equipment 2,986 - - 2,986
Right-of-use assets 1,260 805 - 2,065
Miscellaneous equipment 26,900 - - 26,900
Total $ 1,509,279 805 - 1,510,084
December 31, 2019 Below 1 year 1-5 years Over 5 years Total
Machinery and equipment $ 1,226,830 - - 1,226,830
Transportation equipment 130 - - 130
Right-of-use assets 7,358 5,435 - 12,793
Miscellaneous equipment 8,899 - - 8,899
Total $ 1,243,217 5,435 - 1,248,652
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295

(e) Market risk

Market risk refers to the possible loss of the Bank's business in or off the balance sheet results from the disadvantageous fluctuation in market price in terms of interest rates, stock prices, foreign exchange rates and commodity prices.

• (2) Policies and procedures of market risk management

A. Strategy

• a. To carry out market risk management, achieve operation target and maintain healthy capital adequacy by following "Directions Governing the Market Risk Management of Taiwan Business Bank" and other relevant regulations.

• b. Under the risk tolerance approved by the board of directors or board of executive directors, the Bank applies various risk control mechanism to effectively deploy and manage capital in order to maintain the market risk exposure within the tolerable extent and achieve earning target.

B. Policies and procedures

In order to establish the market risk management mechanism and ensure that the market risk is within the tolerable extent, the Bank set up directions governing the market risk management, remarks governing the limit of market risk and financial product valuation procedures as the primary management guidance. Other than what is stated above, the Bank also establish limit control mechanism in terms of trade positions, stop-limit, suspensions and lines of alert based on the operation notices and procedures of different financial instruments, including fix income instruments, equity securities, foreign exchange transaction and derivative financial instruments.

• (3) Process for market risk management

In accordance with the rules of "Directions Governing the Market Risk Management of Taiwan Business Bank", the Bank shall conduct appropriate market risk evaluation and document the process for later review before financial instruments are promoted. The content of evaluation includes risk factors identification, evaluation methods, cost-benefit analysis, market liquidity, risk strategy, adequacy of risk management mechanism and the influence on the Bank for undertaking market risk.

• B. Risk measurement

• a. Annually based on the business development of transaction units and submit to the board of directors or board of executive directors for approval. For the units which the positions and limits remain unchanged after evaluation, they can put the positions and limits into practice after receiving the approval from the general manager.

• through different information systems. For the market data and parameters of the models applied for evaluation, they shall be random inspected regularly to determine the rationality.

C. Risk monitoring

• and serve as the guidance for daily risk management operation.

• b. All financial transactions are equipped with different regulations in terms of limit of loss and stop-limit. Provided that the valuation loss amount is over the limit, a stop-limit, suspension and subsequent risk control will be executed.

D. Risk report

Risk management department report current market risk management status of the Bank to directors, executive directors and executives to facilitate them to control the risk exposure status and adjust management procedures properly.

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• (4) Scope and method of market risk management

• A. Foreign exchange risk management

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Foreign exchange risk refers to the potential profit or loss of the foreign currency financial instruments which results from the transition among fluctuating currencies.

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• b. Applicable scope

and involve in foreign currencies.

• c. Purpose for foreign exchange risk management

To avoid loss of earnings or deterioration of financial status due to intensive fluctuation of foreign exchange and to increase capital deployment efficiency and business operation integrity.

• d. Procedures of foreign exchange risk management

• 1) In order to control foreign exchange transaction risk, the Bank established trade position authorization standard for financial transaction operations, trade units and traders in current regulations. In addition, for non-commercial business foreign exchange operation, all trade units submit the required amounts of position annually based on operation status. Risk management department will evaluated the requirement and submit to the board of directors' (executive directors) for approval. The demand will be executed after the board of directors approved. For the units which the positions remain unchanged after evaluation, they can put the positions into practice after receiving the approval from the general manager.

• 2) The trade units conduct various foreign financial product business, they shall fully understand the content of commodities, the risk tolerance and trade purpose. Trade units shall establish financial products trading strategies based on market status in the meeting every morning and submit the risk-benefit evaluation in the meeting minutes for the department heads to review. The trading shall follow the relevant authorization rules of the Bank and the stop-limit of all trade positions shall be executed reliably.

• e. Process of foreign exchange risk management

  • transactions to effectively identify risk factors and market risk resources. In addition, the financial transactions which the Bank conducts deal with simple type financial products. For complex financial products, the Bank conducts back-to-back hedge covering to effectively avoid market risk.

  • rate for held-for-trading spot exchange and exchange rate derivative and setup Greek's sensitivity allowance according to the yearly demand of trade units, the state of utilization, and monitor the load of fluctuation of exchange rate in each acceptable range.

  • C) Positions of the trading book shall be evaluated daily where the positions of the banking book shall be evaluated monthly. When there are public quotes for financial instruments, the quotes shall be the prior evaluation prices. If the financial instruments are evaluated by models, then they shall be evaluated by mathematic models prudently and the assumptions and parameters of the models shall be reviewed regularly.

297

2) Monitoring and report

  - A) When the evaluation loss of non-commercial foreign exchange transactions is over the limit, the trade units shall execute a stop-limit per the regulations. If the loss amount reaches the suspension warning line or suspension limit of the financial transaction, risk management units shall report to the general manager. Provided that the loss amount reaches the annual suspension line, risk management department shall report to the board of directors or  executive directors.

  - B) Reports of operation results shall be prepared and submitted to the department heads for approval on a daily basis.

• B. Equity security risk management

The market risks of the equity securities possessed by the Bank include the individual risk results from the market price fluctuation of individual equity security and the general market risk results from overall market price fluctuation.

• b. Applicable scope

Financial instruments similar to equity security in all trading books.

• c. Purpose of equity security risk management

To avoid loss of earnings or deterioration of financial status due to intensive fluctuation of equity securities and to increase capital deployment efficiency and business operation integrity.

• d. Procedures of equity security risk management

• 1) All trade units submit the required amounts of position annually base on operation status. Risk management department will evaluate the requirement and submit to the board of directors or executive directors. The demand will be executed after approved by the board of directors.

• 2) The trade units shall predict the possible trend of domestic stock market based on the information of foreign and domestic security markets so as to set up the operation strategies and directions. The traders shall pay close attention to the market trend when the market opens so as to conduct security transactions and the operations as well as the meeting minutes shall be submitted to the department heads to review.

• e. Process of equity security risk management

  • A) The risk management department apply Value at Risk models to measure the market risk of equity security investment. Furthermore, based on the trade units' operation demand and the risk limit established by the Bank's risk tolerance, the risk management units effectively control the variation of risk factors under an acceptable extent.

  • B) Trading book position shall be evaluated daily. When there is a public quote in the market, the quote shall be adopted as the prior evaluation price. If the transaction is in secondary market and the liquidity is high, the closing price can be adopted as the evaluation price. If the financial instruments are evaluated by models, then they shall be evaluated by mathematic models prudently and the assumptions and parameters of the models shall be reviewed regularly.

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2) Monitoring and report

• A) When the evaluation loss of equity security investment is over the limit, the trade units shall execute a stop-limit per regulations. If the loss amount reaches the suspension warning line or suspension limit of the financial transaction, risk management units shall report to the general manager. Provided that the loss amount reaches the annual suspension line, risk management department shall report to the board of directors or executive directors.

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• B) Transaction reports shall be prepared and submitted to the department heads for approval on a daily basis. And the investment gains or losses shall report to the board of directors or executive directors regularly for future reference.

C. Interest rate risk management

Interest rate risk refers to the price decline of the Bank's financial products which contain interest risk factors due to the disadvantageous changes in interest rate.

• b. Applicable scope

Financial instruments which contain interest rate factors in all trading books.

• c. Purpose of interest rate risk management

To avoid loss of earnings or deterioration of financial status due to intensive fluctuation of interest rate and to increase capital deployment efficiency and business operation integrity.

• d. Procedures of interest rate risk management

• 1) In order to control interest rate risk, the Bank established trade position authorization standard for financial transaction operations, trade units and trade counterparties in current regulations. In addition, for the positions held for trading, all trade units submit the required amounts of position annually based on operation status. Risk management department will evaluate the requirement and submit to the board of directors or executive directors for approval. The demand will be executed after the board of directors approved.

• 2) The trade units shall consider safety, liquidity and profitability and gather market information to assess the potential risk and benefit. In additional, the trade units shall choose investment target prudently through analyzing the issuers' credit, financial status, country risks and interest rate trends.

• e. Process of interest rate risk management

  • transaction to effectively identify risk factors and market risk resources. In addition, the financial transactions which the Bank conducts deal with simple type financial products. For complex financial products, the Bank conducts back-to-back hedge covering to effectively avoid market risk.

  • B) Position of the trading book shall be evaluated daily. When there are public quotes for financial instruments, the quotes shall be the prior evaluation prices. If the financial instruments are evaluated by models, then they shall be evaluated by mathematic models prudently and the assumptions and parameters of the models shall be reviewed regularly.

299

2) Monitoring and report

     - A) The risk management department apply DV01 to measure to what extent the trading book bond positions are influenced by the interest rate risk and set up interest rate sensitivity limit base on the requirements of the trade units and the risk tolerance of the Bank annually.

     - B) The trade units shall prepare the income assessment tables of trade positions and traders for the department heads to review. In addition, when the evaluation loss of the position is over the limit, the trade units shall execute a stop-limit per the regulations. If the loss amount reaches the suspension warning line or suspension limit of the financial transaction, risk management department shall report to the general manager. Provided that the loss amount reaches the annual suspension line, risk management units shall report to the board of directors or executive directors.

• D. Concentration management

  • over concentrated and enhance credit risk management, the Bank established financial institution credit risk limit based on the world ranking of Level 1 capital and credit ratings from The Banker. The trade units shall also pay attention to the changes of the credit status of individual financial institution as well as the changes of the national credit rating to conduct the transaction prudently.

  • b. For equity security investments, the Bank set up limits for single institution and single related party.

• (5) Interest rate risk management of the banking book

  • a. The interest rate risk of the banking book refers to the negative effect towards the future net interest income or economic value of equity results from the fluctuation of interest rate. Net Interest Income (hereafter NII) is the total amount of interest revenue deducted by the total amount of interest expense; Economic Value of Equity (hereafter EVE) is the total discounted future cash inflow from assets deducted by the total discounted future cash outflow from liabilities.

  • b. The management purpose of the interest rate risk management of the banking book is to control the negative effect from the interest rate risk fluctuation towards NII or EVE within the approved limit extent.

• B. The process for the interest rate risk management of the banking book

curve risk, basis risk and option characteristic risk and measures the possible influence on the earnings and economic value results from interest rate fluctuation.

• b. Monitoring and report

The Bank established limits of the ratio between interest-rate-sensitivity assets and interest-rate-sensitivity liabilities, the effect to NII in 1 year when the market interest rate parallel changes 1 BP and the effect to EVE when the market interest rate parallel changes 200 BP to control the banking book interest rate risk. The results of interest rate risk measurement are reported to the Assets and Liabilities Management Committee monthly and to the board of directors or executive directors quarterly. When the measurement result is ove r the limit, relevant units shall be convened to establish responding plan and the plan shall be

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submitted to the Assets and Liabilities Management Committee for discussion. After the plan is approved by the general manager, it shall be executed by the relevant business units and report to the board of directors or executive directors.

• (6) Value at Risk

• A. Description of Value at Risk

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Value at Risk (VaR) is a statistical amount used to evaluate the maximum possible loss of portfolio results from the changes of market risk factors within a certain period of time and a fixed

• B. Value at Risk models and assumptions

market risk for the equity security position of the trading book. Based on the historical information of the last 1 year and applies Historical Simulation Method (with the confidence interval being 99% and the duration of possession being 1 day), the Bank calculates and monitors the trend of Value at Risk.

• C. The limit of Value at Risk model

Value at Risk is a tool to measure market risk under normal circumstance. The limits of the model are listed below:

  - liquidity risk.

  - b. Value at Risk measures the possible loss of the position on hand at the end of the transaction day, but it cannot reflect the distribution of the part which actual loss exceeds Value at Risk.

  - c. Value at Risk model is based on historical data to evaluate the amount, and therefore it may not be able to predict the future changes of risk factors, especially for those exceptions result from significant market fluctuation.

• (7) Foreign exchange risk disclosure and sensitivity analysis

• A. Foreign exchange risk exposure

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Significant net positions of foreign currencies (Market risk)
December 31, 2020
Foreign currency
Currency amount (in thousands) NT$ amount
USD $ 440,115 12,367,232
JPY 2,022,710 551,188
CNY 66,291 286,709
EUR 5,401 186,821
AUD 5,013 108,531
Significant net positions of foreign currencies (Market risk)
December 31, 2019
Foreign currency
Currency amount (in thousands) NT$ amount
USD $ 411,606 12,344,064
JPY 4,142,819 1,143,832
EUR 10,906 366,878
AUD 16,808 353,220
ZAR 70,508 149,477
----- End of picture text -----

Note 2: Net foreign currency is the absolute value of the net positions of each foreign currency.

301

b. Assets and liabilities of foreign currency

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December 31, 2020
Monetary financial assets Monetary financial liabilities
Foreign currency Foreign currency
amount amount
Currency (in thousands) Spot rate NTD amount (in thousands) Spot rate NTD amount
USD $ 12,779,803 28.1000 359,112,464 12,201,044 28.1000 342,849,336
AUD 4,711,447 21.6500 102,002,828 4,634,864 21.6500 100,344,806
CNY 10,131,671 4.3250 43,819,477 10,129,659 4.3250 43,810,775
JPY 85,399,458 0.2725 23,271,352 84,061,617 0.2725 22,906,791
HKD 5,621,662 3.6240 20,372,903 5,236,467 3.6240 18,976,956
EUR 362,909 34.5900 12,553,022 363,008 34.5900 12,556,447
ZAR 4,526,436 1.9210 8,695,284 4,524,811 1.9210 8,692,162
NZD 62,764 20.3200 1,275,364 62,734 20.3200 1,274,755
GBP 26,234 38.3500 1,006,074 26,199 38.3500 1,004,732
CAD 17,894 22.0600 394,742 17,894 22.0600 394,742
SGD 7,292 21.2700 155,101 7,483 21.2700 159,163
SEK 34,592 3.4300 118,651 33,662 3.4300 115,461
Others (Note) - - 83,141 - - 93,168
Non-monetary financial assets Non-monetary financial liabilities
USD 5,181 28.1000 145,586 - - -
----- End of picture text -----

Note: Consolidated disclosure is applied for other currencies not over $100,000.

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December 31, 2019
Monetary financial assets Monetary financial liabilities
Foreign currency Foreign currency
amount amount
Currency (in thousands) Spot rate NTD amount (in thousands) Spot rate NTD amount
USD $ 14,942,409 29.9900 448,122,846 14,403,203 29.9900 431,952,058
AUD 4,212,685 21.0150 88,529,575 4,146,043 21.0150 87,129,094
CNY 36,289,937 4.2950 155,865,279 36,291,374 4.2950 155,871,451
JPY 53,452,970 0.2761 14,758,365 52,141,895 0.2761 14,396,377
HKD 6,170,963 3.8510 23,764,379 5,791,786 3.8510 22,304,168
EUR 394,078 33.6400 13,256,784 394,201 33.6400 13,260,922
ZAR 4,442,764 2.1200 9,418,660 4,443,233 2.1200 9,419,654
NZD 58,418 20.2000 1,180,044 58,414 20.2000 1,179,963
GBP 30,508 39.3800 1,201,405 30,488 39.3800 1,200,617
CAD 32,029 22.9800 736,026 32,075 22.9800 737,084
SGD 6,067 22.2600 135,051 6,156 22.2600 137,033
SEK 36,065 3.2200 116,129 35,768 3.2200 115,173
THB 172,762 1.0081 174,161 176,909 1.0081 178,342
CHF - - - 4,030 30.9750 124,829
Others (Note) - - 62,198 - - -
Non-monetary financial assets Non-monetary financial liabilities
USD 2,025 29.9900 60,730 - - -
----- End of picture text -----

Note ： Consolidated disclosure is applied for other currencies not over $100,000.

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B. Foreign exchange risk sensitivity analysis (Change by 1%)

Foreign exchange risk sensitivity analysis is the analysis that given other conditions remain the same, the influence on profit or loss and equity when each respective currency depreciate or appreciate by 1%.

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December 31, 2020
Depreciate by 1% Appreciate by 1%
Currency Income Equity Income Equity
USD $ (94,813 ) (54,119 ) 94,813 54,119
AUD 4,317 (20,838 ) (4,317 ) 20,838
HKD 2,844 (16,090 ) (2,844 ) 16,090
JPY 2 (3,839 ) (2 ) 3,839
GBP (32 ) - 32 -
SGD 41 - (41 ) -
ZAR (33 ) - 33 -
SEK (32 ) - 32 -
CHF 41 - (41 ) -
THB 59 - (59 ) -
EUR 24 - (24 ) -
NZD (14 ) - 14 -
CNY (50,706 ) - 50,706 -
Total $ (138,302 ) (94,886 ) 138,302 94,886
December 31, 2019
Depreciate by 1% Appreciate by 1%
Currency Income Equity Income Equity
USD $ (1,676 ) (55,313 ) 1,676 55,313
AUD 7,410 (18,231 ) (7,410 ) 18,231
HKD 2,979 (17,543 ) (2,979 ) 17,543
JPY 5,572 (3,766 ) (5,572 ) 3,766
GBP 125 - (125 ) -
SGD 20 - (20 ) -
ZAR 7 - (7 ) -
SEK (10 ) - 10 -
CHF 626 - (626 ) -
CAD 42 - (42 ) -
THB 42 - (42 ) -
EUR (119 ) - 119 -
NZD (8 ) - 8 -
CNY (2,189 ) - 2,189 -
Total $ 12,821 (94,853 ) (12,821 ) 94,853
----- End of picture text -----

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303

(8) Interest rate risk disclosure and sensitivity analysis

A. Interest rate sensitivity analysis

The assumption of interest rate sensitivity analysis is, under the circumstance that other conditions remain the same, the yield of the market increase or decrease by 1 basis point (1 bp).

		December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2020
		Interest rate increases by 1 bp				Interest rate decreases by 1 bp
Currency		Income		Equity		Income		Equity
Trading book TWD Banking book TWD USD AUD HKD CNY ZAR Total		$ (131 ) - (2 ) - - - - $ (133)		(4,161 ) (43,732 ) (10,477 ) (639 ) (35 ) (2,587 ) (284 ) (61,915)		131 - 2 - - - - 133		4,161 43,732 10,477 639 35 2,587 284 61,915
				December 31, 2019
		Interest rate increases by 1 bp				Interest rate decreases by 1 bp
Currency		Income		Equity		Income		Equity
Trading book TWD Banking book TWD USD AUD HKD CNY ZAR Total		$ (660 ) - 9 - - - - $ (651)		(5,211 ) (49,215 ) (13,057 ) (647 ) (78 ) (1,423 ) (80 ) (69,711)		660 - (9 ) - - - - 651		5,211 49,215 13,057 647 78 1,423 80 69,711

B. Sensitivity analysis of expected net revenue/Sensitivity of equity in terms of interest rate

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December 31, 2020
Effect on NII in 1 year Effect on EVE
Scenario TWD USD TWD USD
Interest rate increases by 100 bp 3,709,697 (28,815 ) (823,603 ) (50,085 )
Interest rate decreases by 100 bp (4,860,513 ) 4,141 3,263,342 40,109
December 31, 2019
Effect on NII in 1 year Effect on EVE
Scenario TWD USD TWD USD
Interest rate increases by 100 bp 3,000,869 (21,189 ) (2,668,734 ) (59,485 )
Interest rate decreases by 100 bp (5,575,295 ) 8,698 4,298,253 65,845
----- End of picture text -----

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(9) Equity security risk disclosure and sensitivity analysis

• A. Equity security sensitivity analysis (Changes by 1%)

The assumption of equity security sensitivity analysis is, under the circumstance that other conditions remain the same, the price of equity security increased or decreased by 1%.

		December 31, 2020	December 31, 2020
Change	Currency	Income	Equity
Equity security price increases by 1 % Equity security price decreases by 1 %	TWD USD TWD USD	2,053 52 (2,053 ) (52 )	- - - -
	December 31, 2019
Change	Currency	Income	Equity
Equity security price increases by 1 % Equity security price decreases by 1 %	TWD USD TWD USD	1,789 20 (1,789 ) (20 )	- - - -

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B. Value at Risk of equity security

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From the year ended December 31, 2020
Value at Risk Average Maximun Minimun
Equity security risk 6,749 15,917 1,668
For the year ended December 31, 2019
Value at Risk Average Maximun Minimun
Equity security risk 3,255 7,623 94
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The transactions, relating to transferred financial assets not qualifying for full derecognition, the Bank conduct during daily operation mostly involve securities lending in accordance to repurchase agreements. Since the right to receive contractual cash flow has been transferred to others and the Bank's obligation to repurchase the transferred assets for a fixed price at a future date is recognized under liability, for these transactions, the Bank cannot use, sell or pledge those transferred financial assets in availability period, the Bank have interest rate risk and credit risk, the said transferred assets are not fully derecognized.

derecognized.

The Bank has an exercisable master netting arrangement or similar agreement in place with counterparties. When both parties reach a consensus regarding net settlement, the aforesaid exercisable master netting arrangement or similar agreement can be net settled by offsetting financial assets and financial liabilities. If not, the transaction can be settled at total amount. In the event of default involving one of the parties, the other party can have the transaction net settled.

305

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December 31, 2020
Financial assets under offsetting or general agreement of net amount settlement or similar norm
Gross amounts of Net amount of Amounts not set off in the
Gross amounts financial liabilities financial assets balance sheet(d)
of recognized offset in the presented in the Financial
financial assets balance sheet balance sheet instruments Cash collateral Net amount
Item (a) (b) (c)=(a)-(b) (Note) received (e)=(c)-(d)
Derivative financial
instruments $ 391,191 - 391,191 700,109 882,623 (1,191,541)
December 31, 2020
Financial liabilities under offsetting or general agreement of net amount settlement or similar norm
Gross amounts of Gross amounts of Net amount of Amounts not set off in the
recognized financial assets financial liabilities balance sheet(d)
Item financial offset in the presented in the Financial
liabilities balance sheet balance sheet instruments Cash collateral Net amount
(a) (b) (c)=(a)-(b) (Note) pledged (e)=(c)-(d)
Derivative financial
instruments $ 101,929 - 101,929 - 1,531,091 (1,429,162)
December 31, 2019
Financial assets under offsetting or general agreement of net amount settlement or similar norm
Gross amounts of Net amount of Amounts not set off in the
Gross amounts financial liabilities financial assets balance sheet(d)
of recognized offset in the presented in the Financial
financial assets balance sheet balance sheet instruments Cash collateral Net amount
Item (a) (b) (c)=(a)-(b) (Note) received (e)=(c)-(d)
Derivative financial
instruments $ 370,369 - 370,369 468,795 484,712 (583,138)
December 31, 2019
Financial liabilities under offsetting or general agreement of net amount settlement or similar norm
Gross amounts of Gross amounts of Net amount of Amounts not set off in the
recognized financial assets financial liabilities balance sheet(d)
Item financial offset in the presented in the Financial
liabilities balance sheet balance sheet instruments Cash collateral Net amount
(a) (b) (c)=(a)-(b) (Note) pledged (e)=(c)-(d)
Derivative financial
instruments $ 131,733 - 131,733 - 969,900 (838,167)
----- End of picture text -----

(AR) Capital Management

• (a) The Bank takes business development and risk control into consideration and calculates capital adequacy per "Regulations Governing the Capital Adequacy Ratio and Capital Category of Banks" and "Calculation Methods and Forms of Proprietary Capital and Risk Capital of Banks". The ratio between proprietary capital and risk capital shall remain above the regulated minimum ratio.

• (b) In order to maintain adequate capital and reach a balance between risk control and business development, the Bank established "Directions Governing Capital Adequacy" as the guidance for controlling capital adequacy. The scope of the directions includes, except for the least capital requirements for credit risk, market risk and operation risk, significant risk such as banking book interest rate risk, liquidity risk and concentration risk. In addition, in order to link business strategies, capital and risk management, the Bank sets up capital management plan annually for the president's approval and reports to Risk Management Committee and the board of directors quarterly about relevant risks and capital control status.

• relevant rules of competent authority regarding credit risk, market risk, operation risk, interest rate risk of the banking book, and liquidity risk so as to be familiar with current business environment and monitors and adjusts capital adequacy effectively.

• (d) To cope with the implementation of new Basel Accord, the Bank set up complete risk management system, risk management operation tracking procedures to provide the management with appropriate risk

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management information for making decisions. Therefore, the Bank is able to maintain adequate capital within the tolerable extent and to ensure the provision of proprietary capital of the Bank corresponds with the overall operating risk characteristics of the Bank.

(1) Tier 1 capital

• A. Common stock equity: The item includes common stock deducted by treasury stock, goodwill and other intangible assets, deferred tax assets based on future profit status of the Bank, unrealized gain on financial assets measured at fair value through other comprehensive income, operating reserve and deficiency of allowance for bad debts, real estate retained earning increment arising from applying the fair value or the revaluation reserve as the deemed cost when first adopting IFRSs, and 25% of the major investment on financial related business.

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• deducted by the major investment on financial related business.

