Taiwan Banks: Less excitement for the first-ever IRB adoption

Research evidence excerpt

Taiwan Banks: Less excitement for the first-ever IRB adoption

J P M O R G A N Asia Pacific Equity Research

31 July 2026

Taiwan Banks

Less excitement for the first-ever IRB adoption

The FSC earlier this week announced the approval of IRB adoption by seven banks. Asia Financials

ACHowever, the immediate benefits to CET1 ratios are much smaller than we had Jemmy S Huang

anticipated since the FSC requires a six-year progressive release of the excess (886-2) 2725-9870

capital. In addition, bank dividend payout capacity at Fubon, Cathay, and E.Sun jemmy.s.huang@jpmorgan.com

might not really increase as a result given they are already at the regulatory ceiling, J.P.MorganMorganSecuritiesSecurities(Asia(Taiwan)Pacific) Limited/Limited/ J.P.J.P.

but a more sufficient capital position would still be positive for facilitating stronger Morgan Broking (Hong Kong) Limited

balance sheet expansion when underlying credit demands have been robust. Amanda Chang

(886-2) 2725-9861

amanda.chang@jpmorgan.com• D-SIBs and E.Sun as the first batch of approval. FSC announced that the six

D-SIBs (Taiwan Cooperative, First, Mega, CTBC, Fubon, Cathay) and E.Sun J.P. Morgan Securities (Taiwan) Limited

are approved for IRB adoption, which would be effective since 4Q26. On a Katherine Lei

forward-looking basis, banks under the IRB approach need to sustain total (852) 2800-8552

assets above NT$2.5trn and higher minimum requirements for capital ratios katherine.lei@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited/ J.P.

(see Table 1). Morgan Broking (Hong Kong) Limited

• Immediate boost to the CET1 ratios is immaterial due to the five-year

progressive adoption of the output floor. According to the FSC’s comments

made to the local press (Commercial Times), the average increase in bank CAR