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FSC Issues the “Principles for Effective Financial Examination” to Build an Objective & Professional, Risk-based, and Open Communication Organizational Culture for the FEB.

In response to the speed and scale of opening and developing in financial markets in recent years, the FSC is endeavoring to enhance the effectiveness of financial examination to fulfill current supervisory demands. The first priority then is to build an objective & professional, risk-based, and open communication organizational culture for the FEB. Therefore, the FSC draws up the "Principles for Effective Financial Examination", which will act as the highest standards for all examination rules and schemes and as the guiding light for examiners to conduct financial examinations. Through the Principles, the FSC will strive to harmonize the off-site supervisory operations with the on-site examination works to create a unified supervision. It could also ensure that examination outcomes would support the FSC to achieve the statutory obligations through the supervisory policies and risks focused examination approach.
The FSC further declared that the drafting and release of the Principles will clearly outline the goals and culture for financial examination, which include:
1.    Risk-focused and significance-oriented examination approach: The FEB will continually deepen the application of risk-focused financial examination approach to target at higher risk financial institutions and businesses, the FSC’s major policies and supervisory concerns. Examination focuses and findings would be chosen according to the significance-oriented principle and be focused on main risks and significant problems of financial institutions. The FEB would set up clearer standards to facilitate the implementation and to enhance the effectiveness.
2.    Open communication and coordination: The FEB is endeavoring to ensure the fairness and objectivity of the examination outcomes through enhancing the contact and communication within the bureau, across bureaus, and with financial institutions. The FEB has set up various schemes, e.g. discussion meetings and multi-layer review procedure within the FEB, and the verifying procedure with supervisory bureaus, to ensure the consistent view on applicable regulations and examination findings. In addition, the FEB will continue to communicate and discuss examinations findings with financial institutions via the exit meetings and the colloquium held for chief internal auditors, and then the board of directors and senior officers of financial institutions would be able to understand the considerations and concerns regarding the issued examination findings.
3.    Actively employ innovative auditing tools to improve examination efficiency: The FEB would not only continue to improve examiners’ expertise through course and on-job training, but also actively employ new auditing technology, i.e. big data analysis for identifying high-risk and abnormal transactions and business activities, to consolidate the implementation of risk-focused examination.
The Principles include 8 articles, which include the FEB’s important concepts and the key requirements outlined in the BCBS’s "Core Principles for Effective Banking Supervision" for regulators’ examination functions and mechanisms. In the Principles 6 principles are set forth to:
1.    Principle 1: The FEB should conduct financial examinations to assist the fulfillment of the FSC’s statutory duties in maintaining the sound business operation of financial institutions and the stability of financial markets.
2.    Principle 2: The FEB should strive to ensure the independence of the examination functions and operations, establish effective internal procedures to maintain the objectiveness of examination outcomes, and maintain the transparency of the examination procedures.
3.    Principle 3: The FEB should improve the efficiency of examination resources usage through the implementation of Differential Examination Scheme and the Risk-based Examination Approach to plan and execute financial examinations. Attention will be focused on financial institutions’ high risk businesses and operation problems.
4.    Principle 4: The FEB should set up the classification scheme for examination findings to assist the board of directors (BOD) and senior officers of financial institutions as well as the supervisory bureaus in identifying and understanding the significance of findings, and then to enable the BOD and senior officers to urge the management to engage in correcting serious deficiencies and reducing operating risks.
5.    Principle 5: The FEB should maintain close communication with supervisory bureaus during the planning and executing of financial examinations to improve the cooperation between supervision and examination works.
6.    Principle 6: The FEB should improve the examination expertise in an ongoing way to effectively cope with emerging financial businesses and risks.
Through the issuance and disclosure of the Principles, the FSC looks forward to promoting the acquaintance and recognition of the benefits contributed through financial examinations from financial industries and the public.

Contact Unit: Financial Examination Systems Division, FEB
Contact Number: 02-8968-0522
If you have any questions, please send an email to: https://fscmail.fsc.gov.tw
 
Visitor: 1059   Update: 2021-08-03
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