The Cabinet’s surprise announcement on Friday that SinoPac Financial Holdings Co chairman Sean Chen (陳冲) was appointed chairman of the Financial Supervisory Commission (FSC) signals a partial Cabinet shuffle, especially in Premier Liu Chao-shiuan’s (劉兆玄) financial and economic team.
The impetus for a Cabinet reshuffle has been around for a while, as the lineup has failed to deliver on President Ma Ying-jeou’s (馬英九) campaign promises of financial prosperity, while cutting his approval rating in half since his inauguration on May 20.
It’s anyone’s guess who will be the next to bow out, but the resignation of outgoing FSC chairman Gordon Chen (陳樹) could cheer investors because it implies that change is possible.
The Cabinet said in a statement that Chen tendered his resignation after he found the commission’s efforts had gained neither approval nor support amid the fallout of the global financial crisis.
His assessment is correct. The FSC’s recent measures to stem the sell-off of local stocks have been criticized for bringing too much government interference to the market.
The regulator’s measures, such as the ban on short sales and a move to temporarily halve the daily down-limit for trading of individual stocks from 7 percent to 3.5 percent, came under attack for significantly limiting market liquidity.
The FSC has hurt investor confidence through its handling of disputes over investments in structured notes that were linked to Lehman Brothers’ bond holdings.
While Hong Kong and Singapore have been taking action to help individual investors seek compensation from banks, Taiwan’s efforts have been slow and pathetic. Furthermore, nothing has been done to investigate banks that might have misled investors while selling structured products and other financial derivatives.
But what was most laughable was the regulator’s list of 93 undervalued shares in early September. The regulator said it wanted to help investors find bargains amid stock sell-offs. The result was that its recommendations became a long list of regrets because most of the stocks continued to fall for two months.
Now that Gordon Chen has stepped down, Sean Chen will be the sixth top financial regulator since the market watchdog was created in July 2004.
Some have praised the new FSC head’s ability and his complete financial expertise. Besides serving as a former vice finance minister and an ex-chairman of the Taiwan Stock Exchange, Sean Chen helped transform the state-run Taiwan Cooperative Bank into a private firm and completed its initial public offering. The lender saw a 10-fold increase in earnings under his two-year chairmanship.
Even so, no one should put too much faith in one man’s ability to deal with the financial problems the country is facing.
The 59-year-old financial veteran needs the assistance of his capable peers in the Cabinet as the government tackles the increasing number of domestic companies calling for emergency aid.
As the government is considering rolling over bank loans or increasing credit lines to rescue companies that have borne the brunt of the credit crunch and economic slowdown, Sean Chen should take the taxpayers and their hard-earned tax dollars into account. He must seek financial stability as his priority and avoid systemic risks to local banks.
As for financial reform, his policy stance toward industry consolidation will also come under scrutiny because the sector’s inefficiency remains unsolved and there are still too many banks.
In short, the new FSC chairman must act swiftly to help rebuild public confidence in the government’s handling of these matters. Nevertheless, the capabilities of the Cabinet’s current financial and economic team seem to raise alarm, and that’s something over which he has little or no control.
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