(2) Tier 2 capital

debenture, real estate retained earning increment arising from applying the fair value or the revaluation reserve as the deemed cost when first adopting IFRSs, 45% of unrealized gain on financial assets measured at fair value through other comprehensive income, and 50% of the major

	Item	Item	December 31, 2020	December 31, 2019
Eligible capital	Common stock equity		93,119,841	88,212,592
	Other tier 1 capital		17,504,060	12,708,443
	Tier 2 capital		40,329,291	32,082,995
	Eligible Capital		150,953,192	133,004,030
Risk-weighted assets		Standardized approach	1,058,435,685	992,799,980
	Credit risk	Internal ratings-based approach	-	-
		Securitization	-	-
		Basic indicator approach	-	-
	Operational risk	Standardized approach/selective standardized approach	38,142,417	38,286,712
		Advanced measurement approach	-	-
		Standardized approach	28,041,588	19,565,088
	Market risk	Internal model approach	-	-
	Total risk-weighted assets		1,124,619,690	1,050,651,780
Capital adequacyratio			13.42%	12.66%
Common stock equity/ Risk-weighted assets ratio			8.28%	8.40%
Tier 1 capital / Risk-weighted assets ratio			9.84%	9.61%
Leverage ratio			5.90%	5.53%

The formulas of the table are listed as follows:

• A. The eligible capital, risk-weighted assets and exposure are calculated per "Regulations Governing the Capital Adequacy and Capital Category of Banks" and "The Calculation and Forms of Eligible Capital and Risk Assets of Banks".

• Bank shall disclose the capital adequacy of this period and last period and additionally disclose the capital adequacy of the previous period ended December 31.

• C. Note 1. Eligible Capital = Common stock equity ＋ Other Tier 1 Capital ＋ Tier 2 Capital

• Note 2. Total risk-weighted assets = Credit risk weighted assets ＋ (operational risk charge ＋ market risk charge) × 12.5

• Note 3. Capital adequacy ratio= Eligible Capital ÷ Risk weighted assets.

• Note 4. Common stock equity / Risk-weighted assets ratio= Common stock equity / total risk weighted assets

• Note 5. Tier 1 capital / Risk-weighted assets ratio = (Common stock equity ＋ other tier 1 capital)/ Risk-weighted assets

• Note 6. Leverage ratio = Net Tier 1 capital / Total risk exposure.

• quarter.

307

(AS) Investing and financing activities not affecting current cash flow

December 31, 2020 and 2019 were carried out to acquire right-of-use assets under leases. Please refer to Note 6(L).

						Non-cash changes	Non-cash changes	Non-cash changes	Non-cash changes
	January 1, 2020			Cash fows		Foreign exchange rate movement		Fair value changes		Other changes		December 31, 2020
Financial liabilities at fair value through proft or loss Bank notes payable Lease liabilities Total liabilities from fnancing activities		$ 8,949,182 53,250,000 1,026,667 $ 63,225,849		- - (421,392) (421,392 )		(567,000 ) - (4,269) (571,269 )		28,838 - - 28,838		- - 453,659 453,659		8,411,020 53,250,000 1,054,665 62,715,685
						Non-cash changes
	January 1, 2019			Cash fows		Foreign exchange rate movement		Fair value changes		Other changes		December 31, 2019
Financial liabilities at fair value through proft or loss Bank notes payable Lease liabilities Total liabilities from fnancing activities		$ 9,162,841 47,450,000 897,299 $ 57,510,140		- 5,800,000 (421,892 ) 5,378,108		(223,500 ) - 77 (223,423)		9,841 - - 9,841		- - 551,183 551,183		8,949,182 53,250,000 1,026,667 63,225,849

(AT) Structured entities that not included in financial reports

but in which they hold an interest:

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Types of structured entities Nature and purpose Interests held by the Bank
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Types of structured entities	Nature and purpose	Interests held by the Bank
Private fund	Investing in funds that cannot be freely traded on the open market	Investing in units or limited partnership interests issued by these funds.
Asset securitization product	Investing in commercial real estate assets securitization products	Investment in asset-backed securities issued by unconsolidated structured entities

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----- Start of picture text -----

December 31, 2020 December 31, 2019
Private fund $ 104,498 48,150
Asset securitization product 819,768 1,530,429
Total $ 924,266 1,578,579
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(c) The carrying amounts of interests held by the Bank in these structured entities were as follows:

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----- Start of picture text -----

December 31, 2020 December 31, 2019
Financial assets at fair value through profit or loss $ 104,498 48,150
Financial assets at fair value through other comprehensive 415,351 784,228
income
Investments in debt instruments at amortized cost 404,417 746,201
Total $ 924,266 1,578,579
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Taiwan Business Bank Annual Report 2020

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The maximum amount of risk exposure to the Bank endure to a loss incurred from special purpose entities that are not included in the financial reports is the carrying amount of interests held by the Bank.

• (d) As of December 31, 2020 and 2019, the Bank has not provided any financial support to its special purpose entities that are not included in the financial reports.

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7. RELATED PARTY TRANSACTIONS

(A) Names of related parties and relationship

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Name of related party Relationship with the Bank and subsidiaries
Bank of Taiwan Corporate director of the Bank
Ministry of Finance, R.O.C Corporate director of the Bank
Land Bank of Taiwan Corporate director of the Bank
Taiwan Business Bank Guild Corporate director of the Bank
TBB International Leasing Co., Ltd. Investee company of the Bank
TBB (Cambodia) Microfinance Institution Plc Investee company of the Bank
TBB Venture Capital Co., Ltd. Investee company of the Bank
Taiwan Business Bank International Leasing Co., Ltd. Investee company measured by using equity method
Small and Medium Enterprise Credit Guarantee Fund of Substantive related parties
Taiwan
Others Management and other related parties of the Bank
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(B) Significant related party transactions

• (a) Due from banks

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----- Start of picture text -----

December 31, 2020
Amount %
Bank of Taiwan $ 140,960 0.87
Land Bank of Taiwan 12,734 0.08
Total $ 153,694 0.95
December 31, 2019
Amount %
Bank of Taiwan $ 207,228 1.18
Land Bank of Taiwan 4,952 0.03
Total $ 212,180 1.21
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Interest rates are the same as those with regular clients.

• (b) Deposits from banks

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December 31, 2020
Amount %
Land Bank of Taiwan $ 1,999 0.32
December 31, 2019
Amount %
Land Bank of Taiwan $ 1,813 1.94
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Interest rates are the same as those with regular clients.

309

(c) Call loans to banks

For the year ended December 31, 2020		Maximum balance		December 31, 2020		Interest income	Annual interest rate
Bank of Taiwan Land Bank of Taiwan Total		$ 2,847,979 8,391,529 $ 11,239,508		- - -		3,854 3,839 7,693	0.14%~3.12% 0.05%~2.81%
For the years ended December 31, 2019		Maximum balance		December 31, 2019		Interest income	Annual interest rate
Bank of Taiwan Land Bank of Taiwan Total		$ 8,404,583 4,667,730 $ 13,072,313		429,500 - 429,500		8,671 8,259 16,930	0.17%~3.40% 1.4%~3.7%

Interest rates are the same as those with regular clients.

• (d) Call loans from banks

For the year ended December 31, 2020		Maximum balance		December 31, 2020		Interest Expense	Annual interest rate
Bank of Taiwan Land Bank of Taiwan Total		$ 7,977,147 4,512,609 $ 12,489,756		4,309,375 - 4,309,375		14,256 2,100 16,356	0.09%~3.35% 0.10%~6.00%
For the year ended December 31, 2019		Maximum balance		December 31, 2019		Interest Expense	Annual interest rate
Bank of Taiwan Land Bank of Taiwan Total		$ 11,554,385 10,744,942 $ 22,299,327		1,157,025 1,214,735 2,371,760		22,902 26,016 48,918	0.07%~3.35% 0.15%~3.5%

Interest rates are the same as those with regular clients.

• (e) Deposits

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December 31, 2020
Amount %
TBB International Leasing Co., Ltd. $ 29,733 -
Taiwan Business Bank International Leasing Co., Ltd. 96,219 0.01
TBB Venture Capital Co., Ltd. 5,530 -
Others 1,241,158 0.09
Total $ 1,372,640 0.10
December 31, 2019
Amount %
TBB International Leasing Co., Ltd. $ 10,371 -
Taiwan Business Bank International Leasing Co., Ltd. 220,050 0.02
TBB Venture Capital Co., Ltd. 52,126 -
Others 1,067,540 0.08
Total $ 1,350,087 0.10
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Interest rates are the same as those with regular clients.

310 Taiwan Business Bank Annual Report 2020

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(f) Credit

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December 31, 2020
Number of Performing situations
clients or Transaction terms
name of Highest Ending Performing Non-performing are different to
Category related party balance balance loan Loans Collaterals regular clients
Employee consumer 32 15,037 12,405 12,405 - none none
loans
Self-use home 101 443,328 409,569 409,569 - real estate none
mortgages loans
Others Natural person 461,382 450,128 450,128 - real estate none
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December 31, 2019
Number of Performing situations
clients or Transaction terms
name of Highest Ending Performing Non-performing are different to
Category related party balance balance loan Loans Collaterals regular clients
Employee consumer 149 438,488 404,626 404,626 - none/real none
loans estate
Self-use home 113 501,692 461,965 461,965 - real estate none
mortgages loans
Others Natural person 18,810 16,849 16,849 - real estate none
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(g) Donation:

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For the years ended December 31,
2020 2019
Small and Medium Enterprise Credit Guarantee Fund of $ 329,928 304,987
Taiwan
Taiwan Business Bank Guild 2,500 2,500
Total $ 332,428 307,487
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(h) Guarantees: None.

• (i) Service fees: None.

• (j) Rental revenue:

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----- Start of picture text -----

For the years ended December 31,
2020 2019
TBB International Leasing Co., Ltd. $ 691 $ 691
TBB Venture Capital Co., Ltd. 354 354
Total $ 1,045 $ 1,045
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• (l) Sales of Non–Performing Loans Transactions: None.

(C) Major management salary information

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----- Start of picture text -----

For the years ended December 31,
2020 2019
Salary and other short-term employee benefits $ 78,758 99,444
Post-employment benefits 2,265 2,633
Total $ 81,023 102,077
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8. Pledged assets : Please refer to note 6(H) for more details.

311

• (A) Significant commitments and contingencies were as follows:

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----- Start of picture text -----

December 31, 2020 December 31, 2019
Marketable securities held for custody $ 10,522,496 12,065,026
Bills collected for others 43,458,651 44,164,781
Bills lent for others 32,385,246 30,006,439
Guarantees and letters of credit 29,528,944 25,557,114
Collaterals received 426 426
Trust liabilities 174,773,364 167,127,065
Travelers' check in custody for sale - 50,163
Items held for custody 1,138,192 3,995,489
Registered government bonds for sale 57,191,300 66,587,300
Registered short-term bills for sale 2,050,801 1,584,150
Guarantee notes payable 26,061,610 26,383,110
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(B) Unrecognized contractual commitments:

As of December 31, 2020 and 2019 major constructions in progress and purchases amounted to $1,067,016 and $1,097,821 respectively, of which $528,273 and $546,673 respectively, remained unpaid.

• (C) The Bank's trust department plans, manages, and operates trust services in accordance with the Banking Law and Trust Law. Special purpose funds are used to invest in market‑ able securities and the Bank also manages trust funds. The trust information as of De‑ cember 31, 2020 and 2019 is as follows:

Trust Balance Sheet

December 31, 2020 and 2019

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Trust Assets December 31, 2020 December 31, 2019
Cash in Bank $ 5,306,469 2,834,268
Stocks 607,416 358,857
Funds 60,203,034 53,466,368
Bonds 1,484,021 1,306,250
Real estate 15,077,574 18,005,658
Securities custody 91,543,361 90,554,050
Other assets 551,489 601,614
Total trust assets $ 174,773,364 167,127,065
Trust Liabilities December 31, 2020 December 31, 2019
Payables $ 81 12
Securities held for custody 91,543,361 90,554,050
Trust capital 83,159,467 76,519,480
Accumulated loss (2,069,258 ) (1,758,213 )
Net income 2,139,713 1,811,736
Total trust liabilities $ 174,773,364 167,127,065
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Taiwan Business Bank Annual Report 2020

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Trust Property Accounts

December 31, 2020 and 2019

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----- Start of picture text -----

Investment in December 31, 2020 December 31, 2019
Cash in bank $ 5,306,469 2,834,268
Stocks 607,416 358,857
Funds 60,203,034 53,466,368
Bonds 1,484,021 1,306,250
Real estate
Land 12,813,550 13,465,100
Buildings 26,976 47,869
Construction in progress 2,237,048 4,492,689
Securities in custody 91,543,361 90,554,050
Other assets 551,489 601,614
Total $ 174,773,364 167,127,065
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Note: As of December 31, 2020 and 2019, the amounts above included OBU transaction on "foreign currency designated trust funds investment in foreign negotiable securities business" amounting to $1,055,223 and $1,088,678, respectively.

Trust Income Statement

For the years ended December 31, 2020 and 2019

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For the years ended December 31,
Investment items 2020 2019
Trust Revenue
Interest income $ 69,057 39,595
Realized capital gain-fund 1,539,602 -
Realized gain-stocks 3,525 5,196
Realized gain-bonds 38,519 14,928
Dividend revenue 1,981,361 2,120,878
Gains on property transaction - 816,160
Other revenues 15,493 1,976
Sub-total 3,647,557 2,998,733
Trust Expense
Administrative expenses 63,520 55,189
Postage and telecommunication expense 1,048 276
Duties 61 46
Realized loss-funds - 1,045
Realized loss-bonds 4,021 218
Loss on disposal of property 1,433,447 1,129,157
Capital fee 422 -
Other expenses 5,305 1,032
Sub-total 1,507,824 1,186,963
Income before income tax 2,139,733 1,811,770
Income tax expense (20 ) (34 )
Net income $ 2,139,713 1,811,736
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313

(D) In 1996, the Bank' s World Trade Center Branch was sued for handling a letter of credit export collection from Chin Seen Industrial Co., which allegedly used a forged export document and failed to ship the goods to the importer, the International Comagnie de Commercialization et d' Invertissement (I.C.C.I.) of the Republic of Zaire, suffered a loss thereon. In November 1998, I.C.C.I. initiated a case with the Court of Commerce of Brussels in Belgium, requested the L/C opening bank (Banque Bruxelles Lambert, or BBL) and the Bank to jointly pay compensation of USD$7,830 thousand plus interest, losses, and expenses for the L/C. On August 31, 2005, the Court of Commerce of Brussels rendered its judgment which the Bank has to make compensation of USD$7,674 thousand plus interest to I.C.C.I.. The Bank has engaged a local attorney in Belgium to formally file an appeal. In February 2011, Court of Appeal in Brussels had made an intermediate adjudication which I.C.C.I and the Bank are both responsible for the offense. Furthermore, on November 16, 2011, the judgment of the court indicated that the Bank should be responsible for 90% of the negligence proportion. In terms of the judgment of the court of the second instance, the Bank has filed an appeal on November 3, 2011. On February 6, 2013, the court overruled the Bank' s appeal and the Bank lost the case. However, the Bank and I.C.C.I couldn't reach an agreement on the exchange rate and the calculation of the compensation. In October 2016,

I.C.C.I initiated a case with the Court of Frankfurt in Germany, applied for seizing the Bank account in Germany, and the Bank lodged guaranty money of EUR $13,200 thousand to the court to rescind the order for attachment. In July 2017, I.C.C.I applied for compulsory execution to the guaranty money, the court has transferred the guaranty money to I.C.C.I. The Bank then filed a lawsuit objecting to the debt through the attorney. The case was dismissed by the Court of Frankfurt in November 2018, and remanded back to trial court in November 2019 after the Bank's appeal was granted by the High Court of Frankfurt. I.C.C.I. has filed a statement of grounds for objection to the German Federal Court on March 16, 2019. And request to revoke the "Return of the Judgment of the Frankfurt High Court". The German Federal Court requires the Bank to file a defense against I.C.C.I. of objections before July 16, 2019. The Bank has appointed a lawyer to act as an attorney in the German Federal Court and raised a pleading. In October and November 2019, the Bank received subpoenas from the court of the Democratic Republic of Congo by a third person Star Marine, who demanded I.C.C.I to pay USD$1,130 thousand in compensation and held the Bank as jointly liable, and by I.C.C.I, which demanded the Bank to pay USD$20,060 thousand less its reimbursed amount to make a security deposit of EUR$14,000 thousand. The Bank has engaged local attorneys to represent itself in court. The Court of Congo will merge the two cases for court, and the next court session is undetermined. As of December 31, 2020, the Bank has accrued the compensation of $185,016 and EUR$8,000 thousand.

• (E) Among the private equity fund contracts signed by the Bank, the maximum amount of committed investment that has not been invested is :

		December 31, 2020		December 31, 2019
New Taiwan Dollar		$ -		50,000

Note: The committed investment amount that has not been invested does not include the portion of the notified transaction that has not yet been delivered.

A resolution was passed during the subsidiary TBB Venture Capital Co., Ltd.'s board meeting held on December 24, 2020 for the issuance of 40,000 thousand ordinary shares, amounting to $400,000 and were subscribed by the Bank with January 7, 2021 as the date of capital increase.

12. Others

• (A) Information on loan quality, concentration of credit extensions, interest rate sensitivity, profitability and maturity analysis

314

Taiwan Business Bank Annual Report 2020

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(a) Loan quality:

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----- Start of picture text -----

Month/Year December 31, 2020
Non-performing Non-performing Allowance for
Total loans Coverage ratio
Items loans loan ratio credit losses
Corporate Secured 4,333,608 619,478,813 0.70% 7,001,414 161.56%
finance Unsecured 646,422 309,604,313 0.21% 3,946,125 610.46%
Residence mortgages (Note 4) 409,214 139,113,318 0.29% 1,557,182 380.53%
Cash cards - 7 -% - -%
Consumer
Microcredit (Note 5) 14,757 495,713 2.98% 16,518 111.93%
finance
Others Secured 667,825 145,483,951 0.46% 1,645,541 246.40%
(Note 6)
Unsecured 61,010 10,119,126 0.60% 159,377 261.23%
Total loan business 6,132,836 1,224,295,241 0.50% 14,326,157 233.60%
Overdue Allowance for
Total receivables Delinquency ratio Coverage ratio
receivables credit losses
Credit cards business 1,143 1,123,919 0.10% 22,154 1,938.23%
Accounts receivable factoring without recourse - - -% - -%
(Note 7)
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Month/Year December 31, 2019
Non-performing Non-performing Allowance for
Total loans Coverage ratio
Items loans loan ratio credit losses
Corporate Secured 1,796,696 541,634,128 0.33% 6,116,645 340.44%
finance Unsecured 765,400 316,615,157 0.24% 3,901,681 509.76%
Residence mortgages(Note 4) 339,607 144,607,596 0.23% 1,630,514 480.12%
Consumer Cash cards - 13 -% - -%
finance Small-scale credit loan(Note 5) 18,908 656,886 2.88% 18,524 97.97%
Others Secured 656,766 134,365,005 0.49% 1,542,832 234.91%
(Note 6) Unsecured 50,301 8,211,965 0.61% 131,172 260.77%
total loan business 3,627,678 1,146,090,750 0.32% 13,341,368 367.77%
Overdue Allowance for
Total receivables Delinquency ratio Coverage ratio
receivables credit losses
Credit cards business 2,557 1,336,358 0.19% 25,851 1,010.99%
Accounts receivable factoring-without recourse - 19,089 -% 191 -%
(Note 7)
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• Note 1 Non-performing loans represent the amount of overdue loans as reported in accordance with the "Regulations on the Procedures for Banking Institutions to Evaluate Assets and Deal with Past Due/ Non-performing Loans". The credit card overdue loans represent the amount of overdue loans as reported in accordance with Jin-Kuan-Yin-(4)-Zi No. 0944000378, dated July 6, 2005.

• Note 2 Non-performing loan ratio = Non-performing loans ÷ total loans; Credit card delinquency ratio = Overdue

• receivables ÷ receivables.

• Note 3 Coverage ratio for loans = allowance for credit losses ÷ non-performing loans; Coverage ratio for credit card business = allowance for credit losses ÷ overdue receivables.

• Note 4 For residential mortgage loans, a borrower provides his/her (or spouse ’ s or minor child ’ s) house as collateral in full and pledges it to the financial institution for the purpose of obtaining funds to purchase property and to construct or repair a house.

• not include credit cards or cash cards.

• loans, cash card loans, and microcredit loans, and do not include credit cards.

• Note 7 In accordance with Jin-Kuan-Yin-(5)-Zi No. 0945000494, dated July 19, 2005, the amounts of without-recourse factoring will be classified as overdue receivables within three months from the date that suppliers or insurance companies resolve not to compensate the loss. Overdue loans and receivables exempted from reporting

315

Overdue loans and receivables exempted from reporting

	December	31, 2020	December	31, 2019
	Loans may be exempted from reporting as a non- performing loan	Receivables may be exempted from reporting as overdue receivables	Loans may be exempted from reporting as a non- performing loan	Receivables may be exempted from reporting as overdue receivables
Pursuant to a contract under a debt negotiation plan (Note1) Pursuant to a contract under a debt liquidation plan and a debt relief plan (Note 2) Total	$ 536 63,956 $ 64,492	2,135 30,612 32,747	833 66,053 66,886	2,906 33,173 36,079

Note 1: In accordance with Jin-Kuan-Yin-(1)-Zi No. 09510001270, dated April 25, 2006, a bank is required to make supplemental disclosure of credit information which was approved under the debt coordination mechanism of unsecured consumer debts by the Bankers Association of the R.O.C.

Note 2: In accordance with Jin-Kuan-Yin-(1)-Zi No. 09700318940, dated September 15, 2008 and Jin-Kuan-Yin-Fa-Zi No. 10500134790, dated September 20, 2016, a bank is required to make supplemental disclosure of credit information once debtors apply for pre-negotiation, pre-conciliation, relief and liquidation under the

"Consumer Debt Clearance Act."

(b) Concentration of credit extensions

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December 31, 2020
Credit amount to equity
Ranking Group enterprise Credit amount ratio (%)
1 A company. (Railway transportation) 25,103,282 25.44%
2 B group. (Steel rolling and extruding ) 9,422,041 9.55%
3 C group. (Real estate for sale and rental with own or leased property) 9,011,609 9.13%
4 D group. (Real estate development) 8,203,992 8.32%
5 E group. (Computers manufacturing) 7,704,593 7.81%
6 F group. (Other holding) 7,339,697 7.44%
7 G group. (Real estate development) 6,311,017 6.40%
8 H group. (Air transportation) 5,723,286 5.80%
9 I group. (Real estate development) 5,118,016 5.19%
10 J group. (Liquid crystal panel and components manufacturing) 4,954,000 5.02%
December 31, 2019
Credit amount to equity
Ranking Group enterprise Credit amount ratio (%)
1 A company. (Railway transportation) 26,912,468 28.18%
2 B group. (Steel rolling and extruding) 9,036,247 9.46%
3 D group. (Real estate development) 8,752,192 9.16%
4 F group. (Other holding) 7,897,098 8.27%
5 C group. (Real estate for sale and rental with own or leased property) 6,865,922 7.19%
6 H group. (Air transportation) 6,370,151 6.67%
7 E group. (Computer manufacturing) 6,158,068 6.45%
8 G group. (Real estate development) 5,576,407 5.84%
9 K group. (Chemical raw materials manufacturing) 4,843,526 5.07%
10 I group. (Real estate development) 4,775,225 5.00%
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Note 1 The top ten enterprise groups other than government or stated-owned enterprises are ranked according to their total outstanding credit amount. If the borrowers belong to an enterprise group, the aggregate credit balance of the enterprise should be calculated and disclosed as a code number for each such borrower together with an indication of the borrowers' line of business. In addition, if the borrowers are enterprise groups, the enterprise group's industry sector with the maximum exposure to credit risk in its main industry sector should be disclosed, along with the "class" of the industry, in compliance with the Standard Industrial Classification System of the R.O.C. posted by the Directorate-General of Budget, Accounting and Statistics, Executive Yuan, R.O.C.

Corporation Rules for Review of Securities Listings".

• Note 3 Consists of loans (import/export bills negotiated, bills and notes discounted, overdrafts, short-term loans, short-term secured loans, margin loans receivable, medium-term loans, medium-term secured loans, long-term loans, long-term secured loans, overdue loans), exchange bills negotiated, accounts receivable factoring without recourse, bankers' acceptance receivable, guarantees proceeds.

Note 4 In the calculation of Credit amount to equity ratio, the domestic bank should be calculated in the net value of head office. The Foreign bank should be calculated in the net value of Taiwan branch.

316 Taiwan Business Bank Annual Report 2020

Ⅵ

(c) Interest rate-sensitivity information

(1) Analysis of interest rate-sensitive assets and liabilities (New Taiwan dollars)

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Unit: %

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December 31, 2020
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 1,261,749,950 15,575,973 23,133,404 119,785,773 1,420,245,100
Interest rate-sensitive liabilities 1,093,425,439 56,606,354 112,485,169 51,050,064 1,313,567,026
Interest rate sensitivity gap 168,324,511 (41,030,381 ) (89,351,765 ) 68,735,709 106,678,074
Net worth 98,658,749
Ratio of interest rate-sensitive assets to liabilities (%) 108.12
Ratio of interest rate-sensitive gap to net worth (%) 108.13
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December 31, 2019
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 1,173,468,027 48,183,340 32,004,069 127,788,145 1,381,443,581
Interest rate-sensitive liabilities 1,083,476,198 86,252,494 111,628,016 38,899,834 1,320,256,542
Interest rate sensitivity gap 89,991,829 (38,069,154 ) (79,623,947 ) 88,888,311 61,187,039
Net worth 95,516,766
Ratio of interest rate-sensitive assets to liabilities (%) 104.63
Ratio of interest rate-sensitive gap to net worth (%) 64.06
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Note 1 Listed amount refers to the Bank's amount of N.T. dollars and does not include contingent assets or liabilities.

