anselmo l s teng : corporate governance in the financial sector welcome speech by mr anselmo l s teng, chairman of the monetary authority of macao, at the fsi - seanza regional seminar on corporate governance for banks, macao, 22 april 2008. * * * distinguished guests, dear delegates, ladies and gentlemen, good morning, i would like to extend my warmest welcome to all of you, on behalf of the monetary authority of macao, for attending the fsi - seanza regional seminar in the next three days. it is our honour that fsi and seanza hold this prestigious seminar in macao, a fascinating city of a unique mix of eastern and western heritage and recreation, featured by various historical and nostalgic constructions as well as gigantic entertainment complexes. i am very pleased to have the privilege to make an opening remark in this occasion and to share with you some of my views on corporate governance in the financial sector. undoubtedly, this is a prominent topic drawing extensive discussion amongst regulators and entrepreneurs in developed and developing countries at all times. to put the discussion in a nutshell, i would like to start with a study of the idea enshrined in the term “ corporate governance ” which is a legacy of our ancient wisdom. the word “ corporate ” comes from latin, meaning the formation of a body, and the word “ governance ” originates from greek, implying to steer a vessel across the sea. these concepts of ancient wisdom is still relevant nowadays, since the protection of shareholders ’ or stakeholders ’ interests as well as the board ’ s role to lead an institution to sail through uncertainties and challenges is the essence of modern corporate governance. in the context of the financial sector, effective corporate governance practices are indispensable to maintaining trust and security and critical to the proper functioning of economic and social system as a whole. poor corporate governance may lead to loss of public confidence in the ability of a financial institution to manage its assets and liabilities in a prudent manner, trigger more serious impacts on the financial sector through contagion effects and may even end in systemic crises. different from other sectors, financial institutions, particularly credit institutions, have “ duties of care ” not only to their shareholders but also their stakeholders, namely, depositors and customers. as the sole regulator of the financial sector of the macao special administrative region, the monetary authority of macao has exerted a lot of efforts to strengthen corporate governance in order to

take this occasion to share with you the following observations : 1. appropriate laws and regulations are needed to foster a regulatory environment that is conducive to financial innovation. it is worthwhile to attempt new ideas as long as they would not contravene the requirements of existing laws and regulations. however, we must have a full understanding of the related risks. and, we must have an appropriate risk control system or measures to mitigate or eliminate the risks. apart from complying with necessary regulatory procedure, the new ideas must facilitate market development without impairing the rights of consumers. to this end, the qdii scheme for stock investment can serve as a classic example. the introduction and moderation of the qdii scheme as well as the gradual opening of the mainland capital market represent an important step towards financial system reformation. these measures are also financial innovation conducive to financial market development. based on this situation, we can expect more innovation in financial policies. in the near future, a wave of keenly anticipated innovations in financial institutions, products, service and cooperation will arise from innovated financial policies. 2. there should be ongoing observation of changes in market development, analysis of special needs of customers, segmentation of customers and markets, as well as the establishment of a system to trace the demand of market and customers. the regulators should proceed in tandem with the pace of market development and monitor changes and characteristics of consumer demands. as far as financial products are concerned, asset management and structural financing that are selling like hot cakes are good examples. 3. financial innovation should be adapted to time, place and people. this issue has been explored before with macao as an example. 4. maintain good communication between regulators and market participants. it is normal for regulators to receive tons of complaints and enquiries from consumers. as these letters are mostly pinpointing financial products and services, regulators would gain a better understanding or come up with a general idea on the types of services demanded by consumers during the course of handling these complaints and enquiries. 5. investors and consumers need education. it is desirable to initiate a two - pronged measure. based on the objectives of protecting the rights of the consumers and investors as well as facilitating the penetration of the financial market, the regulator can actively embark on financial consumption related education through various channels such as the media and topical exhibitions etc. on the other hand, the market participants are encouraged to launch more promotions that are infused with educational