Financial oversight board to be created by July of next year

Following the legislature's passage of the Financial Supervisory Board Organization Law (金監會組織法) on Thursday, Minister of Finance Lin Chuan (林全) yesterday vowed to facilitate the 900-member agency's establishment on July 1, next year.

"The yet-to-be-established Cabinet-level board will merge the Central Bank of China, the Central Deposit Insurance Corp (CDIC, 中央存保) and finance-related agencies under the Ministry of Finance into one umbrella agency which will centralize regulation of the nation's banking sector," Lin said at a press conference yesterday afternoon.

A nine-member management committee, including one chairman and two vice-chairmen, will be recommended by the premier and later appointed by the president to independently manage the board in four-year terms, Lin said, adding that no more than one-third of the board's members may be from the same political party, to avoid political interference.

A clause that previously stipulated that the vice finance minister and head of the central bank would automatically serve as members of the board is no longer effective, Lin said.

The finance ministry will be streamlined, taking charge only of government coffers and taxation after the Bureau of Monetary Affairs, the Securities and Futures Commission and the Insurance Department are to be spun off from the ministry and consolidated under the financial supervisory board, he said.

Meanwhile, Lin expressed regret over the legislature's failure to approve the size of the Financial Restructuring Fund (金融重建基金), saying that the failure would surely hurt public and foreign investor confidence on the government's progress with financial reforms.

"The later it is passed, the more the government will have to pay for financial reforms," Lin said.

"Without the fund, the government can't even deal with the two most debt-ridden banks, Chung Shing Commercial Bank (中興銀行) and Kaohsiung Business Bank (高雄企銀), which create a combined loss of NT$260 million per month," he added.

Lin said that the ministry will stick to its guns and insist that the bailout fund covers distressed banks' non-depository liabilities, a point of contention for the pan-blue camp.

Therefore, the opposition proposed halving the fund from a previously-agreed NT$680 billion to NT$320 billion.

"The failure to cover distressed banks' non-depository liabilities [under the fund] will further lead to financial instability and crisis, which the government can't afford to take on," Lin said, adding that the ministry has no choice but to stand its ground when the legislature reopens in September.

Lin yesterday expressed his thanks to the legislature for passing the Real Estate Securitization Statute (不動產證券化條例) on Wednesday, saying the new law will effectively reinvigorate the nation's long-stagnant property market.