The term Formosa bond refers to an indenture issued in Taiwan, in a non-New Taiwan dollar denomination, by a foreign bank or corporation. Formosa bonds are one of several ways for multinational companies operating in Taiwan to raise capital.
Foreign corporations that wish to raise capital in Taiwan have the option of issuing Formosa bonds. These bonds are issued in Taiwan by non-domestic entities, in a non-New Taiwan dollar currency. Formosa bonds are usually issued by the Taiwanese branch of a publicly-traded overseas financial institution or corporation.
Formosa bonds must carry a credit rating of BBB or higher. Trading between securities firms is carried out using the GreTai Securities Market's Electronic Bond Trading System. If the bond is listed on an overseas exchange, they can be traded between dealers using the over-the-counter (OTC) market.
Taiwan's Financial Supervisory Commission held a contest to name this bond. At one time, Taiwan was referred to as Formosa. The name comes from the Portuguese "Ilha Formosa," which means beautiful island.