Financial watchdog's independence wins support

Financial Services Commission Chairman Eun Sung-soo, left, and Financial Supervisory Service Governor Yoon Suk-heun walk into the meeting room at the Government Complex Seoul in this September file photo. / Yonhap

By Park Jae-hyuk

Financial Supervisory Service (FSS) Governor Yoon Suk-heun's long-awaited plan to separate the financial watchdog from the Financial Services Commission's (FSC) control will likely gain momentum because a National Assembly think tank has sided with him.

The National Assembly Research Service (NARS) said Friday that the FSS should be independent from the FSC to supervise financial companies more efficiently.

“There is a trade-off between policies for the financial industry and for financial supervision, so there is a need for checks and balances,” the NARS said in its report. “The IMF has continued to advise Korea to enhance the independence of its financial supervisory agency.”

Since 2008, the FSC has taken charge of making and revising regulatory policies as a ministry, while the FSS has supervised and inspected financial companies. The FSC also has the right to approve the budget for the FSS.

The NARS pointed out that this system caused the recent private equity fund fiascos that led to immense investor losses because it was uncertain which agency was to blame.

“To prevent the recurrence of financial incidents and restore trust in financial supervision, we should understand the problems in the current system to reform it,” the NARS said, adding that National Assembly control over the FSS budget was more reasonable.

During the Assembly audit last month, the FSS governor unveiled his plan for the independence of the FSS, which he will submit to lawmakers, so the think tank's latest suggestion is drawing keen attention from those wondering whether representatives will accept this.

Previously, the FSS governor claimed the FSC should be disbanded and the FSS made independent. NARS researchers cited his previous thesis on this, written when he was in academia, in the report.

The FSC has continued to oppose removing the FSS from its control.

In the same audit, which the FSS governor attended, FSC Chairman Eun Sung-soo cited an example of the Bank of Korea, saying its budget was also under control of the Ministry of Economy and Finance, despite the central bank's independence guaranteed by law.