The Financial Supervisory Commission (FSC) is the competent authority responsible for supervising, regulating, and facilitating the development of financial market and financial services in
Thinking has changed in the field of financial supervision since the 2008 financial crisis. The number one concern of reform efforts has shifted to the need for stronger prudential supervision at both the micro and macro levels, and for beefed up protections of financial consumers. The financial service industry is covered under the Early Harvest list of the cross-strait Economic Cooperation Framework Agreement (ECFA) signed in June 2010. This marks a significant milestone and turning point in the development of our financial service industry. In response to changes in economic and financial conditions at home and abroad, and to keep in step with the latest international trends in financial supervision, the FSC needs to make adjustments to its financial sector development strategy, and to the focus of its supervisory work. With that goal in mind, and heedful of the principles of prudential supervision, we are encouraging financial institutions to innovate and expand their markets. At the same time, we are also improving safeguards for financial consumers, strengthening capital adequacy and risk management, pushing for greater internationalization, gradually building up cross-strait ties in the financial industry, expanding the size of capital markets, and taking steps to establish
Enhancing consumer safeguards: The FSC sent a draft version of the Financial Consumer Protection Act to the Legislative Yuan, which passed it into law on 3 June 2011. This act requires that the provisions in financial transaction contracts must be fair, advertising must be truthful, and risks must be properly disclosed. It also sets out the procedures for filing a complaint in the event of a dispute, and specifies how complaints are to be examined and handled. The act provides a legal basis for the establishment of a dispute resolution body, and provides for non-litigious means of resolving consumer disputes. These measures are designed to protect consumers, who are at a disadvantage in terms of financial resources and professional expertise. In addition, the FSC will continue working to promote financial literacy, exercise more rigorous reviews of applications for the issuance of structured notes, classify investors according to their expertise while carrying out channel regulation, and strengthen regulation of the advertising, soliciting, and promotional activities of financial institutions. We will also be paying very close attention to their disclosure of the rights, obligations and risks connected with financial products.
Strengthening capital adequacy and risk management: The recent trend in international financial supervision is to pay close attention to the quality and quantity of regulatory capital, to ensure it is sufficient to absorb future losses. The Basel Committee on Banking Supervision (BCBS) on 16 December 2010 raised minimum capital requirements and issued new rules governing buffer capital. The FSC, in order to strengthen the capital adequacy and risk management of our financial institutions, has required banks to draw up proper plans for long-term capital allocations and dividend policies. In addition, in order to facilitate the business management needs of financial institutions, we also raised the maximum bank deposit guarantee to NT$3 million, and at the end of 2010 discontinued the blanket deposit guarantee.
Expansion of capital markets and establishment of funding platform: In order to enhance the depth and breadth of Taiwan''s capital markets, and encourage high-quality firms of strategic significance to list in Taiwan, the FSC is working to upgrade the skills of financial industry professionals and reassess the underwriting system, and has also amended legal provisions pertaining to insider trading and the business activities of foreign firms in Taiwan. These measures are intended to build up
Promotion of internationalization: The FSC encourages financial institutions to actively develop a global presence. We are also taking active part in international financial bodies, and are entering into MOUs with other authorities in order to expand
Building up cross-strait ties in the financial field: The financial service is covered under the Early Harvest list of the cross-strait Economic Cooperation Framework Agreement (ECFA) signed in June 2010, which is very helpful to
The FSC has always encouraged financial institutions to keep in step with changing societal and economic conditions, and the evolving needs of their customers, by developing new products and innovative new business models. With regard to the plans of financial institutions to meet their business development needs by engaging in M&A activities, the FSC will be concentrating its efforts on establishing a fair, reasonable, and transparent legal environment. While abiding by the principles of prudential supervision and respecting market mechanisms, we will take a close look at the financial soundness of firms engaging in M&A activities to make sure that such activities do not erode their capital base. At the same time, we will also be carefully tracking post-M&A situations to watch for any deterioration in firms'' financial and operational soundness, or any decline of market fairness and discipline. We must be vigilant on all these fronts in order to safeguard the interests of shareholders, employees, and customers.
The FSC stands ready to review conditions in
Yuh-Chang Chen, Chairman
Financial Supervisory Commission (FSC), Executive Yuan