Financial Supervisory Commission Chinese Taipei1 Ensuring Capacity, Integrity and Accountability of Regulators and Supervisors Rebecca Chung-Fern Wu, Ph.D. Financial Supervisory Commission Chinese Taipei

Financial Supervisory Commission Chinese Taipei2 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

Financial Supervisory Commission Chinese Taipei3 Regulation and Supervision – For Development and Against Fraud Regulation, Supervision, Examination and Enforcement Markets Force Internal Compliance

Financial Supervisory Commission Chinese Taipei4 Regulation and Supervision : Three Layers Internal Compliance Markets Force Regulation, Supervision, Examination and Enforcement

Financial Supervisory Commission Chinese Taipei5 Who are R&S: Framework of the Financial Supervisory Commission

Financial Supervisory Commission Chinese Taipei6 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

Financial Supervisory Commission Chinese Taipei7 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

Financial Supervisory Commission Chinese Taipei8 Who are R&S: Features of the FSC Consolidated Financial Supervision Joint 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

Financial Supervisory Commission Chinese Taipei9 Who are R&S: Employment Employment of four bureaus of the FSC Young staff, with an average age of % of employees ’ education level: college or above

Financial Supervisory Commission Chinese Taipei10 Numbers of Financial Institutions of Chinese Taipei

Financial Supervisory Commission Chinese Taipei11 Market Value to GDP in Major Stock Markets

Financial Supervisory Commission Chinese Taipei12 Trading Values in Major Stock Markets Unit: US$ Billion

Financial Supervisory Commission Chinese Taipei13 Capacity, Integrity and Accountability of R&S Humans are essential advocate and implement policy establish principles rules and guidance monitor, evaluate and examine market players

Financial Supervisory Commission Chinese Taipei14 Capacity, Integrity and Accountability of R&S 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)

Financial Supervisory Commission Chinese Taipei15 Capacity, Integrity and Accountability of R&S 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

Financial Supervisory Commission Chinese Taipei16 Relationships among capacity, integrity and accountability

Financial Supervisory Commission Chinese Taipei17 How to ensure capacity

Financial Supervisory Commission Chinese Taipei18 How to ensure capacity 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

Financial Supervisory Commission Chinese Taipei19 How to ensure capacity What does FSC do? ♦ Incentives: mainly non-monetary moderate pay pension plan growth potential achievement job security

Financial Supervisory Commission Chinese Taipei20 How to ensure integrity

Financial Supervisory Commission Chinese Taipei21 How to ensure integrity What 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

Financial Supervisory Commission Chinese Taipei22 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

Financial Supervisory Commission Chinese Taipei23 How to ensure accountability What 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

Financial Supervisory Commission Chinese Taipei24 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

Financial Supervisory Commission Chinese Taipei25 Recommendations Lower left: successful recruitment may filter out those with neither capacity nor integrity Upper left: member with high integrity but low capacity--education, training and adequate motivation Lower right: dangerous--control mechanism Upper right: best condition--keep the staff

Financial Supervisory Commission Chinese Taipei26 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.

Financial Supervisory Commission Chinese Taipei27 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.