[EDITORIALS]Look Again at Financial SupervisionOn Thursday, 90 percent of the Financial Supervisory Service staff, angry at the FSS reorganization proposal, submitted letters of resignation. The same day, Financial Supervisory Commission Chairman Lee Keun-young apologized to President Kim Dae-jung for causing trouble over the restructuring. President Kim said, "The FSC and the FSS should strive for harmony and cooperate as soon as possible." Chairman Lee answered, "We will maintain the status quo in principle in our reorganization, but we will do our best to get the best results."
It is not easy to institute a good financial supervisory system. Yet, it is hard to understand how Mr. Lee intends to "do his best to get good results" in solving the current situation. The current reorganization plan is completely willy-nilly. Most inspection and supervisory functions, which account for most FSS duties, will remain with the FSS, except for some supervisory policies and approval rights to be given to the FSC Secretariat, which is a government body and has the FSS under its control.
Contrary to FSS staffers' worries, there may be no mass firings. Furthermore, the FSS provided reasons for the reorganization. There has indeed been collusion among organizations under the FSS's supervision, as revealed in last year's scandals involving financial companies, and the vast FSS authority seems to have paralyzed oversight mechanisms.
But the government was one cause of the recent wave of resignations. To restructure the FSS, the government should have attempted a future-oriented fundamental reform. It should have sought the best structure to ensure the enhancement of three principles: efficiency, neutrality, and checks and balances.
Even before the scandal involving the financial companies erupted, criticism over the FSC and the FSS was mounting. The list of complaints was long: a lack of professionalism, meddlesome market regulations, abuse of authority, an authoritarian attitude without a sense of responsibility and a monopoly of information. The government should have checked why such criticisms were aired and examined the range and limitations of financial supervision, the most efficient supervisory plans, the optimum number of personnel and productivity. The merger of the FSC and the FSS into a non-government organization sounded like the best solution. That was why the Ministry of Planning and Budget's idea was acceptable as a good interim measure: Merge the FSC and FSS and make it a semi-government organization.
Nevertheless, this proposal was shelved. Instead, what was adopted is the idea to reinforce the "government function" by giving the FSC secretariat the supervisory responsibility and the control over the FSS, thereby undermining its efficiency and neutrality. In terms of preparing supervisory mechanisms for checks and balances, there were some achievements, such as strengthening consultations with financial institutions and reinforcing the Bank of Korea's inspection rights. Still, the preparations for internal supervisory mechanisms lacked, like the reduction of arbitrary rights and the transparency in the decision-making process.
Seoul's reorganization proposal has little justification, so it is no wonder that the FSS protests. This is no time for stopgap measures, talking about "doing one's best to get the best results." A new reorganization proposal should be drawn up to establish an efficient financial supervisory organization with the future in mind. It should include ideas on how to prevent the abuse of FSS rights and meddlesome market supervision.