Misjudgments of the MB Government... Calls for Restructuring Every Time the Administration Changes

[Asia Economy Reporter Song Hwajeong] In the 1990s, following the global trend of financial integration, the government established the Financial Supervisory Service and created the Financial Supervisory Commission as a government ministry. Previously, banks were overseen by the Bank Supervisory Office under the Bank of Korea, the securities industry by the Securities Supervisory Office, the insurance industry by the Insurance Supervisory Office, and mutual credit cooperatives (now savings banks) by the Credit Management Fund.

Until the Lee Myung-bak (MB) administration in 2008, the financial industry policy function was handled by the Financial Policy Bureau of the Ministry of Finance and Economy, the financial supervisory policy function by the Financial Supervisory Commission, and the financial supervisory execution function by the Financial Supervisory Service.

The Lee Myung-bak (MB) administration, under the slogan of a "small government," implemented a large-scale reorganization and consolidation of government agencies. In this process, under the pretext of "developing finance as a single industry," the financial industry policy function and the financial supervisory policy function were merged to create the Financial Services Commission.

Since then, there have been discussions about reforming the financial supervisory system every time the administration changed. Because the industrial policy and supervisory policy were handled by one department, there was much criticism that the principle of checks and balances did not function. Also, previously, the chairman of the Financial Supervisory Commission concurrently served as the head of the Financial Supervisory Service, but after the MB administration, the Financial Services Commission chairman and the Financial Supervisory Service head were separated, leading to conflicts between the Financial Services Commission and the Financial Supervisory Service. There were also criticisms that the Financial Services Commission tried to dominate the Financial Supervisory Service.

In July 2013, a press conference titled "Call for Proper Reform of the Financial Supervisory System," centered on scholars in the financial field, was held, with 143 people signing in support. At that time, "financial consumer protection" emerged as a key issue, and there were claims that the financial supervisory function and the financial consumer protection function should be separated. This only resulted in the establishment of a Financial Consumer Protection Office within the Financial Supervisory Service, but currently, Lee Yong-woo, a member of the Democratic Party of Korea, still advocates for separation.

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