Financial Supervisory System
Government functions regarding domestic and international financial policies, tasks currently carried out by the Financial Services Commission (FSC) and the Ministry of Strategy & Finance (MOSF), respectively, will be combined under one umbrella.
According to the FSC’s taskforce team for the reform of the financial supervisory system, it plans to submit a final report no later than late June, in which it will suggest unification of domestic and international financial policy functions and no new organization for financial stability. So far, taskforce team members have reached an agreement regarding unification of the two functions, yet no consensus has been made in regards to which organization will take the job.
Taskforce team leader Kim In-chul said, “All team members agree that domestic and international policies should be addressed by one organization. However, more discussions will be held regarding organization.”
The idea of a financial stability council was that heads of the MOSF, FSC, The Bank of Korea, and Financial Supervisory Services (FSS) will convene to come up with counter measures against emerging financial problems. However, this idea will not be realized due to differences in view among taskforce team members.
Kim explained, “There are different views regarding the establishment of a financial stability council. I think it is not a big deal anyway because we already have the principle about protection of financial consumers. In fact, the government can establish such an organization anytime it wants. Therefore, we have chosen not to discuss this issue any more.”
Another source from the taskforce team said, “The final report will not include the issue about the establishment of a financial stability council. That’s the decision from our most recent meeting.”
The taskforce team has also agreed not to introduce the so-called “Twin Peak Model” by which the financial supervisory function will be divided into two categories; supervision of the financial institutions’ soundness and protection of consumer rights.
Instead, the team will likely suggest that the Financial Consumer Protection Bureau (FCPB) under the FSS have more power and independence, as well as additional responsibilities to control and monitor microfinance service providers.
More specifically, the taskforce team thinks that the head of the FCPB should be promoted from deputy governor to senior deputy governor, be one of the FSC commissioners, and be given independent right regarding personnel management and budget.
Kim said, “We think it will be better to strengthen the FCPB rather than separate it from the FSS. We also need stricter supervision over savings banks and many kinds of microfinance institutions.” The taskforce team is still negative about having separate offices for financial policies and supervision. Opposition parties have argued that the FSC’s controlling power over financial policies and supervision be separated and there should be a more independent and powerful organization for financial supervision. However, the taskforce team is in fact against this.