The year 2012 marked the beginning of a new era. The Financial Supervisory Commission (FSC) adopted a big slate of deregulatory measures, and cross-strait financial industry ties, in particular, made big strides forward. In connection with the launch of a cross-strait currency settlement mechanism, for example, the FSC began allowing domestic banking units (DBUs) to handle RMB deposits, loans, and wire transfers. Financial institutions in Taiwan are thus now able to develop innovative new financial products. Development of our financial industry has entered an entirely new phase.

In addition, with the entry into force on 1 July 2012 of an amended version of the "Organic Act Governing the Establishment of the Financial Supervisory Commission," the words "Executive Yuan" have been eliminated from the FSC''s name, and the FSC Board of Commissioners has been reconfigured. The financial experts who had already been serving on the board have been joined by the Minister of Finance, the Minister of Economic Affairs, the Minister of Justice, and the Minister of Economic Planning and Development to facilitate communication and coordination on financial supervisory matters. Although the FSC''s name has been changed, it retains the same organizational structure as before, and performs the same duties and functions. The FSC exercises its financial supervisory authority independently in accordance with the law, and continues to implement policies designed to promote financial industry development and execute financial supervision.

Among the various strategies that might be pursued in order to promote development of Taiwan''s financial industry and make it more competitive, two strategies that trigger the most concern and discussion within society are, firstly, how to expand cross-strait financial ties, and secondly, how to develop the asset management business. The FSC has adopted a "Program for Development of Financial Businesses with Cross-Strait Characteristics" and a "Program for Development of a Taiwan-Centric Wealth Management Platform for Domestic Consumers," both of which are currently being implemented. The establishment of a cross-strait currency settlement mechanism has long been anxiously awaited by our domestic financial institutions, which have for some time been seeking greater flexibility in the currency denomination of the instruments in which they invest, and a greater range of choice in investment targets or the underlying instruments of derivatives. Thanks in no small part to the efforts of financial services firms, considerable successes have already been achieved.

And after several years of hard work, we''ve now seen a breakthrough with the Cross-Strait Securities and Futures Supervisory Cooperation Platform, under which framework the FSC and the mainland''s China Securities Regulatory Commission met for the first time in January 2013. The purposes of the meeting were to determine the supervisory cooperation matters to be addressed under the Platform, to establish a mechanism for regular meetings, and to reach conclusions regarding cross-strait market access and two-way capital flows. It is hoped that such meetings will yield a consensus between the two authorities on how to jointly promote sound management of the securities and futures industry and how to work for market stability. This was truly a milestone achievement, and the FSC intends to build upon it through continuing efforts to establish more open markets.

The assets of insurers are rapidly increasing. In addition to steps taken for the sake of stronger supervision, the FSC is also actively working to help insurers achieve better capital efficiency. In order to promote sound operation and development of insurance enterprises, the FSC intends to afford insurers a wider range of investment choices. With this end in mind, we have eased restrictions on overseas investments, and now allow insurers to invest in public utilities and social service enterprises. At the same time, the FSC is also requiring insurers to do a better job of risk management. In particular, we require that insurers establish clear self-regulatory rules to govern their real estate investments.

In order to improve the risk-bearing capacity of banks, regulatory amendments adopted by the FSC with reference to Basel III requirements expressly provide that an institution''s common equity ratio, Tier 1 capital ratio, and capital adequacy ratios must be factored into any determination regarding its capital adequacy, and minimum capital ratios will go up annually beginning from 2013. In addition, to help make banks more resilient to economic downturns, the FSC starting in 2013 will be implementing new differential incentives and regulatory measures to encourage banks to raise their bad debt allowances against guarantee liabilities for Class 1 credit assets to 1% or higher as quickly as possible.

The FSC has also been busy at work to safeguard the interests of financial consumers. The Financial Ombudsman Institution, which commenced operations on 2 January 2012, has a set of standard operating procedures in place to ensure effective resolution of complaints and ombudsman cases involving disputes between financial institutions and consumers. The public will save a lot on litigation expenses thanks to this system. In the meantime, we''ve identified the promotion financial literacy as one of the best things we can do to better safeguard the interests of financial consumers. With this goal in mind, we established a Financial Education Task Force in 2012 to integrate the resources of the FSC and the nation''s various financial industry self-regulatory organizations. These resources will be put to use in our work to raise the level of general financial literacy in Taiwan. The FSC will continue overseeing the Financial Ombudsman Institution to ensure fair, reasonable, speedy, and effective resolution of financial consumer disputes, thereby safeguarding the interests of financial consumers and strengthening their confidence in our financial markets.

In order to build a more robust financial environment, the FSC will continue to deregulate and take measures to increase the size of our financial markets. And to support the development of cross-strait financial industry ties, we will encourage financial institutions to develop high-quality products. More active trading in our bond markets, coupled with further development of markets for fund products, derivatives, and stocks, are the keys to creating a more diverse range of financial products, which in turn will support the emergence of strong asset management services. At the same time, the FSC intends to employ more finely tuned differential regulatory measures to allow greater flexibility for well-run financial institutions, and we are going to continue with efforts to promote internationalization. Financial institutions will be encouraged to expand their overseas presence and provide better financial services to offshore customers, so as to expand Taiwan''s financial markets.