South Korea and Japan are set to resume their regular financial supervision meetings, or shuttle meetings, that had been suspended since 2017. Financial Services Commission (FSC) Chairman Kim Joo-hyun plans to visit Japan in early October to discuss expanding financial exchanges. This development comes after Financial Supervisory Service (FSS) Governor Lee Bok-hyun recently visited China for the first time in six years, where discussions on financial supervision cooperation took place. With the resumption of shuttle meetings with Japan, expectations are rising for the revitalization of “South Korea-China-Japan financial diplomacy.”
According to financial authorities on Sept. 7, Chairman Kim is scheduled to visit Japan next month to discuss the resumption of shuttle meetings. During this meeting, it is expected that specific agendas between South Korea and Japan will also be addressed.
Chairman Kim’s visit to Japan follows three months after the successful outcome of Governor Lee’s meeting with Japanese financial authorities in July, during which he requested financial cooperation. Prior to this, Governor Lee had met with Japan’s Financial Supervisory Agency (FSA) during the “12th East Asia-Pacific Regional Heads of Financial Supervision and Central Bank Meeting” and reached a broad consensus on the necessity of resuming shuttle meetings between South Korea and Japan. Chairman Kim intends to carry forward this momentum and finalize the schedule for the resumption of these meetings as the head of financial authorities.
The “South Korea-Japan Financial Supervision Shuttle Meetings” are high-level regular meetings between financial authorities of both countries aimed at strengthening exchanges and cooperation and discussing mutual interests related to financial policies and supervision. These meetings were first initiated in November 2012 and continued until June 2016, with a total of six sessions. However, they were suspended for seven years after relations between South Korea and Japan deteriorated following the inauguration of the Moon Jae-in administration.
Financial authorities are intending to resume the shuttle meetings within this year. The significant improvement in South Korea-Japan relations since the inauguration of the Yoon Suk-yeol government, coupled with the strengthened cooperation between South Korea, the United States, and Japan, has provided momentum for enhancing financial exchanges. In fact, it has been reported that officials from the FSS have had multiple contacts with their Japanese counterparts at the working level in its efforts to facilitate a meeting within the year, following the meeting with Japan’s FSA.
Indeed, private sector representatives such as Kim Kwang-soo, the head of the Korea Federation of Banks (KFB), along with Chairman Kim, are also planning visits to Japan in pursuit of broader cooperation and exchanges. It is reported that the KFB is preparing a joint seminar with the Japanese Bankers Association to align with Chairman Kim’s visit schedule. Financial authorities are currently under extensive communication and discussion on the seminar’s topics.
Earlier, Governor Lee visited Beijing, China, on Aug. 31, and met with the director of China’s National Financial Regulatory Administration (NFRA). Governor Lee’s visit to China was the first in about six years since the time of former Governor Zhin Woong-seob in 2017. Particularly, given the previous cooling of relations between South Korea and China following the THAAD missile defense system issue, this meeting is seen as a sign of the resumption of cooperation between the financial authorities of both countries. During this meeting, the two leaders agreed to enhance exchanges on key issues such as banking, insurance, and financial supervision direction.
With the strengthening of cooperation with Chinese authorities, it appears that South Korea’s capacity to respond to domestic financial crimes and financial incidents will be significantly bolstered. Last year, the FSS uncovered foreign currency remittance transactions amounting to US$12.2 billion (16.29 trillion won) in 84 companies through financial institution inspections. Since the majority of these suspicious transactions involved remittances to countries such as China, collaboration with other financial institutions is deemed indispensable. Moreover, in recent investigations conducted by the FSS into Lime, Optimus, and Discovery Funds, assistance from the countries to which the funds were transferred will be essential to uncovering illegal transactions and remittances.
As Governor Lee’s visit to China was arranged upon the request of Li Yunze, the newly appointed director of China’s NFRA, there is a significant possibility of expanded cooperation. With the resumption of the shuttle meetings, South Korea may find itself in a mediating position in the “Korea Initiative” within the context of financial diplomacy involving South Korea, China, and Japan, which is of considerable interest.