Supervisory Control Law Gaining Attention Amid Flood of Financial Regulation Laws

"Increased Independence of Sanction Committee" Amendment Under Full Discussion
Concerns Over Excessive Industry Influence

[Asia Economy Reporter Kim Hyo-jin] A revised bill that institutionalizes and strengthens the participation of external organizations in the composition of the Financial Supervisory Service (FSS) Sanctions Committee for sanctioning financial companies has come onto the National Assembly's main discussion table, drawing attention.

While numerous bills have been proposed in the 21st National Assembly to significantly strengthen financial supervision functions and pressure financial companies, legislative attempts to check supervisory authority and represent the voices of financial companies are virtually unique to this case, attracting particular interest from the financial sector.

According to financial and political circles on the 31st, the "Partial Amendment to the Act on the Establishment of the Financial Services Commission," which was primarily proposed by Song Eon-seok, a member of the Future United Party, in June, recently entered detailed discussions in a subcommittee after going through the full meeting of the Political Affairs Committee.

The core of the amendment is to compose the FSS Sanctions Committee (up to 24 members) civilian members through equal recommendations from the Financial Services Commission Chairman, the FSS Governor, and related organizations such as the Korea Federation of Banks and the Korea Insurance Association, while abolishing three ex officio members: FSS executives, legal advisors, and the Financial Services Commission’s directors in charge of agenda items. The amendment also includes upgrading the legal basis for establishing the Sanctions Committee from the current Financial Services Commission notice, "Regulations on Inspection and Sanctions of Financial Institutions," to the Act on the Establishment of the Financial Services Commission.

Representative Song explained the background of the amendment, saying, "Currently, nearly 20 civilian members are appointed by the FSS Governor, which has been criticized for undermining the independence of the sanctions committee," and added, "The aim is to enhance the independence of the composition and operation of the sanctions committee."

The National Assembly Legislative Research Office stated in its review report that "from the perspective of securing expertise, objectivity, and fairness, it is reasonable to include members recommended by external financial-related organizations or groups to ensure that diverse views are balanced and expressed," supporting the purpose of the amendment.

In future discussions, concerns are expected to arise as a key issue that the amendment might lead to overly reflecting the voices of financial companies, beyond enhancing the independence of the sanctions committee. This is because the external organizations stipulated in the amendment include groups to which the sanctioned financial companies belong, potentially sparking controversy over bias.

The Legislative Research Office also pointed out, "There is a risk that industry opinions may be excessively reflected beyond the parties’ (financial companies’) explanations." A Political Affairs Committee official said, "Whether mechanisms or compromises that can dispel such concerns can be derived during detailed discussions will be crucial for the passage of the amendment."

Ruling Party-led 'Financial Shackles Laws' Filed One After Another
Government’s 'Consumer Protection' Stance Suggests Flexibility

Currently, various types of financial company regulatory bills, so-called 'Financial Shackles Laws,' mainly proposed by the ruling Democratic Party of Korea, are accumulating in the National Assembly.

These include amendments to the Financial Company Governance Act that mandate internal control responsibilities for financial company CEOs and impose fines triple the amount of consumer damages; amendments to the Financial Consumer Protection Act requiring compensation to consumers up to three times the damage amount upon detection of illegal acts; and the so-called "Samsung Life Act (Insurance Business Act amendment)" that requires insurance companies to calculate the value of held stocks based on market price rather than acquisition cost.

There is also a "one-sided binding force proposal (Financial Consumer Protection Act amendment)" that requires financial companies to unconditionally accept the FSS dispute resolution proposal for cases below a certain scale if the consumer (complainant) accepts it, thereby depriving the right to litigation.

A financial sector official said, "At first glance, many cases seem somewhat excessive, but considering the seat composition of the 21st National Assembly and the government and ruling party’s strong stance on financial consumer protection, it does not look trivial." A commercial bank official lamented, "We are closely monitoring the discussion status of these bills and hope that the financial sector’s position will be sufficiently reflected in the discussion process, regardless of whether the bills are passed."

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