The Financial Services Commission is being dismantled for the first time in 17 years. In order to improve efficiency in financial supervisory work and strengthen financial consumer protection, the financial policies and supervisory functions previously held by the Financial Services Commission and the Financial Supervisory Service will be divided into the Ministry of Economy and Finance, the Financial Supervisory Commission, and the Financial Supervisory Service. A new Financial Consumer Protection Agency, which strengthens consumer protection functions, will also be established separately from the Financial Supervisory Service.
On the 7th, the government, along with the Democratic Party of Korea and the presidential office, held a high-level government-party meeting and confirmed the government reorganization plan containing these details. The core of the reorganization plan is to separate the budget functions of the Ministry of Economy and Finance and establish a new planning and budget office under the Prime Minister, while the Ministry of Economy and Finance will be reorganized into the 'Ministry of Economy and Finance' overseeing economic policy. The policy and supervisory functions of the existing Financial Services Commission will be separated, with policy responsibilities taken over by the Ministry of Economy and Finance and supervisory functions assigned to the newly established Financial Supervisory Commission.
◇The supervisory function will be transferred to the Financial Supervisory Commission and Financial Consumer Protection Agency
The domestic financial policy functions of the Financial Services Commission will also be transferred to the Ministry of Economy and Finance. The financial supervisory functions of the Financial Services Commission will be reorganized into the 'Financial Supervisory Commission,' which will also establish the Securities and Futures Commission and the Financial Consumer Protection Commission. The Financial Consumer Protection Agency, which was previously part of the Financial Supervisory Service, will be elevated to an independent body, and both agencies will be designated as public institutions.
Established in 2008, the Financial Services Commission is set to be dismantled for the first time in 17 years. If this organizational reorganization plan is confirmed, the government organization responsible for the financial sector will be reorganized into four agencies: 'Ministry of Economy and Finance - Financial Supervisory Commission - Financial Supervisory Service - Financial Consumer Protection Agency (FCPA).' The Financial Consumer Protection Agency, which was under the Financial Supervisory Service, will have its consumer protection functions significantly enhanced and will be upgraded to an independent agency (FCPA).
Additionally, both the Financial Supervisory Service and the Financial Consumer Protection Agency will be designated as public institutions. The Financial Supervisory Service is currently a 'capital-less special corporation,' and it will be transitioned into a public institution. In this case, it must undergo a public institution evaluation by the government, which may increase transparency.
However, the new Ministry of Economy and Finance will not be free from budget and personnel constraints, raising concerns that the 'supervisory policy' functions may be subjected to government control, which could lead to issues of independence. The Financial Consumer Protection Agency, which will primarily handle 'consumer complaint tasks' with a high workload, is expected to have its authority strengthened to be granted inspection and sanctioning rights to effectively protect consumers.
However, despite the new government's efforts to reorganize the financial supervisory organizations, the 'Financial Stability Council' (composed of the Bank of Korea governor and others), which emerged as another point of contention, was not included in this reorganization plan. The proposal to grant supervisory functions to the Bank of Korea was also not mentioned.
◇Despite the confirmation of the reorganization plan, it remains difficult to distinguish between functions... controversy is likely to continue
The reorganization of the economic departments began with discussions centered around the Democratic Party of Korea's policy committee following the last presidential election. After President Lee Jae-myung was elected, the possibility of 'splitting the Financial Services Commission and the Financial Supervisory Service' increased, but the Financial Services Commission gave timely indications of plans to strengthen debt relief measures for vulnerable groups and self-employed individuals, as well as household debt management, which raised expectations for its retention.
President Lee Jae-myung's public praise of Vice Chairman Kwon Dae-young of the Financial Services Commission also contributed to this atmosphere. In addition, the nomination of Lee Eo-keun as the chairman of the Financial Services Commission and Lee Chan-jin as the head of the Financial Supervisory Service in August strengthened the outlook for the retention of the organization, but it ultimately resulted in a financial organization reorganization plan led by the National Policy Committee and the Democratic Party.
Although the organizational reorganization plan has been confirmed, disputes are expected to continue for some time. Inside and outside the financial authorities, there are many opinions that it is difficult to clearly distinguish between financial policy and supervision. This is because timely financial policies are unlikely to be implemented as they are now. The requirement for approval from the Ministry of Economy and Finance will likely considerably slow policy execution speed and could exacerbate conflicts between policy and supervisory institutions.
Separating the Financial Consumer Protection Agency from the Financial Supervisory Service could actually weaken consumer protection functions. The inspection rights of the Financial Consumer Protection Agency could lead to tensions between supervisory authorities, and from the standpoint of financial companies, being subject to inspections from both the Financial Supervisory Service and the Financial Consumer Protection Agency creates a 'double regulation' system that poses a significant burden. Even after confirming the reorganization plan, substantial amendments to multiple laws, including the Government Organization Act, the Financial Services Commission Establishment Act, and the Banking Act will be required, so it is expected to take time to complete the actual organizational reorganization.