Note 2 Interest rate-sensitive assets and liabilities refer to revenues or costs of interest–yielding assets and interest–bearing liabilities, which are affected by interest rate fluctuations.

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 (New Taiwan dollars interest-rate-sensitive assets and New Taiwan dollars interest-rate-sensitive liabilities).

(2) Analysis of the interest-sensitive assets and liabilities (US dollars)

Unit: In Thousands of US Dollars, %

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December 31, 2020
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 5,310,244 469,273 77,166 536,289 6,392,972
Interest rate-sensitive liabilities 6,181,947 966,658 747,211 - 7,895,816
Interest rate sensitivity gap (871,703 ) (497,385 ) (670,045 ) 536,289 (1,502,844 )
Net worth 3,510,988
Ratio of interest rate-sensitive assets to liabilities (%) 80.97
Ratio of interest rate-sensitive gap to net worth (%) (42.80 )
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December 31, 2019
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 4,947,261 485,765 388,815 634,245 6,456,086
Interest rate-sensitive liabilities 4,908,555 740,209 949,016 - 6,597,780
Interest rate sensitivity gap 38,706 (254,444 ) (560,201 ) 634,245 (141,694 )
Net worth 3,184,954
Ratio of interest rate-sensitive assets to liabilities (%) 97.85
Ratio of interest rate-sensitive gap to net worth (%) (4.45 )
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Note 1 Listed amount refers to the Bank's amount of US dollars and does not include contingent assets or liabilities.

Note 2 Interest rate-sensitive assets and interest rate-sensitive liabilities refer to revenues or costs of the interest-yielding assets and interest-bearing liabilities, which are affected by interest rate fluctuation.

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 (US dollars interest-rate-sensitive assets and US dollars interest-rate-sensitive liabilities).

317

Unit: %

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(Restatement)
Item December 31, 2020 December 31, 2019
Before income tax 0.30 0.48
The ratio of return on assets
After income tax 0.27 0.40
Before income tax 5.53 8.93
The ratio of return on equity
After income tax 4.84 7.47
Net income ratio 21.59 29.26
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Note 1 The ratio of return on assets = Income before (after) income tax expense ÷ average assets. Note 2 The ratio of return on equity = Income before (after) income tax expense ÷ average equity. Note 3 Net income ratio = Net income after income tax expense ÷ Net revenue.

Note 4 Income before (after) income tax expense refers to income accumulated from January of the current year to the current period end.

(e) Maturity analysis for assets and liabilities

(1) Maturity analysis in New Taiwan dollars

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December 31, 2020
Amount during the maturity period from the balance sheet date to due date
Total 0-10days 11-30days 31-90days 91-180days 181days-1year Over 1 year
Major maturity $ 1,528,946,546 132,138,936 166,645,095 136,163,423 178,254,748 125,643,908 790,100,436
capital inflow
Major maturity 1,894,385,819 52,672,688 103,498,741 201,839,259 212,757,375 336,728,244 986,889,512
capital outflow
Gap (365,439,273 ) 79,466,248 63,146,354 (65,675,836 ) (34,502,627 ) (211,084,336 ) (196,789,076 )
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Note: Listed amounts are denominated in New Taiwan dollars of the Bank, including loan commitments of credit agreement and estimates to outflow $357,529,991.

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December 31, 2019
Amount during the maturity period from the balance sheet date to due date
Total 0-10days 11-30days 31-90days 91-180days 181days-1year Over 1 year
Major maturity $ 1,501,890,612 179,367,254 151,213,247 134,502,252 184,976,030 129,089,921 722,741,908
capital inflow
Major maturity 1,874,702,427 55,886,586 112,153,255 218,860,212 230,190,070 355,711,629 901,900,675
capital outflow
Gap (372,811,815 ) 123,480,668 39,059,992 (84,357,960 ) (45,214,040 ) (226,621,708 ) (179,158,767 )
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Note: Listed amounts are denominated in New Taiwan dollars of the Bank, including loan commitments of credit agreement and estimates to outflow $364,510,276.

318

Taiwan Business Bank Annual Report 2020

(2) Maturity analysis in US dollars

Ⅵ

Unit : In Thousands of US Dollars

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December 31, 2020
Amount during the maturity period from the balance sheet date to due date
Total 0-30days 31-90days 91-180days 181days-1year Over 1 year
Major maturity $ 13,175,860 4,313,385 2,837,011 1,570,635 1,179,663 3,275,166
capital inflow
Major maturity 13,753,689 4,085,099 2,691,982 1,883,298 1,626,015 3,467,295
capital outflow
Gap (577,829 ) 228,286 145,029 (312,663 ) (446,352 ) (192,129 )
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Note: Listed amounts are denominated in US dollars of the Bank, including loan commitments of credit agreement and estimates to outflow US $779,907.

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December 31, 2020
Amount during the maturity period from the balance sheet date to due date
Total 0-30days 31-90days 91-180days 181days-1year Over 1 year
Major maturity $ 15,355,895 3,358,162 2,608,973 3,107,881 2,619,737 3,661,142
capital inflow
Major maturity 16,092,017 3,851,126 2,573,777 3,475,166 3,026,241 3,165,707
capital outflow
Gap (736,122 ) (492,964 ) 35,196 (367,285 ) (406,504 ) 495,435
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Note: Listed amounts are denominated in US dollars of the Bank, including loan commitments of credit agreement and estimates to outflow US $948,394.

(B) Merger of Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank

Property Insurance Agency Co., Ltd.

As of January 2, 2020, the Bank merged its wholly owned subsidiaries, Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance Agency Co., Ltd. without consideration involved. Because the essence of the merger was reorganization, it is deemed to have been merged from the beginning and required to restate the financial report of 2019.

The increase in assets arising from the merger will be used for the Bank's future operation and no major assets have been planned to be disposed of.

13. Other disclosures

(A) Information on significant transactions:

• (a) Cumulative purchase or sale of the same investee's capital stock up to $300,000 or 10% of paid-in capital: None.

• (b) Acquisition of real estate amounting to over $300,000 or 10% of paid-in capital: None.

• (c) Disposal of real estate amounting to over $300,000 or 10% of paid-in capital: None.

• (d) Discount of commissions fees with related parties amounting to over $5,000: None.

• (e) Receivables from related parties amounting to over $300,000 or 10% of paid-in capital: None.

• (f) Sale of non-performing loans information: None.

• (g) Types of securitization instruments and related information approved by financial assets securitization rules or real estate securitization rules: None.

• statements users: None.

319

(B) Information of investees:

(a) The following is the information on investees (excluding investment in mainland China):

(Unit : thousand shares)

						The cross holding of the Bank and its related parties	The cross holding of the Bank and its related parties	The cross holding of the Bank and its related parties	The cross holding of the Bank and its related parties	Note
								Total
Name of investee	Location	Main business scope	Shareholding ratio	Book value	Investment gain (loss)	Number of shares	Number of proforma shares	Number of shares	Shareholding ratio
TBB International Leasing Co., Ltd TBB (Cambodia) Microfnance Institution Plc TBB Venture Capital Co., Ltd.	Taiwan Cambodia Taiwan	Leasing business SMEs and personal fnance business Investing business	100.00% 100.00% 100.00%	1,431,596 552,164 585,083	61,463 33,725 (11,349)	150,000 20 60,000	- - -	150,000 20 60,000	100.00% 100.00% 100.00%

(b) Loans to others:

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Actual The necessary Allowance Limited Total limited
NO. Creditor Debtor Interaction Related Highest Ending Range of Nature Dealing Guarantee
drawdown reason for for amount for amount
Account party Amount balance amount interest rate of the amount short-term loans bad debts Name Value individual for loan
loan object
1 TBB International Xi Quan Restaurant Financial No 53,540 53,540 53,540 2%~10% 2 - To the lender for 1,478 None - 357,895 1,431,582
Leasing Co., Ltd. Co., Ltd receivables buying goods
1 TBB International Chao-Yang Financial No 44,804 15,198 30,000 2%~10% 2 - To the lender for 425 None - 357,895 1,431,582
Leasing Co.,Ltd. Internatio-nal Co., Ltd receivables buying goods
1 TBB International Hsin Chuan Construc- Financial No 129,357 54,488 100,000 2%~10% 2 - To the lender for 1,442 None - 357,895 1,431,582
Leasing Co.,Ltd. tion Co., Ltd receivables buying goods
1 TBB International Sian Shang Frozen Financial No 46,815 16,446 30,000 2%~10% 2 - To the lender for 461 None - 357,895 1,431,582
Leasing Co.,Ltd. Food Co.,Ltd receivables buying goods
1 TBB International Hsin Dan Co.,Ltd Financial No 33,000 33,000 33,000 2%~10% 2 - To the lender for 911 None - 357,895 1,431,582
Leasing Co.,Ltd. receivables buying goods
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Note1: The meaning of the number is as follows.

(1) Zero stands for issuer.

(2) Investee companies are numbered in a sequence of Arabic numerals from 1 based on company category.

Note2: The amount of loans is still valid up to now.

Note3: The nature of the loan nature is as follows.

(1) 1 stands for business relation.

(2) 2 stands for the necessity for short-term loans.

Note4: Limited amount for individual object:25% net worth of the latest TBB International Leasing Co., Ltd's audited

Note5: Total limited amount for loan: 100% net worth of the latest TBB International Leasing Co., Ltd.'s audited

320

Taiwan Business Bank Annual Report 2020

Ⅵ

(c) Endorsements and guarantee for others: None.

• (d) Acquisition of securities:

				At the end of the period	At the end of the period	At the end of the period	At the end of the period
Company acquired	Type and name of the security	Relationship with the security issuer	Account	Number of shares	Carrying amount	Share proportion (Note 2)	Market price (Note 1)	Note
Taiwan Business Bank International Leasing Co., Ltd.	Unlisted	The investee under the equity method of the subsidiary TBB International Leasing Co., Ltd.	Investment under equity method	-	878,739	100.00%	878,739

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Note 1: Listed companies apply the market price to calculate the net worth of the shares possessed. Unlisted companies apply the proportion of shares calculate the net worth of the shares possessed. The net worth of preferred stock is calculated based on the liquidation price plus dividends in arrears.

• Note 2: The proportion of shares the preferred stock is calculated based on the shares the Bank possessed divided by the shares issued.

• (e) Accumulative purchases or sales of the same investee companies amounting to over $300,000 or 10% of paid-in capital: None.

• (f) Acquisition of real estate amounting to over $300,000 or 10% of paid-in capital: None.

• (g) Disposition of real estate amounting to over $300,000 or 10% of paid-in capital: None.

• (h) Discount of commissions and handling fees with related parties amounting to over $5,000: None.

• (i) Receivables from related parties amounting to over $300,000 or 10% of paid-in capital: None.

• (k) Sale of non-performing loans information: None.

• (l) Types of securitization instruments and related information approved by financial assets securitization rules or real estate securitization rules: None.

• (m) Other significant transactions that might have substantial influence over the decision making of the

321

(C) Information on investments in Mainland China:

• (a) Name and major business item of the investee in China:

Name of investee company in	Major		Investment method	Accumulated amount transferred from Taiwan, beginning	Investment transferred out or recovered	Investment transferred out or recovered	Accumulated amount transferred from Taiwan,	The current proft or loss of the investee	Shares directly or indirectly possessed	Investment income for the period	Ending carrying value of	Accumulated inward remittance of earnings as of the end of
Mainland China	business	Paid-in capital	(Note1)	of the period	Transferred out	Recovered	end of the period	(Note2)	by the Bank	(Note2 and 4)	investment	period
Taiwan Business Bank, Ltd. Shanghai branch	Banking business	3,910,537 (CNY800 million ) (Operating capital )	(c)	3,910,537 (CNY800 million )	-	-	3,910,537 (CNY800 million )	-	Shanghai branch of the Bank, not an investee company	- Note 4	3,937,727	None
Taiwan Business Bank, Ltd. Wuhan branch	Banking business	3,942,815 (CNY800 million ) (Operating capital )	(c)	3,942,815 (CNY800 million )	-	-	3,942,815 (CNY800 million )	-	Wuhan branch of the Bank, not an investee company	- Note 4	3,795,735	"
Taiwan Business Bank International Leasing Co., Ltd.	Leasing business	838,305 (CNY170 million ) (Operating capital )	(a)	838,305 (CNY170 million )	-	-	838,305 (CNY170 million )	33,612 2(a)	100%	33,612 2(a)	878,739	"

• Note 1: Investment method is divided into three categories and are listed as follows: (a) Directly invest in Mainland China.

• (b) Investment in Mainland China companies through a third region.

• (c) Others: establishment of oversea branches

• Note 2: The column of "Investment gains (losses)":

• If the company is still in the preparation process, and does not have any investment gain or loss, please specify.

• The bases for recognition of investment income or loss have three methods, please specify.

• accounting firm in Taiwan.

• c. Others

• Please specify if information regarding current gains or losses of an investee is not retrievable.

• Note 3: The number is expressed in New Taiwan Dollars.

• Note 4: The operating result of Shanghai and Wuhan branch have been included in the Bank.

(b) Limit of investment in China:

Name of Company	Accumulated outfow of investment from Taiwan to Mainland China, as of the end of period	Investment amount authorized by Investment Commission, MOEA	Upper limit on investment authorized by Investment Commission, MOEA
Taiwan Business Bank, Ltd. (Note)	8,691,657 (CNY 1,770 million)	8,691,657 (CNY 1,770 million)	59,195,249

Note: The investment amount in China of the subsidiary TBB International Leasing Co, Ltd is included.

(D) Information of major shareholders:

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Shareholding Shares Percentage
Shareholder's Name
Bank of Taiwan 1,214,173,562 16.21%
National Development Fund, Executive Yuan 439,330,543 5.86%
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14. SEGMENT INFORMATION

322

Taiwan Business Bank Annual Report 2020

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Taiwan Business Bank, Ltd.

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Chairman: Bor-Yi Huang

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President: Chih-Chien Chang

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SVP&GM, Accounting Dept.: Yu-Chuan Chou

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9. Financial Difficulties Confronted by TBB or Its Associates and the Related Impacts: None.

323

VII Review, Analysis, and Risks of Financial Conditions and Performance

325 326

326 326

327

1. Financial Position Analysis

2. Financial Performance Analysis

3. Analysis of Cash Flow

4. Impact of Major Capital Expenditure on the Company's Financial Business in 2020

5. Reinvestment Policy for 2020, the Main Reasons for the Profit or Loss Generated thereby, the Plan for Improving profitability, and Investment Plans for the Coming Year

327 6. Risk Management 339 7. Crisis Management and Response Mechanism 339 8. Other Significant Events

Ⅶ

1. Financial Position Analysis

Consolidated Comparative Analysis of Financial Position

Unit: NT$1,000; %

Year Item	2020	2019	Difference	Difference
			Amount	%
Cash and cash equivalents, due from the Central Bank and call loans to banks Financial assets at fair value through proft or loss Financial assets at fair value through other comprehensive income Investments in debt instruments at amortized costs Securities purchased under agreements to resell Receivables-net Current income tax assets Discounts and loans-net Other fnancial assets-net Premises and equipment-net Right-of-use asset - net Intangible assets-net Deferred income tax assets Other assets-net Total assets Deposits from the Central Bank and other banks Due to the Central Bank and other banks Financial liabilities at fair value through proft or loss Securities sold under agreements Payable Current income tax liabilities Deposits and remittances Financial debentures Other fnancial liabilities Provisions for liabilities Lease liabilities Deferred income tax liabilities Other Liabilities Total liabilities Equity attributable to owners of parent company Common stock Capital Surplus Retained earnings Other items in equity Total equity	145,013,105	156,827,077 26,972,786 102,597,144 263,056,842 13,399,113 27,736,905 810 1,132,462,936 19,928 14,498,237 1,051,559 352,376 1,624,651 5,552,450 1,746,152,814 104,793,612 752,145 9,393,336 868,581 31,057,684 258,956 1,435,049,547 53,250,000 6,835,084 3,158,003 1,041,183 888,436 3,289,481 1,650,636,048 95,516,766 71,319,842 815,900 19,702,723 3,678,301 95,516,766	(11,813,972 ) (11,375,230 ) 14,758,706 (35,053,510 ) (7,266,951 ) 15,711,252 305,607 77,253,147 (6,147 ) 16,669 22,198 22,632 219,184 2,688,654 45,482,239 13,407,427 28,287,955 (754,334 ) 1,187,410 16,729,391 (255,903 ) (16,477,547 ) 0 (1,342,718 ) 235,414 20,838 13,145 1,289,178 42,340,256 3,141,983 3,565,992 0 (456,761 ) 32,752 3,141,983	(7.53 ) (42.17 ) 14.39 (13.33 ) (54.23 ) 56.64 37,729.26 6.82 (30.85) 0.11 2.11 6.42 13.49 48.42 2.60 12.79 3,760.97 (8.03 ) 136.71 53.87 (98.82 ) (1.15 ) 0.00 (19.64 ) 7.45 2.00 1.48 39.19 2.57 3.29 5.00 0.00 (2.32 ) 0.89 3.29
	15,597,556
	117,355,850
	228,003,332
	6,132,162
	43,448,157
	306,417
	1,209,716,083
	13,781
	14,514,906
	1,073,757
	375,008
	1,843,835
	8,241,104
	1,791,635,053
	118,201,039
	29,040,100
	8,639,002
	2,055,991
	47,787,075
	3,053
	1,418,572,000
	53,250,000
	5,492,366
	3,393,417
	1,062,021
	901,581
	4,578,659
	1,692,976,304
	98,658,749
	74,885,834
	815,900
	19,245,962
	3,711,053
	98,658,749

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325

2. Financial Performance Analysis

Consolidated Operational Performance Analysis

Unit: NT$1,000; %

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Year 2020 2019 Amount increased Ratio of changes
Item (decreased) (%)
Net interest income 16,192,217 17,031,113 (838,896 ) (4.93 )
Non-interest net income 5,677,225 6,178,829 (501,604 ) (8.12 )
Bad debts expense, commitment (4,054,740 ) (2,417,677 ) 1,637,063 67.71
and guarantee liability provision
Operating expenses (12,429,441 ) (12,726,585 ) (297,144 ) (2.33 )
Net income before tax from
5,385,261 8,065,680 (2,680,419 ) (33.23 )
continuing operation
Income tax (expense) gain (683,486 ) (1,331,427 ) (647,941 ) (48.67 )
Net income after tax from continuing
4,701,775 6,734,253 (2,032,478 ) (30.18 )
operation
Net profit for the period 4,701,775 6,734,253 (2,032,478 ) (30.18 )
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Analysis on increase/decrease in ratio:

In 2020, net profit for the period decreased by NT$2.032 billion, which was primarily due to the increase in allowances for bad debt.

3. Analysis of Cash Flow

(1) Liquidity analysis for the past two years

Year Item	2020	2019	Increase (Decrease)
Cash fow ratio	(23.46)%	3.86%	(27.32%)
Cash fow adequacy ratio	707.51%	1,507.14%	(799.63%)
Cash fow satisfaction ratio	-	-	-
Analysis on increase/decrease in ratio:

1. The changes in cash flow ratio and cash flow adequacy ratio were primarily caused by reduced net cash inflow from operating activities in 2020 when compared to that of 2019.

2. No analysis is presented for the cash flow adequacy ratio as negative net cash flow from investment activities was recorded for 2020 and 2019.

(2) Analysis of cash liquidity for the coming year

Unit: NT$1,000

Opening cash balanc ①	Expected net cash			Remedial measures for cash inadequacy	Remedial measures for cash inadequacy
	fow from operating activities throughout the year ②	Expected net cash fow throughout the year ③	Expected sum of cash surplus (inadequacy) ①+②+③	Investment planning	Financial planning
30,319,952	(2,199,520)	(1,740,793)	26,379,639	-	-

4. Impact of Major Capital Expenditure on the Company's Financial Business in 2020

(1) The use of major capital expenditures and source of funds

Unit: NT$1,000

Planning items	Actual or expected	Actual or expected	Total capital	Use of actual or expected capital	Use of actual or expected capital	Use of actual or expected capital	Use of actual or expected capital	Use of actual or expected capital
	source of capital	date of completion	required	2017	2018	2019	2020	2021
Purchase of machinery and equipment - computer equipment	Own funds	2021/12/31	1,574,134	373,781	640,157	201,818	200,751	157,627
Purchase of premise of the Bank's headquarter	Own funds	2021/12/31	2,574,374	98,799	0	120	5,455	2,470,000
Maintenance and renovation work for the premise of the headquarter	Own funds	2021/12/31	293,591	65,245	22,276	37,573	81,397	87,100

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Taiwan Business Bank Annual Report 2020

Ⅶ

To improve the corporate image of the Bank, service quality, stabilize the operating branches, and expand our service network.

5. Reinvestment Policy for 2020, the Main Reasons for the Profit or Loss Generated thereby, the Plan for Improving profitability, and Investment Plans for the Coming Year

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During 2020, the primary profiting sources for the reinvestment business are the cash dividends income and the operating performance returns from the reinvestment companies. In the future, shall there be appropriate investment targets or investments made according to factors of government policies, the Bank will carry out relevant procedures after due assessment.

6. Risk Management

(1) Structure of the Bank's risk management organization and the policy

• A. Structure of the risk management organization

• a. Risk Management Committee

The Chairman shall assign the chairman of the Risk Management Committee, and the committee member includes the President, Executive Vice President who is not the legal compliance officer of the Bank's headquarters, and the General Managers of departments under the Bank's headquarter (excluding the General Manager of the Auditing Department). The Committee is established to provide a sound risk management system, strengthen the efficacy of risk management, and execute the risk management and monitoring for the Bank. In principle, a meeting shall be convened per month, and the chairman of the committee may convene an extraordinary meeting when necessary. Its duties are as follow:

• 1) Analyze significant local and foreign economic, financial, and industrial risks, and review responding plans.

• 2) Risk exposures in the risk management report and review on resolutions.

• 3) The review shall be based on the rules and regulations, limitation, management indicator, and responding solutions for exceeding the limitation in relation to risk management approved by the Board (Managing Directors).

• 4) Supervise the capital adequacy management of the Bank.

• 5) Review or supervise relevant matters that shall be reported to the Risk Management Committee according to the requirements from the local and foreign competent authority.

• 6) Review or supervise other matters related to risk management.

  • Risk Management Department is a staff unit of the Committee, responsible for meeting agenda preparation, convening notice, meeting process, meeting minutes, and resolutions tracking and management, and it shall report the material resolutions from the Risk Management Committee and risk exposures to the Board (Managing Directors) regularly.

• b. ALM Committee

The ALM Committee of the Bank is chaired by the President, and the committee member includes Executive Vice President, General Managers from departments in charge of deposits, loans, financial trading, funding allocation, and risk management. The Committee is responsible for the monitoring and management of interest rate risk in the banking book (IRRBB) and funding liquidity risks. It convenes regular meetings to evaluate the analysis and measurement method for funding liquidity risks and IRRBB, review the management policy for funding liquidity risks and IRRBB, relevant limitation, and management indicators, listen to exposure reports for interest risks and funding liquidity risks and adjust the debt-asset ratio period structure and the funding maturity structure of the Bank.

327

c. Loan Supervision Committee

The Loan Supervision Committee of the Bank is convened by the Executive Vice President. In principle, the Committee is convened once a week to review credit loan projects of large denomination loans, foreign currency, and guarantee.

• d. NPL Management Committee

The NPL Management Committee of the Bank is convened by the Executive Vice President. The convenor may call upon members of the Committee for meeting according to business requirements at any time to discuss measures to prevent unfavorable credit loans and methods to handle overdue cases.

• e. Cyber Security Management Committee

Cyber Security Management Committee is convened by the Executive Vice President, and the Committee manages the overall execution and coordination regarding matters related to cybersecurity management of the Bank. The convenor may call upon members of the Committee for meeting according to business requirements at any time to review matters related to cybersecurity management.

B. Risk management policy

To effectively control the Bank's risks, the Bank established its "Risk Management Policy," "Standards for Credit Risk Management," "Standards for Market Risk Management," "Standards for Operational Risk," "Guidelines for Bank Interest Rate Management," "Guidelines for Capital Liquidity Risk Management." The regulations and their relevant risk tolerance were approved by the Board (Managing Directors). Content of the Risk Management Policy is as follows: Establish a risk management mechanism for risk identification, measurement, supervision, control, information report, and countermeasures, construct an integrated risk management system, adopt an operating model with appropriate focus on risk management, and control the reasonableness of risk and compensation with the precondition of statutory adequacy ratio, so as to achieve the operating objectives and improve shareholders' interests. It covers credit risk, market risk, operating risk, IRRBB, and funding liquidity risk management, and capital adequacy management.

