"Dissolve the Financial Services Commission and Make Supervisory Functions Independent"… National Assembly Targets Financial Authorities (Comprehensive)

Transfer of Financial Services Commission Functions, Strengthening Independence of Sanctions Committee
Continuous Legislative Efforts for Fundamental Reorganization of Policy and Supervision
"Both Financial Services Commission and Financial Supervisory Service May Face Reform"

[Asia Economy Reporter Kim Hyo-jin] Attempts to structurally reform the formulation of financial policies and financial supervisory functions are continuously emerging in the National Assembly. There is even a legislative push to dismantle the Financial Services Commission.

Amid frequent recent financial accidents and the responses to them, criticism toward financial and supervisory authorities is high, and internal discord has also surfaced. If discussions become full-fledged, the entire financial sector's interest is expected to intensify further.

According to financial and political circles on the 9th, Seong Il-jong, a member of the Future United Party, is preparing to propose a bill to enact the Financial Supervisory Service Act and amend the Government Organization Act, fundamentally reorganizing the policy functions of the Financial Services Commission and the supervisory functions of the Financial Supervisory Service.

The core of the bill is to transfer the domestic financial policy functions performed by the Financial Services Commission to the Ministry of Economy and Finance, and to transfer the financial supervisory functions to the Financial Supervisory Service. Additionally, the bill stipulates establishing the Financial Supervisory Committee within the Financial Supervisory Service as the highest decision-making body to deliberate and resolve matters related to financial supervision and financial consumer protection.

Currently, the Financial Supervisory Service performs supervisory duties entrusted by the Financial Services Commission. According to the bill, the Financial Services Commission would be abolished.

Seong pointed out, "Currently, the Financial Services Commission performs multiple functions simultaneously, including financial policy, supervision, inspection, and sanctions of financial companies, which leads to criticism that supervisory functions are neglected."

He also explained the background of the legislative push, saying, "The Ministry of Economy and Finance handles international financial policy, while the Financial Services Commission handles domestic financial policy, causing a gap in policies and resulting in reduced efficiency and consistency in financial policy."

To propose the bill, the consent of more than 10 lawmakers is required. Since the issue is highly impactful, initially, few lawmakers were willing to join the proposal, but recently, the number of lawmakers expressing agreement has increased, according to Seong's office.

Seong originally planned to propose the bill last month. A staff member from his office said, "We expect to propose the bill soon," adding, "Once proposed, we plan to actively conduct various discussions and debates."

In the same party, Song Eon-seok proposed an amendment to the Financial Services Commission Installation Act last month. The amendment aims to enhance the independence and objectivity of the Financial Supervisory Service's sanction committee, the Sanctions Review Committee.

To this end, the amendment stipulates the legal basis for the Financial Supervisory Service's Sanctions Review Committee and requires that civilian members be appointed based on recommendations from external organizations such as the Korea Federation of Banks and the Korea Insurance Association.

The Sanctions Review Committee consists of four Financial Supervisory Service officials and up to 20 civilian members. Currently, all civilian members are appointed by the head of the Financial Supervisory Service.

Song criticized, "Civilian members appointed by the head of the Financial Supervisory Service find it difficult to oppose the Service's opinions, so the sanction decisions are merely procedural formalities and are effectively decided according to the Service's will."

Earlier this year, the Financial Supervisory Service imposed heavy sanctions on CEOs of financial companies over the incomplete sales of overseas interest rate-linked derivative-linked funds (DLF). These CEOs filed administrative lawsuits against the sanctions, and during the litigation, courts pointed out the possibility of the Financial Supervisory Service's overreach, escalating the controversy.

A financial sector official said, "The two bills differ in direction and problem recognition, but both raise structural issues regarding the duplicated and dualized financial policy and supervisory functions, so overall, they can be seen as 'Financial Authority Reform Bills.'"

The official added, "If the current situation continues where the Financial Services Commission and the Financial Supervisory Service engage in a tug-of-war over successive private equity fund accidents, appearing as a blame game, voices saying 'this can no longer be tolerated' will grow louder. If they fail to find an effective coexistence method on their own, they will equally face reform efforts."

This content was produced with the assistance of AI translation services.