Premier Lin Chuan’s (林全) Cabinet was dealt a massive blow last week as Financial Supervisory Commission (FSC) chairman Ding Kung-wha (丁克華) and vice chairman Kuei Hsien-nung (桂先農) both tendered their resignations amid intensifying criticism over their handling of alleged financial irregularities at Mega International Commercial Bank and XPEC Entertainment Inc.
Ding — who is a classmate of Lin from National Chengchi University and has held high positions in the Taipei Exchange, Securities and Futures Commission, and the Securities & Futures Institute — became the first minister in Lin’s Cabinet to resign after occupying the post for about four months. It will be interesting to see if Ding’s resignation will have a domino effect in the Cabinet and/or lead to a minor Cabinet reshuffle.
Ding might have had one of the most difficult jobs in President Tsai Ing-wen’s (蔡英文) administration at a time when Taiwan’s financial sector is facing unprecedented challenges from narrowing interest rate spreads and the growing digitization of financial services, as well as strains from insufficient investment opportunities in the domestic market and the increased life expectancy of an aging population.
Ding might also be the most unfortunate chairman in the FSC’s history, given a series of financial irregularities that came to light during his relatively short tenure. In addition to the lax money laundering controls by Mega Bank’s New York branch and a botched tender offer for gaming software developer XPEC Entertainment, there were also the automatic teller machine heist at First Commercial Bank; allegations of the embezzlement of company funds and other illegal financial dealings at CTBC Financial Holding Co; Phison Electronics Corp allegedly falsifying its earnings through illegal accounting practices; and the controversy about risky yuan-linked target redemption forward derivatives.
Ding said in his resignation letter that he had to resign to protect his integrity and prevent further aspersions being cast on the commission.
However, he needed to resign because the commission had handled the Mega Bank and XPEC Entertainment cases sloppily until they reached a point where everyone was unhappy, and the outcomes were disappointing and confusing to the public. Ding might think he was doing his best to deal with the cases, but unfortunately his best was not good enough.
Other former and current officials at the commission, the Ministry of Finance, the Taiwan Stock Exchange and the Taipei Exchange should also be held liable for their failure to properly oversee Mega Bank and protect the interests of investors in the XPEC Entertainment case. The government must get to the bottom of the cases and mete out necessary punishment to those responsible, as bureaucratic inertia in the government has been a serious problem for too long.
Ding’s resignation alone will not put the two disputes to rest and is not likely to help the Cabinet regain credibility. Rather, it damages the public’s confidence in Tsai’s administration.
The question now is who will be appointed to head the commission and whether the potential candidate has sufficient knowledge of and vision for the finance industry, while being determined to stand up to opposition from conservative forces and interest groups.
Given the circumstances, it could take considerable time and effort to find the most suitable candidate. Finding the right person is never easy, but for policymakers it is likely even harder to retain qualified people, as public sentiment remains depressed by the political situation.
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