Taiwan Clears Seven Banks to Adopt IRB Capital Models

The internal ratings-based (IRB) approach lets banks use regulator-approved models to estimate borrowers’ probability of default and potential losses, replacing standardized risk weights for eligible credit exposures. More risk-sensitive calculations can reduce risk-weighted assets and lift capital adequacy ratios when portfolios are lower-risk, easing pressure to raise capital and creating more room for lending or dividends. The benefit is not automatic, as model validation and Basel-style output floors limit how far capital requirements can fall.

Taiwan’s Financial Supervisory Commission on July 28, 2026 approved Taiwan Cooperative Bank, First Commercial Bank, Mega International Commercial Bank, Taipei Fubon Commercial Bank, Cathay United Bank, E.SUN Commercial Bank and CTBC Bank to begin using IRB calculations in the fourth quarter of 2026. The output floor will start at 95% and decline by 5 percentage points annually, reaching 72.5% in the fourth quarter of 2031. The regulator did not disclose a specific amount of capital relief or additional dividends.