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Position Explanation of Financial Supervisory Commission with Respect to Continuing to Drive Forward Second Financial Reform
After the consideration that outsiders proposed much criticism as regards the government’s advancement of the second financial reform recently and much content of the criticism concerned that the outsiders misunderstood the government’s intention in driving forward the policy of the financial reform, the Financial Supervisory Commission, Executive Yuan (hereinafter called the “FSC”) proposes the following explanation with respect to the issues relevant to the second financial reform to which the public has paid much attention recently:
1. It is necessary to continue to drive forward the second financial reform:
(1) After the consideration of the structure problems, the number of the domestic banks is excessively high; the degree of homogeneity of these banks is high; these banks’ ability to earn interests is poor; there is a lack of big, good and internationally competitive financial institutions in Chinese Taipei; the nation faces the situation that the market share of public banks tends to be high; and the efficiency of the financial market has been awaited to be elevated, the government has driven forward a series of financial reforms since 2001 and under the principles of respecting the market mechanism and increasing the international competitiveness of financial institutions, considerable results from the advancement of financial consolidation have been achieved. Therefore, it is necessary to keep driving forward financial reforms.
(2) The FSC and the Ministry of Finance will continue to advance financial consolidation in accordance with the “Scheme for Advancement of Regional Financial Service Centers” passed by the Executive Yuan in November 2004 and the “Adjustment Plan of Bank Market Structure” under the “Package Program of Financial Market,” for the first phase, three-year sprint plan (2007-2009), of 2015 Outlook of Economic Development passed by the Executive Yuan in September 2006. This plan is a continuance of the second financial reform and a guiding principle which is to be adhered to for continuing to execute the financial consolidation policy.
2. Financial reform puts equal emphasis on two aspects, “promote what is beneficial” and “abolish what is harmful”:
Financial reform is a long-term project and cannot be reached by one step – it must be driven forward continuously; in the same way, in order to cope with the change of the market environment, a rolling review is to be conducted. The FSC will continue to put equal emphasis on the aspects, “promote what is beneficial” and “abolish what is harmful” and take them as the principles for driving the financial reform forward; and under the premise of respecting market mechanisms, the FSC will construct a fair and transparent consolidation environment and eliminate barriers caused by the application of laws and regulations of merger and acquisition, with the aim of encouraging effective consolidation of financial institutions.
3. Explanation of Anxieties over Syndicates during the Financial Reform
(1) Capital of banks or financial holding companies have been popularized:
After the consideration that the merged entities, irrespective of banks or financial holding companies, are all listed companies and/or over-the-counter companies, the capital of the companies have been popularized; the bigger the scale of a company is, the more the shareholders are, and the company is not really owned by specific shareholders. For example, the ratio of foreign investors’ shareholdings of some financial holding companies is also considerably high and the operating performance of the management must undergo a high degree of inspection by the market and the supervision of the board of shareholders continuously; outsiders see that financial institutions are owned by certain shareholders and this is the characteristic for making financial institutions as financial agencies, as well as the result of the fact that there is an insufficient understanding on the fundamental aspect, popularization of capital of listed companies. The most important set of tasks for financial institutions should be that financial institutions are to do well risk management and maintain operating performances to obtain supports from customers and shareholders.
(2) Financial institutions are under a high degree of supervision:
Financial institutions conduct businesses that are under a high degree of supervision and their business activities are all regulated by basic laws and regulations and subject to market disciplines, as well as self-regulatory codes; for examples, declaration of large amount credit transactions, regulations on transactions of related parties, declaration of equity and periodical disclosure of financial statements are to promote sound operation of financial institutions and considerable penalties will be imposed on financial institutions which violate provisions. The FSC also adopts the principle of high-degree supervision and applies it on mergers among financial institutions – it not only requires the responsible person and substantial shareholders of the financial institutions in question to comply with eligibility requirements, the financial instructions are required to establish reasonable firework mechanisms to avoid improper circulation of staff, information and funds.
4. Explanation of Disputes of Public Shareholders and/or Civilian Shareholders over Operation rights:
The FSC adopts the neutrality principle to deal with public shareholders’ and/or civilian shareholders’ endeavors over operation rights of financial institutions, and based on the position of the competent authority of financial supervision, it pays close attention to acts of public shareholders and of civilian shareholders to see whether these shareholders acquire operations rights fairly. Fr example, whether the use of a commission form violates the law; if a violation of the law is a fact, the violator will be punished. In spite of what has been said, the FSC will review eligibility of the responsible persons and substantial shareholders.
5. Human resources, stock floatation and consolidation policies of government-owned financial institutions:
Matters related to human resources, stock floatation and consolidation policies of government-owned financial institutions fall within the powers of the Ministry of Finance. The FSC will coordinate consolidation policies on government-owned financial institutions of the Ministry of Finance, cooperate with the Ministry of Finance, and continue to drive forward the financial reform. With respect to designated directors and/or supervisors, the Commission will pay attention to whether corporate governance of the directors and/or supervisors conforms to financial laws and regulations, and it will try eligibility of these directors and of supervisors according to the regulations governing qualification requirements for responsible persons of banks and of financial holding companies.
6. Outcomes of Driving Forwards Second Financial Reform:
The government’s advancement of the second consolidation of financial institutions has pushed forwards a trend of the consolidation of the financial market and the number of banks has reduced from 53 in the year of 2001 to 41 currently. In the same way, since September 2004 until now, 22 cases of financial consolidation have been completed and 11 foreign investors continually invest in domestic financial holding companies and banks. These data obviously show that the government’s advancement of financial consolidation has achieved considerable fruitful results.
The FSC emphasized that financial services were one of the nation’s important industries and their contribution to GDP was steadily on the increase. In order to construct a competitive financial market environment and increase the economic scale and economic categories of domestic financial institutions, the Commission will continue to drive forward the financial reform to make consumers, investors and enterprises enjoy a relieved, safe and satisfied financial environment, and will increase in full scale the competitiveness of the domestic financial industry. |