In order to redress a number of weaknesses that were uncovered during the Asian financial crisis, the government has introduced a series of financial reforms. These measures are designed to improve bank balance sheets and profitability. The government has also actively encouraged consolidation in the banking industry. A new supervisory authority will be set up at the beginning of next year which will assume overall responsibility for supervising financial institutions, including banks, insurance companies, and securities houses. By further strengthening the soundness of the banking system, we are preparing ourselves for the challenges posed by the new global economy.
Financial stability forms the bedrock of sustained economic development.
It enables the private sector to make sound judgements with respect to production plans and trade decisions under a consistent macro environment. The central bank in Taiwan adopts a flexible exchange rate regime, allowing market forces to determine the nominal exchange rate, while also ensuring that the real exchange rate reflects economic fundamentals. Other features of our exchange rate policy indicate our resolve to remove distortions from the market, improve bank risk management, and offer market participants accurate and timely information. With respect to monetary policy, we closely monitor developments both at home and abroad and fine tune our policies accordingly. By maintaining the money stock within the target range, we are not only able to meet the funding requirements of both private and public enterprises, but are also able to create a low-inflation environment.