As the International Monetary Fund (IMF) has begun the Financial Sector Assessment Program (FSAP) for South Korea for the first time in six years, some analysts say that this could trigger a debate over the reform of the financial supervision system. If the FSAP team expresses a negative opinion about the current financial supervision system due to the conflicts between the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) since the inauguration of the incumbent government, the government cannot help but improve the system.
The FSAP team of the IMF will visit South Korea for three days from Feb. 12, according to financial authorities. The team will submit written questions and receive answers until June and conduct one or two rounds of on-site evaluation until December. Then, it will submit a final report to the IMF board of directors by the end of the first half of 2020. The FSAP inspects the overall financial system of IMF members, assess vulnerabilities and propose proper political countermeasures. An official from the financial authorities said, “The assessment team will convene a meeting with the FSC and the FSS as well as the Ministry of Economy and Finance and the Bank of Korea during the visit and talk about the schedule and scope of evaluation. The relevant agencies formed a FSAP task force team in September last year to prepare for the assessment.’
The IMF took a critical stance on the financial supervision system in South Korea through the FSAP evaluation in 2013. The report at the time said, “Overlapping scopes of work among financial regulators and complicated procedures cloud the focus of supervision. Political influence infringes upon the independence of financial supervision.” Some expect that the IMF is highly likely to take a negative stance as the FSC and the FSS have been conflicting on everything, such as the alleged accounting fraud of Samsung BioLogics Co. and budget appropriation of the FSS, since the inauguration of the current government.
The debate over the reform of the financial supervision system can be reignited depending on the FSAP results. The supervision system reform was included in the top 100 national agenda when the Moon Jae-in government was launched. However, discussion on the topic could not start due to various issues. The IMF’s assessment cannot play a crucial role in rekindling the discussion over the supervision system reform but it can provide a trigger. Therefore, the FSC and the FSS will be all ears for a while.