[Reporter's Notebook] Financial Supervisory Service Restructuring: 'Consumer Protection' Slogan May Increase Risks

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Last year, there were 116,338 financial complaints. Of these, 45.9% (53,450 cases) were disputes related to insurance. Nearly half of all complaints stemmed from insurance issues. Financial crimes such as voice phishing and insurance fraud are becoming increasingly sophisticated, and the number of complaints, particularly in the insurance sector, continues to rise each year. Despite this, the government has announced a plan to separate the Financial Consumer Protection Bureau, currently under the Financial Supervisory Service, and establish it as an independent agency. The rationale is simple: to strengthen the protection of financial consumers and safeguard people's livelihoods. However, those in the financial sector and field practitioners are offering a completely opposite diagnosis. They argue that rather than preventing financial accidents or eradicating financial fraud, this move will actually weaken the ability to respond. Splitting the organization could deepen information silos and barriers, ultimately leading to neglect in consumer protection. As a result, voices from the field are saying that what is needed now is not 'separation' but 'reinforcement.'

Even now, the Financial Supervisory Service is severely understaffed. In the Insurance Fraud Response Team, there is only one person dedicated to handling insurance fraud complaint calls. While crimes are evolving internationally and organizationally, the number of personnel responding has not increased. In this situation, separating the organization would inevitably further weaken the ability to respond to fraud.

The first and second divisions of dispute mediation within the Financial Consumer Protection Bureau, which are at the forefront of consumer protection, have the heaviest workload. Practitioners in these divisions frequently communicate with supervisory departments that design systems and with inspection and sanction departments that conduct audits and impose penalties, especially during the mediation process between consumers and insurance companies. Currently, a single phone call is enough to coordinate, but if the organization is split, they would have to wait for official documents and approvals. If response times slow down, consumers will bear the brunt of the damage.

There are also concerns about organizational self-interest. If a new Financial Consumer Protection Agency is established, inevitable performance competition will arise between its dispute mediation divisions and the inspection and supervisory departments of the Financial Supervisory Service. This could strengthen internal barriers rather than promote collaboration, making it likely that actual victim relief will be pushed aside.

The risks of separation are evident when looking at major financial accidents in recent years. In the Lime and Optimus incidents, the failure to catch early warning signs led to snowballing damage. In the Hong Kong equity-linked securities (ELS) case, if supervisory and consumer protection functions had operated separately, the confusion would have been even greater. The larger the financial accident, the more crucial an 'integrated response system' becomes.

What is needed to strengthen consumer protection is an increase in personnel and the reinforcement of collaborative systems. The idea of separating the Financial Consumer Protection Bureau at this point is an out-of-touch, desk-bound policy. If the justification of 'consumer protection' ends up causing greater harm, it is a failure of the system and a reversal of policy. With financial complaints and financial fraud surging, if the government pushes ahead with this organizational restructuring, consumers will ultimately bear the consequences. The government must take the voices from the field seriously. The Financial Supervisory Service's organizational reform should focus not on separation, but on strengthening collaboration and establishing a pan-governmental control tower.

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