[Empty Promises of Regulatory Innovation] Said They Would Reform Regulations... Yet 'Financial Regulatory Silos' Have Become Even More Stringent

838 Legal Regulations, 49 More Than 2 Years Ago
Among 132 Improvement Targets, Zero Abolished Regulations
Delayed Legislation Leads to 40 Administrative Guidance Cases

[Asia Economy Reporter Song Seung-seop] “We will boldly remove the old barriers that block innovative attempts.” (May 2019, then Kim Yong-beom, Vice Chairman of the Financial Services Commission)

Although the government declared that it would boldly remove outdated regulatory barriers for financial innovation, it has been confirmed that the total amount of regulations has actually increased over the past two years. There is criticism that while existing regulations were slightly adjusted, new regulations were significantly increased, reducing the capacity for innovation.

According to data submitted by the Financial Services Commission to Rep. Yoon Doo-hyun of the People Power Party on the 9th, the number of “explicit financial regulations” maintained until last May was 838, which is more than two years ago (789). A total of 132 items were identified for improvement through the Financial Services Commission’s “Integrated Financial Regulation Innovation Promotion Meeting” in May 2019. Among them, not a single regulation was abolished, and most were only reorganized or relaxed.

Regulations on financial companies are broadly divided into explicit financial regulations stipulated by law and implicit financial regulations (administrative guidance, self-regulation, etc.). Administrative guidance refers to administrative acts where financial authorities provide guidance, recommendations, or advice to financial companies, while self-regulation means regulations operated by financial associations through member consensus. Financial companies practically comply with implicit financial regulations as if they were legal regulations.

Two years ago, the Financial Services Commission planned to abolish or improve regulations if the necessity of maintaining them could not be proven. Even if maintained, they intended to change to a “comprehensive negative” system that classifies and defines regulations flexibly.

Kim Yong-beom, then Vice Chairman who presided over the meeting, expressed his determination, saying, “We will boldly remove old barriers and positive regulatory systems that block startups and innovative attempts.”

Delayed Legislation Increases Administrative Guidance... "Progressive Regulatory Innovation Needed"

However, among the 18 regulations requested for innovation by the business community, only one (private funds and professional investor provisions) was fully accepted. Two regulations were accepted with alternatives proposed, one partially accepted, and one under mid- to long-term review. The rest were all judged difficult to accept.

Administrative guidance also increased from 39 to 40 during the same period. Although administrative guidance is a recommendation, most financial companies regard it as unclear “shadow regulation,” and authorities planned to abolish many of them. Accordingly, eight were abolished and 22 were to be abolished after legislation. However, as legislation was delayed and new regulations increased, the total amount of regulation grew even larger.

The financial authorities consider this a natural phenomenon. A Financial Services Commission official explained, “It is difficult to completely eliminate provisions, and even if not abolished, many regulations have been improved,” adding, “It is natural for the number of regulations to increase over time.”

However, looking closely at the improvements, many were measures for “legislation” or “clarification” rather than regulatory relaxation. In the case of self-regulation, out of 282 cases, excluding 171 marked as not applicable, among the remaining 111, 14 were abolished and 97 improved. Some of the improvements counted included “specifying standards” or “legislating calculation methods,” which are far from regulatory relaxation.

Rep. Yoon said, “Two years ago, the Financial Services Commission announced strong regulatory innovation and emphasized enhancing the sense of impact, but it is questionable whether regulatory reduction has been properly achieved,” urging, “At the time of the ‘financial big bang’ when boundaries between sectors are breaking down, more progressive regulatory innovation is needed.”

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