"More High-Ranking Positions, Less Reform": Experts Criticize Financial Authority Overhaul Amid Ongoing Turmoil

On the 17th, the People Power Party hosted a discussion titled "Ministry of Economy and Finance and Financial Services Commission Reorganization Plan Debate: Reform or Deterioration?" at the National Assembly in Yeouido, Seoul. Photo by Yonhap News Agency

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There is growing criticism that the ruling party's push to reorganize the financial supervisory system will increase the number of senior positions, while the original goals of strengthening the independence of financial policy and enhancing consumer protection may actually regress. Despite opposition from the minority party, the ruling party has decided to process the government organization bill on the 25th, and employees of the Financial Supervisory Service are expected to continue their large-scale protests, suggesting ongoing confusion at the scene.

On the 17th, Koo Minkyo, a professor at the Graduate School of Public Administration at Seoul National University, stated at the "Ministry of Economy and Finance and Financial Services Commission Reorganization Plan Debate" hosted by the People Power Party at the National Assembly, "The government restructuring plan, which involves dismantling and separating the Ministry of Economy and Finance, the Financial Services Commission, and the Financial Supervisory Service, will simultaneously weaken the independence of financial policy and the stability of fiscal policy."

The ruling Democratic Party and the government are currently working on a government reorganization plan that would split the Ministry of Economy and Finance into the Ministry of Planning and Budget and the Ministry of Strategy and Finance, dissolve the Financial Services Commission to establish a Financial Supervisory Commission, and separate the Financial Consumer Protection Agency from the Financial Supervisory Service.

Professor Koo diagnosed, "This organizational restructuring is the result of significant political considerations and the redistribution of authority among bureaucratic organizations, rather than a focus on policy consistency or fiscal soundness," adding, "It is highly likely to increase uncertainty in the Korean economy rather than yield positive outcomes."

According to the partial amendment to the "Act on the Establishment of the Financial Services Commission," sponsored by Democratic Party floor leader Kim Byungki on the 15th, the newly established Financial Supervisory Commission will consist of 10 commissioners, one more than the current nine commissioners of the Financial Services Commission. While the organization will be halved in size compared to the current Financial Services Commission, the number of senior positions will actually increase. Under the Financial Supervisory Commission, a new Financial Consumer Protection Committee will be established, which will also create additional senior positions.

The Financial Supervisory Service will also see an increase in executives as the Financial Consumer Protection Agency is separated. Currently, the Financial Supervisory Service has 14 executives, including one governor, four deputy governors, and nine assistant deputy governors, but with the separation, the total number of executives will rise to 17. There are concerns that these new executive positions may be filled by individuals close to the ruling party.

Members of the Financial Supervisory Service labor union and employees condemned the government's organizational restructuring plan on the 10th at the Financial Supervisory Service lobby in Yeouido, Yeongdeungpo-gu, Seoul, which designates the Financial Supervisory Service as a public institution and separates the Financial Consumer Protection Agency from the Financial Supervisory Service. Photo by Yonhap News

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There are also claims that the ruling party's reorganization plan, which was originally intended to reduce the power of the Ministry of Economy and Finance, will actually increase the number of senior officials and expand its authority. Kim Sangbong, a professor of economics at Hansung University, pointed out, "If the current government reorganization plan is implemented, the ultimate winner will be the Ministry of Economy and Finance, because the domestic financial policy functions of the Financial Services Commission will be integrated into the Ministry of Strategy and Finance, which is being separated from the Ministry of Economy and Finance, thereby increasing the number of first-grade positions."

He also predicted that policy efficiency would decrease if the financial policy organization is transferred to the Ministry of Strategy and Finance. Professor Kim stated, "If the financial policy organization of the Financial Services Commission is moved to the Ministry of Strategy and Finance, policy efficiency will decline," adding, "It will become difficult to properly address numerous current issues handled by the Financial Services Commission, such as innovative finance, inclusive finance, housing finance, productive finance, capital markets, and customs."

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, noting that even with the new agency, it will be difficult to properly regulate the entry of big tech companies into finance, as well as foreign stablecoin and payment service providers (such as Apple Pay and Alipay) into the domestic market. Professor Kim said, "If the Financial Consumer Protection Bureau is separated from the Financial Supervisory Service, it will become difficult to properly supervise IT companies' financial businesses and foreign stablecoin companies," adding, "It will also become difficult to adequately protect consumers."

Lawmakers from the minority People Power Party also criticized the ruling party's government reorganization plan. Yoon Hanhong, chairman of the National Assembly's Political Affairs Committee and a member of the People Power Party, said, "This reorganization plan is being pushed through unilaterally in an atmosphere where neither employees of financial institutions nor officials at the Financial Services Commission can speak out," adding, "None of the People Power Party members on the Political Affairs Committee were consulted in advance." Kim Doeup, the party's Policy Committee chairman, pointed out, "Even during the Kim Dae-jung and Roh Moo-hyun administrations, the Ministry of Planning and Budget and the Ministry of Strategy and Finance were separated, but it was confirmed that it is impossible to comprehensively manage economic policy by separating budget and fiscal functions," adding, "The current government is repeating the failures of previous administrations."

The Financial Supervisory Service union and employees are also strongly opposing the plan. Employees have been staging protests in the main lobby of the headquarters during morning commute hours since last week, opposing the separation of the Financial Consumer Protection Agency and the designation of the Financial Supervisory Service as a public institution. On the 18th, more than 700 employees are scheduled to hold a large-scale protest near Korea Development Bank across from the National Assembly during lunchtime.

Financial Supervisory Service Governor Lee Chanjin indicated his intention to accept the organizational separation at an executive meeting on the 16th, stating, "The Financial Supervisory Service, as a public institution, has a duty to faithfully implement government decisions." In response, the emergency committee of the Financial Supervisory Service criticized, "If the Financial Supervisory Service and the Financial Consumer Protection Agency are separated, it will only increase harm to financial consumers due to blame-shifting and avoidance of responsibility among supervisory bodies," adding, "For Governor Lee to insist on following government decisions while ignoring this situation is to put the public last."

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