Financial agencies could still be changed
The team said early last week that it will create two new ministries and appoint a deputy prime minister to cope with the trying economic times.
When asked if the FSC and FSS would remain intact, Yoo Min-bong, head of the team’s subcommittee on planning state affairs, was noncommittal but left the door open for change.
“The issue of reorganizing the way the financial regulatory roles are assigned was not included in [last Tuesday’s announcement]. While the financial regulators we have now will stay in place, any plans to reorganize them will be reflected in the road map [for the new government].”
The academic and political circles have called on the government to restructure the FSS and make its financial consumer protection unit an independent body as the FSS has been peppered with criticism for being too lax in its supervision of savings banks. As of now, 24 savings banks have had their operations suspended since 2011 due to poor management and cases of graft.
Many see the Financial Consumer Protection Bureau as being straitjacketed by the FSS as it cannot raise an independent voice. They say the bureau’s job of protecting financial consumers conflicts with the FSS’ main agenda, which focuses on monitoring institutions’ financial soundness.
President-elect Park has hinted at her desire to strengthen the government’s role as a guardian of consumers, although she didn’t specifically mention a separation of power in the FSS among her election pledges.
“The recent scandals involving savings banks highlight how some key figures in the industry are vulnerable to moral hazard, and the public was clearly very disappointed,” Park said at a financial forum in Seoul in October. “[Financial institutions] should not rely on public funds whenever they encounter problems while neglecting their responsibility regarding the deteriorating financial conditions [of savings banks].”
Separately, the FSS published a pamphlet this month promoting its role in protecting consumers of financial products. Some market observers have questioned the reasoning behind this and say it shows the agency’s opposition to meddling in its affairs.
FSS officials said in November, their own research showed it would cost 1 trillion won ($946.8 billion) to spin off the bureau.
Meanwhile, the FSC was hoping to be promoted as a ministry after it took over the Ministry of Strategy and Finance’s international finance bureau, but this is unlikely to happen as the transition committee sees clearing up household debt as a top priority.
The FSC argued that merging its role in monitoring domestic financial affairs with the Finance Ministry’s role in looking after international finance would help the government respond quickly to global financial crises. But the ministry opposed the idea, saying its bureau should stay put as part of its balancing role.
“Some officials at the FSC are disappointed as they wanted it to be promoted to ministry-level, while others said they’re relieved that the financial regulatory system has not been changed,” said an official at the FSC.
Others say having separate bodies for domestic and international finance is inefficient. “It’s pointless to divide the two in an open market economy, where overseas markets are linked with the domestic market,” said a former financial bureaucrat. “This just makes Korea slower to respond to fast-changing global market conditions.”
The transition team made the second announcement on the government restructuring yesterday.
By Kim Mi-ju [email@example.com]