Financial authority overhaul plan put on backburner

Lee Han-joo, head of the State Affairs Planning Committee, announces the Lee Jae Myung government's five-year state governance blueprint during a public briefing at Cheong Wa Dae in Seoul, Wednesday. Yonhap

Discussions on the reorganization of financial authorities under the Lee Jae Myung administration are expected to be extended after the plan was omitted from the presidential committee’s announcement of the new government’s five-year blueprint, officials said Thursday.

It had been widely anticipated that the plan would be unveiled during a public briefing by the State Affairs Planning Committee held Wednesday. However, the proposal was not announced at the event.

A committee official noted that the focus will remain on the other 123 key state projects for now.

According to government insiders, the committee has already submitted the restructuring plan to the presidential office, recommending that the Financial Services Commission’s (FSC) financial policy functions be separated from its supervisory responsibilities.

Under the plan, the FSC’s role in financial policy would be absorbed by the Ministry of Economy and Finance, while oversight duties would be transferred to the Financial Supervisory Service (FSS), effectively dismantling the FSC, the country’s top financial regulator.

The proposal also calls for the creation of a new financial consumer protection agency by spinning off the relevant division from the FSS.

However, discussions have stalled as the presidential office takes a cautious approach.

Disagreements over the reorganization plan have also emerged within both the committee and the ruling Democratic Party of Korea, with officials expressing concern that the debate could dominate the agenda and overshadow other pressing issues, such as the U.S. administration’s tariff policy and the upcoming Korea-U.S. summit.

In addition, some ruling party members cautioned that dismantling the FSC while the commission is still engaged in urgent financial tasks, such as shifting to productive finance, managing household debt and implementing debt relief measures, could bring more drawbacks than benefits.

They also noted that separating financial policy from supervisory functions and detaching consumer protection could increase the number of regulators, blur the control structure and create market instability.

Even if the reorganization plan is approved, it could take more than a year to implement, as numerous laws, including the Government Organization Act and the FSC Establishment Act, would need to be amended, and budgets and staffing arrangements coordinated.

Lee Eog-weon, the nominee for FSC chairman, declined to comment on the issue.

“As I am a nominee, it is not appropriate for me to make any remarks,” he said while speaking to reporters at the Korea Deposit Insurance Corp. headquarters in Seoul, where he was preparing for his confirmation hearing.