Taiwan Poised to Clear Seven Banks for IRB Adoption

Taiwan’s Financial Supervisory Commission has allowed banks to apply to use the internal ratings-based, or IRB, approach for credit risk. The framework lets lenders use approved internal data and models to align regulatory capital more closely with the risks on their loan books. Adoption could improve capital efficiency while preserving loss-absorbing capacity, potentially giving banks greater flexibility to distribute earnings through cash dividends.

The regulator’s review has entered its final approval stage, with all seven applicants — including CTBC Bank and Cathay United Bank — expected to pass. The FSC has not disclosed a specific approval date. If cleared to adopt the IRB approach, the banks could benefit from improved capital structures and greater room for dividend payouts, though the eventual impact will depend on their risk profiles and regulatory capital requirements.