FSS vows to strengthen measures for consumer protection

Financial Supervisory Service (FSS) Governor Jeong Eun-bo speaks during an online press conference at FSS headquarters in Seoul on Tuesday. Courtesy of FSS

By Anna J. Park

Financial Supervisory Service (FSS) Governor Jeong Eun-bo reiterated his long-held position that the financial authorities will continue to focus on balancing preemptive consumer protection measures with post controls such as sanctions on financial institutions, in order to maximize consumer protection.

During an online year-end press conference held on Tuesday, Governor Jeong said he firmly believes that the ex-post sanctions by financial authorities alone cannot guarantee protection of consumer rights.

“I believe the FSS performs two key functions; first, it needs to guide financial companies to strengthen preemptive and preventive measures against market risks, and secondly, it should impose ex-post sanctions on financial companies in the case of accidents,” he said.

“Only when the two functions align together in a balance, then the FSS' supervisory role could be strengthened. Consumer protection could never be guaranteed and protected only by ex-post measures like sanctions. That's why I've been putting emphasis on preemptive and preventive measures on the part of financial companies,” Jeong explained.

After Jeong took the top position at the FSS in August, he's been meeting financial business leaders in every sector of the finance industry, ranging from brokerages and insurance to banks, to listen to their voices. Some expressed concerns that Jeong is leaning towards the side of financial companies, while putting less focus on necessary functions.

Regarding whether he has been favoring financial businesses at the expense of lowered consumer protection, he stated his conviction that a balance is needed between preventive and ex-post measures in maximizing consumer protection.

Regarding a rising trend of interest rates, the FSS chief said he'd take reasonable actions, if necessary, when the gap between deposit and loan interest rates is widened beyond a reasonable range.

“It is in the realm of market autonomy that each financial institution decides the interest rates for its deposit and loan products. However, if the gap between deposit and loan products gets widened excessively, the FSS will take necessary measures, as it means that financial institutions are taking disproportionate profits,” Jeong explained.

Financial Supervisory Service (FSS) Governor Jeong Eun-bo, center, speaks during an online press conference at the headquarters of FSS in Seoul on Tuesday. Courtesy of FSS

While the FSS Governor forecasts that the household debt next year is likely to increase at around five percent rate with the government's tightened regulation, he vowed to closely monitor so that risks from increasing household would not be transmitted towards financial institutions' soundness.

“Currently, it seems each bank's BIS capital adequacy ratio as well as distressed debt ratio are kept in a sound level. However, as interest rates are fast rising, the FSS will strengthen its preemptive supervision on financial companies to check that they maintain soundness,” Jeong said.

As to the matter of financial groups' dividends, he said it is up to each company's self-ruling issue, as long as they maintain their financial soundness.

“In principle, I think that the issue of dividend payment by financial companies should follow their own decisions. However, it should pre-require that the financial companies should maintain their environment of financial soundness as well as an appropriate level of capital buffers,” he said.