Industry fears inefficiency from proposed division of financial policy and oversight
An office of the Financial Services Commission at Government Complex Seoul / Yonhap
The government’s reorganization plan for financial policy and oversight is raising concerns, as the finalized proposal, if approved by the National Assembly, would split the responsibilities currently held by the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) across four different organizations, industry officials said Monday.
With four bodies to be involved in financial affairs — the finance ministry, the revived Financial Supervisory Commission, the FSS and a new financial consumer protection agency — industry officials warned that the increase in organizations could lead to unnecessary work, greater inefficiency, slower responses to urgent issues and higher costs.
On Sunday, the government and the ruling Democratic Party of Korea (DPK) convened a high-level meeting where they finalized and unveiled a government reorganization plan that includes changes to the financial policy and oversight system.
According to the plan, the budgetary authority of the finance ministry will be separated and assigned to a new agency supervised by the prime minister, while the ministry itself will take over the domestic financial policy functions of the current FSC.
The FSC, in turn, will be dismantled and reestablished as the Financial Supervisory Commission, which was dissolved in 2008, and concentrate solely on inspection and supervisory roles.
The proposal also calls for the creation of a new financial consumer protection agency by spinning off the relevant division from the FSS. Both the FSS and this new agency will be designated as public institutions.
The plan is based on the idea that effective checks and balances can only be achieved by separating policymaking from oversight and monitoring functions. It is anticipated to receive final approval during the Assembly’s plenary session on Sept. 25, as the DPK holds a majority.
Interior Minister Yun Ho-jung, right, speaks during a press briefing on a government reorganization plan at Government Complex Seoul, Sunday. At the front left is Rep. Han Jeoung-ae, the ruling Democratic Party of Korea's top policymaker. Yonhap
However, skepticism remains over whether financial policy and supervision can truly be separated.
In the past, when the Financial Supervisory Commission was in place, disputes frequently arose over how responsibilities should be divided among the commission, the FSS and the finance ministry’s financial policy bureau.
Critics say that with the latest reorganization increasing the number of relevant agencies to four, the risk of jurisdictional overlap and conflicts of interest is expected to grow even further.
Financial firms worry that if each body sets its own supervisory standards, they could be left uncertain about which rules to follow.
Even now, when corrective measures are issued, the FSS makes the initial assessment, but the final decision rests with the FSC. Financial firms must go through separate review procedures with both bodies, often resulting in inefficiencies such as submitting the same documents multiple times or attending repeated hearings.
An industry insider recalled, “In the early 2000s, when major incidents occurred, the finance ministry, Financial Supervisory Commission and FSS frequently bounced responsibility back and forth.”
He warned, “Now, with the creation of the financial consumer protection agency, the response process could become even more sluggish.”
An official at a major credit card company also noted that the creation of the financial consumer protection agency could cause confusion when reviewing tasks such as card contract terms.
“It’s uncertain whether the task will fall under the agency, the Financial Supervisory Commission or potentially both. This ambiguity puts financial firms in a difficult position,” he said.