[2020 National Audit] Yoon Seok-heon’s Candid Remarks: "FSS Subordinated to FSC... Proper Supervision Difficult"

Financial Supervisory Service Separation Theory Rapidly Emerging

[Image source=Yonhap News]

[Asia Economy Reporter Park Ji-hwan] Yoon Seok-heon, Governor of the Financial Supervisory Service (FSS), made a candid statement on the independence issue of the FSS on the 23rd. He argued that under the current financial supervision system, the FSS is subordinated to the Financial Services Commission (FSC), making independent supervisory execution difficult, which is also inconsistent with the trends in major foreign countries.

Song Jae-ho, a member of the Democratic Party of Korea, pointed out at the National Assembly’s Political Affairs Committee audit on the same day, "The current status of the FSS is constrained as a 'nominally independent organization' because its budget and organizational operations are decided under the jurisdiction of the FSC." He added, "This has resulted in a supervisory work style that is reactive, investigating and supervising only after financial accidents or problems occur, and a lack of expertise." He emphasized, "There seems to be a need for a reform direction to enhance autonomy and expertise in the FSS’s own budget formulation and organizational management."

Financial Services Commission Chairman Eun Sung-soo responded, "I believe that someone should have oversight such as approval over the FSS’s budget," and said, "I think the budget aspect is unrelated to the independence of the FSS."

In response, FSS Governor Yoon Seok-heon said, "There is a mismatch between responsibility and authority and conditions," and added, "Even referring to overseas cases, the prerequisite for securing independence is the budget aspect." Governor Yoon argued, "Looking at various materials on the independence of financial supervision abroad, the first thing mentioned is budget independence," and stated, "As pointed out, budget independence is a very important issue."

The current financial supervision system, where the FSC is responsible for establishing financial industry and supervisory policies and the FSS handles inspection, sanctions, and supervisory execution functions, has been maintained since 2008. Prior to that, the Financial Policy Bureau of the Ministry of Strategy and Finance was in charge of financial policy, and the Financial Supervisory Commission was responsible for financial supervision.

The discussion on reforming the supervisory system is not the first. Governor Yoon also voiced last year during the audit that separation from the FSC is necessary in budget formulation and personnel authority to secure the independence of the FSS, but it ended in vain. Without FSC approval, it is difficult to immediately expand personnel and budget even if needed, and due to the structure where supervisory work is executed according to FSC decisions, there are limitations in timely response even if accidents occur.

However, this time the situation is different. With the nationwide attention on the private equity fund incident, issues such as the FSS’s manpower shortage and inefficiency of the supervisory system have been highlighted, showing signs that related discussions will become more active.

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