(2) Information on the Nature and Amount of All Types of Risk

A. Credit Risk Management Strategies, Goals, Policies and Procedures

Credit Risk Management System

2020

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Item Description
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Item

Description

1. Credit Risk Management Strategies, Goals, Policies and Procedures

I. Credit risk strategies (I) Establish a proper credit risk control environment, including credit verifcation procedures, credit management, measurement, and supervision procedures, as well as credit risk control. (II) Credit risks regarding counterparties (including counterparties, borrower, and debtor), such as default risk and delivery risk, are included in the scope of control. (III) Develop advanced credit risk measuring methods to measure credit risk, and gradually introduce such methods into our business procedures. II. Credit risk management goals Within the scope of acceptable credit risk to the Bank, maintain adequate capital to achieve a reasonable state between risk and returns. III. Credit risk management policies (I) Fully understand the credit status of borrowers or counterparties and the usage of borrowings and repayment sources of the borrowers. (II) Prudently assess the credit risk condition of borrowers or counterparties and attach attention to the adequacy of the collateral and the guarantee to measure risks and interests. (III) Establish a credit rating system regarding the credit status of the borrowers or consider the ratings of the customers from external credit rating institutions as the reference for accepting credit loan cases and setting interest rate. IV. Credit risk management procedures (I) Establish comprehensive credit approval procedures, including mechanisms such as credit investigation, credit loans, post-loan management, and claims management, to manage credit risks in an appropriate manner. (II) Regularly carry out control for the concentration of corporate risk regarding nations, fnancial industries, industries, or conglomerates. (III) Regularly report to the senior management and the Risk Management Committee regarding the credit risk limitation utilization. Shall there be abnormal losses, establish the responding countermeasures immediately and report to the senior management to minimize the potential losses.

328 Taiwan Business Bank Annual Report 2020

Ⅶ

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Item Description
2. Credit risk I. Board: The Board is the highest decision-making level for credit risk management, which supervises
management the effective operation for credit risk management. Credit risk management policies and standards
organization and are regularly reviewed by the Board meeting to ensure the efficacy of risk management and the
framework optimized allocation of resources.
II. Risk Management Committee: Responsible for the review of relevant information and issues about
credit risk.
III. Loan Supervision Department: Responsible for credit loan management and credit loan review.
IV. Credit Investigation Department: Responsible for the credit investigation business and its
management and planning, industrial analysis.
V. Overdue Loan & Control Department: Responsible for matters in relation to post-loan management,
non-performing loans, non-accrual loans, and bad debt claims.
VI. Risk Management Department: Responsible for the measurement, evaluation, monitoring,
management, disclosure, and reporting of credit risks.
3. Scope and features I. Credit risk reporting
of the credit risk Convene meetings of the Risk Management Committee every month, report to the senior
reporting and management regarding the alert for counterparties, and the concentration control for the industry,
measurement group, country, and financial industry, and discuss the relevant information concerning the credit risk
system exposures of the Bank.
II. Credit risk measurement system
(I) The Bank currently adopts the credit risk standard method to calculate the capital charges; the
risk management system generates the statement for reporting to the competent authorities
automatically by month, and report to the senior management and the Risk Management
Committee.
(II) The Bank has established multiple limitation control mechanisms (including, country, financial
industry, industry, group, counterparties of derivative) and monitored the above risk limitation on
a daily basis. In the case of exceeding the alert value or above 90% of the limitation, the Bank
will establish the relevant countermeasures.
(III) The Bank has established an internal credit rating system and verified the rating results
regularly. Currently, the rating results are included as part of the review regulations, and the
Bank is planning to expand the applicable scope for such business gradually.
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1. Credit Risk I. Credit Risk Hedging or Mitigation Policies: Avoidance or (I) Reduce the credit risk for the Bank through credit deduction methods of transferring credit trust Mitigation Policies, fund guarantee, collecting collateral and request for guarantors. and Monitoring (II) Establish the management limitation for credit risk concentration, such as limitation for the the Continued country, financial industry, industry, group, individual corporate, to prevent over-centralized risks. Effectiveness of II. Monitoring the Continued Effectiveness of Risk Hedging and Mitigation Tools: Risk Avoidance and (I) Through post-loan management and review mechanism, understand the usage of collateral Mitigation Tools and carry out the interim management inspection for the credit trust fund guarantee, so as to continue monitoring the credit risk undertaken by the Bank.

2. (II) Regularly monitor the credit risk concentration limitation, exposure distribution, and asset quality changes of the Bank to correspond to the changes of the financial states, review the credit risk control measures in due time, and regularly report to the senior management and the Risk Management Committee.

3. Approach adopted for statutory capital The standardized measurement method charges

Exposure After Risk Mitigation and Capital Charges via Credit Risk Standardized Approach

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December 31, 2020 (Unit: NT$1,000)
Types of Exposure Exposure After Risk Mitigation Capital Charge
Sovereign States 275,458,644 49,997
Non-central Government Public Sectors 71,023,206 1,231,021
Banks (including multilateral development banks) 151,211,803 4,764,760
Corporations (including securities and insurance companies) 743,621,749 51,983,940
Retail Claims 342,374,951 16,973,458
Residential Real Estate 152,081,081 5,676,616
Equity Investments 13,926,224 1,114,098
Other assets 80,506,089 2,651,555
Total 1,830,203,747 84,445,445
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Note 1: Please fill in according to the information as of the quarter before the date printing the annual report. Note 2: Capital charges = Exposure After Risk Mitigation x Statutory Minimum Capital Adequacy Ratio.

329

B. Securitization Risk Management System, Exposure and Capital Charges

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Securitization Risk Management System
2020
Item Explanation
1. Securitization Management Strategies and I. Securitization Management Strategies
Procedures Currently, the Bank does not engage in business related to
founding banks, and it may only invest in securitized products
with certain ratings approved by Taiwan Rating, S&P, Moody's,
and FITCH according to the requirements under the "Directions
for New Taiwan Dollar Capital Utilization Management of TBB"
and "Directions for Investments in Foreign Currency Marketable
Securities Management of TBB" approved by the Board of the
Bank.
II. Securitization Management Procedures
(I) Before investing in marketable securitized securities, such
investment shall be passed by the review team and shall be
approved by the report within the authorized limits of each
level.
(II) Subsequent evaluation, limitation monitoring, and stop-loss
mechanism shall be controlled according to the relevant
regulations.
2. Securitization Management Organization and I. Board: Approve the authorized limitation for all levels.
Framework II. Trading department: Engage in investment for securitized
products within the prescribed limitation according to the relevant
regulations of the Bank.
III. Risk Management Department: Perform the control according to
evaluation, limitation monitoring, and stop-loss mechanism of the
investment position according to the abovementioned regulations.
IV. Operating department: Carry out subsequent operations of
settlement.
3. Scope and Features of Securitization Risk Reporting The Risk Management Department shall be responsible for the
and Measurement Systems calculation of the limitation of investment position and capital charges
and shall report to the President by month.
4. Securitization Risk Hedging or Mitigation Policies, Invest in securitized products with certain ratings approved by
and Monitoring the Continued Effectiveness of Risk Taiwan Rating, S&P, Moody's, and FITCH.
Avoidance and Mitigation Tools
5. Approaches adopted for statutory capital charges Perform according to the Standard Law of Securitized Seal according
to the third part of "Calculation Method Description and Forms
regarding the Equity Capital and Risk Assets of the Bank."
6. Overall requirements for qualitative disclosure, Currently, the Bank does not engage in the founding bank business.
including:
(1) Purpose of securitization activities and types of
risk that the Bank undertakes and retains in re-
securitization activities
(2) Other Risks Inherent in Securitized Assets (e.g.,
Liquidity Risk)
(3) Roles Played by the Bank in Processes of
Securitization and Degrees of the Bank's
Participation in Each Process
(4) Monitoring Procedures for Changes in Credit
and Market Risks Involved in Securitization Risk
Exposure
(5) Credit Risk Mitigation Management Policies
Used by the Bank to Mitigate Risks Retained by
Securitization and Re-securitization
7. Policies for Securitization Currently, the Bank does not engage in the founding bank business.
8. The Names of External Credit Assessment Currently, the Bank does not engage in the founding bank business.
Institutions (ECAI) Used in Securitization in Banking
Books and the Usage of Each Type of Securitization
Risk Exposure
9. Significant Changes in Quantitative Information since None
the Last Reporting (e.g., Asset Movements between
Banking Books and Trading Books)
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Taiwan Business Bank Annual Report 2020

Ⅶ

Securitization Risk Exposure and Capital Charge

December 31, 2020

			December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2020
								(Unit: NT$1,000)
Exposure Level Book Category Role of TBB			Traditional Style					Portfolio Style		Total
			Exposure					Exposure
		**Asset Type **	Existing or Purchased Securitized Product	Providing Liquidity Facility	Providing Credit Enhancement	Subtotal (1)	Capital Charge (2)	Existing or Purchased Securitized Product (3)	Capital Charge (4)	Exposure (5)=(1)+(3)	Capital Charge (6)=(2)+(4)	Pre- securitization Capital Charges
Non- founding Bank	Banking Book	Real Estate Mortgage Securities	770,473			770,473	12,328			770,473	12,328
	Trading Book
	Subtotal		770,473			770,473	12,328			770,473	12,328
Founding Banking	Banking Book
	Trading Book
	Subtotal
Total			770,473			770,473	12,328			770,473	12,328

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Information on Securitized Product

1. Table of Securitized Products Held by the Bank

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December 31, 2020 Unit: NT$1,000
Total Fair Value Accumulated Carrying
Item (Notes 1) Accounting Category Original Cost
Profit/Loss Impairment Amount
Investments in debt instruments
Collateralized mortgage
measured at amortized costs - corporate 413,196 7,209 0 167,545
obligations (CMO)
bond
Investments in debt instruments
Collateralized mortgage
measured at amortized costs - corporate 403,581 16,738 0 236,872
obligations (CMO)
bond
Investments in debt instruments
Collateralized mortgage
measured at fair value through other 392,737 3,815 0 110,883
obligations (CMO)
comprehensive income - corporate bond
Investments in debt instruments
Collateralized mortgage
measured at fair value through other 415,556 10,529 0 255,173
obligations (CMO)
comprehensive income - corporate bond
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Note 1: The table includes domestic and overseas securitized products, and the items are accounted for according to the following accounting categories:

(1) Mortgage-backed securities (MBS): Including residential mortgage-backed securities (RMBS), commercial mortgagebacked securities (CMBS), collateralized mortgage obligations (CMO), and other mortgage-backed securities.

(2) Beneficiary asset-backed securitization (ABS): Including collateralized loan obligations (CLO), collateralized bond obligations (CBO), credit card receivables securitization, auto loan securitization, consumption loan/cash card securitization, lease securitization, other securitizations.

(3) Asset-backed commercial papers (ABCP).

(4) Collateralized debt obligations (CDO).

(5) Mortgage securitization: Real estate asset trust (REAT).

(6) Bonds issued under structured investment vehicles (SIV).

(7) Other securitized products. Note 2: The table includes beneficiary securities or asset-backed securities with banks as founding institutions.

331

1. (1) Disclosure of investments in securitized products with an original value over NT$300 million (excluding those held by the Bank in the capacity as the founding institution with a view to strengthened credit):

Unit: NT$1,000

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Method of
securities Name of (Note 2) Accounting Category Currency LocationIssuer and PurchaseDate of Maturity Date Coupon Rate(%) RatingsCredit Interest Payment and Principal Repayment Original Cost Profit/LossTotal Fair Value Accumulated Impairment Carrying Amount Attachment Point Content of Asset Pool
Announce the California:11.45%;
Investments in
interests for the Florida: 9.29%;
debt instruments
US3137FGJD84 measured at USD US 2018/10/17 2045/10/15 3.50 AAA next period and the 413,196 7,209 0 167,545 Texas: 8.97%;
amortized costs - amount of principal Others: 70.29%.
repayment by
corporate bond month
Announce the Texas: 12.99%;
Investments in
interests for the California: 12.71%;
debt instruments
US3137F4VQ28 measured at USD US 2018/10/23 2046/9/15 3.50 AAA next period and the 403,581 16,738 0 236,872 Florida: 8.65%;
amortized costs - amount of principal Colorado: 4.95%;
repayment by others: 60.7%.
corporate bond month
Investments in California: 58.38%;
Announce the
debt instruments New York: 14.78%;
interests for the
measured at fair Washington: 7.46%;
US3136B3KS88 value through other USD US 2018/11/15 2048/11/25 4.00 AAA next period and the 392,737 3,815 0 110,883 District of Columbia:
amount of principal
comprehensive 6.33%; Virginia:
repayment by
income - corporate month 4.58%; others: 8.47%
bond
Investments in New York: 95.33%;
Announce the
debt instruments California: 2.45%;
interests for the
measured at fair Washington: 1.62%;
US3136B4CG16 value through other USD US 2019/3/29 2049/4/25 3.00 AAA next period and the 415,556 10,529 0 255,173 District of Columbia:
comprehensive amount of principal 0.60%
repayment by
income - corporate month
bond
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Note 1: The table includes domestic and overseas securitized products.

• Note 2: Specify the full name separately for the same securitized products in different tranches.

• Note 3: Please fill in the results of the latest credit rating.

Note 4: Attachment point refers to the ratio of the amount of the total issued tranches with an order of priority of payment later the tranches held by the Bank accounting for the total issued amount of such securitized products. For instance, where the Bank purchased the A tranche collateralized debt obligation (CDO), the tranches with an order of priority of payment later A tranche are BBB tranche and equity tranche, and the issue amount of BBB tranche and equity tranche account for 12% of the total issue amount of the CDO; therefore, the attachment point for A tranche shall be 12%.

Note 5: Asset pool refers to the asset portfolio entrusted to the trustee or transferred to the special purpose company by the founding institution. Please fill in the asset category (senior or subordinated), breakdown, carrying amount denominated in the original currency, and the number of entries of the asset portfolio.

• (2) Disclosure of Information on the Positions Held by the Bank in the Capacity as the Founding Bank with a View to Strengthened Credit:

Unit: NT$1,000

Name of Security	Accounting Category	Currency	Date of Purchase	Expiry Date	**Coupon Rate **	Credit Rating	Method of Interest Payment and Principal Repayment	Original Cost	Total Fair Value Proft/ Loss	Accumulated Impairment	Carrying Amount	Attachment Point	Content of Asset Pool

Note: Please refer to Table2 (1) above for the definition and description of the columns.

• (3) Disclosure of Information of the Discredited or Liquidated Securitized Commodities Held by the Bank in the Capacity as the Buyer Institution:

Unit: NT$1,000

Name of Security	Currency	Founding Institution	Maturity Date	Content of the Contract	Contract Performance (Note)

Note: Where the Bank has purchased assets according to contracts, please set out the reference market price of the acquired assets.

332

Taiwan Business Bank Annual Report 2020

Ⅶ

1. Disclosure of the Bank Serving as Guaranteeing Institution or Liquidity Provider for Securitized Products, and Amount:

Unit: NT$1,000

Name of Security	Currency	Founding Institution	Maturity Date	Coupon Rate	Credit Rating	Role (Note 1)	Amount (Note 2)	Attachment Point	Content of Asset Pool

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• Note 1: When serving as guaranteeing institution for securitized products, please fill in the column “Guaranteeing institution.” When serving as a provider of liquidity financing, please fill in the column “Provider of the liquidity financing.”

• Note 2: When the Bank is serving as guaranteeing institution, please specify the guarantee amount; when the Bank is serving as a provider of liquidity financing, please specify the limitation.

• Note 3: Please refer to Table2. (1) above for the definition and description of the columns.

• C. Operational risk management system and capital charges

C. Operational risk management system and capital charges	C. Operational risk management system and capital charges
Operational risk management system 2020
Item	Description
1. Operational Risk Management Strategies and Procedures	I. The operational risk management strategies of the Bank aim to establish an appropriate operational management environment. Through the implementation of operating risk management structure approved by the Board and the rigorous execution of such structure by the senior managers, the Bank ensures that all relevant operational risks have been monitored by using appropriate evaluation procedures. II. To optimize the function of operational risk management, the Bank grasps the scope of operational risk through managing procedures of risk identifcation, risk evaluation, risk measurement, risk monitoring, and communication. The Bank also adopts appropriate measures to ensure a duly management for the relevant operational risk, effciently allocate limited resources to the operational risk management tasks.
2. Operational Risk Management Organization and Framework	I. Board of Directors: Approve the risk management policies for the Risk Management Committee to execute the relevant management and monitoring matters. II. Risk Management Committee Responsible for the review of information and issues related to the operational risk of the Bank. III. Risk Management Department (I) Execute the risk management policies approved by the Board. (II) Establish the operational risk management system and risk management tools. (III) Monitor, analyze, and report to the Bank regarding the information on operational risks. IV. Authority Department of Business (I) Identify and analyze the potential operational risks of each business activity. (II) Establish the standard operation procedures (SOP) as the basis for business execution (III) Set up business regulations and operational procedures that cover operational risk points and relevant control measures. (IV) Manage and report the operational risks of each business activity. V. Auditing Department Conduct regular audit regarding the risk management operations for the departments of the Bank. VI. All departments of the Bank (I) Daily operations shall comply with the operational management requirements. (II) Report the operational risk management information in accordance with regulations.
3. Scope and Features of Operational Risk Reporting and Measurement Systems	I. The Bank conducts its operational risk measurement primarily through three operational risk management tools: (I) Loss data collection (LDC) for operational risk- A. The LDC for operational risk of the Bank covers operational risk incidents arising from all business activities. Departments file such incidents through the "Operational Risk Management (ORM) System" and provide details regarding the registering items of the operational risk incidents. B. Improve the cognition to risk for all employees of the Bank through the implementation of ORM System and relevant training and assist the incident occurring department in performing proper improvement plan and tracking the management execution. (II) Key risk indicators (KRI) for operational risk - A. Adopt the view of the Bank's risk management, consider the data availability, indicator management effcacy, and risk signifcance among the operational risk items concerned by the businesses to establish the Bank's key risk indicators with effective management benefts. B. Each risk indicator has an alert value that is based on the historical statistics or experiences of the Bank, which is used as the basis for determining whether active management is required for the indicator. The authorities of the Bank carry out risk control through monitoring the exposures of the indicators, so as to prevent the occurrence of potential operating risk incidents for each department.

333

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Item Description
(III) Risk and control self-assessment (RCSA) for operational risk -
A. Regarding the RCSA system of the Bank, the authority department of business at the Bank's headquarter
prepares a self-assessment questionnaire in respect of risk and control of its business procedures and the
business execution departments and supervision departments shall conduct the self-assessment concerning
execution and management according to the risk and control assessment scale, and self-assess the risk
results to provide a responding plan, allowing the Bank to analyze the exposures of potential operational risk.
B. When carrying out the self-assessment, departments of the Bank may assess the residual risk hierarchy
of operational risk items concerning the effect of the residual risk and the probability of the residual risk.
Departments shall also assess the effectiveness of the control with respect to the execution of control and
relevance.
C. The Bank compiles and analyzes the risk control self-assessment results of the departments and prepares the
risk control self-assessment chart. Regarding items with higher risks, the authority department shall propose
the action plan to respond accordingly.
II. The content of the Bank's operational risk management report includes the disclosure regarding the Bank's operational
risk information and exposure monitoring status. The report is prepared and reported by the Risk Management
Department on a regular basis with a scope covering operational risk incidents, operational risk indicators, trend
analysis, and department improvement and tracking opinion, as well as the measurement and analysis regarding the
operational risk incident occurring frequency and severity based on the risk matrix formed with the top eight business
types and the top seven incident types, as the reference of improvement for relevant operating procedures.
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1. Operational I. The Bank has stipulation such as guidelines, procedures, and regulations to control and mitigate the operational Risk Hedging risk of the Bank. In addition, business departments adopt reasonable responding measures according to the loss or Risk probability and the amount arising from the operational risk, respectively, i.e., directly avoid processing, transfer Mitigation partial or entire risk by way of transfer or charges, or process after an evaluation on profit and risk. Policies, and II. Operational risk hedging or risk mitigation of the Bank is primarily processed through insurance or outsourcing, so Monitoring as to transfer and mitigate the losses of operational risks arising from human, system, or operation negligence, or the Continued external incidents. Effectiveness III. To minimize human factors, natural disasters, and other significant emergencies affecting the reputation or

of Risk endangering the normal operation of the Bank and the financial order, the Bank has established operational

Hedging and processing procedures and relevant regulations for departments to comply with, so as to instantly minimize the

Mitigation damages and resume the normal operation in a short time.

Tools

• IV. Unscheduled reports regarding crisis management of the Bank are submitted to the Risk Management Committee and senior managers to monitor the operational risks exposures and response capabilities of the Bank.

• Approaches Adopted for Statutory The standardized measurement method Capital Charges

Operational Risk Capital Charges December 31, 2020 (Unit: NT$1,000)	Operational Risk Capital Charges December 31, 2020 (Unit: NT$1,000)	Operational Risk Capital Charges December 31, 2020 (Unit: NT$1,000)
Year	Gross proft	Capital Charge
2018	22,560,518
2019	21,760,230
2020	20,602,141
Total	64,922,889	3,051,393

D. The Market Risk Management System and Capital Charges

The Market Risk Management System - Standard Law

2020

• Item Content

• 1. Market Risk I. Management Strategies Management (I) Implement market risk management according to "TBB Market Risk Management Standards" and other Strategies and relevant regulations to achieve the operating goals and maintain the healthy capital adequacy ratio. Procedures (II) Subject to the risk tolerance approved by the Board (Managing Directors), the Bank adopts various risk control mechanisms to effectively utilize and manage its capital, ensuring that the market risk exposures are within the bearable scope and the Bank may still achieve its goal for earning.

• Market Risk

• II. Management Procedures

• (I) Risk Identification

According to the requirements under the "TBB Market Risk Management Standards," a proper market risk evaluation shall be performed before promoting a financial product; documentation of such evaluation shall be preserved for further reference. Content for the evaluation includes identification of risk factors, costbenefit analysis, market liquidity, risk countermeasure, the adequacy of the risk management system and the effect of exposure to market risk by the Bank.

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Taiwan Business Bank Annual Report 2020

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Item Content
(II) Risk measurement
A. The risk management department shall draw up the market risk positions, sensitivity, value-at-risk and
suspension limit, and report to the Directors (Managing Directors) for approvals of execution.
B. The risk measurement (or valuation) for the financial products of the Bank are carried out on the different
information system, and the market data and model parameters used in the valuation were sampled
regularly to check their reasonability.
(III) Risk monitoring
A. Regularly prepare the valuation report of financial products and submit it to the supervisors of the
departments for approval, and used as the basis for the execution of daily risk management.
B. There are requirements concerning limitation and stop-loss in place for all financial transactions; risk
control mechanisms of stop-loss, suspension, and post-management will be carried out according to the
requirements when the losses amount from the valuation exceeds the limitation.
(IV) Risk Reporting
The risk management department regularly reports the current conditions of market risk management to
the Directors (Managing Directors) and senior management, allowing them to grasp the risk exposures and
adjust the management measures in due time.
2. Market Risk I. Board of Directors:
Management The highest market risk management and supervision unit, responsible for approving the market risk
Organization and management policies and all risk limitations.
Framework II. Risk Management Committee
Responsible for the review of issues and responding plans related to the market risk of the Bank.
III. Risk Management Department
(I) Establish market risk management operating procedures and relevant regulations.
(II) Plan and execute a market risk management business.
(III) Establish market risk management-related systems.
(IV) Report the market risk management execution of the Bank to senior management and Directors (Managing
Directors) on a regular basis.
3. Scope and Features I. Scope and features of the measurement system
of Market Risk (I) Evaluate and monitor market risk exposure on a daily basis, including the losses of the Bank caused by
Reporting and adverse changes in market price resulting from interest rates, equity, exchange rate and commodities on and
Measurement off the balance sheet.
Systems (II) Adopt the historical simulation method to calculate the value at risk (VaR) on the financial trading
management system on a daily basis and observe its changing trends to report at the Risk Management
Committee meeting per month.
(III) The VaR measurement scope includes all positions of foreign exchange risk and commodity risks, as well
as the trading book positions of interest rate and equity securities risk. There are VaR limitation control
mechanisms in place for interest rate, equity, foreign exchange, and overall position.
II. Connotations of Market Risk Report
(I) Regularly report to the Directors (Managing Directors) and Risk Management Committee regarding the
amount of asset portfolio exposures, providing references to senior management for decision-making.
(II) The market risk report of the Bank includes the valuation on the exchange rate, interest rate, equity
securities positions, and profit or loss, so as to monitor the profit or loss for the market risk positions.
(III) The risk management department reports the equity securities, government bonds, foreign exchange trading
positions, and profit or loss valuation on a daily basis, so as to grasp the daily routine market risk control at
any time.
4. Market Risk The financial transactions of the Bank mostly involve simple financial products. Regarding complex financial
Hedging or products from the customer end, the Bank, in principle, will carry out back-to-back hedging and covering to avoid
Mitigation Policies, market risks effectively. In addition, when engaging in hedging transactions with different contractual terms, the
and Monitoring financial trading department shall specify matters of hedged items, hedging relationship, nature of the hedged
the Continued risks, and the mitigation effects of the valuation risks. Risk management departments shall regularly carry out
Effectiveness of measurements regarding the effects of executing risk mitigation.
Risk Hedging and
Mitigation Tools
5. Approach Adopted
for Statutory Capital The standardized measurement method
Charges
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Market risk capital charges

December 31, 2020

Market risk capital charges December 31, 2020	Market risk capital charges December 31, 2020
(Unit: NT$1,000)
Category of Risk	Capital Charge
Interest Rate Risk	596,702
Equity Risk	46,273
Foreign Exchange Risk	1,600,352
Commodity Risk	0
Total	2,243,327

335

E. Liquidity risks include the maturity analysis regarding assets and liabilities as well as management methods for assets liquidity and the cash flow gap liquidity

Liquidity Risk Management System

2020

• Item Description

• 1. Liquidity Risk Management I. Liquidity risk management strategies Strategies and Procedures (I) Monitor the liquidity risk positions according to the liquidity risk management policies and limitations approved by the Board of Directors.

