[Inside Chodong] On-Site Confusion Grows... Financial Authorities Must Accelerate Organizational Restructuring

Changhwan Lee, Deputy Head of Economic and Financial Department

On the morning of July 21, the previously quiet press room at the Financial Supervisory Service (FSS) was visited unexpectedly by several FSS employees. They distributed an appeal to reporters, expressing their opposition to the separation of the Financial Consumer Protection Bureau (FCPB) from the FSS. The appeal, which was reportedly agreed to by 1,539 FSS staff members, raised doubts about whether separating the FCPB would actually help protect financial consumers, arguing instead that it would only cause unnecessary social costs and confusion.

The appeal argued that if the FSS and FCPB were separated, essential tasks for protecting financial consumers?such as supervision, inspections, investigations, and victim relief?might not function efficiently. This unusual move came just ten days after the FSS labor union issued a statement opposing the separation of the FCPB, marking a rare instance of the entire FSS staff voicing their concerns again. This reflects the heightened anxiety among FSS employees regarding the possibility of organizational separation.

Concerns about the separation of the FSS are also being raised by financial companies under its supervision. Banks and securities firms, for example, worry that if the FCPB is separated and a new Financial Consumer Protection Agency (tentative name) is established, it would be like having two supervisors instead of one. A banking industry official stated, "If the FCPB is separated from the FSS and is also given additional supervisory authority, it is true that financial companies are concerned about being subjected to excessive sanctions."

The confusion surrounding the FSS is also closely tied to the new administration's unclear plans for reorganizing financial authorities and the prolonged vacancy in key leadership positions. The National Planning Committee has drawn up plans to split the Ministry of Strategy and Finance into the Ministry of Planning and Budget and the Ministry of Finance and Economy, but has yet to decide how to reorganize the Financial Services Commission (FSC) and the FSS. It remains unclear whether domestic financial policy functions will be transferred from the FSC to the Ministry of Finance and Economy, with the rest merged with the FSS to create a Financial Supervisory Commission, or whether the FSC will be retained. Some even speculate that the FSC could expand its role by taking over international finance duties from the Ministry of Strategy and Finance.

With no clear direction for reorganizing the FSC and FSS, the position of FSS governor has been vacant for two months since the resignation of former governor Lee Bokhyun in early June. In the absence of a central figure and with only rumors circulating about the next FSS governor, employees may feel as if their shield has disappeared. Meanwhile, Kim Byunghwan, chairman of the FSC, who had offered his resignation following the change in administration, still has not clarified his position, limiting his activities.

The lack of a control tower in the financial authorities has delayed or indefinitely postponed the handling of various financial issues. The announcement of preliminary approval for the fourth internet-only bank has been postponed without a timeline. Other major financial issues, such as the reform of performance-based pay systems in the financial sector and the development of improvement plans for real estate project financing (PF) loans in mutual financial institutions, are also failing to gain momentum. As the reorganization of financial authorities is delayed, the appointment of heads of affiliated organizations that must collaborate with the authorities is also being pushed back. The chairman of Korea Development Bank has been vacant for two months, and Yoon Heesung, president of the Export-Import Bank of Korea, will see his term end this month without a successor named. As a result, two of the three major policy banks are left without a leader.

The only way to resolve the confusion on the ground is to complete the organizational restructuring quickly and appoint new leaders. Some point out that a turf war over control of the restructuring process has already begun. The longer the delay, the greater the confusion on the ground, and the public ultimately bears the cost. A swift decision is urgently needed.

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