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Will FSS be run by state again?
Financial Supervisory Service Governor Yoon Suk-heun center, arrives at Seoul Government Complex in Gwanghwamun, Oct 28. Yonhap
By Lee Kyung-min
By Lee Kyung-min
The scandal-ridden Financial Supervisory Service is highly likely to become a state-run organization, a disgrace largely expected due to incompetence associated with a slew of oversights, failures and employee misconduct allegations.
The Ministry of Economy and Finance said Tuesday that a necessary process is underway to determine whether the supervisory organization should be among the state-run entities subject to ministry oversight over personnel management and budget. Spending for employee benefits among other discretionary expenditures must then be disclosed for audit.
The discussion seeking to revert the organization to its previous status is gaining momentum, a much-needed measure given its overall mismanagement as illustrated by fiascos involving derivative-linked funds (DLFs) that led to many people losing part of or the entirety of their investments.
Other damning allegations include that former and current FSS workers were offered bribes in return for handing over information about an ongoing investigation into a man who the prosecution believes was the key financier of the highly complicated financial products. The alleged bribes included high-priced liquor and escort services.
The FSS was close to becoming a state-run entity in 2018, a year after it came under fire over allegations involving hiring fraud and lax management. But the ministry let the organization remain private on four conditions: eradicate hiring fraud, raise the standard of public disclosure involving the organization's financials, submit to mandatory outside evaluation and remove or significantly reduce organizational inefficiencies.
The FSS is unlikely to avoid being designated as a state-run entity this time, given the Board of Audit and Inspection (BAI) investigation in July triggered by a series of redemption failures whereby customers were not able to have their investments returned before the products' maturity.
The issue was brought to the fore further by Rep. Choo Kyung-ho of the main opposition People Power Party, during the Assembly audit of the FSS in October.
Choo, a former vice finance minister, called for the designation citing the organization's incompetence highlighted further by employee misconduct.
Deputy Prime Minister and Finance Minister Hong Nam-ki said the ministry would take the recommendation under consideration together with the organization's performance over the past two years and efforts to meet tighter scrutiny.
At a separate audit, FSS Governor Yoon Suk-heun said the lax oversight of many troubled hedge funds in question was attributable to a shortage of personnel and resources, all under supervision of the Financial Services Commission (FSC).
The FSC said it spoke against the FSS becoming a state-run entity last year, saying the supervisory organization is already under control of the FSC.
The ministry will make its decision in January 2021, following a recommendation from related ministries and government organizations together with a review of a report written by the Korea Institute of Public Finance.
The final decision will follow a deliberation made by a ministry-supervised special committee that determines the appointment and dismissal of heads of public or state-run institutions.
The committee is chaired by the finance minister and comprised of up to 11 members including vice minister-level public officials and President-appointed experts in the fields of law, economics and academia.