The short answer to your question is to interview, audition and examine the portfolio of the teacher-to-be. The latter includes his experience in the music industry, his works, etc. For me (and several others in the music education industry) will also observe a demo lesson by him to gauge pedagogical suitability. Many a time, these supersede the paper qualifications he possesses (if any).

Disciplines like medicine and engineering would definitely need certified credentials because we can't risk doctors prescribing the wrong medication leading to deaths; and neither can we risk living in buildings that might collapse anytime. But what is music? What is its inherent risk?

But if we are talking about teaching FOR THE SAKE of letting students go through the graded EXAMS, then of course his credentials would ONLY matter then.

But for many parents like me, I dunno music. So I can't interview them the way you can. I need something easier to measure with. Paper qualifications will be one consideration, of cos. Just wondering can any person who knows how to play the piano, and take some exams b4, just suddenly one day decides to teach, and can teach straight away?

If you are thinking of finding a piano teacher for your child, then you'd need consider your objective. If you want him/her to take the graded exams (for whatever purpose later in life is yet another big topic by itself, which I shall skip for now) then your question is valid, which I will illustrate below. But if the objective is to let him/her appreciate music, learn it with joy and motivation and to be empowered to play music in a carefree way (without the exam stress) by ear and improvisation for whatever music he likes/listens to, then the paper qualifications of the teacher become highly irrelevant.

Let's assume it is the former. Teachers with a teaching licence at a govt school have gone through proper certification and training in pedagogy - explaining why a PhD in Maths may not teach as well as an A Level holder in Maths for a primary school maths syllabus, especially if the latter possess a teaching license (and not the former). In the music ed industry - the phenomenon is similar - my counterparts and I have seen several top notch musicians with superior qualifications but are unable to teach - yet those with lower qualifications can teach better (though their own musicianship isn't that strong).

Thus if you are considering between two piano teachers - one with a Diploma in Piano Performance and the other a Diploma in Piano Teaching, and OTHER THINGS BEING EQUAL, the latter is a better choice for your child.

Read this link to understand the difference between them.