BOT Spokesperson Name: Fu-Chi Tsai Title: Executive Vice President Tel: (02)

Transcription

1 BOT Spokesperson Name: Fu-Chi Tsai Title: Executive Vice President Tel: (02) Acting Spokesperson Name: Teng-Lung Hsieh Title: Executive Vice President Tel: (02) Head Office No. 120, Sec.1, Chongcing South Road, Jhongjheng District, Taipei City 10007, Taiwan (R.O.C.) Tel: (02) SWIFT: BKTWTWTP Website: Internet bank: Stock Transfer Agency Name: President Securities Corporation Address: B1, No.8, Tong Shin Rd., Taipei, Taiwan (R.O.C.) Website: Tel: (02) This Annual Report may be accessed on the Bank's Website ( Credit Rating Agencies (1) Standard & Poor's 55 Water Street, New York, N.Y U.S.A. Tel: (2) Moody's Investors Service 7 World Trade Center, 250 Greenwich Street, New York, N.Y U.S.A. Tel: The CPA-Auditor of The Financial Report Name: Yen-Ling Fang, Derek Hsu CPA Firm: KPMG Certified Public Accountants Address: 6 F, No.156, Sec.3, Minsheng East Road, Taipei City 10596, Taiwan (R.O.C.) Website: Tel: (02)

2 BANK OF TAIWAN 2008 ANNUAL REPORT

3 Bank of Taiwan, 2008 Annual Report Published by:bank of Taiwan Address: No. 120, Sec. 1, Chongcing South Road, Jhongjheng District, Taipei City 10007, Taiwan (R.O.C.) Tel: Date of publication:june 2009 Date of publication of first BOT Annual Report:June 1953 E-publication: This Annual Report may be accessed on the Market Observation Post System( Cost of production: NT$500 and on the Bank's Website( GPN: ISSN:

4 Contents Foreword Introduction Corporate Governance Report I. Organization System Directors, Supervisors, President, Executive Vice Presidents, and Heads of Departments and Branches 16 I Corporate Governance Operations IV. CPA Information V. Transfer of Equity and Changes in Equity Used as Collateral by Directors, Supervisors, Managers, and Others Required to Report Equity by the Provisions of Item 3, Article 25 of the Banking Law VI. Information on the Relationships between the 10 Largest Shareholders as Given in SFAS No. 6 V Numbers of Shares in the Same Reinvested Enterprises Held by the BOT and its Directors, Supervisors, President, Executive Vice Presidents, the Heads of Departments and Branches, and Enterprises Controlled Directly or Indirectly by the Bank, and Ratios of Consolidated Shareholding Fund-Raising Activities I. Shares and Stock Dividends Status of Bank Debentures, Preferred Shares, Overseas Depository Receipts, Employee Stock Warrants 42 I Merging of Entrusted for Other Financial Institutions IV. Fund Utilization Plans General Operating Conditions I. Contents of Business Human Resources 49 I Corporate Responsibility and Ethical Behavior IV. Information Equipment V. Labor-Ownership Relations VI. Major Contracts V Type of and Related Information on Securitized Products Approved in Accordance with the Statute for Securitization of Financial Assets or Statute for Securitization of Real Estate During the Past Year

5 Financial Status I. Balance Sheets and Income Statements for Past Five Year Financial Ratios for Past Five Years 55 I Supervisors' Report on Financial Statements for Most Recent Year IV. Financial Statements for Past Year V. CPA-Audited Consolidated Financial Statements for 2008 VI. Effect of Financial Difficulties Experienced by the Bank and Related Enterprises on the Bank's Financial Status in Most Recent Year and to the Annual Report Publication Date Review and Analysis of Financial and Operating Results, a n d Risk Management I. Financial Status Operating Results 123 I Cash Flow IV. Influence of Major Capital Expenditures on Financial Operations During Past Years V. Reinvestment Policy for the Past Year VI. Risk Management V Crisis Management Mechanism VI Other Important Matters Special Notes I. Information on Affiliated Enterprises Private Placement of Securities and Bank Debentures 144 I Holdings or Disposition of BOT Shares by Subsidiaries IV. Other Matters for Supplementary Explanation V. Incidents Occurring During the Previous Year and to Date of Annual Report Publication Which, as Stipulated in Article 36, Section 2, Subsection 2 of the Securities Transaction Law, Had a Major Impact on Shareholder Interests or Share Prices Directory of Head Office and Branches I. Domestic Business Units Overseas Units 152

