Ensuring Capacity, Integrity and Accountability of Regulators and Supervisors

1. Ensuring Capacity, Integrity and Accountability of Regulators and Supervisors Rebecca Chung-Fern Wu, Ph.D. Financial Supervisory Commission Chinese Taipei Financial Supervisory Commission Chinese Taipei

2. OUTLINE • Regulation and Supervision- For Development and Against Fraud • How to ensure the capacity, integrity and accountability of regulators and supervisors (R&S)? • What does FSC do? • Recommendations Financial Supervisory Commission Chinese Taipei

3. Regulation and Supervision – For Development and Against Fraud • Regulation, Supervision, Examination and Enforcement • Markets Force • Internal Compliance Financial Supervisory Commission Chinese Taipei

4. Internal Compliance Markets Force Regulation, Supervision, Examination and Enforcement Regulation and Supervision : Three Layers Financial Supervisory Commission Chinese Taipei

5. Who are R&S: Framework of the Financial Supervisory Commission Financial Supervisory Commission Chinese Taipei

6. Who are R&S? • Competent authority, exchanges and self-regulatory organizations (SROs) • Chinese Taipei ♦FSC, BOMA, SEB, IB, EB ♦TSE, GTSM, TAIFEX, TSCD ♦SFI, SFIPC Financial Supervisory Commission Chinese Taipei

7. Who are R&S: logo of the FSC • Composed of three colors • Green: Energy • Blue: Fair, Justice, Public • Gold: Prosperous vision of the FSC • Core “F”: Finance, Formosa, Focus • Four blocks : banks, securities, • futures, and insurance sectors • The two outside crescents: constant • dynamics and infinite development Financial Supervisory Commission Chinese Taipei

8. Who are R&S: Features of the FSC • Consolidated Financial Supervision • Joint Consultation Mechanism • Professional Qualification for the Commissioners • Integration of Regulations and Policies among Different Financial sectors • Combination of Financial Institutions Examinations • Investigation Power to Enforce Market Discipline Financial Supervisory Commission Chinese Taipei

9. Who are R&S: Employment • Employment of four bureaus of the FSC • Young staff, with an average age of 38.7 • 98.03 % of employees’ education level: • college or above Financial Supervisory Commission Chinese Taipei

10. Numbers of Financial Institutions of Chinese Taipei Financial Supervisory Commission Chinese Taipei

11. Market Value to GDP in Major Stock Markets Financial Supervisory Commission Chinese Taipei

12. Trading Values in Major Stock Markets Unit: US$ Billion Financial Supervisory Commission Chinese Taipei

13. Capacity, Integrity and Accountability of R&S • Humans are essential • advocate and implement policy • establish principles rules and guidance • monitor, evaluate and examine market players Financial Supervisory Commission Chinese Taipei

14. Capacity, Integrity and Accountability of R&S Example: • Corporate Governance Best-Practice Principles for TSEC/GTSM listed companies • Executive Yuan passed “Accountability for Companies in Chinese Taipei: Policy Agenda and Action Plan” to Strengthen Corporate Governance” (November 12, 2003) Financial Supervisory Commission Chinese Taipei

15. Capacity, Integrity and Accountability of R&S Example: Agenda implemented- • Established and implemented internal control systems • Integrated and strengthened - information transparency of listed companies • Established independent directors system • Cultivated corporate governance culture and environment • Implemented a regulatory system for corporate governance Financial Supervisory Commission Chinese Taipei

16. Relationships among capacity, integrity and accountability Financial Supervisory Commission Chinese Taipei

17. How to ensure capacity Financial Supervisory Commission Chinese Taipei

18. How to ensure capacity • What does FSC do? ♦Recruiting: civil service examination;high standards or recruiting requirements ♦Job Development: external training program; international meetings exposure; in-house training program Financial Supervisory Commission Chinese Taipei

19. How to ensure capacity • What does FSC do? • ♦Incentives: mainly non-monetarymoderate pay • pension plan • growth potential achievement • job security Financial Supervisory Commission Chinese Taipei

20. How to ensure integrity Financial Supervisory Commission Chinese Taipei

21. How to ensure integrity • What does FSC do? ♦Civil Servants: restriction of holding securities (Code of Conduct), Criminal Law, Civil Servant Work Act, Civil Service Employment Act ♦ Commissioners of the FSC: appointed by the President; selected from those with industrial or academic backgrounds of laws, economy, finance, taxation, accounting or management ♦Perform duties independently Financial Supervisory Commission Chinese Taipei

22. How to ensure accountability • Accountability of R&S is highly associated with the capacity and integrity of R&S • Communication and disclosure to ensure the transparency of R&S and then enhance the confidence to the public Financial Supervisory Commission Chinese Taipei

23. How to ensure accountability • What does FSC do? ♦building the communication access to the public through open meetings and public hearings ♦The regulation and regulatory process are highly transparent ♦crucial policies of the FSC are required to be formulated based on Commission’s decision and announce to the public to ensure the transparency of operations Financial Supervisory Commission Chinese Taipei

24. Recommendations • How can we choose with the dilemma? (Education, Motivation) Integrity ( Control ) Low Capacity Accountable High High Integrity High Capacity Not Accountable Low Low Integrity Capacity Low High s Financial Supervisory Commission Chinese Taipei

25. Recommendations • Lower left: successful recruitment may filter out those with neither capacity nor integrity • Upper left: member with high integrity but low capacity--education, training and adequate motivation • Lower right: dangerous--control mechanism • Upper right: best condition--keep the staff Financial Supervisory Commission Chinese Taipei

26. Recommendations • When capacity and integrity cannot match at the same time: choose the one with high integrity even if the capacity condition is not satisfied. R&S cannot take any chance for corruption; or it may harm the confidence of the public and hence attribute to the damage of capital market. Financial Supervisory Commission Chinese Taipei

27. Thank you Rebecca Chung-Fern Wu, Ph.D. Financial Supervisory Commission Chinese Taipei This is the report of the views of the author. The FSC has expressed no view regarding the analysis, findings, or conclusions herein. Financial Supervisory Commission Chinese Taipei