'Director Negligence' by Financial Supervisory Service, Will It Be Designated as a Public Institution?

Decision on designation by the Public Institution Management Committee around the end of January next year
Hong Nam-ki: "Will consider compliance with four conditions and the recent Lime incident"

(Photo) [Image source=Yonhap News]

[Sejong=Asia Economy Reporter Joo Sang-don] The government has begun the designation process for public institutions for the next year. Discussions are also underway regarding whether the Financial Supervisory Service (FSS), which has faced criticism for poor supervision following the Lime Asset Management and Optimus Asset Management private fund scandals, will be designated as a public institution. The final decision is expected around the end of January next year.

On the 2nd, a Ministry of Economy and Finance official said in a phone interview with Asia Economy, "We have started reviewing the designation of public institutions for next year," adding, "Although this is not a specific review targeting the FSS, which has recently been controversial, we are broadly considering whether to designate it."

The Ministry of Economy and Finance collects opinions from related ministries regarding candidate public institutions and verifies designation requirements with the Korea Institute of Public Finance. Based on this, the Public Institution Management Committee holds a meeting every January to finalize the designation decision.

The key issue is whether the FSS, which has narrowly avoided designation as a public institution until now, will be redesignated. The FSS was established on January 2, 1999, by integrating four supervisory bodies?the former Bank Supervisory Agency, Securities Supervisory Agency, Insurance Supervisory Agency, and Credit Management Fund?under the Act on the Establishment of Financial Supervisory Organizations. Since then, under the amended Act on the Establishment of the Financial Services Commission in February 2008, it has been conducting inspection and supervision of financial institutions. Currently, the FSS is a non-capital special corporation and a private organization, with its budget and personnel controlled by the Financial Services Commission. Previously, the FSS was designated as an "other public institution" in 2007 but was removed from this status in 2009 to guarantee independence and autonomy in supervisory duties. If designated as a public institution next year, it will again be subject to management and supervision of its budget and personnel by the Ministry of Economy and Finance.

The possibility of the FSS being designated as a public institution has grown stronger than ever. At last month's National Assembly Budget and Accounts Committee audit, Rep. Choo Kyung-ho of the People Power Party pointed out the FSS's poor supervision and staff discipline issues revealed in the Lime and Optimus scandals, arguing that "it should be designated as a public institution." In response, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, said, "The designation of the FSS as a public institution has been conditionally deferred," adding, "We will check whether the four conditions have been met and additionally consider the recent Lime incident." By not explicitly opposing Rep. Choo's claim, he left room for the FSS's designation as a public institution. Ultimately, the preconditions set when the FSS was not designated as a public institution in 2018?▲eradication of hiring corruption ▲implementation of management disclosure at the level of public institutions ▲strict management evaluation ▲resolution of inefficient organizational operations?are expected to determine whether it will be designated.

FSS Governor Yoon Seok-heon's "declaration of independence" also increases the likelihood of the FSS being designated as a public institution. At the National Assembly's Political Affairs Committee comprehensive audit, Governor Yoon said, "In terms of budget, organization, and personnel, we inevitably remain subordinate to the Financial Services Commission," adding, "We will prepare an independence plan and submit it to the National Assembly." Until now, the Financial Services Commission has opposed the FSS's designation as a public institution, arguing that "since the FSS is already under the control of the Financial Services Commission and the Political Affairs Committee, designation would be redundant regulation with no practical benefit." However, with Governor Yoon's declaration of independence from the Financial Services Commission, it has become difficult to expect support from the Commission to avoid designation as a public institution.

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