Supervisory board likely to pass

The proposed Financial Supervisory Board Organization Law (金融監理委員會組織法) is scheduled to be reviewed by the Executive Yuan this week. Since Premier Chang Chung-hsiung (張俊雄) has already clearly articulated his stance on the current draft, it's likely that the bill will be pass as early as tomorrow.

Indeed, many officials said they were miffed that it failed to pass at Executive Yuan's weekly meeting last Wednesday, hinting that Minister of Finance Yen Ching-chang (顏慶章) was its sole opponent.

At that time, Yen proposed that the financial supervisory board could be responsible for executing financial regulatory policy, while the finance ministry could retain its policy-making powers. Yen said this was common practice in other countries.

As Yen made his opposition to the draft clear, a number of other ministerial officials took the opportunity to comment on other parts of the draft, including its budget and personnel provisions.

It's not hard to understand Yen's opposition since, if the supervisory board is established, it would usurp most the regulatory power currently enjoyed by the finance ministry.

If the draft were passed in the near term, the finance ministry would be left with only taxation as its main function. All regulatory authority over the financial services industry, -- including banking, insurance, and securities -- would be taken up by the supervisory board.

President Chen Shui-bian (陳水扁) had vowed last month to make financial reform one of the government's top priorities. Establishing a new regulatory body in the financial services industry is an integral part of the government's reform plans. In this respect, Premier Chang has decided to break through the limitations of the current legal framework and has asked Minister Without Portfolio Chung Ching (鍾琴), who has overseen the review, to hasten its completion, as the premier wants all roadblocks to its establishment removed.

According to the draft, the board would be empowered to conduct independent investigations. It would also enjoy an independent budget and regulatory powers.

For instance, the board could order any financial institution to assist ion an investigation into fraud or other suspected criminal activities. If the parties refused to assist the board in its investigation, they could be fined anywhere from NT$50,000 to NT$250,000.

The draft also empowers the board to levy 0.03 percent to 0.1 percent of all financial institutions' annual revenue and to determine all procedures regarding the levy. Since the board's budget would be beyond the reach of legislators, there is less chance for political pressure being applied to the board regarding its regulatory duties.

In the past, a number of legislators have been accused of intervention in the regulatory body's investigations and other functions by threatening to cut its budget. The current draft has been designed to remove such concern.

The board's reconfigured personnel system would also give it greater flexibility in its hiring practices. The total number of board personnel was recently revised to between 900 to 1,200, with an additional 100 to 150 who would be responsible for developing derivative financial products and securing financial assets.

These changes have been made in order to allow the board the opportunity to hire from the private sector, instead of hiring only civil servants.