• (II) Established the "TBB Directions for funding Liquidity Risk Management" and "TBB Management Guidelines for funding Liquidity Risk Management" for the compliance of the Bank, so as to effectively control the funding liquidity risks.

• (III) Overseas branches shall establish regulations related to liquidity risk management according to the business nature and the requirements of the competent local authority; such regulations shall be executed after being approved by the President, and the Risk Management Department shall be responsible for the monitoring.

• II. Liquidity risk management procedures (I) Discuss and formulate directions, management guidelines for liquidity risk management, and contingency plan for funding liquidity risk and conduct a review on a yearly basis.

• (II) Identify, measure, supervise, and control the funding liquidity risk and establish stable operating procedures and structures.

• (III) Report to the ALM committee regarding the measurement results for funding liquidity risk on a monthly basis and report to the Board of Directors regarding funding liquidity risk and stress test results.

• 1. Liquidity Risk Management I. Board: The highest liquidity risk management and supervision unit, responsible for approving the directions for liquidity Organization and Framework risk management and all risk limitation, and shall review on a yearly basis, so as to ensure the effectiveness of the liquidity risk management.

• II. ALM Committee: The Bank established an ALM Committee subordinated to the President, responsible for the supervision for liquidity risk exposures and the approval of responding plan upon conditions exceeding management indicators.

• III. Treasury Department: Execute daily funding allocation operations to ensure sufficient funding is in place to satisfy all funding requirements.

• IV. Risk Management Department: Responsible for the identification, measurement, monitoring, disclosure, and reporting of liquidity risk.

• 1. Scope and Features of The Bank uses the ALM system to calculate the liquidity gap on a monthly basis, allocates items of funding inflow and outflow Liquidity Risk Reporting and to each time slot according to the remaining maturity date, calculates the funding gap, to measure the funding gap within each Measurement Systems time slot. Also, it prepares the statement of term structures of the maturity date, to contain the liquidity gap within the limitation, making sure that the Bank will have sufficient capacity to fulfill its obligation in due course.
• 1. Funding strategies of the I. The ratio of wholesale NT$ time deposits accounts shall be accounted for less than 1% of total time deposits of the Bank Bank: Policy of mismatching in principle. funding sources and funding II. The ratio of deposit balances per account for wholesale deposit accounts (sum of demand and time deposits) shall be tenor, and centralized accounted for less than 2% of total NT$ deposits (excluding time deposits transferred from post offices) of the Bank in or decentralized funding principle. strategies III. Regarding depositors exceeding the above ratio, the Risk Management Department shall report to the ALM Committee on a monthly basis.

• IV. The ratio of total deposits balances (demand and time) of the top 10 customers of the Bank shall be accounted for less than 30% of total NT$ deposits (excluding time deposits transferred from post offices) of the Bank in principle; however, where the ratio is over 24%, the authority department shall propose countermeasure and report to the ALM Committee.

• V. Prepare the "Wholesale Time Deposits Transaction List" and "Wholesale Deposits Transaction List"

• 1. Liquidity risk hedging or I. The Bank has "Contingency Plan for Funding Liquidity Risk" in place to respond to liquidity crisis such as abnormal mitigation policies, and withdrawal of deposits, huge loss of funding, or material shortage of liquidity, to minimize liquidity risk and maintain the monitoring the continued normal operation of the Bank. effectiveness of risk hedging II. Review the "TBB Directions for Funding Liquidity Risk Management", "TBB Management Guidelines for Funding and mitigation tools Liquidity Risk Management", and "Contingency Plan for Funding Liquidity Risk" to effectively control the funding liquidity risk.

• III. Where the funding liquidity risk limitation is exceeded or other significant events have occurred that may lead to a funding liquidity crisis, the Risk Management Department shall immediately call for a meeting with other related departments to formulate countermeasures, submit to the ALM Committee for discussion and execute by the relevant business authority after receiving the approvals from the President, and shall report to the Board of Directors (Managing Directors).

• 1. Description of how to conduct I. Conduct stress tests on the crisis that occurred to the individual banks, and the crisis occurred to the overall market on a a stress test quarterly basis. II. Convene a meeting with related business departments to formulate the stress scenario and the target value for risk management; submit to the President for approval and conduct the stress test on a yearly basis.
• 1. Summary for liquidity When significant events occurred to the Bank that may incur funding liquidity crisis, and convene the ALM Committee meeting contingency plans and establish a contingency workforce that is in charge of the following: I. Allocate sufficient cash for support.

• II. Deal with abnormal wholesale deposits and funding withdrawals. III. Issue statement to clarify the truth.

• IV. Maintain the operating orders.

• V. Provide information related to crisis management, funding changes, and available balances of the Bank from time to time according to the requirements of external processing institutions to allow such institutions to grasp the actual circumstances of the Bank in a short time and provide assistance to the Bank in due course.

• VI. Avoid conditions of over-utilization regarding deposits in the interbank accounts and proactively contact the correspondent bank to maintain the current limitations.

• VII. By the end of such events, in order to repay the borrowings and strengthened the confidence of the depositors, the Bank's headquarter and branches shall assign material officers to visit designated key accounts at the site, so as to strive for the early return of deposits. Meanwhile, to completely eliminate the suspicions casts by different sectors, the Bank shall publish declarations to explain the event and show its appreciation to the assistance of relevant departments.

336

Taiwan Business Bank Annual Report 2020

Ⅶ

a Structural Analysis of the Maturity of New Taiwan Dollars

(Unit: NT$1,000)

December 31, 2020

		Amount for the Remaining Period Prior to the Maturity Date	Amount for the Remaining Period Prior to the Maturity Date	Amount for the Remaining Period Prior to the Maturity Date	Amount for the Remaining Period Prior to the Maturity Date	Amount for the Remaining Period Prior to the Maturity Date	Amount for the Remaining Period Prior to the Maturity Date
	Total	0-10 days	11-30 days	31-90 days	91-180 days	181 days-1 year	Over one year
Primary inflow upon maturity	1,528,946,546	132,138,936	166,645,095	136,163,423	178,254,748	125,643,908	790,100,436
Primary outfow upon maturity	1,894,385,819	52,672,688	103,498,741	201,839,259	212,757,375	336,728,244	986,889,512
Gap	-365,439,273	79,466,248	63,146,354	-65,675,836	-34,502,627	-211,084,336	-196,789,076

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Note: The table includes the NT$ amount of the Bank, including an estimated outflow of loan commitments NT$357,529,991 thousand.

b Structural Analysis of the Maturity of US Dollars

December 31, 2020 (Unit: US$1,000)

		Amount for the Remaining Period Prior to the Maturity Date	Amount for the Remaining Period Prior to the Maturity Date	Amount for the Remaining Period Prior to the Maturity Date	Amount for the Remaining Period Prior to the Maturity Date	Amount for the Remaining Period Prior to the Maturity Date
	Total	0-30 days	31-90 days	91-180 days	181 days-1 year	Over one year
Primary infow upon maturity	13,175,860	4,313,385	2,837,011	1,570,635	1,179,663	3,275,166
Primary outfow upon maturity	13,753,689	4,085,099	2,691,982	1,883,298	1,626,015	3,467,295
Gap	-577,829	228,286	145,029	-312,663	-446,352	-192,129

Note: The table includes the US$ amount of the Bank, including an estimated outflow of loan commitments NT$779,907 thousand.

(3) Impact of changes of important domestic and international policies and laws on the Bank ’ s finance and business, and response measures:

In response to the implementation of laws regarding the "repatriated offshore funds," the Bank promoted the repatriated offshore funds foreign currency trust business to satisfy the demand of customers regarding wealth management and investment for repatriated offshore funds. The Bank entered into the first contract for repatriated offshore funds foreign currency trust in October 2020.

response measures

1. Due to the ever-changing development of digitalization and FinTech, banks within the same industry invested resources one after another to carry out their own digital development and digital transformation. Big Data and FinTech are also widely used to improve customer experiences, and precise marketing and social media are adopted for business promotion. Furthermore, to become a part of customers’ lives and provide omnipresent financial services, banks have adopted various approaches to construct their own digital ecosystems.

2. In response to the changes in the financial environment, the Bank actively promoted its digital transformation and developed digital marketing. It introduced FinTech services to establish the Bank’s digitalized services with customers as cores, data as the basis, and customers’ experiences as primary considerations. To rapidly develop its digital banking, the Bank intends to adopt a strategy with channels, customer-acquiring, marketing, and innovation, which is described as follows:

3. A. Channel strategy

4. Provide revisions and optimization for four major mediums used by customers, including online personal banking, online corporate banking, mobile banking APP, and its website. Attach attention to UIUX, emphasize simple and refreshing visual display as well as easy and convenient operations, and continue to update functions and services. Meanwhile, actively introduce a transaction security control system with convenience and security to provide a convenient and secured digital finance environment for customers.

5. B. Acquisition strategy

6. Develop simple online application services and introduce automated and intelligent services to create the online application platform, including account opening, card application, loans and payment, and provision of exclusive products, allowing customers to enjoy fast, convenient, and preferential application services all day long. Promote the mobile payment business, continue developing Taiwan Pay, and proactively manages chains or online merchants to introduce Taiwan Pay. Develop segment management according to the grouping based on their categorizations.

7. C. Marketing strategy

8. Develop social media operations, including active expansion of fans, the number of friends on LINE’s official account, and functional services, to formulate a digital-friendly image of the Bank and attract

337

different customer groups to make exchanges with the Bank. Introduce Big Data analysis to analyze, group, and label customers, and concurrently understand the behaviors of customers in different aspects, so as to design and provide customized and personalized services.

• D. Innovation strategy

Create the AI intelligent banking that combines AI with customer services, procedures, and biological characteristics to continue developing Artificial Intelligence Customer Service, RPA, biometric recognition, and digital identity recognition and expand the diverse development of the Blockchain. Develop and deepen open API according to the open API development procedures in three stages promoted by the government to allow the Bank’s services to enter customers’ lives, in the hope of providing premium and wide-ranged digital finance services and experiences.

• (5) Impact of changes in the Bank's image on corporate risk management and response

measures

Where the external parties recognize the Bank for its excellent business performances, the Bank will generally grasp the timely opportunities of news and carry out relevant promotional activities, so as to improve the image of the Bank. Shall there be untrue rumors or negative media press that adversely affects the image of the Bank, the Bank will proactively verify the truth, provide instant verification or engage media to make a balance, protecting the reputation and image of the Bank.

and the countermeasures: None.

(7) The expected benefits and possible risks to expand the branches and the countermeasures:

In 2020, the Bank had not expanded its branches but only carried out adjustments for its domestic branches.

(8) Risks derived from the concentration of operations, and countermeasures:

(9) The impact on the Company, and risk due to changes in managerial authority, and the countermeasures: None

• (10) The effects of Directors or major shareholders holding more than 1% of shareholdings transferring or converting a larg e amount of equity in the Bank, as well as the risks, and countermeasures:

The equity changes in Directors and corporate shareholders represented by Directors are reported according to the Securities and Exchange Act; furthermore, within 10 days from the closing day, communicate with shareholders holding more than 1% of shareholdings in the Bank according to Article 25 of the Banking Act to remind shareholders regarding notifying the Bank of the changes in their shareholding according to the requirements of the Banking Act, in order to stabilize the Bank's ownership.

(11) Litigious or non-litigious matters

The World Trade Center Branch of the Bank carried out the outward collection project under the letter of credits for its customer Chi Seng Industrial Co., Ltd. in 1996, and it is suspected that the importer L' International Compagnie de Commercialisation et D'Investissement in the Republic of Zaire (hereinafter, 'I.C.C.I. Company') incurred losses due to Chi Seng Industrial Co., Ltd. holding counterfeit notes and has not performed the exports. The I.C.C.I. Company filed a prosecution to the Brussels Commercial Court in November 1998 and requested the issuing bank of the certificate and the Bank to make a joint compensation amounting to US$7.83 million, plus interests, losses, and fees. On August 31, 2005, the Court pronounced the judgment that the Bank shall make compensation of US$7.674 million plus interests to the I.C.C.I. Company. The Bank engaged a local attorney to file an appeal, and the Brussels Appellate Court had made its interlocutory judgment in February 2011, considering that both the Bank and I.C.C.I. Company had faults and made its judgment regarding the proportion of fault on November 16, 2011, sentencing that the Bank shall be responsible for 90% of the proportion of fault. The Bank lodged an appeal regarding the interlocutory judgment of the second instance on November 3, 2011; however, the Court of Final Appeal rejected the appeal from the Bank on February 6, 2013. Therefore, losing the lawsuit was confirmed. However, the Bank failed to achieve a consensus regarding the currency rate and calculation of compensation with I.C.C.I. Company. In October 2016, I.C.C.I. Company filed an application to the Frankfurt Court to impound the deposits of the Bank at the correspondent bank. The Bank immediately provided security deposits of €13.2 million to the Court to release the order. In July 2017, I.C.C.I. Company applied for the enforcement regarding the abovementioned security deposits, and the Court transferred such security deposits to I.C.C.I. Company without any consultations. Therefore, the Bank filed an

338

Taiwan Business Bank Annual Report 2020

appeal of debtor disagreement. However, the Frankfurt Court rejected the lawsuit of the Bank in November 2018. After another appeal by the Bank, the Frankfurt Supreme Court return the lawsuit to the first trial for remand in November 2019. On March 16, 2020, I.C.C.I. Company submitted a declaration for the reasons of objection to BVerfG for requesting the cancellation of "Verdict of Return for Remand by the Frankfurt Supreme Court." The BVerfG requested the Bank to provide its defense to the declaration for the reasons of objection submitted by I.C.C.I. Company before July 16, 2020. The Bank has engaged a lawyer as the representative for the lawsuit at the BVerfG to submit its defense. Furthermore, the Bank received notices of appearance from the court in Congo in October and November 2019, respectively, for the reason that (1) StarMarine Company, a third-party, required I.C.C.I to make a compensation of US$1.13 million, and required the Bank to bear the joint and several liabilities for compensation; and (2) I.C.C.I required the Bank to make a compensation of US$20.06 million for the loss of investment opportunity and business reputation (less the amount it had been repaid) and required the Bank to provide a guarantee of €14 million. The Bank had engaged local lawyers to serve the summon. The court in Congo merged the two cases for trial. In September and October 2020, documents from the Congo Court were twice served to the Bank in delay, resulting in the Bank's inability to sign and defend itself during the court period. Our lawyer in Congo had submitted petitions on October 28 and December 1, 2020 to the court to apply for the opening of the debate process. As of December 31, 2020, the Bank recognized compensation for losses of NT$183,923 thousand and €8 million.

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Ⅶ
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To strengthen the risk management for the loan business and avoid excessive centralized loans to industries, group corporations, and individual corporations, the Bank established the 'Management Guidelines for Credit Risk Limitations Control' and 'Procedures for Credit Risk Limitations and Control of Credit Loans' to regulate its risk limits for loans, and thus diversify the risk.

7. Crisis Management and Response Mechanism

• (1) The Bank has established the “Guideline for Material Contingencies Handling Mechanisms.” Shall there be bank runs for deposits, robberies, fraud, fire, flood, natural disaster, violence, or other significant matters, the department shall immediately notify the Business Development Department of the Bank with a call and describe the relevant circumstances according to the requirements under the Guideline to carry out the related reporting and contingency process. The Business Development Department shall notify the President immediately to adopt appropriate countermeasures, convene the contingency workforce meeting when necessary, and take the initiatives to assign staff for assistance in branches to take required measures. Report the relevant data to FSC, the Central Bank, Central Deposit Insurance Corporation, and the Ministry of Finance, and closely work with the responding measures of the competent authority. Where necessary, the spokesman of the Bank will take the initiative in the press release, directing the news report regarding the event toward the facts, instead of exaggerating, and affecting the reputation of the Bank.

• (2) Respond to natural disaster factors according to the “TBB Management Guidelines for Branches Concerning Foreign Currency Transaction and Capital Operations during Natural Disasters.” When the Bank’s headquarter has called off work due to natural disasters while partial branches are still operating as usual, such guidelines provide a basis for branches that carry out foreign currency transactions and capital operations.

• (3) Emergency backup and security protection measures for information equipment: Please refer to “Emergency backup and security protection measures for information operations” in “Chapter 5 Business Operation” .

• (4) Responding to the probability of significant funding outflow, the Bank has established the “Directions for Contingencies Response” and “Funding Liquidity Risk Management,” describing the contingency measures to be adopted when any liquidity crisis occurred.

• (5) The Bank has established the “Occupational Safety and Health Code,” which sets out the relevant occupational safety and health standards, maintenance and inspection method for all equipment, and designates specialists to carry out safety and health inspection regularly to ensure related equipment to function normally, minimize accidents, and protect the personal safety of the employees. Upon disasters, a comprehensive security inspection shall be carried out according to the “Disaster Contingency Manual.” Regarding damaged branch premises or significant operating equipment, the Bank will adopt the necessary reinforcement or repair to ensure operational safety. For equipment that cannot be reinforced or repaired in a short time, a temporary substitute plan is also provided to help the restoration of all businesses.

The Bank has no designated hedging instrument for hedging accounting.

339

VIII

Special Notes

341

1. Information Regarding the Bank's Subsidiaries

343

2. Progress of Private Placement of Securities and Financial Bonds

343

3. The Bank's Subsidiaries' Shareholding or Disposal of the Bank's Shares

343

4. Additional Disclosure

343

5. Pursuant to Item 2, Paragraph 3, Article 36 of Security and Exchange Act, the Incidence Exerting Material Influence on Shareholders' Rights or Security Prices

VIII

1. Information Regarding the Bank's Subsidiaries

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----- Start of picture text -----

Taiwan Business Bank, Ltd.
100% Ownership
TBB Venture TBB TBB
Capital Co., International (Cambodia)
Ltd. Leasing Co., Microfinance
Ltd. Institution Plc.
100% Ownership
Taiwan Business Bank
International Leasing
Co., Ltd.
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（ 2 ）

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----- Start of picture text -----

Enterprise Name Established Date Address Paid-In Capital Major Business
5F, No. 151, Sec. 4, Nanjing E. Rd.,
TBB International Leasing 2013.04.03 Songshan Dist., Taipei City, Taiwan, NT$ 1.5 billion Financial lease
Co., Ltd.
R.O.C.
Taiwan Business Bank Room 368, 302 Part, No.211, North
International Leasing Co., 2014.06.16 Fute Road, Free Trade Zone, Pudong CNY$ 170 million Financial lease
Ltd. District, Shanghai
TBB (Cambodia) 2E/2F Street 315, Sangkat Boeung
Microfinance Institution 2015.08.10 Kok 1, Khan Toul Kork, Phnom Penh, US$ 20 million SME and personal
Plc Cambodia. finance business
TBB Venture Capital Co., 2018.09.07 11F, No. 30, Ta Cheng St., Taipei City, NT$ 600 million Venture capital
Ltd. Taiwan, R.O.C. business
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341

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Shareholding
Enterprise Name Title Name
Shares %
Chairman Shao-Huang Chen
Director Tseng-Hsiang Yi
TBB International Leasing Co., Ltd. Director Kuo-Liang Tseng 150,000,000 100%
Supervisor Chih-Wei Chen
President Jaw-Jiun Lai
Chairman Shao-Huang Chen
Director Tseng-Hsiang Yi
Taiwan Business Bank International Director Mei-Chun Lin - 100%
Leasing Co., Ltd.
Supervisor Chih-Wei Chen
President Chi-An Liu
Chairman Yu-Min Chang
Director Sung-Shui Chiu
TBB (Cambodia) Microfinance Institution Plc. Director Jung-Pin Huang 20,000 100%
Independent Director Tien-Liang Hsu
President Jung-Pin Huang
Chairman Chang-Yu Lin
Director Tzong-Wen Chou
Director Tseng-Hsiang Yi
Director Chih-Wei Chen
TBB Venture Capital Co., Ltd. 60,000,000 100%
Director Jung-Fang Kuo
Supervisor Tun-Kung Cheng
Supervisor Yu-Chuan Chou
Acting President Le-Yi Chiang
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Unit: NT$ Thousand

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Current
Enterprise Name Capital AssetTotal LiabilityTotal Net Value Operating Revenue Operating Profits Profit and Loss (After-tax)EPS
(After-tax)
TBB International
Leasing Co., Ltd. 1,500,000 1,481,191 49,609 1,431,582 62,611 28,853 61,459 0.41
(Consolidated)
TBB (Cambodia)
Microfinance Institution 614,730 1,171,025 618,861 552,164 87,480 34,081 33,725 1,686.25
Plc
TBB Venture Capital 600,000 590,138 5,069 585,069 2,109 -15,138 -11,354 -0.19
Co., Ltd.
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Note: The price per share of TBB (Cambodia) Microfinance Institution Plc is US$1,000. If it is converted to NT$10 per share according to the local practice, the earnings per share (after-tax) would be NT$0.55.

The financial statements of the reinvestment companies with more than 50% of equity owned by the Bank have been incorporated into the consolidated statements. Please refer to the 2020 Consolidated Financial Statements and notes in VI Financial Statements (Page 123) 。

342

Taiwan Business Bank Annual Report 2020

VIII

2. Progress of Private Placement of Securities and Financial Bonds: None.

3. The Bank's Subsidiaries' Shareholding or Disposal of the Bank's Shares: None.

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4. Additional Disclosure: None.

5. Pursuant to Item 2, Paragraph 3, Article 36 of Security and Exchange Act, the Incidence Exerting Material Influence on Shareholders' Rights or Security Prices: None.

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109 年再新增贊助 6 家社區組織，設立「銀髮樂齡學堂」。 與台北大學合辦「臺北經濟論壇」活動。
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與財政部共同舉辦 2020 「統一發票盃路跑活動 - 臺中場」。 本行「意象大稻埕藝文空間」持續邀約在地藝文工作者策展。

343

IX

Corporate Social Responsibility Report

• 345 1. Promotion of Corporate Social Responsibility and Responsibility Analysis

346

350

351

2. Material Aspects Analysis

3. Risks and Opportunities of Climate Change

4. TBB’s Achievements in Promoting of Corporate Social Responsibility in 2020

IX

1. Promotion of Corporate Social Responsibility and Responsibility Analysis

The fulfillment of Corporate Social Responsibility (CSR) has always been one of TBB’s core operating principles. In addition to the pursuit of business performance, the provision of employee value-added, and an emphasis on shareholder interests, TBB uses concrete action to fulfill its CSR by starting out from the banking industry itself and participating actively in public-benefit activities, showing care for society, enhancing customer benefits, reinforcing care for employees, and striving to become an outstanding bank with sustainable operations.

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To reinforce the fulfillment of its CSR and exhibit the importance that TBB attaches to CSR, TBB set up a CSR Initiative Committee in 2017, which was subsequently promoted to the CSR Committee, responsible for the proposal and execution of CSR policies or systems, and report to the Board regarding the results of executing the CSR of TBB.

The committee charter of the CSR Committee was promulgated on November 14, 2018. There are currently 5 members. Except for the Chairman and the President undertaking posts of committee chairman the mandatory member, respectively, the remaining 3 members are Independent Directors of TBB. There are five subordinated units dedicated to Corporate Governance, Customer Rights, Sustainable Environment, Social Benefit, and Employee Care in place. TBB will take the core financing business as the starting point in carrying out CSR within its scope of business.

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CSR Committee
Committee Chairman:
Chairman of the Board
Executive Secretary
GM of Business
Development Dept.
Corporate Customer Sustainable Social Employee
Governance Rights Environment Benefit Care
Integrity Provision of detailed Environmentally Attention to social Enhancement
management, information on sustainable issues, support of staff welfare,
maintenance of products and development, green for disadvantaged strengthening
shareholder rights, services, protection financial products, groups, involvement of staff training,
equal treatment of customers' green procurement in community reinforcement of
of shareholders, personal information and supplier development, labor relations
reinforcement of security, provision management, promotion of art communication,
the structure and of appeal channels, energy conservation activities and sports, creation of an
operation of the maintenance and carbon reduction molding of the outstanding work
Board of Directors, of customer corporate image environment
enhancement relationships
of information
transparency, risk
management,
organizational
strategy
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345

2. Material Aspects Analysis

Collect, understand, and identify concerns related to TBB's stakeholders through distributing the "Stakeholder Identification" form to evaluate the concerns of different types of stakeholders and the level of influence on the operations of TBB.

