FSC wants to split FSS to make consumer unit

The Financial Supervisory Service will be split into two organizations in the second quarter of next year to beef up its consumer protection functions, the government said yesterday.

A backlash to the plan, however, is expected from FSS officials.

Yesterday, the Financial Services Commission, the country’s top regulator, described a reform plan for the current financial monitoring system to Cabinet members at a meeting yesterday.

The plan was based on a request from the Blue House in March that the regulator strengthen its role protecting consumers of financial products and services by setting up an independent agency. President Park Geun-hye is reportedly keen for more financial consumer protection.

The FSC plans on submitting the plan to lawmakers this week and hopes related bills will be passed by the National Assembly within this year.

According to the FSC, a separate, independent agency spun off from the FSS will be responsible for monitoring financial institutions including banks, insurance companies, investment and card companies.

It said that over a period of time, Korea’s financial industry has been overly focused on making profits while financial consumers have been neglected.

“The new agency will be in charge of mediating financial disputes between financial institutions and consumers, receiving consumer complaints, providing consumers with financial information and education and monitoring businesses that sell illegal financial products.

“The new agency will be given the authority to request financial institutions to submit necessary documents, conduct inspections and impose restrictions,” the FSC said in a statement yesterday.

“We will have the FSS and the new consumer protection agency sign a memorandum of understanding guiding the new agency to conduct joint inspections of financial institutions with the FSS if necessary,” the statement said, “and allow the agency to conduct independent inspections at exceptional times.”

As for a budget for the new agency, an official from the FSC said the plan won’t cost more.

“There won’t be much budget needed in pushing forward the plan,” said Koh Seung-beom, an official from the FSC.

“Even if a separate agency is established,” Koh said, “in principle the number of senior executives and employees at both the FSS and the new agency would be the same as now.”

The head of the new agency will hold the same authority as current FSS Governor Choi Soo-hyun.

But FSS officials warn that its role will overlap with the newly created consumer protection agency. An emergency committee was set up by FSS officials earlier this month and it is urging the FSC to drop the plan.

“The plan has been drawn up too hastily,” the committee said in a statement yesterday.

“We will hold a debate today at our headquarters,” the committee said, “and raise problems we foresee in the plan proposed by the FSC.”

BY LEE EUN-JOO [angie@joongang.co.kr]