What are some of FSC’s new policy objectives?
There is some anticipation towards FSC’s new fintech policy. In the UK, Singapore, Hong Kong and Australia, there are some regulatory sandbox mechanisms that touch on some concepts of fintech and provide flexibility to boost financial innovation. However, as there may be some conflicts with the current regulations, which set specified rules on allowed and forbidden things, we are worried about potential violations once we temporarily allow some activities. Consumer protection can also be affected.

 

That is why we are drawing up a pilot regulation on fintech innovation, the first such regulation under the Statutory Law system in the world. We are still working on that now. The regulation will provide more time and a clear framework for fintech players to bring innovations to the financial market.

 

The second thing is the New Southbound policy. We have Eximbank, the Overseas Credit Guarantee Fund and the overseas arms of Taiwanese banks. We have a KPI for them in terms of credit provided to the local market.

 

Thirdly, green finance is also important. Taipei exchange actually has issued guidance for green bonds. On the banking side, we have an equator principle and green finance guidance. We also have similar guidance in the insurance industry. Our cabinet is pushing for green finance. As you may know, we are promoting a nuclear-free Taiwan. Offshore wind power and solar power are our main focus. Impact investing is also involved. When SITCs (securities investment trust companies), banks, and insurance companies are looking for investment, they should also look at green industries.

 

Fourthly, Taiwan is becoming an aged society.  By 2025, 20% of the population will be above 65 years old. So, we are keeping a close eye on the potential opportunities and risk to the financial industry from the demographic change. In terms of opportunities, we can provide more products for the ageing society such as trust, reverse mortgage, insurance and securities products for retirement.

 

Financial inclusiveness is an idea raised after the financial crisis in 2008. Banks became cautious in capital allocation, but then they realized they should also focus on small and medium-sized enterprises (SMEs). Taiwan has been making efforts in this aspect. We encourage credit cooperatives to set up more rural offices and provide more loans to SMEs.

 

Last but not least, it is financial resilience. Despite some global geopolitical uncertainty, the Taiwanese stock market remains bullish. We, as regulators, should consider whether our financial system is stable enough.

 

 
Do you think Taiwan’s fintech development is lagging behind that of Asian peers?
Each country has its own pace. The philosophies of regulators differ. Some countries act first and make regulations later. But our society does not have the flexibility to adopt this approach. Given the stringent accountability mechanism, we have to be very cautious with regard some policy directions that may affect retail customers and investors and do it step by step. Whether it is early or late is relative.

 

How do you ensure that the new Southbound Policy will not create problems for Taiwanese banks?
There is the issue of anti-money laundering and (combating the financing of) terrorism (AML/CFT). Currently, we require financial institutions to strengthen board of directors’ governance, create an AML/CFT culture and develop group-wide AML/CFT programmes. Moreover, before our banks went to Southeast Asia, they were made aware of specific requirements in terms of local regulations and cyber-security concerns. We have asked the banks to strengthen security control. We’ve also  asked the bankers association to collect domestic and foreign security incidents and revise the information in the security norms accordingly.

 

When you talk about Southbound, there is always a trade-off between risk and return. We will definitely make specific requirements in terms of compliance, risk management and corporate governance of Soutbound Taiwanese banks.

 

How is FSC encouraging consolidation in the banking sector?
FSC has approved the merger of China Development Financial Holding and China Life. This is an M&A between two different financial holdings and is a milestone for Taiwan. Going forward, we will provide friendlier regulations for M&As. In cases when an M&A is initiated, but there are still some problems that needed to be solved, it may  be too late for the participants to address all the concerns before the FSC approves the deal. A possible solution will be to get their commitment without affecting operations. We will be happy to help them reach their objectives and strategy.