Risk assessment and management for material aspects

(1) Environmental

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Risk assessment and management Evaluation and target
Scope Material aspects Risk assessment Policy Commitment Action Performance indicator Short-term: 1 to 2 years Mid-term: 2 to 3 years Long-term: 3 to 5 years Achievement in 2020
Effects of TBB does not engage in Support environmental and For loan customers causing Assist customers For customers who had issues regarding the No circumstance of any supplier
environmental loan activities with disputable green industries and avoid risk accidents of significant in continual environment or labor safety, make remarks violating environmental protection
and labor safety customers. When performing direct dealing with disputable environmental pollution and improvements. under the conditions of approval to continue occurred during 2020.
aspects on loan its operations, TBB accessed corporates. food safety, TBB will require follow-up the improvement of such events.
customers. relevant information on the the customers to propose
loan applicant with regards to an improvement plan. On
the environment, labor safety, the other hand, regarding
Corporate
food safety, and provision rate customers with insufficient
sustainability policy for the Workers’ Retirement provision for the Workers’
Preparation Funds through Retirement Preparation
websites of government Funds that damages the
agencies and included the rights of laborers, TBB will
information in its evaluation urge customers to make up
focus for the loan. the differences as soon as
possible.
The increase in pollution Promote the “Green Energy Sustainable Project Loan,” Support environmental and green industries and avoid Provide preferential financing conditions and encourage The accumulated project loan cases Year-on-year growth of 10% Year-on-year growth of 10% Year-on-year growth of 10% • TBB managed the Sustainable Project Loan, “ Green Energy ”
and energy “Preferential Loans for directly work with disputable corporate to acquire (build) for providing loans “ Preferential Loans for Acquisition
consumption Acquisition of Renewable corporates. equipment for renewable to assist customers of Renewable Energy Equipment, ”
affects living Energy Equipment,” energy, energy-saving, and in improving and “ Machinery and Equipment
quality and “Machinery and Equipment pollution prevention to reduce and upgrading Upgrade Loans. ” The cumulative
economic Upgrade Loans,” and carbon emission and energy their production number of loans disbursed at
development. “Low-Carbon Sustainable (resource) consumption. equipment. the end of 2020 was 700 cases,
Homeland Project Loans” to representing a growth of 23.02% as
respond to the global initiative compared to 569 cases at the end
of carbon emission reduction of 2019, achieving 10% of TBB ’ s
and comply with government short-term target.
policies. • Acquisition of power generation
equipment for renewable energy:
Environmentally
One case amounted to NT$2,360
and socially friendly
thousand, and two cases
services
amounted to NT$1,640 thousand
The
environment were recorded during 2019 and
2020, respectively, achieving
10% of TBB ’ s short-term target
regarding the year-on-year growth
for the number of cases and loan
balances.
• For green finance, the cumulative
number of loans disbursed at
the end of 2020 was 256 cases,
representing a year-on-year growth
of 47% as compared to 174 cases
at the end of 2019, achieving 10%
of TBB ’ s short-term target.
Acquire new equipment to • Follow-up on short-term, mid-term, and long-term Duly fulfill corporate social responsibilities and spare • Reduce greenhouse gas emissions year by year. • Reduce the greenhouse gas • Achieved 1% • Achieved 1% • Achieved 1% • The greenhouse gas emission of the headquarters ’ building was
replace old conditions of greenhouse no effort in environmental • Increase the amount of emission ratio of • Achieved • Achieved • Achieved 1,377 T/CO2e and 1,379 T/CO2e
equipment gas in scope I and II. protection. Respond to the green purchase year by the headquarters ’ 2% 2% 2% for 2018 and 2019, respectively;
producing more • Increase the amount and green purchase policies year. building the data for 2020 is still under
greenhouse gas scope for green purchase. promoted by the government, • Carry out suppliers ’ • Amount of green verification and compilation.
to save energy • Require suppliers to fulfill avoid dealings with suppliers evaluation. For any conduct purchase by TBB • The amount of green purchase
and cut down their corporate social with poor environmental violating environmental was NT$82,166 thousand and
carbon emissions, responsibilities. performance, and include protection or CSR, TBB NT$88,095 thousand for 2019 and
Energy-saving and
carbon emission which may cause supplier’s commitment to will notify the supplier 2020, respectively, representing
reduction an increase in operating costs. purchase contracts to jointly practice corporate social to make improvements within a limited time and year-on-year growth of 7.2%, achieving 2% of TBB ’ s short-term
responsibilities. will reject or terminate target.
the cooperation for those • On December 18, 2020, TBB
who refuse to make issued its Regulations for
improvements. Supplier Management. TBB also
added terms related to supplier
management in the procurement
contracts for the joint practice of
corporate social responsibilities.
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Taiwan Business Bank Annual Report 2020

IX

(2) Social

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Risk assessment and management Evaluation and target
Scope Material aspects Risk assessment Policy Commitment Action Performance indicator Short-term: 1 to 2 years Mid-term: 2 to 3 years Long-term: 3 to 5 years Achievement in 2020
The failure to keep Promote the Silver Care for the seniors TBB allocated 0.3% of the general Support the Accumulated a Accumulated a Accumulated a From June 14, 2018 to December 31,
up with the social Love Credit Card to with the strength of card consumption from the Silver disadvantaged non-profit fund of non-profit fund of non-profit fund of 2020, accumulated a non-profit fund
trend by carrying help seniors to dine cardholders to spread Love Credit Card to help seniors group NT$12 million. NT$17 million. NT$25 million. of NT$13.34 million.
out charity-related and learn together love to every corner of to dine and learn together, and
events will render through the allocated Taiwan. assist in the building of Schools for
Public welfare and TBB’s image non-profit funds. Seniors in communities. By doing
of being profit- so, TBB may spread love to every
charity oriented. corner across Taiwan, support
the vulnerable groups and people
with physical/mental disabilities,
and realize community caring and
social relief, fulfilling its corporate
social responsibilities.
The Bank is • Provide advisory • Assist enterprises • The Bank provides assistance • Organize or • >2 sessions • >2 sessions • >2 sessions • Cooperate with external
a specialized in inheritance and in their sustainable required for corporate inheritance participate in • Ranked the 1st • Ranked the 1st • Ranked the 1st organizations to hold financing
bank for SME succession plan to development and through organizing the lecture tour lectures organized practical courses such as "Relief and
customers; poor jointly face the issue become a great "Loans and Counseling for SMEs" by external Revitalization Seminar" and "Youth
development of of second generation partner of customers across Taiwan, planning serial departments. Entrepreneurship Loan Seminar", and
SMEs may affect inheritance currently in corporate topics on "Second Generation • Ranking of participate in a total of 231 sessions
the image of the faced by SMEs. operations. Inheritance," or participating in market shares in 2020.
Bank as a SME • Promote the program • Help micro-to-small relevant counseling programs for the number • At the end of December 2020, TBB
specialized bank. to "double the number enterprises to obtain organized by external of micro-to-small assisted 53,452 small and micro
Corporate of loans provided funds required for departments. enterprises enterprises (with a capital of less
image to micro-to-small corporate operations • Cooperating with the SMEs, than NT$ 30 million) to obtain the
enterprises and start- and growth to the Bank established project necessary funds for operation, an
ups within three years stabilize economic regulations to simplify the increase of 22,623 from the 30,829
and provide loans development. procedures for credit investigation in 2019, making it the largest market
amounted to NT$100 to help enterprises to obtain the share in the country.
billion to help SMEs," required funds.
in order to solve the
issue for micro-to
small enterprises in
obtaining funds.
Urban renewal is Established the Provide fast Established the "Innovative Set the amount of • NT$20 billion • NT$30 billion • NT$50 billion Innovative Finance Project Office's
Social the development "Regulations for information inquiries Finance Project Office" to serve loan approved as loan commitments for urban renewal,
focus of the Bank; Reconstruction of services regarding our customers. an indicator old-fashioned reconstruction and co-
the unsatisfying Hazardous and Old urban renewals and marketing business in 2019 and 2020
implementation Buildings Loan." one-stop financial were NT$17.06 billion (24 cases)
for relevant services, offering case and NT$18.612 billion (26 cases),
services may hurt inquiry, counseling, and respectively. In addition, in 2020,
the image of the project loans, as well the second "Dangerous Old Towns
Bank. as trust management Expo" has been held, successfully
for citizens. attracting relevant industries and
people to participate, supporting
important government policies with
practical actions, and the news media
exposure has been greatly increased,
increasing the public's awareness of
the bank’s brand for dangerous elderly
people. Sense of trust enhances the
corporate image of the bank.
Poor service Comply with the Fair Maintain premium Arrange regular educational Arrange regular • Closed within 2 • Closed within 2 • Closed within 2 In 2020, a total of 16 customer
quality or Dealing Policy of service quality and training to promote material legal educational training days >90% days >93% days >95% complaints were handled within 2
communication the Bank, provide communication requirements and common errors; to promote material days.
channel may product information, channels and take the implement the regulatory system. legal requirements
result in customer contact, complaint, and initiative to deal with Have specialized personnel in and common errors;
complaints and application channels customers' problems place to manage customers' implement the
thus losing on its website, actively. inquiries for loans via channels regulatory system.
business disclose service and of customer service line "0800," Have specialized
Service quality and
Communication opportunities complaint channels website, and e-mail, and refer personnel in
channels in different contracts, to branches for them to take the place to manage
and comply with the initiative to visit. customers'
TBB's "Procedures inquiries for loans
for Customer Service via channels of
Center in Processing customer service
Customer Complaints." line "0800," website,
and e-mail, and
refer to branches
for them to take the
initiative to visit.
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347

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Risk assessment and management Evaluation and target
Scope Material aspects Risk assessment Policy Commitment Action Performance indicator Short-term: 1 to 2 years Mid-term: 2 to 3 years Long-term: 3 to 5 years Achievement in 2020
Diversified Implement diversified Our fellow colleagues TBB will inspect the actual benefit For integrated The number The number The number 1. In 2020, TBB tracked all basic
training provides training to execute the enroll for participating of the training through the following training and of employees of employees of employees business courses based on
our fellow program for employees’ in weekday internal methods: utilization follow- engaging in engaging in works engaging in implementation and the, and the
colleagues position transfer and training programs and 1. Organize the integrated up, the number works related to related to the works related to average implementation rate was
the training for transformation. employee’s weekend training and utilization follow- of employees the training shall training shall be the training shall 95.81%.
professional training class to receive up 6 months after the ending engaging in works be accounted accounted for be accounted 2. According to the questionnaire after
capacities beyond cross-field education. of weekday internal training related to the for 96% of the 97% total number for 98% of the the employee’s weekend training
their current programs. training shall be total number of of employees total number class, the average satisfaction rate
positions. Training 2. Inspect the training results accounted for 95% employees who who received the of employees achieved 96.23%, representing
resources may be according to the questionnaire of the total number received the training. received the that the content of such lectures
wasted where our after the employee’s weekend of employees training. training. gained recognition from the
fellow colleagues training class. who received the majority of students. In the future,
failed to take training. TBB will continue planning and
Diversified training the position or executing the classes according to
and promotion engage in related topics suggested by students.
work after such
training.
TBB promotes A total of 782 employees were
The increase outstanding talents Promote Increase the Increase the Increase the promoted during 2020.
TBB established and provides Organize promotion operations outstanding talents number of places number of places number of places
in employee’s
salaries due to the “Regulations for systematic promotion on a yearly basis and perform to improve the for promotion for promotion for promotion
the Promotion of opportunities for evaluations according to the cohesiveness (it is estimated (it is estimated (it is estimated
promotion may
increase the Employees” and has a employees with performance of employees to of employees to promote to promote to promote
reasonable promotion extensive knowledge, achieve the effect of providing (increase the approximately approximately approximately
operating costs of TBB. system in place. expertise, personal incentives. number of places 740 employees 760 employees 780 employees
integrity, and for promotion) per year) per year) per year)
outstanding integrity.
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(3) Corporate governance

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Risk assessment and management Evaluation and target
Scope Material aspects
Risk assessment Policy Commitment Action Performance indicator Short-term: 1 year Mid-term: 2 to 3 years Long-term: 4 to 5 years Achievement in 2020
• Internal audit • Assist the • Regarding the • Establish the audit • Execution of • Execution rate • Execution rate • Execution rate • Execution rate for the audit plan of 100%.
personnel failed Board and the matters to be plan according to TBB ’ s audit for the audit for the audit for the audit
to discover management improved listed by the requirements plan plan of 100%. plan of 100%. plan of 100%.
the defects in the audit audit authorities, of competent • Education
that violate the and evaluation CPA, and internal authorities and on code of • Passing rate of • Passing rate of • Passing rate of • Regarding the ethical training program of TBB, the
law during the of whether audit departments, continue to perform conducts 95%. 96%. 97%. relevant business departments shall promote the internal
audit; accepting the internal continue to follow- the audit according and legal and external requirements by managing the training,
improper control system up and re-examine, to the audit plan. compliance including contents related to ethical operations such as
benefits would is operating and report to the • TBB executes • Event of laws and regulations promotion, legal responsibilities
expose TBB effectively. Board and the education on code receiving of employees of TBB, etc. TBB organized the business
to the risk of • Shape the Audit Committee. of conduct and improper foundation program for new employees upon the date
reputation damages. culture of integrity • Core values of TBB are integrity legal compliance, and internal audit benefits. of arriving at their post and arranged programs for “ Legislative Requirements for Financial Practitioners ”
management and incorruptibility. simultaneously. (including training related to the regulations and integrity).
Governance Integrity with the top- In addition, to formulate the TBB ’ s culture of legal
management
down approach compliance, online examinations have been conducted
and internalize from the second quarter of 2020, and the “ Ethical
integrity Corporate Management Best Practice Principles ” have
management been included as a common subject for the examination
as the virtue in the fourth quarter, allowing fellow colleagues
of our fellow to internalize ethical operations as their virtues.
colleagues. Furthermore, TBB also assigns employees to participate
in relevant external programs in due course to improve
employees ’ relevant knowledge and competencies.
• 0 case. • 0 case. • 0 case. • The Secretariat has not received any report related to
improper benefits. In addition, the Auditing Dept. had
completed the audit according to the audit plan, and there
was no violation of the ethical operations of TBB.
Imperfect Improve the Continue to review Protect shareholders’ Board diversity Natural person Single-gender Natural person Re-election is to be held in 2021. TBB planned for five seats
structural design corporate our corporate rights and improve and evaluation professional Directors professional of Independent Directors (with banking expertise) to comply
or business governance governance to create the function of the Directors accounted for 1/4 Directors and with its planned target of 1/3.
operation system to achieve an environment with Board. Communication accounted for 1/3 of the Directors. single-gender According to the statistics between departments of the
Corporate may affect the the target of mutual benefits. with stakeholders of the Directors. Directors headquarters and stakeholders, the communication
governance stakeholders. sustainable Communication Communication accounted for 1/3 completion rate was 98.7%.
operations. completion rate of completion rate of of the Directors.
95%. 98%. Communication
completion rate of
100%.
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348

Taiwan Business Bank Annual Report 2020

IX

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Risk assessment and management Evaluation and target
Scope Material aspects
Risk assessment Policy Commitment Action Performance indicator Short-term: 1 year Mid-term: 2 to 3 years Long-term: 4 to 5 years Achievement in 2020
The improved Support Duly fulfill the duties Select investment Invest in green The annual investment amount recorded a year-on-year The investment amount in 2019 and 2020 was NT$810
awareness for environmental of the management targets with due care bonds or green- increase of 3%. million and NT660 million, respectively. The failure in
environmental and green and realize ethical and attach continuing related industries achieving the target of a year-on-year increase of 3%
Operating and protection and industries and operations. attention after or products. resulted from no-issuance of green bonds in the foreign
investment strategies relevant legal avoid investing transactions. bond market due to the effect of COVID-19 in 2020.
requirement led in disputable
to an increase in enterprises.
operating costs.
Violating the Legal compliance Allow all employees All departments Number of cases 0 case for 0 case for 0 case for The deficiencies in non-discretionary money trust with the
regulations is the joint to gain in-depth shall perform legal for punishment punishment. punishment. punishment. purpose of investment through the trust in foreign securities
may lead to the responsibility of knowledge regarding compliance self- imposed by and the statements for trust transactions are verified as
losses of TBB; the Board, senior the laws and evaluation. the competent having the risk of affecting the healthy operation of TBB;
however, where management, and regulations as well as authority the Financial Supervisory Commission determined that TBB
any punishment all employees. moral code related to shall make rectification pursuant to Article 44 of the Trust
is imposed, the themselves. Enterprise Act and Paragraph 1, Article 61-1 of the Banking
reputation of Act. (February 26, 2020)
TBB may be The deficiencies in archiving and case approval operations
compromised. for stakeholders are verified as having the risk of affecting
Legal compliance
the healthy operation of TBB; the Financial Supervisory
Commission determined that TBB shall make rectification
pursuant to Paragraph 1, Article 61-1 of the Banking Act.
(April 13, 2020)
As Taiwan Business Bank Insurance Agency Co., Ltd., a
subsidiary dissolved after the merger with TBB, violated
the requirements under the law and regulations, the FSC
ordered TBB to make two corrections within the timeframe
of one month, together with the punishment of a fine that
amounted to NT$3 million only, and rectify. (July 27, 2020)
Any invasion of Personal data Provide a Establish a The number 0 information 0 information 0 information No information security case had occurred, where the
the information management comprehensive comprehensive of information security case. security case. security case. system was invaded by hackers and significant operating
system would policy information security information security security cases data was tampered with, causing impacts on the operations.
affect the security environment management where the core
of customers’ to ensure the system and relevant cybersecurity
personal data. confidentiality, regulations for the system or the
Governance completeness, entire TBB. Carry core business
and availability of out information information
operating data. security testing and was materially
Enhance the assessment for TBB’s tampered with or
information computer systems to leaked that led
security protection improve the security to compromised
structure, protect protection capacities interests of
the confidentiality, of the internet and customers
completeness, information system. or affected
and availability of Organize information TBB’s healthy
Information security TBB’s information and communication operations.
and personal data and communication security drills
privacy
system and to improve our
information assets, fellow colleagues’
and maintain the corresponding and
continual operation of handing capacities.
the core systems. Organize social
engineering drills and
educational training
related to information
security and
promote concepts of
information security
protection to improve
the awareness of our
fellow colleagues
regarding information
security.
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349

3. Risks and Opportunities of Climate Change

In response to risks and opportunities brought by extreme weather, natural disasters, energy crisis, and low-carbon economy (LCE) transformation, TBB aligns its CSR report in 2020 with the structure of “Task Force on ClimateRelated Financial Disclosures (TCFD)” to carry out its information disclosures related to climate changes. TBB identified potential risks and opportunities of climate change and provided them to its business departments as the basis for making decisions on credit loans and investments. Furthermore, TBB evaluated the impacts of such risks and opportunities on TBB and its financial conditions through additional situational analysis; and established the corresponding action plan. At present, TBB has been preparing for the signing of TCFD.

(1) Risk of climates change

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Response measures for Performance indicators and
Category of risk Description of risk Financial impact risks Risk management strategy targets
To develop FinTech Increase the Enhance business promotion Organize educational Increase the transaction
and simplify operating purchase costs and encourage customers to training for employees, make percentage of online/mobile
procedures, TBB shall for systems and use digital finance services. encouragement and promotion, banking and minimize the
invest a large amount equipment. and prepare Q&A to promote chances for customers to
of human resources to customers on the website or present at the counter; carry
and capital in system online banking. out comprehensive business
development and transformation and paperless
maintenance. transactions.
Credit loan customers Operating income Access relevant information Require the customers to Provide loans and help
had records of fines on the enterprises with propose an improvement plan customers in improving the
due to security issues of regards to the environment, and list it as an item for follow-up security issues according to the
environmental pollution, labor safety, food safety, after the appropriation of loans. plan.
food safety, or labor and provision rate for
Transformation safety. the Workers’ Retirement
risks Preparation Funds through
websites of government
agencies and included the
information in the evaluation
focus for the loan.
Impose restraints on Increase in Establish solar power Adhere to the water and Reduce carbon dioxide
thermal power and operating income generation facilities, electricity saving measures of (greenhouse gas) emissions on a
nuclear power with purchase new energy-saving TBB. yearly basis.
lower prices and and water-saving equipment,
encourage green and purchase green energy
energy, which may to reduce the charges for
cause a significant carbon emission.
increase in energy
costs.
Collateral for the credit Decrease in Include the impact of extreme Increase the insurance for natural Minimize the effect of damaged
loan is damaged due to assets value weather on the collaterals as disasters causing damages to collateral on creditor’s rights.
natural disasters. the reference for credit loan properties.
review.
The rainfall is Increase in Establish short-term, mid- Statistics for monthly water WCR of the headquarters’
decreasing year by operating income term, and long-term water usage. building reaching 1%
year. conservation rates (WCR).
The stoppage of water A decrease in The emergency response Require all operating premises The installation rate of power
and electricity supply operating income measure of TBB is installing to have UPS in place for short- generators and UPS for branches
due to typhoons may or renting power generators term power supply; evaluate the has been increasing year by
affect the operations. and UPS for power supply establishing condition of power year. (Explanation: Currently, all
and arrange water tanks for generators, establish when the branches of TBB have installed
water supply. environmental conditions are UPS and the installation rate
approved; for conditions which is 100%; 63 branches have
Physical risks are not approved, establish a installed power generators; TBB
list of suppliers for renting power will examine the additions of
generators in the area, rent or power generators according to
call for a power generator for the fitting-out works for branches
electricity when risks occurred. on a case-by-case basis.
Where any premise Decrease in 1. Increase insurance 1. Purchase policies of 1. Currently, the insurance
of TBB is flooded, assets and purchased for the commercial fire insurance coverage rate and execution
and the properties of operating income premises regarding and electronic equipment rate for TBB’s premises are
TBB are damaged, natural disasters. insurance for all branches. targeting 100%.
the operations may be 2. Carry out inspection and 2. Choose premises with relevant 2. The leasing of new premises
significantly affected. maintenance for premises certification for any relocation shall comply with the building’s
of TBB on a regular basis. (i.e., green building materials, usage (i.e., G1 financial
energy-saving label, institutions). The decoration of
environmental-friendly label). premises shall apply for and
obtain the certificate of indoor
decoration.
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350

Taiwan Business Bank Annual Report 2020

IX

(2) Opportunities in climate change

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Category of Financial Response measures for Opportunity management Performance indicators and
Opportunities Description of Opportunities impact Opportunities strategy targets
Respond to the business Increase the Introduce new types of insurance Make reference to the recent Relevant product sales
opportunities brought by climate operating related to climate change, or development and market performance
change. income of TBB. improve programs that may demand within the industry.
minimize the losses of insurance
customers from the disaster
caused by climate change among
the existing product portfolio.
Under the impact of climate Improve Assist corporate customers of TBB Continue to promote the “Green Targeting a year-on-year
change, awareness for operating to acquire (build) equipment for Energy Sustainable Project increase of 10% for the
environmental protection income renewable energy, energy-saving, Loan,” “Preferential Loans for accumulated project loan
around the world has increased. and pollution prevention to reduce Acquisition of Renewable Energy cases for providing loans to
Governments worldwide carbon emissions and energy Equipment,” “Machinery and assist customers in improving
Products and urge enterprises to improve (resource) consumption. Equipment Upgrade Loans,” and upgrading their production
services environmental pollution due and “Low-Carbon Sustainable equipment.
to their production processes Homeland Project Loans” to
and call for minimizing carbon respond to the global initiative of
emissions. Meanwhile, carbon emission reduction and
governments provide grants for comply with government policies.
low-carbon emission energy
in the hope of achieving a
sustainable environment.
Increase in interests and demand Increase Provide relevant products and Consider the market demand Continue to provide diversified
of investors regarding green/low- profiting services related to climate change/ and recent promotion of other wealth management products
carbon products sources environment sustainability. banks and provide relevant and increase educational
financial products and services. training for products related to
climate change/environmental
sustainability.
The increasing impact of climate Improve To respond to government policies, Promote project loans with green To help customers obtain funds
change boosts the importance operating facilitate the development of green investment plans - the “Green required for green investment
attached to the people’s income industries, and establish a low- Energy Sustainable Project plans, TBB set a target of
awareness of green energy, and carbon economy for achieving the Loan” provides funds with high increasing the amounts of
Energy the demand for corresponding goal of a sustainable society, TBB amounts and low-interest rates loans by NT$1.5 billion in
loans has risen. established the “Green Energy to provide funds for enterprises 2020.
Sustainable Project Loan.” to purchase equipment for
renewable energy, pollution
prevention, and energy-saving.
Competent authorities adjusted Increase in Adjust relevant product rights or Propose the improvement plans Improve customer satisfaction
Market the relevant financial regulations revenue pricing according to regulations. and perform subsequent follow- to increase revenue.
and adopted policy incentives for up.
support.
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4. TBB's Achievements in Promoting of Corporate Social Responsibility in 2020, divided into Environmental, Social and Corporate Governance (ESG) categories, are described below:

(1) Environmental

• A. Extension of Environmentally Friendly Enterprise Project Loans

In its advancement toward such sustainable environment goals as lowering energy consumption and reducing pollution, in addition to the implementation of corporate environmental protection in the review of loan applications, TBB will continuously promote project loans under the "Preferential Loans for the Procurement of Renewal Energy Equipment," "Machinery and Equipment Upgrading (Phase II) Loans," "Preferential Loans for Key Innovative Industries (Phase II)," and "Project Loans for Green Energy Sustainability" programs, in the hope of establishing a low-carbon economy, achieving the goal of sustainable social development, and generating a win-win for economic development and environmental protection.

• B. Implementation of Carbon Reduction and Energy Conservation Policy to Stimulate Sustainable Environmental Development

• a. TBB implemented its "Energy Policies" and "Measures for Water and Electricity Conservation" with scheduled follow-up on the status of water and electricity conservation by different units and inclusion of the results in business performance assessments. Various energy conservation improvement programs were vigorously implemented in order to enhance the energy efficiency of equipment and save on electricity costs.

