Regulators pledge to meddle less

Korean authorities will no longer intervene in key business decisions of local banks, insurance companies and other financial institutions, particularly in setting prices and commissions on new products, the Financial Services Commission (FSC) announced Monday.

The move was part of the Park Geun-hye government’s efforts to root out government control that industry observers say is excessive or unnecessary in the financial sector.

A group of high-ranking government officials and researchers from the FSC, Ministry of Strategy and Finance, Financial Supervisory Service and other state-run institutes had the “first discussion” on reforming regulations in the financial sector.

One of the key decisions made at the meeting Monday was to abolish the authorities’ intervention in prices and commissions on financial products, as well as some key judgments by institutions on business management, according to the FSC.

“This means we will tie our hands and feet ourselves so that we will not excessively intervene [in the industry],” said Son Byeong-du, a senior FSC official at a briefing about the closed-door meeting. “It means we promise we will not impose restrictions on prices or other things.

“If [any authorities] violate this rule, we will take proper measures [against them],” he said.

So-called “shadow instructions” will be also foresworn, Son said, which refer to informal, verbal orders or non-binding guidelines that are not stated in the law.

In FSC surveys of workers in the financial industry, many said they were effectively under the strict control of government officials in their business.

One of the complaints was that bankers had to seek advance approval from officials every time they released new financial products, although the current law does not require them to do so.

Even though the government abolished several regulations last year, workers at banks and other financial institutions said they still felt pressured to conform to the lifted regulations, and some even asked the authorities if they were indeed free from the rules or not.

To effectively remove behind-the-scenes regulations, the FSC announced a so-called “ombudsman system,” in which a third-party organization unrelated to the government receives complaints from the financial sector about excessive regulation.

Also, when the government adopts a new regulation, an existing regulation will be removed, so that the total number of regulations on the financial industry will not increase.

“Although I strived for a series of reforms in regulations, it is still true that current regulations are hindering competition and are unreasonable and inconvenient,” said FSC Chairman Yim Jong-yong at the meeting, quoted by the commission. “I directly heard that ‘uncontrolled powers’ or ‘shadow regulations’ are still bullying people in the industry and there are still a lot of regulations to be reformed.

“We will put our focus on easing regulations to boost competition in the finance industry,” he said.

BY KIM HEE-JIN [kim.heejin@joongang.co.kr ]