Rep. Kim Ju-young: "Payment Operation Authority Should Belong to Bank of Korea"…Counterattack Against Financial Services Commission

Assemblyman Kim Ju-young Proposes Partial Amendment to Bank of Korea Act
Specifies Payment and Settlement Operations as Exclusive Authority of Bank of Korea

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eunbyeol] Amid ongoing conflicts between the Bank of Korea and the Financial Services Commission over amendments to the Electronic Financial Transactions Act, a bill to amend the Bank of Korea Act has been proposed to strengthen the Bank of Korea's role and responsibilities related to payment and settlement. The academic community has also raised the need to institutionalize payment and settlement clearing through amendments to the Bank of Korea Act, drawing attention to whether full-scale discussions will take place at the National Assembly level.

On the 4th, Kim Jooyoung, a member of the National Assembly's Planning and Finance Committee (Democratic Party), took the lead in proposing a partial amendment to the Bank of Korea Act. This is the second time a member of the Planning and Finance Committee has proposed an amendment related to payment and settlement, following Representative Yang Kyungsook in November last year.

The amendment proposed by Representative Kim (Article 81) stipulates that "the Bank of Korea shall perform tasks such as operation, management, supervision, domestic and international cooperation, and promotion of development of the payment and settlement system to ensure its safety and efficiency," thereby explicitly stating that payment and settlement tasks are the Bank of Korea's inherent authority.

In exchange for strengthening responsibility, a public reporting obligation was newly established (Article 81, Paragraph 2), requiring the Bank of Korea to report annually to the National Assembly on the results of its performance in operating and supervising the payment and settlement system.

The amendment (Article 81-3) also provides a legal basis for the Bank of Korea to designate and manage private fund settlement system operators and participating institutions such as the Korea Financial Telecommunications and Clearings Institute. Along with this, the Bank of Korea was granted policy tools such as the authority to establish risk management standards, conduct inspections, and demand corrective actions. To prevent changes in the payment and settlement environment from becoming risk factors across the entire payment and settlement system, the Bank of Korea was also given policy tools such as on-site investigation rights and sanction request rights (Article 81-4). This is a measure to respond to the recent expansion of digital payment methods and diversification of payment service participants.

Representative Kim said, "I proposed the amendment to redefine the Bank of Korea's responsibilities for the payment and settlement system in line with changes in the payment and settlement environment." He added, "The emergence of private digital currencies threatens monetary sovereignty, and while the rapid growth of fintech companies has increased risks in the payment and settlement system, the policy tools currently granted to the Bank of Korea remain at the level of the 2004 amendment to the Bank of Korea Act, limiting its ability to respond."

The current Bank of Korea Act allows institutions other than the Bank of Korea to request data or improvements to operational standards for the payment and settlement system. However, Representative Kim argues that due to the recent convergence of IT and finance, the payment and settlement structure has become complex and could spread system risk in emergencies, so the Bank of Korea's responsibilities and authority must be further strengthened. For example, in the UK, a fintech company was expelled from the large-value payment system due to poor financial soundness. Representative Kim explained that the Bank of Korea is the only institution that can monitor the overall operation of the payment and settlement system in real time, respond quickly, and act as the lender of last resort by injecting funds in emergencies, thereby preventing the spread of system risk.

The Bank of Korea also expressed its welcome for Representative Kim's proposed amendment. A senior Bank of Korea official said, "The stable operation and continuous development of the payment and settlement system is an essential duty of the central bank," adding, "It is neither principled nor globally precedent-setting for the operation of the payment and settlement system to be controlled by financial supervisory authorities." The official further stated, "Considering that digital payment methods are expanding and the growth of fintech and big tech has increased payment convenience but also the possibility of payment system instability, amending the Bank of Korea Act is an urgent matter that can no longer be postponed," emphasizing, "We hope that full-scale discussions will be held promptly at the Planning and Finance Committee level, and the Bank of Korea will actively participate in discussions if requested by the National Assembly."

Meanwhile, in November last year, Yoon Gwansuk, a member of the National Assembly's Political Affairs Committee, proposed an amendment to the Electronic Financial Transactions Act designating the Korea Financial Telecommunications and Clearings Institute as an electronic payment transaction clearing institution and granting the Financial Services Commission comprehensive sanction authority over it. The amendment to the Electronic Financial Transactions Act mandates the clearing of payment transactions by fintech and big tech companies such as KakaoPay and Naver Pay, with the Financial Services Commission overseeing and supervising this. The Bank of Korea has opposed the amendment, arguing that it infringes on the Bank of Korea's inherent authority.

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