Heading a panel to review the second financial reforms, Chiu issued the instruction in response to Premier Liu Chao-shiuan, who, when interviewed by local newspapers, said Chairman Gordon S. Chen of the FSC should avoid taking charge of the probes into possible irregularities committed in the process of the second financial reform.

The center of the second financial reforms was in the privatization of state-run banks and the merger of financial holding firms, with the goal of halving the number of domestic financial holding companies before the end of 2006.

The recent exposure of the suspected money laundering scandal involving former president Chen Shui-bian was alleged to have something to do with some illegal benefit transfers between former president and domestic financial holding firms.

Premier Liu recently asked the FSC and the Ministry of Finance to investigate the allegations to see if there were any irregularities involved.

In response, Chen Shu of the FSC and the finance ministry reported to the Cabinet that they didn't see any "administrative defects" during the second round of financial reforms.

Chen, who was in charge of releasing government-owned stakes in state-run banking institutions in the second round of financial reform in his capacity as vice finance minister then, soon came under fire from lawmakers of the ruling Kuomintang, especially Chiu Yu. The lawmakers asked Chen Shu to avoid assuming the task of investigating the possible irregularities that might be committed during the second financial reforms.

Lawmaker Chiu recognized Premier Liu's decision yesterday to have Chen Shu stay clear of taking the job of investigating the second financial reforms. "Chen Shu cannot simultaneously serve as a player and a judge," Chiu said.

But the Cabinet has yet to discuss whether or not Chen Shu remains suitable for heading the FSC to take charge of the third round of financial reforms, including developing Taiwan into a Asia-Pacific financial center, Asia-Pacific asset management center and the Asia-Pacific funding center.

It would be a difficult job for Chen to accomplish the aforementioned missions due to his "original sin" of having a role in the second round of financial reforms, observers said.

Observers speculated that Lee Chi-chu might gradually replace Chen Shu as the real commander of the FSC.