As part of the latest round of government restructuring, the Financial Supervisory Commission (FSC) became a subordinate agency under the direction of the Executive Yuan on July 1, after having been an independent institution since its launch in July 2004. As an independent agency it had the authority and power to strengthen the nation’s financial management, conduct independent investigations and discipline the financial markets.
The biggest difference in the latest administrative reorganization is that the FSC chairman and members of its policymaking committee will no longer enjoy a four-year tenure. In addition, the membership of the commission’s policymaking committee will largely be composed of heads of various government agencies instead of experts selected from various fields. Meanwhile, the FSC chairman, rather than the policymaking committee, will hold executive power.
In the previous system, the policymaking committee members were selected on their professional merits. Each of them was responsible for running an aspect of the financial watchdog and their collaboration helped ensure that all aspects were considered before a final decision was made. Similarly, policies and draft bills were devised following thorough discussion and deliberation.
However, because of the organization’s composition and decisionmaking processes, the FSC often took more time than was expected in dealing with financial irregularities and fraud. We have seen such problems before; prime examples can be seen in the way the commission dealt with the Rebar Asia Pacific Group scandal in 2006 and in its handing of the fallout from the global financial crisis.
Another problem associated with the previous system involves the FSC chairman’s lack of executive power. In some circumstances, where one member or a small group was significantly more powerful than others, they could impose their decisions upon the chairman and the policymaking committee. Such power was not matched with responsibilities.
Given the new organization, the FSC should be able to communicate easily with other government agencies. However, the commission could face uncertainty in terms of communications efficiency, as it will now hold its committee meetings once a month instead of once a week. As financial services have become more complex and with many modern financial products spanning a variety of financial fields, the new arrangement has raised questions as to the committee’s ability to respond efficiently and effectively, let alone to enhance the financial sector’s international competitiveness.
Meanwhile, becoming a subordinate agency under the Executive Yuan indicates that the government hopes to press for continuity in its economic and financial policies. Yet the organizational change has again highlighted questions over whether the commission will be able to enjoy its independent role in supervising financial industries.
The commission was originally formed by merging various government agencies which were previously under the direction of the central bank, the Ministry of Finance and the Central Deposit Insurance Corp, as the government wanted to centralize regulation of the nation’s financial sector. However, ever since its establishment, the commission has flip-flopped several times on its policies and the government has since considered whether the commission’s policymaking and supervisory roles should be split up.
While the commission now acquiesces in authority to the Executive Yuan, the argument over whether the commission can have independent oversight of the financial sector continues much as it did before the latest government restructuring. The government claims the commission will still have independent oversight and will continue to work toward creating an international and competitive financial market at home, but we will have to wait and see.