6 Foreword Introduction Corporate Governance Report Fund-Raising Activities General Operating Conditions Foreword Financial Status Review and Analysis of Financial and Operating Results and Risk Management Special Notes Directory of Head Office and Branches

7 During the past year, the financial situation experienced a multitude of changes and the global economy fell into the shadows of recession. The subprime mortgage turmoil that erupted in the United States in the last half of 2007 led to the Fannie Mae/Freddie Mac crisis in 2008, and investment banks encountered financial difficulties one after another. This gave rise to the global financial tsunami, creating an impact that spread to the real economy and caused sharp drops in investment and increases in personnel layoffs. The countries of Europe and America suffered economic setbacks in the second half of 2008 and governments rushed to mount rescue efforts, using monetary and fiscal policy in an attempt to restore their economies to the normal track of growth. In the Asian countries, exports plummeted because of the excessive dependence of their export-oriented economies on the advanced European and American countries; economic growth weakened rapidly, and the global economy slipped into a wintery abyss. Taiwan's economy also turned downward in 2008, with the growth rate for the year a mere 0.12%--the lowest level since the negative 2.17% growth of The sharp rises and sudden falls in international oil and raw materials prices during the year brought the increase in consumer prices to 3.53%, a level rarely reached in the years since The Central Bank hiked interest rates twice in the first half of 2008 in an attempt to keep inflationary expectations down; but then the international oil price turned downward, inflationary concerns lessened, and the risk of economic decline rose, prompting the Central Bank to institute, in September, a series of five interest-rate cuts that brought the rediscount rate down to 2.0% at the end of the year. At the same time the American dollar

8 Foreword Introduction appreciated in response to demand for hedging purposes; at the end of the year the exchange rate stood at NT$32.86 to the dollar, a decline of 1.27% compared with a year earlier. The international economic situation has deteriorated even further since the beginning of this year (2009) and Taiwan's economic performance figures have also been weak, with an especially large contraction in exports. The currencies of Asia's exporting countries have depreciated; the Central Bank again lowered the interest rate in January and February, bringing the rediscount rate down to 1.25%. The NT dollar has weakened rapidly, dropping to NT$ to the dollar on Mar. 31. As a wholly owned government bank, the Bank of Taiwan maintained a steady pace of advancement amid last year's turbulent operating environment. In addition to readily meeting our profit target, we also achieved satisfactory performance in other areas of business. In the area of loans to small and medium enterprises, the Bank was granted first place in the Outstanding category by the Financial Supervisory Commission; in financial innovation, the Bank was given the Best Business Innovation Award in the "Outstanding Taiwan Financial Business Awards" for its gold passbook online trading business by the Taiwan Academy of Banking and Finance; and on Dec. 18, 2008 the Bank introduced the new "Gold Piggy Bank" business, creating a sensation in the financial market. In the field of information security the Bank won ISO 27001:2005 information security management system certification, bringing it in line with international security standards. The economy moves in cycles, with ups and downs. The present recession, said to be the worst since World War II, may be relatively severe and longer-lasting, but it too will pass. In this year's environment, with the global financial system not yet having recovered its health, we can foresee a weakening of the highleverage, high-risk mode of financial operation and a return to the traditional low-leverage conservative model. In the future, we will move more nimbly on our stable operating base to utilize all kinds of effective means to cope with the chill of this economic winter, and exhort all of our colleagues to change their thinking and adapt to the changing situation, make psychological preparations for a long "war of resistance," and find new advantageous niches in the low-profit environment as they hold firmly to the operating principles of "Integrity, Care, Efficiency, and Prudence" and manifest the nature and style of outstanding bank personnel as we continue creating even more exceptional performance records. We can foresee the continuation of severe trials this year. In the second half of 2008 the government began introducing measures to revitalize Taiwan's economic energy, including cuts in interest rates, reductions of and exemptions from taxes, the issuance of consumer vouchers, the expansion of public construction, and the stimulation of employment. At the same time, the ongoing relaxation of cross-straits laws and regulations has positive implications for banking and for the operation of industries in general. As a state-run enterprise responsible for coordinating with government policy and supporting business development, the BOT will continue to provide strong backing for financing the corporate sector and the general public so as to strengthen the confidence of all our clients in economic recovery. Working on the foundation provided by Taiwan Financial Holdings, we will work to express the synergies and competitive advantages of the subsidiary companies in achieving our vision of "deeply cultivating Taiwan finance and advancing into the international market." Chairperson Corporate Governance Report Fund-Raising Activities General Operating Conditions Financial Status Review and Analysis of Financial and Operating Results and Risk Management Special Notes Directory of Head Office and Branches

