Concerns are emerging in the financial sector that Lee Chan-jin, governor of the Financial Supervisory Service, has focused only on strengthening authority rather than organizational reform after surviving the threat of the Financial Supervisory Service being split and designated as a public institution. If Lee's plan goes ahead, the Financial Supervisory Service (FSS) would be able to play the roles of police, prosecutors, and the bench. The financial industry also points out that granting excessive administrative power to the FSS, a private organization, runs counter to current law.
According to the financial sector on the 5th, Lee recently stressed at the National Policy Committee's parliamentary audit the need to introduce one-sided binding force, the right to initiate investigations, and the right to conduct compulsory investigations. With Lee mentioning the need to introduce these systems, the discussion appears set to gain momentum. Some lawmakers of the Democratic Party of Korea are also said to plan to support the introduction. The problem is that if all these systems are introduced, the Financial Supervisory Service (FSS) would wield excessive administrative power.
One-sided binding force is a system in which financial companies must unconditionally accept the financial authorities' dispute mediation results. Currently, a dispute mediation plan decided by the FSS Dispute Mediation Committee (Bunjowi) is a "recommendation" that only takes effect if both the financial company and the consumer agree. If either side refuses, the recommendation loses its effect.
The Financial Supervisory Service (FSS) maintains that one-sided binding force should be introduced to enhance the effectiveness of dispute mediation plans and strengthen protection for financial consumers. If one-sided binding force is introduced, the FSS, a public-private body, would take on all judicial roles, including those of prosecutors and judges. Financial companies, unable to refuse, would also be deprived of the right to a trial. This is why there are many voices in the financial sector expressing concern about introducing the system.
There are also concerns that granting the capital markets special judicial police (special police) of the Financial Supervisory Service (FSS) the right to initiate investigations and the right to conduct compulsory investigations could be excessive authority. The FSS special police handle investigations into unfair trading such as stock price manipulation, but they are an organization under the direction of prosecutors. They do not have the authority to independently detect criminal suspicions or leads and initiate investigations.
The right to conduct compulsory investigations is also one of the FSS's long-standing demands. Unlike the Financial Services Commission (FSC) and the prosecution, the FSS does not have compulsory investigation powers such as on-site investigations or search and seizure. It can only conduct voluntary investigations such as tracking funds, analyzing data, and questioning.
Lee's position is that as unfair trading cases become increasingly sophisticated, strengthening the special police's authority is necessary for swift investigations. Lee is also said to have expressed his intent to introduce the right to initiate investigations at a recent executives' meeting and instructed preparations for follow-up work.
The Financial Services Commission (FSC) has opposed granting the FSS, whose staff are private citizens, the right to initiate investigations and the right to conduct compulsory investigations, saying it is difficult to do so. The FSC believes that granting the FSS the right to initiate investigations does not align with the intent of the institutional design. If the FSS's investigative powers become bloated, it could trigger sweeping investigations and cause turmoil in the capital market.
In the case of the right to conduct compulsory investigations, some argue that granting private citizens the authority to restrain the public's bodies is not appropriate under administrative law. The FSC's position is that joint investigations with the FSC's Capital Markets Investigation Team, which has compulsory investigation powers, would suffice. A financial authorities official said, "The FSC and the Financial Supervisory Service (FSS) can fully utilize compulsory investigation powers through joint investigations. There are already several cases."
The Lee Jae-myung administration had pushed to designate the FSS as a public institution and to separate the consumer protection organization, reforming the financial oversight framework on the grounds that a private organization's authority was excessive. Although the reform plan fell through, Lee repeatedly expressed his intent to use the occasion to pursue organizational reform to strengthen financial consumer protection. In the financial sector, there is criticism that the FSS, which should be shedding authority through reform, is focusing on strengthening its powers.