Taiwan Securitisation Overview: Opportunity but Risk Mitigation is Key

Securitisation in Taiwan tells a story of early momentum, abrupt retrenchment, and prolonged regulatory caution. Prior to the global financial crisis, Taiwan had a relatively active securitisation market, with financial institutions making regular use of structured products to fund loan portfolios and monetise receivables. That momentum came to a sharp halt after 2008. In the years that followed, concerns from both investors and regulators fundamentally reshaped the market’s trajectory. Policymakers worried that securitisation—particularly of residential mortgage assets—could indirectly fuel real estate price inflation by allowing banks to recycle capital too efficiently. As a result, issuance slowed dramatically, and for more than a decade, annual securitisation volumes have been limited to one or two transactions at most.

Unlike jurisdictions that rely on general trust or contract law, Taiwan operates a highly codified securitisation regime. Transactions are governed primarily by two dedicated statutes, each tied closely to the nature of the underlying assets. Financial assets such as loans, leases, credit card receivables, and accounts receivable fall under the Financial Assets Securitisation Act, while real estate and property-linked rights are governed by a separate Real Estate Securitisation Act. These laws define not only what assets may be securitised, but also how securitisation must be structured, who may participate, and what approvals are required. In practice, this means Taiwan’s securitisation market is rule-driven rather than principles-based.

Structurally, securitisation in Taiwan is overwhelmingly trust-centric. Although the financial assets framework technically allows for the use of special purpose companies, market practice has settled almost entirely on trust structures, with banks acting as trustees. This reflects both regulatory preference and market conservatism. Trustees play a central role as issuers of beneficiary certificates or asset-backed securities, while originators—typically financial institutions, though sometimes corporates with regulatory approval—transfer or entrust assets into the trust. Oversight is further reinforced through the appointment of trust supervisors, adding another layer of governance uncommon in many offshore markets.

Regulatory supervision is correspondingly centralised. The Financial Supervisory Commission acts as the single competent authority for both financial asset and real estate securitisations. Issuance cannot proceed without formal approval or effective registration, and disclosure obligations apply regardless of whether the transaction is a public offering or a private placement. Even private deals are subject to mandatory public announcements regarding the assets being securitised, a requirement that underscores the regulator’s emphasis on transparency and third-party protection rather than investor sophistication alone.

From a risk perspective, Taiwan does not impose a formal risk-retention requirement, but credit enhancement is a standard feature of transaction design. Originators frequently retain subordinated tranches to support senior securities, aligning economic incentives even in the absence of statutory mandates. Investor obligations, by contrast, are relatively light: there is no regulatory duty for investors to conduct due diligence, reflecting the assumption that participants—particularly in private placements—are capable of assessing risk independently.

Several concepts familiar in other securitisation markets are notably absent. There is no formal notion of “simple, transparent and comparable” securitisations, and Taiwan law does not explicitly recognise the concept of a “true sale” in the way common law jurisdictions do. Instead, legal certainty hinges on compliance with statutory entrustment, transfer, registration, and notification requirements. If these are satisfied, courts are generally reluctant to disturb securitisation structures, although general insolvency doctrines such as fraudulent transfer and hardening periods continue to apply.

Taxation and cross-border considerations further reinforce the market’s domestic orientation. Asset transfers into a securitisation trust are treated as disposals for tax purposes, potentially triggering income tax at the originator level. Investors are subject to transaction taxes and income tax on distributions. While there is no express prohibition on cross-border securitisations, Taiwan assets are rarely used directly in offshore structures. Instead, a two-step approach has occasionally been used, where domestic securitisation certificates are issued first and then re-securitised offshore.

Overall, Taiwan’s securitisation framework prioritises regulatory control, asset transparency, and systemic stability over market growth. While this has limited issuance volumes, it has also produced a legally robust and tightly supervised environment. Any revival of the market is likely to depend not on structural innovation, but on incremental regulatory reform and renewed comfort among both policymakers and investors.

