Ensuring Capacity, Integrity and Accountability of Regulators and Supervisors Rebecca Chung-Fern Wu, Ph. D. Financial Supervisory Commission Chinese Taipei 1
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 Taipei 2
Regulation and Supervision – For Development and Against Fraud Regulation, Supervision, Examination and Enforcement Markets Force Internal Compliance Financial Supervisory Commission Chinese Taipei 3
Regulation and Supervision : Three Layers Internal Compliance Markets Force Regulation, Supervision, Examination and Enforcement Financial Supervisory Commission Chinese Taipei 4
Who are R&S: Framework of the Financial Supervisory Commission Chinese Taipei 5
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 Taipei 6
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 Taipei 7
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 Taipei 8
Who are R&S: Employment of four bureaus of the FSC Young staff, with an average of 38. 7 98. 03 % of employees’ education level: college or above Commission Financial Supervisory Chinese Taipei 9
Numbers of Financial Institutions of Chinese Taipei Financial Supervisory Commission Chinese Taipei 10
Market Value to GDP in Major Stock Markets Financial Supervisory Commission Chinese Taipei 11
Trading Values in Major Stock Markets Unit: US$ Billion Financial Supervisory Commission Chinese Taipei 12
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 Taipei 13
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 Taipei 14
Capacity, Integrity and Accountabilityimplementedof R&S Example: Agenda 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 Taipei 15
Relationships among capacity, integrity and accountability Financial Supervisory Commission Chinese Taipei 16
How to ensure capacity Financial Supervisory Commission Chinese Taipei 17
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 Taipei 18
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 Taipei 19
How to ensure integrity Financial Supervisory Commission Chinese Taipei 20
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 Taipei 21
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 Taipei 22
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 Taipei 23
Recommendations How can we choose with the dilemma? (Education, Motivation) Integrity Low Capacity High Low High Integrity Not Accountable (Control ) Accountable High Capacity Low Integrity Low High Capacity s Financial Supervisory Commission Chinese Taipei 24
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 Taipei 25
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 Taipei 26
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. Financial Supervisory Commission Chinese Taipei 27
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