9 The impact of the financial storms continued spreading through 2008, bringing difficulties to the whole world, and governments everywhere instituted economic revitalization programs. Being a government bank, the BOT took concrete action to back business and support our government in its economic revitalization policy, exhibiting a model of corporate social responsibility. The economic recession has also struck a heavy blow at the financial industry, bringing problems to banking operations; the BOT has been fortunate in benefiting from the outstanding leadership of our Board of Directors and the untiring efforts of our entire staff, and we were able to exceed our operating performance and profit targets. Our Gold Passbook, Gold Piggy Bank, and other innovative products consolidated the BOT's position in the investment and financial management business. In this new year, the BOT will move to overcome the severe challenges posed by the overall operating environment by nimbly adjusting its operating strategy and vigorously executing risk management. The Bank will also encourage its staff to exhibit a fighting spirit, turn crisis into opportunity, and, in a working attitude of seeking newness, change, and improvement, and with a corporate culture of sincerity and pragmatism, provide exceptional services in pursuit of the BOT's goal of outstanding development and create an excellent performance so that its century-old golden nameplate can continue shining into the future. Our business report for 2008 and operating plans for 2009 are described briefly below: I. Business Report for Implementation of Business Plans (1) Bank-wide products and services will be integrated to realize operating synergies and upgrade competitiveness. (2) Improvement of the structure and operating procedures of the banking business, so as to lower the cost of operating capital. (3) Active development of the wealth management business, so as to heighten the ratio of non-interest income to operating income. (4) Financial operations will be strengthened, and financial management performance and marketing capabilities will be upgraded. (5) Reinforcement of the depth and breadth of operational management and risk management.

10 2. Budget Implementation The volume of deposit operations during the year was NT$2.69 trillion, giving a target achievement ratio of %. Loans amounted to NT$1.97 trillion, for a target achievement ratio of %. Foreign exchange operations undertaken in 2008 totaled US$ billion, amounting to % of the target figure, and profits reached NT$8.15 billion, achieving % of the target. 3. Revenues, Expenditures, and Profits Net interest income for 2008 amounted to NT$23.67 billion; non-interest income (net) totaled NT$4.32 billion; bad debt expenses amounted to NT$1.55 billion, and operating costs totaled NT$17.94 billion. Income before tax reached NT$8.50 billion; income tax amounted to NT$350 million, leaving a net income after tax of NT$8.15 billion. This year's NT$8.15 billion in after-tax income was NT$204 million more than the budgeted income of NT$7.95 billion. Return on assets (ROA) for 2008: 0.23% Return on equity (ROE) for 2008: 3.45% Business Plan for 2009 The BOT's Business Plan and Business Targets for 2009 was formulated in accordance with the business plan approved by the Ministry of Finance, with consideration given to past performance as well as to future trends of development. The Plan's main points are as follows: 1. Major Operating Policies Foreword Introduction Corporate Governance Report Fund-Raising Activities (1) Reinforcement of the loan business and clearing up of non-performing loans. (2) Low-interest demand deposits will be expanded and electronic banking businesses will be reinforced. (3) Development of the foreign exchange and international financing businesses. (4) The Government Employees Insurance business will be continued. (5) The wealth management and trust, gold dealing, and government procurement businesses will be promoted. (6) Enhancement of the efficiency of funds utilization and revitalization of real estate utilization performance. General Operating Conditions (7) The resources of the financial holding company will be used effectively to enhance operating performance. (8) Reinforcement of the operational management, information operations and risk control mechanisms. 2. Business Targets (1) Deposits: NT$2.42 trillion Financial Status (2) Loans: NT$1.80 trillion (3) Guarantees: NT$66.05 billion (4) Foreign exchange: US$87.00 billion (5) Procurement:NT$44.00 billion (6) Trade:NT$11.02 billion (7) Government Emplyoees Insurance:NT$16.77 billion I Most Recent Credit Ratings, and Rating Dates Items Rating Results Rating Date Rating Company Long-term Short-term Outlook Standard & Poor's Oct A+ A-1 stable Moody's Investors Service Jan Aa3 P-1 stable Review and Analysis of Financial and Operating Results and Risk Management Special Notes President Directory of Head Office and Branches