1. Market activity and historical development

• Taiwan’s securitisation market was active prior to the 2008 global financial crisis, with multiple transactions completed annually
• After 2008, issuance declined sharply due to investor risk aversion and regulatory concern over financial stability
• Regulators were particularly worried that mortgage-backed securitisation could accelerate real estate price inflation by allowing banks to recycle capital more aggressively
• Since then, annual issuance has generally been limited to one or two transactions, often with conservative structures

2. A dual-statute legal foundation

• Taiwan regulates securitisation through two dedicated laws rather than general commercial or trust principles
• The Financial Assets Securitisation Act (FASA) governs securitisations backed by financial assets arising from banking and commercial activity
• The Real Estate Securitisation Act (RESA) governs securitisations backed by real property and property-related rights
• Each statute applies based strictly on asset type, creating a segmented regulatory framework

3. Scope of eligible securitised assets

• Under the FASA, eligible assets include:
  • Loans secured by movable or immovable property
  • Residential mortgage loans
  • Automobile loans
  • Lease receivables
  • Credit card receivables
  • Accounts receivable
  • Trust beneficial rights derived from qualifying assets
• Under the RESA, eligible assets include:
  • Land and buildings
  • Infrastructure assets such as roads, bridges, tunnels, and parking facilities
  • Rights attached to real estate, including superficies
  • Securities backed by real estate or real estate mortgages
• Assets not expressly listed in either statute are generally considered ineligible for securitisation

4. Permitted securitisation structures

• The FASA allows securitisation through either:
  • Trust structures, or
  • Special purpose companies (SPCs)
• Despite this flexibility, all securitisation transactions to date have used trust structures
• SPCs exist only as a statutory option and have not been adopted in practice
• Under the RESA, securitisation may only be conducted through trusts

5. Key transaction parties and roles

• Originator:
  • Typically a financial institution, though non-financial corporates may participate with regulatory approval
  • Transfers or entrusts assets into the securitisation structure
• Trustee:
  • Almost always a bank
  • Holds and administers the securitised assets
  • Issues beneficiary certificates or asset-backed securities
• Service agent:
  • Commonly the originator
  • Manages collections and borrower relationships
• Trust supervisor:
  • Oversees the trustee’s management of assets
  • Provides an additional governance layer unique to Taiwan
• Investors:
  • Participate via public offerings or private placements

6. Regulatory oversight and approval process

• The Financial Supervisory Commission (FSC) is the sole competent authority for securitisation
• Issuers must obtain FSC approval or effective registration before issuing securities
• FSC-issued regulations specify required documentation, review procedures, and disclosure formats
• Both public and private transactions are subject to regulatory scrutiny prior to issuance

7. Disclosure and transparency requirements

• Originators must publicly announce:
  • The nature of the assets
  • The quantity of assets
  • The key content of the asset pool
• Announcements must be made for three consecutive days through prescribed channels
• This disclosure requirement applies to both public offerings and private placements
• Ongoing disclosure includes:
  • Trust financial statements
  • Asset performance reports
  • Management and utilisation reports
• Failure to comply with disclosure requirements can render asset transfers unenforceable against third parties

8. Risk retention, credit enhancement, and investor obligations

• There is no statutory risk-retention requirement under either the FASA or the RESA
• In practice, originators frequently retain subordinated tranches as credit enhancement
• Credit support mechanisms include:
  • Subordinated beneficiary certificates
  • Excess asset coverage
  • Collateral arrangements
• Investors are not subject to regulatory due-diligence obligations
• The framework assumes investor sophistication, particularly in private placements

9. Asset transfer, bankruptcy remoteness, and legal certainty

• Taiwan law does not formally define the concept of “true sale”
• Legal certainty depends on compliance with statutory entrustment, transfer, and notification requirements
• Individual obligor notification is generally required for assignments, but:
  • The FASA allows public announcements to substitute for notice in securitisations
  • Continued servicing by the originator further mitigates enforcement risk
• Bankruptcy remoteness is achieved through:
  • Legal segregation of trust assets
  • Trust law protections preventing creditor attachment
  • Strict limits on SPC activities where applicable

10. Taxation, cross-border use, and future outlook

• Asset entrustment into a securitisation trust is treated as a disposal for tax purposes
• Originators may incur income tax on gains from asset transfers
• Trustees are taxed on service fees
• Investors are subject to:
  • Securities transaction tax on transfers
  • Income tax on distributions
• Cross-border securitisations are rare:
  • Taiwanese assets are seldom used directly offshore
  • Some transactions involve domestic issuance followed by offshore re-securitisation
• Since enactment, legislative change has been minimal, reflecting low issuance volume
• Any future revival of the market is likely to depend on regulatory recalibration rather than structural reform

Bottom line: Taiwan’s securitisation regime is legally comprehensive, tightly controlled, and highly transparent—but intentionally conservative. The framework prioritises financial stability and regulatory oversight over market volume, resulting in a structurally sound but lightly used securitisation market.