The Taiwan Banker

In his inauguration ceremony, Huang Tien-mu, newly appointed Chairman of the Financial Supervisory Commission (FSC) described the four objectives of future financial supervision as stability, innovation, sustainability, and inclusiveness. His talk left a deep impression on listeners. Chairman Huang’s book Enterprise Risk Management in the Taiwanese Financial Industry contains a particularly memorable passage. “Financial institutions have two licenses: a business license issued by the financial supervisor, and a license of trust bestowed by the general public. Only by holding both of these licenses can a financial institution operate sustainably.” When evaluating the performance of financial institutions, we typically use ratios such as return on assets (ROA), return on equity (ROE), and non-performing loans (NPL), but are these quantitative indicators of financial performance the only way to measure value? We also should consider the benefits financial institutions bring to society and whether they can earn the citizenry's trust and respect. The capital we use comes from the public. This means that we must operate in good faith, work for the public good, and fully support industry development. The financial industry has invested in relief from the COVID-19 pandemic, helping the economy and society maintain their full potential, and giving the industry itself room to expand. The financial industry engaged itself in this endeavor out of concern for the state of society amid the pandemic and ensuing economic downturn. The sector knows that its own success is inextricably linked with the health of broader society. When the Taiwan Banker interviewed Mr. Huang in January, he brought up the book Go Long: Why Long-Term Thinking is Your Best Short-Term Strategy, by Dennis Carey and Brian Dumaine. The title reflects the new financial outlook he hopes to create. Finance should take sustainable management as its long-term goal, measured by benefit to customers, employees, and shareholders, and use innovative thinking to create value for industry and improvements in society. With a focus on sustainability and inclusiveness, profitability and social responsibility don’t contradict, but rather are complimentary. Similarly, when regulators and the industry have a shared goal to use finance to improve society, the relationship between the regulator and the regulated is not one of giving and taking orders, but rather one of mutual understanding and cooperation. While controlling risks, financial regulators should ease restrictions to encourage innovation and allow for reasonable profits. While earning profits, the industry should live up to its social expectations to gradually realize the ideals of the regulators. We have great confidence that with 30 years of experience in financial regulation, nobody better understands the sector than the new Chairman Huang.