Minister of Finance Yen Ching-chang (
That statement was a 180 degree reversal of his comments at the Legislative Yuan yesterday morning when he declared that it was not urgent to pass the law. "The current supervision system is sufficient to do the task," he said.
Instead, Yen claimed what he really wanted to say was "there will be no lapse in financial supervision."
The financial supervisory board organization law -- a key part of President Chen Shui-bian's (
According to the current draft, all regulatory bodies, including the Central Deposit Insurance Co, the finance ministry's Securities and Futures Commission, Bureau of Monetary Affairs, and Department of Insurance, as well as the central bank's Banking Examination Department, will all be under the command of the new agency. The body is also designed to monitor financial holding companies.
Pundits strongly criticized Yen's view that the current system is good enough.
"It's pure nonsense," said Yophy Huang (黃耀輝), an associate research fellow at the Chung-hua Institution for Economic Research. "Several financial holding companies have already been established and have begun operating, so it's urgent that a comprehensive regulatory organization is set up to plug any loopholes and prevent moral hazards that may already be going on within one of the financial holding companies," he said.
Without a regulator overseeing financial holding companies that encompass the banking, insurance and securities sectors, a banking unit could offer illegal loans to other units within the same holding company, Huang said.
The consequence of the delay may be a rise in the non-performing loan ratio that would further endanger the soundness of the financial system, Huang said.
Lee Tong-how (李桐豪), a finance professor at National Chengchi University, said that setting up the new agency is the easy part.
"It's only the first step to overseeing the financial services sector," Lee said.
The real task after setting up the new agency is that a number of current government regulators, including the Securities and Futures Commission, Bureau of Monetary Affairs and Department of Insurance under the Ministry of Finance, will have to be completely restructured from within, he said. In addition, financial regulations such as the Securities Exchange Law, Banking Law and Insurance Law will have to be revised.
"Before the second step in financial restructuring is completed, reform measures must be completed," Lee said. "If we regulate the financial holding companies under the current system [without the new supervisory board], the Bureau of Monetary Affairs could become too powerful."
Power politics has played a role in delaying passage of the law.
"Since the DPP lacks professional bureaucrats in finance and economics, opposition parties worry that the integrity and function of the new agency could be devastated," Lee said. "The nine-member committee of the supervisory board is the center of the power game," he said.
Huang advised Yen not to stand in the way of progress.
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