In the two years and four months since the Financial Supervisory Commission (FSC) was established, it has been plagued by a lack of careful planning and a succession of scandals involving high-ranking members.
Its reputation was damaged again last week by the detention and investigation of commission member Lin Chung-cheng (
The founding of the commission was set against the backdrop of the Asian financial crisis during which the hardest-hit countries, such as South Korea and Thailand, gave themselves economic makeovers by undertaking broad financial reforms with assistance from the IMF.
Following Japan's financial reforms in 1998, there was a broad resurgence in Asian financial markets. South Korea and Thailand structured their reforms around the model of the UK's Financial Services Authority by consolidating the management of the banking, insurance, securities and related industries under a single body.
Most countries in the EU are moving toward a model similar to that of the British. The US is also working on legislation to streamline its current financial regulatory system, preceded by the Financial Services Modernization Act passed in 1999, which facilitated more financial market integration.
The integration of financial services across different sectors has already become commonplace in international financial markets, and multinational financial institutions have become widespread. Organizations such as the Bank for International Settlements and the IMF have even begun admonishing various countries to take steps to manage their financial markets more efficiently.
Taiwan's financial industry was also affected in 1998 when the total of bad loans accumulated by banks almost equaled the net worth of the entire sector. The insurance industry was also taking major losses. With the repeated tumbling of the Taiwanese stock market, the securities industry began consolidating.
The passage of the Financial Holding Company Act (
The founding of the FSC was originally an opportunity to create a whole new financial environment for Taiwan. It could have been built on a more open and transparent foundation to do away with all of the age-old malpractices and enable the financial system to be internationally competitive.
But up to this point, it has completely failed to meet expectations. First and foremost, it has employed the wrong kind of people. The upper-level managers have not had the necessary executive experience, professional abilities, moral character, or integrity. The commission members simply reiterate their own opinion when a consensus can't be reached, creating chaos.
This is the reason for the debate about bringing the commission's authority to set policy back to the Ministry of Finance. The Financial Examination Bureau under the FSC should be focused on auditing accounts, but it has had to spend its time finding prosecutors for scandals. The controversies surrounding whether its heads should stay or go have entangled what should be an independent body. Meanwhile, official duties are not distributed appropriately among members, work loads vary and problems have multiplied.