Financial Supervisory Commission Chinese Taipei1 Ensuring Capacity, Integrity and Accountability of...

Financial Supervisory Commission Chinese Taipei

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Ensuring Capacity, Integrity and Accountability of Regulators and Supervisors Rebecca Chung-Fern Wu,

Ph.D.Financial Supervisory

Commission

Chinese Taipei


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OUTLINE

Regulation and Supervision- For Development and Against Fraud

How to ensure the capacity, integrity and accountability of regulators and supervisors (R&S)?What does FSC do?Recommendations


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Regulation and Supervision – For Development and Against Fraud

Regulation, Supervision, Examination and Enforcement

Markets Force

Internal Compliance


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Regulation and Supervision : Three Layers

Internal Compliance

Markets Force

Regulation, Supervision, Examination and Enforcement


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Who are R&S: Framework of the Financial Supervisory Commission

Bureau of M onetary A ffa irs

Securities and Futures Bureau

Insurance Bureau

Exam ination Bureau

F inanc ia l S upervis ory C ommis s ion

E xec utive Y uan


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Who are R&S?

Competent authority, exchanges and self-regulatory organizations (SROs) Chinese Taipei

♦FSC, BOMA, SEB, IB, EB ♦TSE, GTSM, TAIFEX, TSCD ♦SFI, SFIPC


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Who are R&S: logo of the FSC• Composed of three colors Green: Energy Blue: Fair, Justice, Public Gold: Prosperous vision of the FSC•Core “F”: Finance, Formosa, Focus•Four blocks : banks, securities, futures, and insurance sectors•The two outside crescents: constant dynamics and infinite development


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Who are R&S: Features of the FSCConsolidated Financial SupervisionJoint Consultation Mechanism Professional Qualification for the Commissioners Integration of Regulations and Policies among Different Financial sectors Combination of Financial Institutions Examinations Investigation Power to Enforce Market Discipline


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Who are R&S: EmploymentEmployment of four bureaus of the FSC

Young staff, with an average age of 38.798.03 % of employees’ education level:

college or above

FSC SFB BOMA IB EB

Below College

Level

0 7 3 0 5

College Level 24 99 106 23 181

Graduate Level 20 115 83 30 60

Doctoral Level 3 3 1 0 0

Total 47 224 193 53 246


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Numbers of Financial Institutions of Chinese Taipei

0

100

200

300

400

500

84 85 86 87 88 89 90 91 92

Banks

Securities Firms

Insurance Companies

Financial Holding Companies


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Market Value to GDP in Major Stock Markets

Chinese

Taipei

New

York

NASDAQ Tokyo London Hong

Kong

Korea Singapore

1995 71.87 82.76 15.67 68.97 125.63 216.27 40.10 173.30

2000 84.77 117.39 36.61 67.04 181.15 377.58 32.03 168.48

2003 130.57 103.10 25.88 68.72 134.98 456.29 49.07 163.20


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Trading Values in Major Stock Markets

Chinese

Taipei

New

York

NASDAQ Tokyo London Hong

Kong

Korea Singapore

1995 378.0 2454.0 1449.3 859.0 930.0 147.0 287.0 77.0

2000 993.3 11060.1 19798.8 2315.5 4558.6 376.7 556.1 95.2

2003 592.0 9692.3 7068.2 2130.7 3624.0 296.4 459.2 92.0

Unit: US$ Billion


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Capacity, Integrity and Accountability of R&S

Humans are essentialadvocate and implement policyestablish principles rules and guidancemonitor, evaluate and examine market players


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Example:Corporate Governance Best-Practice Principles for TSEC/GTSM listed companies Executive Yuan passed “Accountability for Companies in Chinese Taipei: Policy Agenda and Action Plan” to Strengthen Corporate Governance” (November 12, 2003)


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Example: Agenda implemented-Established and implemented internal control systems Integrated and strengthened - information transparency of listed companies Established independent directors system Cultivated corporate governance culture and environment Implemented a regulatory system for corporate governance


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Relationships among capacity, integrity and accountability

Capacity of R&S

Integrity of R&S

Accountability of R&S


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How to ensure capacity

Capacity

Recruiting

Development

Incentives


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What does FSC do? ♦Recruiting: civil service

examination; high standards or recruiting requirements

♦Job Development: external training program; international meetings exposure; in-house training program


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What does FSC do? ♦Incentives: mainly non-monetary

moderate pay pension plan growth potential achievement job security


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How to ensure integrity

Integrity

Monitor Education

Investigation

Legal action & Penalty

Hierarchical Control Social Control

Code of Conduct

Relations

Self- Commitment


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How to ensure integrityWhat does FSC do?

♦Civil Servants: restriction of holding securities (Code of Conduct), Criminal Law, Civil Servant Work Act, Civil Service Employment Act

♦ Commissioners of the FSC: appointed by the President; selected from those with industrial or academic backgrounds of laws, economy, finance, taxation, accounting or management

♦Perform duties independently


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How to ensure accountability

Accountability of R&S is highly associated with the capacity and integrity of R&S Communication and disclosure to ensure the transparency of R&S and then enhance the confidence to the public


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How to ensure accountabilityWhat does FSC do?

♦building the communication access to the public through open meetings and public hearings

♦The regulation and regulatory process are highly transparent

♦crucial policies of the FSC are required to be formulated based on Commission’s decision and announce to the public to ensure the transparency of operations


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Recommendations

How can we choose with the dilemma?

s

High

Low Capacity

High Integrity Accountable

Low Not Accountable

High Capacity

Low Integrity

Low High

(Control ) Integrity

(Education, Motivation)

Capacity


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Recommendations

Lower left: successful recruitment may filter out those with neither capacity nor integrityUpper left: member with high integrity but low capacity--education, training and adequate motivationLower right: dangerous--control mechanismUpper right: best condition--keep the staff


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Recommendations

When capacity and integrity cannot match at the same time:

choose the one with high integrity even if the capacity condition is not satisfied.

R&S cannot take any chance for corruption; or it may harm the confidence of the public and hence attribute to the damage of capital market.


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Thank you

Rebecca Chung-Fern Wu, Ph.D.Financial Supervisory Commission

Chinese Taipei

This is the report of the views of the author. The FSC has expressed no view regarding the analysis, findings, or conclusions herein.

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