Mega Bank Annual Report 2017

5 Annual Report 2017 -5- Development Strategies  In terms of systems, the Bank continues to promote anti-money laundering and to build the compliance culture.  The Bank continues to implement reform, study the tight specifications and high standards of international banks, and develop anti-money laundering and internal audit and internal control systems consistent across the entire bank.  The Bank deeply plants the concept of anti-money laundering and compliance through continuous, high-frequency education and training.  In terms of business, the Bank actively develops various businesses and creates operational growth and momentum.  The Bank solidifies the niche advantages in the fields of corporate finance, international finance, and financial operation.  The Bank actively expands various consumer banking businesses, increases the percentage of service fee income thereby, and creates a dual engine of profitability of corporate finance and consumer finance.  In terms of organization, the Bank promotes reorganization and improves administrative and operational effectiveness.  The Bank introduces business and management models of “business groups”.  The Bank performs a professional division of work according to business categories and characteristics of the front end and back end. Major Regulatory Changes and Influences  Cooperating with the “New Southbound Policy implementation plans” launched by the Executive Yuan o n January 2017, the Financial Supervisory Commission formulated “The Program to Incentivize Lending by Domestic Banks to Enterprises in New Southbound Target Countries” which not only helps companies acquire funds required for investment or business development, but is also beneficial for domestic banks to develop new markets in southeast Asia and improve overseas credit businesses and profitability.  In response to the APG assessment in 2018 to strengthen the procedure of confirming OBU customer identities, in May 2017, the Financial Supervisory Commission revised the “Rules Governing Offshore Banking Branches”, requiring that OBU re-inspect customer identities and conduct KYC and risk classification on accounts. Although this increases the operational costs of domestic banks, it is beneficial for banks to quickly align with the international anti- money laundering system.  In the first half of 2017, the Financial Supervisory Commission revised “Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries ”, “Regulations Governing Anti - Money Laundering of Financial Institutions”, and “Directions Governing Internal Control System of Anti -Money Laundering and Countering Terrorism Financing of Banking Business, Electronic Payment Institutions and Electronic Stored Value Card Issuers”, which help financial institutions pay more attention to compliance and systems for anti - money laundering and combating the financing of terrorism, as well as strengthen qualifications, professional training, and roles and function of compliance staff and directors.  In order to foster innovative businesses and assist the government in promoting strategic industries, the Financial Supervisory Commission increased the limit of shareholding percentage of venture capital businesses by banks from 5% to 100% in October 2017, but the total amount of direct investment in venture capital may not exceed 3% of the net value of the bank; moreover, relevant certificates issued by supervisory authorities are not required for direct investment in five plus two main innovative industries. This is beneficial for the diversified business development of domestic banks and increasing investment and credit business momentum.