FSS Emergency Committee Meets Political Affairs Chairman, Opposes Financial System Reform

September 15 Meeting... Letter Delivered Opposing Establishment of Financial Consumer Protection Agency and Public Institution Designation
"Head of Financial Supervisory Service Should Be Subject to Personnel Hearing... Strengthening Political Neutrality"

On September 15, the Emergency Response Committee of the Financial Supervisory Service announced that it had delivered a letter to Yoon Han-hong, Chairman of the National Assembly's Political Affairs Committee and a member of the People Power Party, expressing opposition to the establishment of the Financial Consumer Protection Agency and its designation as a public institution. The committee also recommended that the head of the Financial Supervisory Service be subject to a personnel hearing, in order to strengthen political neutrality in the operation of the Financial Supervisory Service.

Yoon Hanhong, Chairman of the National Assembly's Political Affairs Committee (right), and Yoon Taewan, Vice Chairman of the Financial Supervisory Service Emergency Response Committee, are taking a commemorative photo after a discussion opposing the reform of the financial supervisory system at the National Assembly in Yeouido, Yeongdeungpo-gu, Seoul on the 15th. Financial Supervisory Service Emergency Response Committee.

The Emergency Response Committee pointed out that even if the Financial Consumer Protection Agency is established as proposed in the government's financial supervisory system reform plan announced on September 7, it is uncertain whether consumer protection will actually be strengthened. The committee explained that it would become more difficult to systematically handle the planning, development, sales, and complaint response processes for financial products. Instead, it argued that the separation of work and restrictions on information sharing could increase the potential for supervisory agencies to shift responsibility to one another, ultimately resulting in continued harm to financial consumers.

The committee stated, "Instead of separating organizations, which would incur significant costs and whose effectiveness is questionable, the functions of the Financial Consumer Protection Bureau within the Financial Supervisory Service should be significantly strengthened, or the organization should be completely redesigned to focus on consumer protection."

The committee also argued against designating the Financial Supervisory Service as a public institution, describing it as "government-controlled finance." They reasoned that this would violate the 1997 International Monetary Fund (IMF) recommendation to establish a financial supervisory system independent from political influence. The committee warned that if the financial supervisory system comes under the control of political circles and the government, it could undermine the credibility of Korea's financial supervisory system and negatively impact the new administration's policy goals, such as achieving a KOSPI index of 5,000.

The committee emphasized that inefficiencies and weakened accountability resulting from the separation of supervisory policy and supervisory enforcement would persist. According to the committee, the government is pushing for a reform plan in which the Chairman of the Financial Supervisory Commission and the head of the Financial Supervisory Service are separated, and a significant portion of the staff of the Financial Supervisory Commission remains within the government. The committee predicted that this would maintain a dual structure between supervisory policy and enforcement, leading to ongoing friction between the two institutions.

The committee stated, "Maintaining a dual structure runs counter to the unified supervisory function direction reportedly reviewed by the new government's National Policy Planning Committee," and insisted, "The Financial Supervisory Service should be responsible for both supervisory policy and enforcement as a public, private organization."

The committee proposed that the head of the Financial Supervisory Service be subject to a personnel hearing to strengthen political neutrality.

The committee stated, "Actively considering making the head of the Financial Supervisory Service subject to a personnel hearing would strengthen political neutrality in the agency's operations," and added, "The capabilities of the Financial Supervisory Service should be devoted solely to consumer protection and financial market stability, not to political power, through the agency's own reform efforts."