Financial Supervisory Commission (FSC) Chairman Wellington Koo (顧立雄) on Tuesday weathered his first question-and-answer session at the Legislative Yuan as he faced lawmakers on the Finance Committee and discussed his objectives.
Koo, a lawyer and former head of the Executive Yuan’s Ill-gotten Party Assets Settlement Committee, reiterated that he would preserve administrative neutrality and distance himself from the Democratic Progressive Party (DPP).
To avoid the pitfalls of previous financial reform efforts, Koo also said he would not promote consolidation in the financial sector.
However, Finance Committee members complained that there was nothing new in Koo’s report on the aftermath of scandals at SinoPac Financial Holdings Co (永豐金控) and state-run Mega Financial Holding Co’s (兆豐金控) Mega International Commercial Bank (兆豐商銀), and that many questions about the companies’ violations remain unanswered.
Chinese Nationalist Party (KMT) Legislator William Tseng (曾銘宗), a former FSC chairman, said that Koo’s report did not include any policy directions for the commission.
Koo responded by promising an internal investigation into the lack of action by the commission in 2014, when it first detected lending irregularities at SinoPac Financial during an audit.
He also said that he is considering raising the maximum fine that could be levied on infractions from the NT$10 million (US$328,407), which he said was inadequate to give teeth to regulations.
DPP Legislator Chiang Yung-chang (江永昌) told Koo that he had drafted a bill to bolster corporate governance by requiring companies to run their legal and compliance departments independently of each other.
Chiang’s proposals includes barring a financial company employee from concurrently holding the top position in a firm’s compliance and legal departments, and requiring a company’s top compliance officer to report directly to its board of directors instead of the company president.
Preserving operating independence is key to preventing missteps and compliance staff must be distanced from a company’s profit-seeking sections, Chiang said.
The DPP lawmaker asked the commission to conduct a feasibility study on bolstering the rules on internal audit and internal control systems for financial holding companies and the banking industries, and to deliver its findings in two months.
In related news, foreign institutional investors in Taiwan recorded a net fund outflow of US$2.307 billion last month, the third consecutive month of foreign fund outflow, according to the commission’s statistics released yesterday.
The outflows reflected anticipation of a stronger US dollar as the US economy continued to grow, which in turn might prompt an interest rate hike in the US soon, analysts said.
Due to the foreign fund outflows, the TAIEX fell 1.91 percent last month, but the commission said there are no concerns about liquidity in the local equity market, and the bourse remained healthy.
Despite the net foreign fund outflows over the past three months, local investors have been pouring money into the equity market, which has kept the daily turnover on the main board above NT$100 billion in recent sessions, the commission said.
In the first nine months of the year, foreign institutional investors registered a net fund inflow of US$7.24 billion, the commission’s data showed.
Additional reporting by CNA
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