351

• b. In 2020, the second replacing work for lightings at all offices of TBB was conducted, where the latest LED Energy Label lighting announced during 2020 was adopted. TBB replaced over 28,000 lights, greatly reducing the electricity used for lighting at business premises. About 3.54 million kilowatt-hours are saved annually, reducing carbon dioxide emissions by 1,845 metric tons — equivalent to the planting of 168,000 trees a year, enough to develop 4.7 Da'an Forest Parks. By doing so, TBB contributes to energy conservation and carbon reduction and the protects the environment.

• c. TBB's headquarters carried out the renewal of a VSD chiller and installed an energy management system as well as LED lighting for public areas. Third-party verification showed that these improvements boosted the energy efficiency of equipment by more than 37.2%, saving about 273,000 kilowatt-hours per year, reducing carbon dioxide emissions by 167 metric tons, and saving NT$1.55 million in electricity costs annually. The electricity contract capacity of TBB's headquarters was cut from 1,150 kilowatts to 750 kilowatts in recent years.

• d. For greenhouse gas emissions, the major source of TBB's greenhouse gas emission is power usage. Through improving the power usage management at power-consuming locations (such as Chongqing South Building and Lin Kou Branch), TBB set 20,406,432kWh, which was the power usage of all office premises of TBB for 2018, as the benchmark; the details are as follow: In 2019 and 2020, the power usage of all office premises of TBB were 20,562,615kWh (equivalent to 74.03MJ) and 20,235,864kWh (equivalent to 72.85MJ), respectively, and the carbon dioxide equivalent (CO2e) were approximately 10,466 tons and 10,341 tons, respectively, representing a year-on-year decrease of 1.59% in power usage, and the accumulated decrease in CO2e for the past 2 years is 577 tons. (Note: The power usage of all office premises of TBB is the sum of the power used based on the monthly e-statement information of all premises from 2019 to 2020 provided by the Taiwan Power Company; based on the carbon dioxide coefficient of electricity at 0.533kg CO2e/kWh and 0.509kg CO2e/kWh, announced by the Bureau of Energy, Ministry of Economic Affairs for 2018 and 2019, respectively; 1kWh equals to 3.6MJ.)

• e. To connect to the internet standards and continue to enhance its corporate social responsibility, in 2020, TBB had engaged SGS, a third-party certification institute, for the certification operations based on ISO 14064-3:2006 Greenhouse Gases. The headquarters' building was the target, the operating control method was adopted, and the information covered the period from January 1, 2019 to December 31, 2019. SGS focused on the emission of 7 types of greenhouse gases, including CO2 and methane, and checked through the 3 major types of greenhouse gas emissions (direct emissions, indirect emissions from power consumption, and other emissions). In 2019, the total emission of greenhouse gases was 1,379.1 tons CO2e, with major emissions from scope 2 of greenhouse gases, accounting for 89.31% of total emissions. For greenhouse gases, the direct (scope 1) emission was 146.4745 tons CO2e, and the indirect (scope 2) emission was 1,224.1944 tons CO2e.

• f. In 2015, TBB completed the solar power photovoltaic facilities of Ta Fa Branch, with a monthly capacity of 28.8kWh (equivalent to 103.68MJ). The construction of photovoltaic facilities for Ta Yuan, Ming Hsiung, and Tai Nan Branches was completed from 2019 to 2020; the aggregate power generation capacity of such branches is 81.775KW.

• g. Currently, the wastes from TBB's departments are processed by contracted professional suppliers, who provide the processing certificate to TBB; the statistics showed that the amount of wastes produced by the headquarters' building in 2020 was approximately 106 tons. TBB will continue to enhance the promotion of environmental protection and garbage classification to our fellow colleagues, with the aim of reducing 3 tons of wastes in 2021.

• h. To enhance environmental management and improve water, waste, and resource recycling, TBB planned to introduce ISO 14001 Environmental Management Systems for its headquarters building.

• i. For decoration of premises and procurement of equipment, TBB opts for properties and supplies with the energy-saving label or environmental-friendly label, or are green building materials in the first place; a majority of frequency conversion split air conditioners are adopted regarding air conditioners. Over a hundred high-efficiency air conditioners and air conditioning units were installed for replacement during 2020, and it is estimated that the venues with new equipment could save over 10% of its power usage.

352 Taiwan Business Bank Annual Report 2020

• j. In response to the national reading habits promoted by the government, TBB implemented its paperless policy and energy-saving and carbon emission reduction initiatives. It launched the E-Library reading services at the headquarters.

• C. Superior Performance Record in Implementing Environmental Protection

• a. TBB signed a "Letter of Intent for Green Procurement by Private Enterprises and Groups" with the Environmental Protection Administration, Executive Yuan, and has been cited by the Environmental Protection Administration and the Taipei City Government's Department of Environmental Protection for "Outstanding Performance in Green Procurement" for nine years in a row. The amount of green procurement in 2020 achieved NT$98.22 million.

• b. Chu Bei Branch of TBB participated in the "Outstanding Assessment Award for Energy-saving by the Service Industry in Hsinchu County for 2020" and received the High Distinction Award (1st Prize) for Commercial Buildings

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IX
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• c. TBB's headquarters building has received ISO 50001 Energy Management System certification from 2016 to 2020. There are two versions of certification regarding TBB's certification for ISO 50001 Energy Management System received in 2011 and 2018, respectively, and the validity of the certifications is from December 28, 2018 to August 19, 2021 and from December 14, 2020 to December 28, 2021, respectively. The validity period for such certifications covered the entire 2019 and 2020.

• d. The headquarters' building obtained the ISO 14064-1 Greenhouse Gas Inventory certification from 2017 to 2020.

(2) Social

• A. Promotion of Social Benefit and Participation in Community Development

• a. Charity sponsorship in support of public benefit activities

  • 1) TBB participated in the "2020 Financial Services Public Benefit Carnival" in Pingtung and Chiayi organized by the Taiwan Financial Services Roundtable and made donations to social welfare organizations in Chiayi County, to care for underprivileged groups and promote financial knowledge and public welfare.

  • 2) To assist in relieving the pressure of banana farmers arising from the poor sales of bananas, TBB purchased a total of 273 cartons of bananas (4,100kg in aggregate) from agricultural produce companies in the Pingtung region through the Council of Agriculture.

  • 3) Sponsorship is provided to "2020 Warm Heart Project" held by Anue.com with the underprivileged groups who are unable to access medical protection and educational resources as beneficiaries.

  • 4) Upholds to the humanitarian spirit and assists the healthy growth of the vulnerable children, TBB continued to sponsor the cost of nutritious breakfasts for Saijia Elementary School, Duona Elementary School, Nanfeng Elementary School, and Shuang Long Elementary School in remote regions for the 2020 School Year. From 2011 to 2020, a total of 2,561 people received the sponsorship, and the accumulated amount of sponsorship amounted to over NT$15 million.

  • 5) To revitalize the economy impacted by the outbreak of COVID-19 in Taiwan, TBB encourages consumption and supports local industries. TBB cooperated with Beigang Chaotian Temple in organizing the media press of "Support Industries by Local Consumption & Spread Mazu's Love across Taiwan." TBB also increased the cash return for consumption of Beigang Chaotian Gong Affinity Card to encourage citizens' credit card consumption, so as to provide drivers for the six major local industries, including tourism and travel, department stores, F&B, apparels, transportation, and entertainment services. By doing so, TBB may help the government fight against the outbreak and boost the economy, fulfilling its corporate social responsibilities.

  • 6) To help with the media exposure of charity and public benefit groups, TBB disclosed information on charitable donations on the Credit Card section of its official website, including donation programs for the Spinal Cord Injury Foundation, Taiwan Fund for Children and Families, World Vision International (Taiwan), Sunshine Social Welfare Foundation, Eden Social Welfare Foundation, Children Are Us Foundation, Genesis Social Welfare Foundation, and Waker Group.

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• b. Participation in community development

  • 1) TBB established the "Public Welfare Trust - Senior Carefree Social Welfare Fund" as the trustee. In 2020, ongoing donations were made to community development associations in townships with scarce resources to assist the associations in repairing the venue and equipment for social care, realizing community care.

  • 3) Provided subsidies to Gaodong Community Development Association in Qingshui District, Taichung City, as budgets for purchasing food ingredients and tools, so as to provide better care for seniors in the community and show TBB's corporate image of supporting social welfare.

  • 4) Sponsorship is provided to Taipei Kuanyin-Line Psychological and Social Service Association in organizing charity concerts and activities related to supporting long-term and preventive care for aging communities.

• B. Support for Academic, Cultural, and Sports Activities

• a. Support for educational development

  • 1) TBB participated in the lecturing tour at Senior Community Colleges jointly organized by the Trust Association of R.O.C. and New Taipei City, where events such as the Banking Bureau communicating financial knowledge on campus and in communities, and promotions for social welfare group trusts. The events delivered the message that seniors may make use of trusts to plan for their properties after retirement, and persons with disabilities and Dementia may make use of trusts to safeguard the care in the future with sufficient living funds. By doing so, TBB may implement the Trust 2.0 policy issued by the competent authority and fulfill its social responsibilities. The event received warm applause and was highly recognized.

  • 2) TBB provided sponsorship for the Taiwan Economic Association in organizing its "2020 Taiwan Economic Association Annual Conference" to facilitate the academic and cultural exchange.

  • 3) TBB organized the "Taipei Economic Forum" with National Taipei University, which invited outstanding persons from the industrial, governmental, and academic sectors to jointly focus on the international landscape and the major trend of the economy in Taiwan.

  • 4) TBB organized the "2020 Digital Innovation Election, Exhibition, and Forum" with Business Times to encourage the young generation to make innovations on technologies and use digital technologies to help the innovative operations of industries, exhibiting the digital soft power in Taiwan.

  • 5) TBB sponsored the "2020 Taiwan Capital Market" forum organized by Liberty Times to assist in facilitating the development of the capital market in Taiwan.

  • 6) In response to the financial policy promoted by the government, TBB sponsored Business Today for organizing the "Taipei FinExpo."

  • 7) TBB sponsored Business Today for organizing the "Taiwan Future" in 2020 to explore the new orders of the global economy under the effects of trade wars and the future application of 5G technologies.

  • 8) TBB sponsored Wealth Magazine in organizing the "2020 Wealth Magazine Influence Forum" to explore the global economic trend and the future development opportunities of Taiwan.

  • 9) Dong Hu Branch organized a wealth management roadshow at the Taipei District Court. The event was divided into two sessions, and employees of the court were invited. The event managed to involve general knowledge on wealth management into ordinary lives through promoting personal wealth management planning and on-site interactions, allowing the hardworking employees of the court to understand the importance of wealth management.

• b. Enhancement of the vogue for art and literature and promotion of sports activities

  • 1) TBB sponsored The General Association of Chinese Culture for organizing the "2020 Art and Culture Socializing Tea Party" and sponsored "The Soul of the Craftsman" video-shooting project to facilitate the art and culture exchange and contribute to the inheritance of Taiwanese culture.

  • 2) Provided sponsorship in the "6th Tua-Tiu-Tiann International Festival of Arts in 2020" to support local art and cultural events with concrete actions, so as to facilitate the deep-rooted soft power of culture in Taiwan.

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Taiwan Business Bank Annual Report 2020

IX

• 3) Sponsorship was provided to Taitung Echo Orchestra for organizing the 2020 Summer Concert, creating a local art and cultural feast.

• 4) TBB continued to invite local artists and culture workers to plan for exhibitions at TBB's "Image of Dadaocheng - Art and Cultural Space." Solo exhibitions were organized for ink painter Chien-Hui Yang, oil painter Ho-Shan Lin, ink painter Ching-Hui Shih, oil painter Qiao-Zhen Fan, and watercolorist Uen-Lin Tsai. TBB also invited Green Film Production to plan for a theater and drama photographic exhibition.

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• 5) In response to the new life movement related to pandemic prevention, TBB organized a special art and cultural exhibition for employees and retired employees and invited overseas employees to transform their stories of happiness and bitterness related to pandemic prevention into texts, images, and posters for TBB to hang them at its Art and Cultural Space, allowing fellow colleagues in Taiwan to understand the difficulties faced by overseas employees.

• 6) TBB sponsored the Chinese Taipei Football Association for organizing the national single league/cup competition, to improve the reputation and strength of football in Taiwan on the international field and fulfill TBB's corporate social responsibilities.

• 7) TBB sponsored the Taichung Real Estate Development Association for organizing the "2nd Session of the 15th Director's Cup Golf Competition" to improve the industrial exchange and promote healthy leisure sports.

• 8) TBB sponsored the Keelung City Basketball Association for organizing the "29th New Park Cup Basketball League in Keelung City" to support local sports events and improve the nationals' sports habits.

• 9) TBB sponsored the Legislative Assistants Union of the Legislative Yuan, R.O.C (Taiwan) for organizing the "2020 Legislative Yuan Congressional Assistant and Congressional Liaison Business Discussion and Socializing Dinner Party."

• 10) TBB jointly organized the "2020 Uniform Invoice Cup Road Running - Taichung" with the Ministry of Finance and successfully raised 268,168 pieces of invoices, which were all donated to six social welfare organizations in Central Taiwan, in the hope of helping the mass underprivileged groups through the public welfare event of road running.

• 11) Lots Home Entertainment Co., Ltd., which received subsidies from the Ministry of Culture in producing a long movie, consulted TBB regarding the counseling subsidy trust, and a contract was signed in March 2020.

• 12) TBB has been dedicated to improving the overall cultural and art vibes in the society as well as the quality of education culture; relevant sponsorship events are as follows:

• For the Friend of Palace Card, TBB allocates 0.2% of the card consumption to donate to the National Palace Museum as the promotional fund for culture, arts, and education.

• For the Yilan Affinity Card, TBB allocates 0.3% of the card consumption to donate to National Ilan University and Yilan County Government to facilitate school affairs development and facilitate local prosperity.

• TBB collaborated with Beigang Chaotian Gong in issuing the Beigang Chaotian Gong Affinity Card. A sponsorship of NT$1 million is provided to Beigang Chaotian Gong each year for organizing the pilgrimage or other public welfare events.

C. Care for employees

Employees are the assets of a corporation. TBB has spared no effort in taking care of its employees. In addition to establishing work rules and human resources management rules in accordance with the Labor Standards Act and other relevant labor regulations, TBB also complies with the law in providing labor insurance, national health insurance, and allocations for retirement funds. Employee health exams are carried out on a regular basis, and group medical care and accident insurance are offered on preferential terms in order to protect the living of employees. In 2020, the repair and improvement work for TBB's

355

employee dormitory on Roosevelt Road was completed, providing employees a comfortable living environment, so that they can fully express their professional skills at work.

• a. Enhancement of Employees' Professional Knowledge

To strengthen the competitiveness of employees and enhance their professional knowledge, TBB inaugurated training programs for different areas of business in accordance with its annual staff training plan, and also offered holiday courses in such subjects as digital finance and wealth management on a regular basis. Such programs focused on corporate banking (micro-loan and innovation), project financing, development skills for credit loans and foreign currency businesses, grasping the business opportunities of repatriated offshore funds, and family trust, in the hope of improving employees' professional expertise and competencies.

• b. Creation of an excellent workplace

• 1) In compliance with the Act of Gender Equality in Employment, TBB has established regulations for sexual harassment measures, complaints, and punishments so that employees will have a work environment free of sexual harassment.

• 2) To enhance the safety of TBB's working environment, whenever a construction incident occurs, the contractor is issued a "contractor working environment and hazard factors notice" in order to reduce occupational accidents; in addition, TBB holds "general worker safety and health training" to enhance employees' concept of safety and health.

• 3) TBB provides its employees with a safe and healthy workplace, equipped with central air conditioning systems, abundant lighting, comfortable and appropriate working space, and emergency evacuation routes and exits. Elevators are maintained on a regular basis, firefighting equipment is available, and regular fire drills are held. Workplaces are disinfected and cleaned regularly, and door access safety controls are in place. Health service and stress-free activity center and first-class facilities (such as AED, first aid kit) are also in place.

• c. Establishment of Smooth Channels for Promotion and Communication

• 1) TBB has a comprehensive system of remuneration and rewards as well as the promotion channel, diversified training and welfare measures that attract and retain talents, joining hands for the prosperity of the Company.

• 2) TBB places the utmost emphasis on employee rights and regularly calls labor-management meetings where the two sides can fully communicate and negotiate on employee rights and welfare issues, and sign the Collective Agreement, thereby maintaining harmonious labor-management relations.

(3) Corporate Governance

• A. Fulfillment of responsibility as a specialized SME bank

• a. Deep cultivation of the core SME business

  • 1) To help small-scale enterprises in obtaining facilities, TBB participated in events of "Support Small and Micro Enterprises to Upgrade - Financing Guarantee Roadshow" and "Financing Opportunity Program for Micro and Innovative Businesses" organized by SMEG on January 2, 2020 (Taitung) and January 31, 2020 (Neihu, Taipei). TBB set up booths at the site of the events to provide financing consultancy services to small and micro enterprises and arranged lecturers to present the "Introduction to Finance Business of Financial Institutions."

  • 2) TBB proactively participated in the burden alleviation explanation sessions held by governmental agencies, counseling departments, industrial associations, and commercial districts (participated in a total of 122 sessions from February 12, 2020 to September 30, 2020), arranged lecturers to present the "Introduction to Burden Alleviation (Guarantee)," and required local branches to set up booths to provide consultancy services.

  • 3) Chinese Management Association made use of WebEx to conduct an online roadshow (April 27, 2020) at the Center of Technology Transfer of National Cheng Kung University. Lecturers were also arranged to present the "Finance Practices Program."

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Taiwan Business Bank Annual Report 2020

• 4) To reinforce the counseling force provided to SMEs, TBB participated in six sessions of the "Startup Financing Matching Session" (July 3, 2020 and September 23, 2020 in Taipei; July 8, 2020 and September 18, 2020 in Taichung; July 10, 2020 and September 25, 2020 in Kaohsiung) organized by the National Innovation and Entrepreneurship Association. TBB held the post as the lecturer for the "Results of Operating Plan and Expert's Opinions" to shape the professional image of a specialized SME bank. TBB also arranged to set up booths at the event venues to provide financing consultancy services.

• 5) TBB worked with Chihlee University of Technology for industrial and academic cooperation. The cooperation project relates to the joint promotion of financing programs for burden alleviation, revitalization, and hazardous and old buildings reconstruction. During the cooperation period (May 22, 2020 to December 31, 2020), Chihlee University of Technology arranged personnel to visit the surrounding merchants, alumni, and upstream and downstream suppliers for the university to spread out information related to the burden alleviation loans endorsed by the government and introduce suppliers to TBB for the burden alleviation loans. At the end of the year, loans were approved for a total of 40 customers, with an approved amount of loan amounted to NT$68.5 million. TBB fulfills its corporate social responsibilities in a manner that combined the resources of the university.

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• 6) To help young entrepreneurs in acquiring necessary funds, TBB actively participated in the "Startup Loan Lecture" and "Loans for Startup Funding for Young Entrepreneurs Promotion Roadshow" (participated in a total of 109 sessions from May 15, 2020 to December 20, 2020) organized by governmental agencies and counseling departments.

• 7) National Association of Small & Medium Enterprise organized the "Prospective Trend Lectures - Financial Loan Utilization and Practice Lecture" (August 18, 2020), lecturers were arranged to present the "Introduction to Bank Facility Project Preferential Loan," and local branches were required to set up a booth to provide consultancy services.

• 8) SMECF organized the "Lecture with Chairman Kun-Cheng Lai" at Huwei, Yunlin (October 7, 2020); the theme was "Understand in One Second - How to Apply for Governmental Subsidies X Counseling Resources to Improve Your Business Energy." Lecturers were arranged to present the "How to Deal with Banks" program.

• 9) Nantou County Government organized the "Sparkle Nantou Innovative Future Job Fair" at Caotun Township Gymnasium (October 31, 2020) to help young entrepreneurs understand the information of entrepreneurship loans. TBB arranged its local branch to set up a booth to provide consultancy services.

• 10) Industrial Technology Research Institute organized six sessions of "Matching Session for Connecting Financing Guarantee and Technology Market" (September 7, September 10, September 15, September 17, September 24, October 12, 2020) TBB arranged its local branches to set up booths to provide consultancy services.

• 11) In accordance with the provisions of Article 13 of the Act for the Development of Small and Medium Enterprises, and as approved by its Board, TBB's apportioned contribution to the SMEG for 2020 amounted to NT$377,866,915.

• 12) TBB set up footholds at Startup Terrace in Linkou and Hutoushan Innovation Hub in Taoyuan to provide business counseling services and assist others in obtaining financing and counseling resources.

• b. Loan policy

TBB follows the spirit of the "Equator Principles" in its loan policy.

In its extension of loans, TBB fulfills its corporate social responsibility by taking the client's honesty management, corporate governance, environmental protection, social responsibility, food safety, and labor safety into consideration in its loan evaluation and decision making, thereby exerting its influence on corporate social responsibility.

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• B. Implementation of consumer protection and reinforcement of customer care

• a. Reinforcement of consumer protection

  • 1) TBB protects consumer rights through its "Consumer Protection Policy" and "Consumer Protection Operating Procedures," which clearly state the measures to be implemented and designate an exclusive unit to review the effectiveness of the consumer protection mechanism. The Auditing Dept. is responsible for checking on the status of implementation.

  • 2) In line with the implementation of the Consumer Debt Clearance Act, TBB has set up a single window for taking applications and providing consultation on preliminary negotiations, thereby helping to lighten the debt burden on debtors. To date, this facility has helped 5,306 people to start new lives.

  • 3) TBB has established an "Operating Procedure for the Handling of Credit Card Disputes" and has set up a customer service center with a toll-free hotline, allowing the center to receive and handle customer complaints immediately.

• b. Implementation of customer service and care

  • 1) Since the outbreak of COVID-19, all members of TBB were called to action. The "Burden Alleviation and Revitalization Steering Group for the Outbreak" was immediately established at the headquarters to provide various burden alleviation and revitalization programs organized by the government to our fellow colleagues and customers of our branches first. Meanwhile, TBB simplified relevant investigation and review operating procedure for burden alleviation loans and set up the "COVID-19 Burden Alleviation" section on its website to provide exclusive online services, so as to accelerate the operating time for cases, ease the short-term capital pressure of corporates, and help them survive through the operating difficulties. For the year ended December 31, 2020, the number of approved loan cases for burden alleviation and revitalization under the policy and organized by TBB was 46,677, with an amount approved amounted to NT$219.459 billion.

  • 2) In response to the "Labor Relief Loans" operates by the Ministry of Labor, TBB assisted local workers who were affected by the outbreak of COVID-19 to obtain capital for riding through the difficulties. In accumulation, TBB assisted 23,041 people, and the amount of loan approved was NT$2.303 billion at the end of December 2020.

  • 3) To take care of young people and disadvantaged groups, TBB carried out the Ministry of Finance's "Preferential Housing Loan Program for Successful Family Foundation of Youth" and the Construction and Planning Agency, Ministry of the Interior's "Housing Subsidy and Home Improvement Loans." By the end of December 2020, a total of 27,773 and 1,422 of these loans, respectively, had been extended, with the accumulated value amounting to a respective NT$113.471 billion and NT$2.803 billion.

  • 4) TBB established negotiation service windows, provided debt negotiation channels, and re-negotiation systems to help relieve the debt burden for borrowers in financial difficulties.

  • 5) To reinforce the interaction between fellow colleagues of all operating branches and the existing customers of the wealth management business and improve the communication between both parties, TBB organized multiple sessions of small-scale high-asset customer roadshows, with "Good Friends - Heart-to-Heart Interaction" as the title, in different regions to develop profound relationships with customers and improve the reputation of TBB.

  • 6) To help assist operating branches in developing offshore bonds businesses and provide comprehensive asset allocation planning for customers, TBB organized multiple sessions of customer roadshows, with "Uncover the Mysterious Veil - Bond Investment Market" as the title, in different regions to introduce bond products and investment logics, and in turns achieving the accumulation of wealth and inheritance.

  • 7) In view of providing services to TBB's customers, a total of 16 sessions of "Securities and Futures System Communication Roadshow" were organized from September to October in 2020 to allow customers to understand the new system and trading strategies for securities and futures, and enrich their knowledge of investment and wealth management.

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Taiwan Business Bank Annual Report 2020

• 8) To accord with the governmental policy and fulfill its corporate social responsibilities, TBB donated the amount equal to the insurance premium to "Chiayi Fu An Sovereign Charity" for it to purchase the "Micro Group Accident Insurance" product from South China Insurance.

• 9) To show its care for customers during the period of pandemic prevention, TBB provided a set of fabric masks to those who purchased personal injury insurance policy from TBB to accord with the antipandemic policies of the government.

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• c. Creating financial products that conform to social trends and customer needs

• 1) In response to Taiwan's aging population and low birth rate, TBB constantly introduces trust products, including nursing care trust, disability trust, and insurance trust, and has planned out a trust model that combines asset management and nursing care. This adds assurance and peace of mind for customers and fulfills TBB's corporate social responsibility while offering a full range of financial services.

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• 2) The majority of enterprises in Taiwan are family businesses. Through the distinct advantage of family trusts, TBB continued to assist business owners in smooth succession and planned to combine the "Employee Stock Ownership Trust" and "Employee Benefit Trust" as the incentives for employees' performance and the retention of outstanding talents, in order to fulfill demands of business owners in relation to the harmonious family, the long succession of wealth, and care for family and employees, and thus realizing TBB's concept of care for customers and society.

