Committee instructs FSC to get tougher

The new government’s policy advisory committee pressed the country’s top financial regulatory agency to more strictly regulate conglomerates with financial affiliates on Thursday.

The Financial Services Commission reported the progress of its policy initiatives to the advisory committee for state affairs planning, a de facto power transition team under the Moon Jae-in administration.

“Along with the market distortions and protection needed for financial consumers, the construction of a comprehensive oversight system is critically important,” said Lee Han-joo, head of the economy division of the committee. The committee is governed by Rep. Kim Jin-pyo of the Democratic Party.

The main point is for conglomerates to face the same safety and soundness standards applied to banks and financial institutions if a group has financial affiliates. Samsung and Hanwha Group appear to be the main targets.

Currently they are exempt from financial requirements concerning debt and capital reserves, though banks and insurance companies under financial holdings groups are subject to such requirements. Moon has pledged to get tough on the family-run chaebol.

The Financial Services Commission declined to reveal its response to the committee’s demand during the meeting.

The advisory committee also mentioned that the Financial Services Commission will launch a 30 billion won ($27 million) fund next year to support smaller tech companies trying to rebound after a business failure.

The fund will be raised until August, the committee said, and the private sector will be responsible for the half of the fund.

In a meeting with the Labor Ministry following the briefing by the financial regulator, the committee raised the need to ease instability in the labor market as it causes many social and economic problems in the country.

“The key to the new administration’s policies is stabilizing the labor market first,” said Kim Yeon-myung, chairman of the advisory committee for state affairs planning’s subcommittee on social issues at a briefing with the Ministry of Employment and Labor on Thursday.

“If the labor market is not stabilized, the government would have to use money allocated for welfare to solve problems derived from it, which interrupts us from achieving a win-win effect. The labor market is very complex and has various stakeholders, and we need to create an environment in which people compromise with each other.”

Moon has been focusing on boosting the labor market, including creating 810,000 jobs in the public sector and putting all government employees in salaried positions. The new administration is pressuring the private sector to follow its lead to improve the sluggish labor market. But business leaders are expressing concerns.

“Many workers are asking for having their employment status to be upgraded from contract or part-time to full-time, salaried positions and companies are going through a very hard time because of that,” said Kim Young-bae, Vice Chairperson of the Korea Employers Federation, at a forum held in central Seoul on Thursday.

“Small and mid-size companies, in particular, are worrying about surviving. The fundamental problem is not the employment status of workers. Rather, it is the wage gap between big firms and small.”

Kim argued that the idea that all employees should be full-time, salaried workers doesn’t conform to business realities.

BY PARK EUN-JEE, KIM YOUNG-NAM [park.eunjee@joongang.co.kr]