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Remarks

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Chairman''s Statement of Year 2011

 

The Financial Supervisory Commission (FSC) is the competent authority responsible for supervising, regulating, and facilitating the development of financial market and financial services in Taiwan, and for conducting financial examinations. The FSC helps to create a business climate that is favorable to the needs of financial institutions here. My Commission carefully monitors the financial and business soundness of financial institutions, pays close attention to their corporate governance, and works continually to strengthen safeguards for financial consumers. Our key goal has always been to keep the financial market moving in a positive direction over the long term.

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 Taiwan as a capital-raising platform. These measures are intended to make our financial institutions more competitive, increase the soundness of their business operations, maintain financial stability, and promote the development of our financial markets.

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 Taiwan as a capital-raising platform for high-tech and innovative industries. In order to strengthen corporate governance, we intend to require a broader range of listed companies to establish independent directors and executive compensation committees, and encourage companies to work harder to ensure ethical business practices and fulfill their corporate social responsibility.

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 Taiwan''s international participation and cooperation in the financial world, and to help our financial institutions develop their overseas businesses. In March 2011, the FSC officially became a full signatory to the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (IOSCO MMOU).

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 Taiwan''s financial service firms in their efforts to establish a presence in mainland China. In line with our government''s overall policy with mainland China, the FSC will actively seek advantageous market access for our financial service firms to expand the scope of their business activities. In addition, we will also adjust restrictions on the access of financial firms from mainland China into our market, in accordance with the principles of parity and prudential supervision so as to ensure that these changes do not have any significant impact upon the domestic market.

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 Taiwan''s financial industry as well as trends and practices in international financial supervision. Where the resulting findings indicate changes are necessary, we will adjust our supervisory policies and measures, and amend legislation. Placing equal emphasis on financial stability and respect for market mechanisms, and maintaining a positive focus on what can be done to improve the industry, we will be taking steps to create a favorable business climate for financial institutions. Our vision is to facilitate the growth of financial markets and the development of financial service industries.

 

Yuh-Chang Chen, Chairman

Financial Supervisory Commission (FSC), Executive Yuan

June 2011

 

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