Due to the lingering impact of the financial tsunami over the past year, development of global economic activity and trade has remained problematic, as has the state of the financial system. Faced with precarious economic and financial conditions, the Financial Supervisory Commission (FSC) has focused on stability and the long-term picture in working to steady the financial sector, ensure the safe and sound operation of financial institutions, expand the size of our capital markets, facilitate the efforts of enterprises to secure financing, and strengthen safeguards for consumers and investors.
On the domestic front, our primary objective this past year was to maintain stability in Taiwan''s financial markets. We took a number of steps toward that end, including the following: (1) created a sound financial safety net by extending the blanket guarantee for bank deposits to the end of 2010, and strengthened the ability of financial institutions to manage capital adequacy and risks; (2) implemented the Executive Yuan''s "government supports banks, banks support enterprises, enterprises support employees" policy, thereby helping enterprises obtain the working capital they need to maintain normal operations while pushing for financial institutions to reschedule loan repayments for individuals who are involuntarily unemployed; and (3) adopted a requirement for financial institutions to disclose information on professional fees paid to CPAs and remuneration paid to directors and supervisors, so as to strengthen corporate governance. In addition, we took a number of steps to expand the size of our capital markets, including the following: (1) continued working to encourage high-quality foreign companies to list on the Taiwan Stock Exchange or the GreTai Securities Market; (2) undertook a critical review of securities market trading regulations; and (3) entered into an agreement with the Hong Kong securities authority for cross-listing of ETFs. We also sought to help enterprises secure financing by: (1) continuing to implement the Program to Encourage Lending by Domestic Banks to Small and Medium Enterprises; and (2) adopting numerous differential regulatory treatment measures to provide positive incentives that encourage banks to provide loans to small and medium enterprises so that they can obtain working capital.
Providing improved protections for consumers and investors was another key focus. Lehman Brothers touched off a flurry of problems in relation to structured notes when it filed for bankruptcy protection in September 2008. In dealing with the aftermath, the FSC sought first of all to encourage out-of-court settlements of structured notes disputes, and in order to achieve maximum efficiency we adopted a two-track system, combining the out-of-court settlement approach with a structured notes dispute resolution mechanism run by the ROC Bankers Association. Within this framework, we put top priority on handling disputes involving the elderly, persons with a low level of education, individuals suffering from major illness, and other investors in a relatively disadvantaged position. We also introduced a customer management system that differentiates between different types of customers in order to better safeguard the interests of non-professional investors. In addition, we continued working to improve the financial literacy of the general public. We launched our MoneyWise website, for example, which assembles a strong collection of educational materials focusing on financial matters, including some very entertaining animation and games designed to help website visitors develop a proper understanding of how to use financial services, invest, and manage their personal finances. At the same time, in order to encourage the insurance industry to fulfill its social responsibilities, we have been working with insurers to get them to launch one-year personal injury policies and micro life insurance products, which will enable them to better serve the needs of the economically disadvantaged.
On the international front, we encouraged domestic banks to develop into regional financial institutions, and foreign banks to increase their participation in Taiwan''s financial markets. We also continued working to sign bilateral and multilateral memorandums of understanding (MOUs) for financial supervisory cooperation with counterpart authorities and important international financial organizations; as of this writing, we have signed 41 bilateral MOUs. Major progress was also achieved last year in cross-strait financial ties when the FSC signed MOUs for financial supervisory cooperation on 16 November 2009 with the mainland''s China Banking Regulatory Commission, China Insurance Regulatory Commission, and China Securities Regulatory Commission. In order to ensure stable development of Taiwan''s domestic financial system, the FSC is moving slowly and deliberately, insisting on equal status at all times, as we work to coordinate with the mainland on laws, regulations, and regulatory measures related to financial markets.
Looking to the future, the FSC will continue monitoring the latest international trends in financial supervision. Matters receiving especially close attention recently include consumer and investor safeguards, management of capital adequacy and liquidity, amendment of accounting standards and efforts to familiarize financial institutions with the changes, cross-border supervisory cooperation mechanisms, and remuneration systems. In addition, in recognition of current economic and financial conditions in Taiwan, the need to stabilize our domestic financial sector will continue to be our main focus, and we are planning a two-pronged approach to achieve this end. We will adopt forward-looking domestic innovations, on the one hand, while at the same time moving as quickly as possible to discuss early harvest items for our financial markets in ongoing talks with mainland China on the Economic Cooperation Framework Agreement (ECFA). By adopting this latter approach, we hope to win preferential treatment for our financial industry on their access to the mainland market, so as to spur development of our financial industry and enhance the international competitiveness of our financial institutions. This, in turn, should contribute to real economic growth and spur the emergence of financial markets that mesh smoothly with the global financial system and are characterized by stability and a forward-looking mentality.
Sean C. Chen, Chairman
Financial Supervisory Commission (FSC), Executive Yuan