Bank of Korea criticizes Financial Services Commission's plan to 'steal authority'

Bank of Korea Lee Ju-yeol speaks during a National Assembly audit on Yeouido in Seoul on Oct. 16. Yonhap

By Lee Min-hyung

The Bank of Korea (BOK) is stepping up criticism of a plan by the Financial Services Commission (FSC) to “usurp the authority” of the central bank in the area of payment settlements.

The BOK is the central authority handling the comprehensive supervision and operation of the nation's payment settlement systems. But the FSC is seeking to revise a relevant law on electronic financial transactions and widen its authority in supervising digital payment settlements here, according to the central bank.

It is very rare for the BOK to raise its voice against other authorities, but it decided to do so amid intensifying concerns over losing its authority.

The BOK argues that management and supervision of payment settlements should be independently handled by the central bank's monetary policy board according to the Bank of Korea Act, so the FSC's plan will end up creating redundant regulations and both authorities will come into conflict with each other even after the revision is passed.

Both sides have conducted negotiations over the law revision since March upon the request of the FSC, according to the BOK. Despite opposition from the central bank, the FSC is known to have submitted a request on the law revision to Rep. Youn Kwan-suk of the ruling Democratic Party of Korea.

The revision is centered on extending comprehensive authority to the FSC in giving licenses, demanding documents and supervising payment settlement work with the rise of the fintech industry.

A ranking official from the central bank claimed that the move was aimed at “stealing the authority” of the BOK.

“The real intention of the FSC is to become a control tower in the area by taking authority away from the BOK,” the official said.

The FSC, however, is still continuing to push for its earlier plan and fine-tune details over the revision with lawmakers and the legal circle.

In July, the FSC shared its plan to submit the request to the National Assembly by the end of the third quarter.

The central bank took issue with the FSC's “unilateral” decision to carry out the plan without sharing details over the revision with it.

“The FSC is urged to share details over the revision with the BOK and immediately withdraw the plan, as this infringes on the central bank's work area,” the BOK official said. “It is highly undesirable for the two financial authorities to escalate conflict at a time when all the policy authorities should focus on enhancing their capability for the nation to overcome the COVID-19-induced economic crisis.”

According to the BOK, central banks in the United States, the United Kingdom and Switzerland manage and supervise their payment settlement systems.

“The BOK has insisted that its authority should be protected just like central banks in developed countries, but the FSC appears to be ignoring our request and pushing ahead with its initial plan,” the official said.

“The central bank should play a role as a firefighter in the area of payment settlements, and this has been done independently by the BOK for decades.”