Shame on the FSS

The Financial Supervisory Service (FSS) was established in 1999 to protect depositors, investors and other financial customers. To achieve that goal, the FSS was given enormous authority to regulate the financial sector. It hasn’t done so well, as seen in a series of massive financial frauds — 1.6 trillion won ($1.4 billion) with Lime Asset Management and 510 billion won with Optimus Asset Management, for instance.

The financial watchdog had many chances to prevent such colossal losses to customers. Yet it ignored whistleblowing about the two financial fraud cases. When it came to the Optimus fund scam, its former chairman received VIP treatment whenever he visited the FSS. An FSS official even advised him to change the fund’s largest shareholder to stay afloat. No wonder an opposition lawmaker criticized the FSS for “offering a consulting service instead of checking their wrongdoings.”

Another FSS employee met with a Blue House official at a hostess bar in Seoul and handed over its internal plan to probe the Lime scandal. The plan was immediately delivered to Kim Bong-hyun — founder of the Lime Asset Management and former chairman of Star Mobility, who was waiting in the next room at the time.

A sensitive piece of information was transferred to a criminal suspect. The FSS imposed a light punishment — a salary cut — on the employee who leaked the information. But the FSS wielded its massive power on CEOs of securities firms, including by pressuring some to quit their jobs. Some securities companies are preparing documents to fight back against the FSS’s “overly laid-back work ethic.”

In the legislature’s regular audit of the FSS on Monday, Commissioner Yoon Suk-heun made incomprehensible remarks. He attributed such problems to current systems in which the FSS is subjugated to the Financial Services Commission (FSC) to implement oversight on financial institutions or draw up its budget. Therefore, it is very difficult to immediately reflect changes in the market when it looks into problems with financial organizations, he explained. We cannot accept Yoon’s argument. The FSS is a large organization with about 2,000 employees. Their average salaries amount to a whopping 100 million won. Any complaint about a lack of manpower does not make sense.

Commissioner Yoon said he would submit a plan to separate the FSS from the FSC to the National Assembly sooner or later. However, he seems to be engrossed in securing independence for the organization. If the commissioner really thinks that this idea will work, that’s a big mistake. The financial watchdog must work hard for the present and future instead of revisiting concluded cases in the past.