"Government Restructuring: Ultimate Winner Is the Ministry of Finance and Economy...Opposition to Dismantling and Separating Financial Authorities"

Criticism has emerged that the Lee Jaemyung administration's financial authorities restructuring plan, which centers on dismantling the Financial Services Commission and separating the Financial Supervisory Service, would make it difficult to effectively regulate new industries such as stablecoins.

On the 17th, attendees are taking a commemorative photo at the discussion forum titled "Ministry of Strategy and Finance and Financial Services Commission Organization Restructuring Proposal: Reorganization or Deterioration?" jointly hosted by the People Power Party Policy Committee, the Political Affairs Committee, and the Planning and Finance Committee at the National Assembly in Yeouido, Yeongdeungpo-gu, Seoul. Photo by Moon Chaeseok

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Kim Sangbong, a professor of economics at Hansung University, made this statement at the "Ministry of Strategy and Finance and Financial Services Commission Organization Restructuring Proposal Forum" hosted by the People Power Party at the National Assembly in Yeouido, Yeongdeungpo-gu, Seoul, on September 17.

The government is working on splitting the Ministry of Strategy and Finance into the Ministry of Planning and Budget and the Ministry of Finance and Economy, dismantling the Financial Services Commission, and reorganizing it into the Financial Supervisory Commission. There are also plans to separate the Financial Consumer Protection Bureau from the Financial Supervisory Service and establish a new Financial Consumer Protection Agency.

Professor Kim pointed out that the direction of the Lee Jaemyung administration's restructuring does not fit the realities of Korea. He diagnosed that although it resembles the U.S. government’s restructuring, it does not suit the Korean economy.

He especially predicted that, contrary to the Democratic Party’s intention to disperse the authority of the Ministry of Strategy and Finance, the ministry would retain strong powers even after the budget organization is separated, as it would take over the financial policy organization.

He stated, "If the current government restructuring plan is implemented, the ultimate winner will be the Ministry of Finance and Economy," criticizing, "This is because the number of first-grade (vice-ministerial or director-general level) positions in the Ministry of Finance and Economy will increase."

He argued that restructuring the financial policy and supervisory organizations is undesirable. First, he believes that if the financial policy organization is transferred to the Ministry of Finance and Economy, policy efficiency will decrease.

Professor Kim said, "If the Financial Services Commission's financial policy organization is transferred to the Ministry of Finance and Economy, policy efficiency will be reduced," adding, "It will be difficult to properly address numerous current issues such as innovative finance, inclusive finance, housing finance, productive finance, capital markets, and customs, which are currently handled by the Financial Services Commission."

He further criticized the plan to separate the Financial Consumer Protection Bureau from the Financial Supervisory Service and establish a new Financial Consumer Protection Agency. He argued that even with the new agency, it would be difficult to properly regulate the entry of big tech companies into finance, the entry of overseas stablecoin and payment service providers (such as Apple Pay and Alipay) into the domestic market, and other related issues.

Professor Kim stated, "If the Financial Consumer Protection Bureau is separated from the Financial Supervisory Service, it will become difficult to properly supervise the financial businesses of IT companies and overseas stablecoin firms," adding, "It will also be difficult to adequately protect consumers."

He also opposed designating the Financial Supervisory Service as a public institution. He argued, "If the Financial Supervisory Service becomes a public institution, it will be difficult to properly carry out supervisory work due to job audits and conduct audits."

He predicted that the burden on financial companies would also increase. Currently, they only have to deal with the Financial Services Commission and the Financial Supervisory Service, but after the government restructuring, they would have to interact with four organizations: the Ministry of Finance and Economy, the Financial Supervisory Commission, the Financial Supervisory Service, and the Financial Consumer Protection Agency.

Professor Kim advised, "It is not yet the time to divide financial-related organizations," adding, "It would be better to observe market trends first and then decide whether or not to proceed with the division."

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