• 3) As the government encouraged financial institutions to actively participate in urban renewal and hazardous and old buildings reconstruction, TBB continued to promote its urban renewal and hazardous and old buildings reconstruction trusts, where TBB would provide the facilities and organize the land and capital trusts to offer the complete financial services for facilitating the development of reconstruction, so as to revitalize urban and community functions and achieve the purposes of city appearance beautification and improvements in living environments.

• 4) In coordination with the "Loans for Youth Overseas Experience" program of the Youth Development Administration, Ministry of Education, TBB provides young people aged 20 to 35 with loans for overseas study, self-guided travel, and working holidays, helping them to realize their dreams of living overseas. As of the end of December 2020, TBB had provided NT$559 million in these loans to 4,717 persons, helping numerous young students to pursue their dreams overseas.

• 5) To help increase birth rates, TBB continues to extend childbirth consumer loans, lightening the burden on family finances by providing the capital needed to pay for bearing children. By the end of December 2020, 1,601 of these loans for a total of NT$616 million had been extended.

• 6) To help seniors to invigorate their assets and stabilize their livings, TBB continued to promote the "Joyful Retirement" project. By the end of December 2020, a total of 225 of these loans had been extended, with the contract amount and the appropriation amount accumulated to NT$1,576 million and NT$878 million, respectively.

• C. Upgrading of information transparency, and reinforcement of communication with shareholders and investors

TBB is engaged in a long-term effort to upgrade its corporate governance, pursue even better operating performance, and constantly enhance asset quality and competitiveness so as to reinforce its operating structure and create greater value for its shareholders. In addition, TBB works vigorously to reinforce channels of communication with its domestic and overseas shareholders and investors. The concrete methods used to do this are as follows:

• a. Holding of the Annual Shareholders' Meeting each year (May 29. 2020).

• b. Holding of online investor conferences on August 28, 2020 and December 4, 2020 to provide a complete statement of TBB's operating situation.

• c. TBB has contact persons responsible for immediate response to queries raised by shareholders and investors.

• d. TBB discloses monthly revenue and financial status information on its official website, as well as the announcements and CSR status in Chinese and English versions. This helps domestic and overseas investors understand the status of TBB's operations.

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X Directory of Head Office and Branch Units

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TBB ’ S OFFICES ADDRESS TEL NO. SWIFT CODE
Head Office 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171
Banking Department 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171 MBBTTWTP010
Trust Department 15F, 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171
Securities Department
4F, 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171
(Banking Broker)
International Banking
3F, 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171 MBBTTWTP
Department
634-10, Jingping Rd., Zhonghe Dist, New Taipei City, Taiwan,
Chung Ho Branch (02)22427171 MBBTTWTP002
R.O.C.
419, Mingcheng 2nd Rd., Zuoying Dist., Kaohsiung City,
Po Ai Branch (07)5567171
Taiwan, R.O.C.
North Taoyuan Branch 985 Chunri Rd., Taoyuan Dist., Taoyuan City, Taiwan, R.O.C. (03)3567171 MBBTTWTP004
381 Zhongzheng Rd., Luzhu Dist., Taoyuan City, Taiwan,
Nan Ken Branch (03)3227171 MBBTTWTP005
R.O.C.
839 Sec. 4, Taiwan Blvd., Xitun Dist., Taichung City , Taiwan
Si Tuen Branch (04)23587171 MBBTTWTP006
R.O.C.
301 Zhongming S. Rd., West Dist., Taichung City, Taiwan,
Chung Min Branch (04)23057171 MBBTTWTP007
R.O.C.
116, Minquan Rd., Jincheng Township, Kinmen County,
Kinmen Branch (082)316871 MBBTTWTP009
Taiwan, R.O.C.
Ta Ya Branch 161 Daya Rd., Daya Dist., Taichung City, Taiwan, R.O.C (04)25687171 MBBTTWTP011
Jen Ta Branch 183 Fengnan Rd., Nanzi Dist., Kaohsiung City, Taiwan, R.O.C. (07)3537171 MBBTTWTP012
Jen Ai Branch 357, Sec. 4, Ren’ai Rd., Da’an Dist., Taipei City, Taiwan, R.O.C. (02)27217171 MBBTTWTP020
147, Sec. 4, Nanjing E. Rd., Songshan Dist., Taipei City,
Sung Shan Branch (02)27167171 MBBTTWTP021
Taiwan, R.O.C.
Chien Cheng Branch
76 Nanjing W. Rd., Datong Dist., Taipei City, Taiwan, R.O.C. (02)25507171 MBBTTWTP022
(Banking Broker)
Shih Lin Branch 601 Zhongzheng Rd., Shilin Dist., Taipei City, Taiwan, R.O.C (02)28117171 MBBTTWTP023
Yung Ho Branch 168 Zhulin Rd., Yonghe Dist., New Taipei City, Taiwan, R.O.C. (02)29277171 MBBTTWTP024
192, Sec. 2, Zhongxing Rd., Xindian Dist., New Taipei City,
Hsin Tien Branch (02)29117171 MBBTTWTP025
Taiwan, R.O.C.
16, Sec. 1, Zhonghua Rd., Xinzhuang Dist., New Taipei City,
Hsin Chuang Branch (02)29907171 MBBTTWTP026
Taiwan, R.O.C.
25, Touqian Rd., Xinzhuang Dist., New Taipei City, Taiwan,
Hwa Cheng Branch (02)29977171 MBBTTWTP027
R.O.C.
158 Songjiang Rd., Zhongshan Dist., Taipei City, Taiwan,
Sung Kiang Branch (02)25377171 MBBTTWTP040
R.O.C.
72, Sec. 1, Chongqing S. Rd., Zhongzheng Dist., Taipei City,
Taipei Branch (02)23717171 MBBTTWTP050
Taiwan, R.O.C.
Wan Hua Branch 103, Kangding Rd., Wanhua Dist., Taipei City, Taiwan, R.O.C. (02)23757171 MBBTTWTP060
93, Sec. 2, Roosevelt Rd., Da’an Dist., Taipei City, Taiwan,
South Taipei Branch (02)23697171 MBBTTWTP061
R.O.C.
390, Sec. 1, Fuxing S. Rd., Da’an Dist., Taipei City, Taiwan,
Fu Hsin Branch (02)27057171 MBBTTWTP070
R.O.C.
17 Changchun Rd., Zhongshan Dist., Taipei City, Taiwan,
Chung Shan Branch (02)25517171 MBBTTWTP080
R.O.C.
4, Sec. 3, Minquan E. Rd., Zhongshan Dist., Taipei CIty,
Chien Kuo Branch (02)25097171 MBBTTWTP081
Taiwan, R.O.C.
15, Alley 360, Sec. 1, Naihu Rd., Naihu Dist., Taipei City,
Nai Hu Branch (02)27997171 MBBTTWTP082
Taiwan, R.O.C.
N a n K i n g E a s t R o a d 311, Sec. 3, Nanjing E. Rd., Songshan Dist., Taipei City,
(02)27127171 MBBTTWTP090
Branch Taiwan, R.O.C.
Chung Hsiao Branch 267, Sec. 3, Chung Hsiao E. Rd., Taipei City, Taiwan, R.O.C. (02)27727171 MBBTTWTP100
World Trade Center Branch 547 Guangfu S. Rd., Xinyi Dist., Taipei City, Taiwan, R.O.C. (02)23457171 MBBTTWTP102
Yung Trin Branch 552, Sec. 5, Chung Hsiao E. Rd., Taipei City, Taiwan, R.O.C. (02)23467171 MBBTTWTP103
Nan Kang Branch 19-2 Sanchong Rd., Nangang Dist., Taipei City, Taiwan, R.O.C. (02)26553771 MBBTTWTP105
161, Sec. 1, Keelung Rd., Xinyi Dist., Taipei City, Taiwan,
Sung Nan Branch (02)27647171 MBBTTWTP110
R.O.C.
152, Sec. 6, Minquan E. Rd., Naihu Dist., Taipei City, Taiwan,
Dong Hu Branch (02)87929771 MBBTTWTP111
R.O.C.
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TBB ’ S OFFICES ADDRESS TEL NO. SWIFT CODE
92, Sec. 2, Dunhua S. Rd. Da’an Dist., Taipei City, Taiwan,
Ta An Branch (02)27007171 MBBTTWTP120
R.O.C.
356 Zhonghe Rd., Zhonghe Dist., New Taipei City, Taiwan,
Shuang Ho Branch (02)22327171 MBBTTWTP121
R.O.C.
403, Sec. 2, Zhongshan Rd., Zhonghe Dist., New Taipei City,
Jim Ho Branch (02)22287171 MBBTTWTP122
Taiwan, R.O.C.
95 Wugong Rd., Wu Ku Industrial Zone, Xinzhuang Dist., New
Wu Ku Branch (02)22987171 MBBTTWTP130
Taipei City, Taiwan, R.O.C.
1F-2, 188 Zhongshan Rd., Linkou Dist., New Taipei City,
Lin Kou Branch (02)26037171 MBBTTWTP131
R.O.C.
38-11 Wenhua 2nd Rd., Guishan Dist., Taoyuan City, Taiwan,
East Lin Kou Branch (03)3287171 MBBTTWTP132
R.O.C.
Pan Chiao Branch 2-1 Mingde St., Banqiao Dist., New Taipei City, Taiwan, R.O.C. (02)29687171 MBBTTWTP140
217, Sec. 1, Zhongshan Rd., Shulin Dist., New Taipei City,
Shu Lin Branch (02)26757171 MBBTTWTP141
Taiwan, R.O.C.
126, Sec. 2, Zhongyang Rd., Tucheng Dist., New Taipei City,
Tu Cheng Branch (02)22737171 MBBTTWTP142
Taiwan, R.O.C.
933 Zhongzheng Rd., Xinzhuang Dist., New Taipei City,
Hwei Long Branch (02)82097171 MBBTTWTP143
Taiwan, R.O.C.
75, Sec. 1, Xintai 5th Rd., Xizhi Dist., New Taipei City, Taiwan,
Xi Zhi Branch (02)26987171 MBBTTWTP144
R.O.C.
San Xia Branch 31, Daxue Rd., Sanxia Dist., New Taipei City, R.O.C. (02)26739871 MBBTTWTP148
Kee Lung Branch 9 Ai 3rd Rd., Ren’ai Dist., Keelung City, Taiwan, R.O.C. (02)24237171
Pu Chya Branch 62-1, Sec. 2, Zhongshan Rd., Banqiao Dist., New Taipei City,
(02)29547171 MBBTTWTP151
(Banking Broker) Taiwan, R.O.C.
137, Sec. 4, Sanhe Rd., Sanchong Dist., New Taipei City,
North San Chung Branch (02)22867171 MBBTTWTP152
Taiwan, R.O.C.
232, Sec. 1, Ziqiang Rd., Sanchong Dist., New Taipei City,
South San Chung Branch (02)29827171 MBBTTWTP153
Taiwan, R.O.C.
Lu Chow Branch 42 Yongle St., Luzhou Dist., New Taipei City, Taiwan, R.O.C. (02)28477171 MBBTTWTP154
305 Sec. 2,Zhongshan Rd., Yilan City, Yilan County, Taiwan,
I Lan Branch (03)9367171 MBBTTWTP160
R.O.C.
15 Zhongzheng N. Rd., Luodong Township, Yilan County,
Lo Tung Branch (03)9567171
Taiwan, R.O.C.
96-1,Sec. 1, Zhongshan Rd., Su’ao Township, Yilan County,
Su Aw Branch (03)9965051
Taiwan, R.O.C.
10, Guangfu N. Rd., Yangmei Dist., Taoyuan City, Taiwan,
Yang Mei Branch (03)4786111 MBBTTWTP290
R.O.C.
76, Sec. 1, Zhongcheng Rd., Hukou Township, Hsinchu
Hu Kou Branch (03)5997171 MBBTTWTP291
County, Taiwan, R.O.C.
Taoyuan Branch
99 Zhonghua Rd. Taoyuan Dist., Taoyuan City, Taiwan, R.O.C. (03)3317171 MBBTTWTP300
(Banking Broker)
80 Zhongshan S. Rd., Dayuan Township, Taoyuan City,
Ta Yuan Branch (03)3857171 MBBTTWTP301
Taiwan, R.O.C.
Ta Shi Branch 80 Fuxing Rd., Daxi Dist., Taoyuan City, Taiwan, R.O.C. (03)3887171 MBBTTWTP302
Chung Li Branch 157 Zhongshan Rd., Zhongli Dist Taoyuan City, Taiwan, R.O.C. (03)4277171 MBBTTWTP310
153 Zhongxiao Rd., Zhongli Dist., Taoyuan City, Taiwan,
Nei Li Branch (03)4557171 MBBTTWTP311
R.O.C.
Hsin Ming Branch 282 Minzu Rd., Zhongli Dist., Taoyuan City, Taiwan, R.O.C. (03)4027171 MBBTTWTP312
1223, Sec. 2, Wanshou Rd., Guishan Dist., Taoyuan City,
East Taoyuan Branch (03)3297171 MBBTTWTP313
Taiwan, R.O.C.
Hsin Wu Branch 257 Zhongshan Rd., Xinwu Dist., Taoyuan CIty, Taiwan, R.O.C. (03)4777171
Hsin Chu Branch 100 Dongmen St., Hsinchu City, Taiwan, R.O.C. (03)5277171 MBBTTWTP320
Chu Pei Branch 128 Xianzheng 9th Rd., Zhubei City, Hsinchu County, Taiwan,
(03)5517171 MBBTTWTP321
(Banking Broker) R.O.C.
Hsinchu Science Based
198, Guanxin Rd., Hsinchu City 300, Taiwan, R.O.C. (03)5637171 MBBTTWTP322
Industrial Park Branch
789, Sec. 1, Jieshou Rd., Bade Dist., Taoyuan City, Taiwan,
Pa Te Branch (03)3767171 MBBTTWTP330
R.O.C.
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Taiwan Business Bank Annual Report 2020

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TBB ’ S OFFICES ADDRESS TEL NO. SWIFT CODE
Luong Tan Branch 64 Longyuan Rd., Longtan Dist., Taoyuan City, Taiwan, R.O.C. (03)4807171 MBBTTWTP332
6 Donglin Rd., Zhudong Township, Hsinchu County, Taiwan,
Chu Tung Branch (03)5947171 MBBTTWTP340
R.O.C.
Chu Nan Branch 29 Bo’ai St., Zhunan Township, Miaoli County Taiwan, R.O.C. (037)467171 MBBTTWTP350
Tou Fen Branch 90 Xinyi Rd., Toufen City, Miaoli County, Taiwan, R.O.C. (037)687171 MBBTTWTP351
Maio Li Branch 606 Zhongzheng Rd., Miaoli City, Taiwan, R.O.C. (037)327171 MBBTTWTP360
Feng Yuan Branch
1 Yuanfeng Rd., Fengyuan Dist., Taichung City, Taiwan, R.O.C. (04)25267171 MBBTTWTP460
(Banking Broker)
Tai Ping Branch 27 Zhongxing E. Rd., Taiping Dist., Taichung City, Taiwan,
(04)22707171 MBBTTWTP470
(Banking Broker) R.O.C.
Ta Chia Branch 14 Zhenzheng Rd., Dajia Dist., Taichung City, Taiwan, R.O.C. (04)26867171 MBBTTWTP480
1023 Sec. 7, Taiwan Blvd., Shalu Dist., Taichung City , Taiwan
Sha Lu Branch (04)26657171 MBBTTWTP482
R.O.C.
Wu Jih Branch 616 Zhonghua Rd., Wuri Dist., Taichung City, Taiwan, R.O.C. (04)23387171 MBBTTWTP483
Taichung Branch 400 Sec. 1, Taiwan Blvd., Central Dist., Taichung City, Taiwan
(04)22297171 MBBTTWTP490
(Banking Broker) R.O.C.
Min Chen Branch 84 Minquan Rd., Central Dist., Taichung City, Taiwan, R.O.C. (04)22267171 MBBTTWTP491
Hsing Chung Branch 136 Taizhong Rd., South Dist., Taichung City, Taiwan, R.O.C. (04)22877171 MBBTTWTP500
Pei Tuen Branch 53 Jinhua N. Rd., Beitun Dist., Taichung City, Taiwan, R.O.C. (04)22307171 MBBTTWTP501
Nan Tou Branch 139 Fuxing Rd., Nantou City, Nantou County, Taiwan, R.O.C. (049)2237171 MBBTTWTP510
604 Zhongzheng Rd., Caotun Township, Nantou County,
Tsao Tuen Branch (049)2357171 MBBTTWTP511
Taiwan, R.O.C.
434 Zhongzheng Rd., Puli Township, Nantou County, Taiwan,
Pu Li Branch (049)2997171
R.O.C.
135, Sec. 2, Zhongshan Rd., Tanzi Dist., Taichung City,
Tan Tze Branch (04)25317171 MBBTTWTP521
Taiwan, R.O.C.
919, Sec. 3, Jishan Rd., Zhushan Township, Nantou County,
Chu Shan Branch (049)2637171 MBBTTWTP530
Taiwan, R.O.C.
61 Guangfu Rd., Changhua City, Changhua County, Taiwan,
Chang Hwa Branch (04)7257171 MBBTTWTP540
R.O.C.
8 He’an St., Hemei Township, Changhua County, Taiwan,
Ho Mei Branch (04)7558131 MBBTTWTP541
R.O.C.
16 Minquan St., Yuanlin Township, Changhua County, Taiwan,
Yuan Lin Branch (04)8377171 MBBTTWTP550
R.O.C.
62 Gongqian St., Beidou Township, Changhua County,
Pei Tou Branch (04)8877171 MBBTTWTP560
Taiwan, R.O.C.
2 Zhongzheng Rd., Erlin Township, Changhua County, Taiwan,
Erh Lin Branch (04)8957171 MBBTTWTP561
R.O.C.
Tou Liu Branch 109 Datong Rd., Douliu City, Yunlin County, Taiwan, R.O.C. (05)5347171 MBBTTWTP660
65 Wenhua Rd., Beigang Township, Yunlin County, Taiwan,
Pei Kang Branch (05)7827171
R.O.C.
45 Heping Rd., Huwei Township, Yunlin County, Taiwan,
Hu Wei Branch (05)6337171
R.O.C.
Chia Yi Branch
132 Guanghua Rd., Chiayi City, Taiwan, R.O.C. (05)2287171 MBBTTWTP680
(Banking Broker)
Ming Hsiung Branch 83, Sec. 3, Jianguo Rd., Minxiong Township, Chiayi County,
(05)2207171 MBBTTWTP681
(Banking Broker) Taiwan, R.O.C.
Chia Hsin Branch 766 Hsinming Rd., West Dist., Chiayi City, Taiwan, R.O.C. (05)286-7171 MBBTTWTP686
Hsin Ying Branch 216 Zhongshan Rd., Xinying Dist., Tainan City, Taiwan, R.O.C. (06)6357171 MBBTTWTP690
Kai Yuan Branch 12 Zhonghua Rd., Yongkang Dist., Tainan City, Taiwan, R.O.C. (06)3117171 MBBTTWTP691
79 Zhongzheng S. Rd., Yongkang Dist., Tainan City, Taiwan,
Yun Kang Branch (06)2517171 MBBTTWTP700
R.O.C.
Shiue Chia Branch 87 Zhongshan Rd., Xuejia Dist., Tainan City, Taiwan, R.O.C. (06)7837171 MBBTTWTP701
352 Zhongshan Rd., Shanhua Dist., Tainan City, Taiwan,
Shan Hwa Branch (06)5816111 MBBTTWTP702
R.O.C.
1532, Sec. 2, Yongda Rd., Yongkang Dist., Tainan City,
Yung Ta Branch (06)2337171 MBBTTWTP703
Taiwan, R.O.C.
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TBB ’ S OFFICES ADDRESS TEL NO. SWIFT CODE
Tainan Branch
185 Zhongzheng Rd., Tainan City, Taiwan, R.O.C. (06)2247171 MBBTTWTP710
(Banking Broker)
Jen Te Branch 339 Zhongshan Rd., Rende Dist., Tainan City, Taiwan, R.O.C. (06)2797171 MBBTTWTP711
25 Gongyuan Rd., West Central Dist., Tainan City, Taiwan,
Cheng Kung Branch (06)2217171 MBBTTWTP720
R.O.C.
East Tainan Branch 75, Sec. 2, Zhonghua E. Rd., East Dist., Tainan City, R.O.C. (06)2687171 MBBTTWTP721
An Ping Branch 67, Sec. 1, Zhonghua W. Rd., East Dist., Tainan City, R.O.C (06)2657171 MBBTTWTP730
247 Zhongshan Rd., Hualien City, Hualien County, Taiwan,
Hua Lien Branch (03)8357171 MBBTTWTP760
R.O.C.
335, Sec. 1, Zhonghua Rd., Taitung City, Taitung County,
Tai Tung Branch (089)327171
Taiwan, R.O.C.
249 Zhongzheng 1st Rd., Lingya Dist., Kaohsiung City,
East Kaohsiung Branch (07)7167171 MBBTTWTP820
Taiwan, R.O.C.
Kang Shan Branch 412 Gangshan Rd., Gangshan Dist., Kaohsiung City, Taiwan,
(07)6227171 MBBTTWTP830
(Banking Broker) R.O.C.
28, Sec. 3, Jianguo Rd., Fengshan Dist., Kaohsiung City,
North Feng Shan Branch (07)7767171 MBBTTWTP840
Taiwan, R.O.C.
31 Qingnian 1st Rd., Lingya Dist., Kaohsiung City, Taiwan,
Ling Ya Branch (07)5377171 MBBTTWTP841
R.O.C.
Kaohsiung Branch 79 Wufu 3rd Rd., Qianjin Dist., Kaohsiung City, Taiwan, R.O.C. (07)2717171 MBBTTWTP850
North Kaohsiung Branch 90, Fuxing 1st Rd., Xinxing Dist., Kaohsiung City, Taiwan,
(07)2387171 MBBTTWTP851
(Banking Broker) R.O.C.
116 Dachang 2nd Rd., Sanmin Dist., Kaohsiung City, Taiwan,
Ta Chang Branch (07)3827171
R.O.C.
378-3 Minquan 2nd Rd., Qianzhen Dist., Kaohsiung City,
Chien Chen Branch (07)5355171 MBBTTWTP853
Taiwan, R.O.C.
Jeou Ru Branch 255 Jiuru 2nd Rd., Sanmin Dist., Kaohsiung City, Taiwan,
(07)3137171 MBBTTWTP860
(Banking Broker) R.O.C.
San Ming Branch 153 Zhongshan 1st Rd., Xinxing Dist., Kaohsiung City, Taiwan,
(07)2867171 MBBTTWTP870
(Banking Broker) R.O.C.
157 Zhongshan Rd., Fengshan Dist., Kaohsiung City, Taiwan,
Feng Shan Branch (07)7107171
R.O.C.
No.5-3, Guanghua Rd., Daliao Dist., Kaohsiung City 831,
Ta Fa Branch (07)7887171 MBBTTWTP881
Taiwan, R.O.C.
Ping Tung Branch
7 Hankou St., Pingtung City, Pingtung County, Taiwan, R.O.C. (08)7327171
(Banking Broker)
718 Hongping Rd., Xiaogang Dist., Kaohsiung City, Taiwan,
Xiao Gang Branch (07)8016171 MBBTTWTP891
R.O.C.
100 Xinsheng Rd., Chaozhou Township, Pingtung County,
Chiao Chou Branch (08)7807171
Taiwan, R.O.C.
Offshore Banking Branch 3F, 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171 MBBTTWTP893
Los Angeles Branch 633, West 5th St. Suite 2280, Los Angeles, CA 90071, U.S.A. 1-213-8921260 MBBTUS6L
Suite 2705-9, 27F, Tower 6, The Gateway, Harbour City,
Hong Kong Branch 852-29710111 MBBTHKHH
Kowloon, Hong Kong
Suite 601, Level 6, 60 Carrington Street, Sydney NSW 2000,
Sydney Branch 61-2-92623356 MBBTAU2S
Australia
Room 3806, 38F, Longemont Yes Tower, 399 Kaixuan Road,
Shanghai Branch 86-21-62627171 MBBTCNSH
Changning District, Shanghai 200051, China
Suite 903, Level 9, 239 George Street, Brisbane, QLD 4000,
Brisbane Branch 61-7-33173000 MBBTAU2SBRI
Australia
17F, Building 2, 108 Zhongbei Road, Wuchang District,
Wuhan Branch 86-27-59817171 MBBTCNSHWUH
Wuhan, Hubei Province 430077, China
New York Branch 32 Old Slip, 5F, New York, NY 10005, U.S.A. 1-646-213-3258 MBBTUS33
707, 7F, Tekko Building, 1-8-2 Marunouchi, Chiyoda-Ku, Tokyo
Tokyo Branch 81-3-5220-3918 MBBTJPJT
100-0005, Japan
422 Strand Road (Corner of Botahtaung Pagoda Road), #04-
Yangon Representative
Office 08, Botahtaung Township, Yangon, Republic of the Union of 95-1-202101
Myanmar
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Taiwan Business Bank Annual Report 2020

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Taiwan Business Bank, Ltd.

Chairman

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365

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www.tbb.com.tw

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