Why FSS seeks IMF backing in financial regulatory reorganization controversy

Members of the Financial Supervisory Service labor union and other employees protest at the agency’s headquarters in Seoul, Thursday, criticizing the government’s financial policy and oversight reorganization plan. Yonhap

The Financial Supervisory Service (FSS) emergency committee, formed by union members and employees in protest of the government’s financial regulatory reorganization plan, is exploring ways to convey its concerns over the proposal to the International Monetary Fund (IMF), government insiders said Friday.

Although the anticipated meeting with the visiting IMF mission was canceled, the emergency committee is preparing to communicate its position through a written statement and other channels instead.

FSS emergency committee members argued that the country's financial watchdog was originally created after the 1997 Asian financial crisis in line with the IMF’s recommendation for an independent, nongovernmental supervisory body. They warned that the current reorganization proposal threatens the agency’s independence.

At the time, the IMF had identified Korea’s weak supervisory framework as a major factor behind the 1997 financial crisis and urged the creation of a consolidated watchdog with full authority and autonomy over its operations and budget.

The committee claimed that the government’s proposal, which would create a new financial consumer protection agency by spinning off relevant duties from the FSS and classify both bodies as public institutions, runs counter to that guidance.

It warned that being designated as public institutions and subject to annual government performance reviews would seriously compromise their independence and make them vulnerable to political influence.

The IMF mission team arrived in Korea on Thursday and will remain until Sept. 24, holding meetings with the Ministry of Economy and Finance, Financial Services Commission, Bank of Korea and FSS, as well as with research institutes and private companies, to review the country’s economic conditions, outlook and the new administration’s policy agenda.

The FSS emergency committee had intended to use the IMF’s scheduled visit to the agency on Friday to showcase employees’ daily protest rallies and explain their objections to being designated public institutions, in order to emphasize their concerns.

However, the IMF canceled the visit just a day in advance, opting instead for a virtual consultation. The change is believed to be linked to the ongoing controversy surrounding the government’s plan for financial policy and oversight overhaul, as the IMF reportedly wanted to avoid its annual review being overshadowed by domestic disputes.

“The decision to cancel the visit was made at the IMF’s request,” a finance ministry official said. “Since the IMF is already well-informed about the situation in Korea, we coordinated with the FSS after receiving their request and agreed to switch to a virtual meeting.”

In response, the FSS emergency committee is reportedly considering channels such as written submissions to engage with the IMF, aiming to highlight its concerns over threats to the institution’s supervisory independence.

Financial Supervisory Service Gov. Lee Chan-jin pushes past reporters on his way into the agency’s headquarters in Seoul, Tuesday, while union members and other employees protest against the government’s financial policy and oversight reorganization plan. Yonhap

Meanwhile, the committee met with FSS Gov. Lee Chan-jin on Friday to convey their opposition to the reorganization plan and press for effective measures to address employees’ concerns.

“Although presented as a reform of the financial supervisory system, it effectively represents state control of finance for political purposes,” Jung Bo-seop, a senior member of the FSS union, said. “Consumers will be sidelined, and both financial transparency and fairness will be undermined.”

As part of broader protests, the committee plans to stage a demonstration outside the National Assembly next week, aiming for maximum employee participation.

It is also exploring collaboration with the national financial union and has indicated that it would not rule out a full-scale strike if necessary.