A Reform without Transformation－Globalization and Financial Supervisory Reform in Taiwan
Date Issued
2010
Date
2010
Author(s)
Yen, Wei-Ting
Abstract
The financial supervisory system is a reflection of a country''s financial regulations. As international financial trading increases, it is not feasible to only make financial supervisory rules domestically. The financial industry in a given country can only be supervised effectively through supervisory rules both at the international and the domestic level. The main focus of this thesis is to explore how the financial supervisory system in Taiwan reformed through the interaction between the international level and domestic level. The dependent variable in this study is "The Organizational Law of the Financial Supervisory Commission of the Executive Yuan" (FSC). By investigating the political process behind its establishment, I aim to answer why the reform began, what the legislative process was, and what changes have occurred since its establishment.
The development of the financial supervisory system in Taiwan is affected by the pressure of financial globalization as well as the autonomy of the state. First of all, the initiation of the financial supervisory reform was indeed influenced by the pressure of financial globalization; however, the pressure was not transited through an outside-in route. Rather, the state began the reform in the knowledge of the shocks that globalization might bring. The move represented the states determination to show that it was well-prepared to join the international financial community. As a result, the logic of "declaration" pushed supervisory reform into political agenda, and it was under the same logic that the target of the reform was to build a single supervisory agency (that is, the FSC).
Although the reform was initiated by political elites, the legislative process was led by the state bureaucracy (mainly officials in Ministry of Finance). Since the financial industry has been under the control of the state for a long time, the state has always prevailed over the market. This uneven relationship between the state and the market became path dependent through the mechanism of increasing returns. Therefore, from the perspective of the bureaucracy, there was no need to reform the supervisory system since the system itself was efficient. Besides, there were no pressure groups in society to oversee the reform. In addition, the main political cleavage between the two main parties in Taiwan does not rest on economic or financial issues, leading to partisan indifference toward the reform. These factors resulted in a lack of political momentum during the reform process. Consequently, the financial supervisory reform was stuck in the legislative process for eight years. The bill finally passed in 2003 due to electoral considerations. In appearance, a new single organization emerged out of the reform. In reality, however, little has changed.
Subjects
globalization
finance
financial supervision, FSC
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