When the nation’s financial supervisory division was split into the Financial Services Commission and the Financial Supervisory Service back in 2008, the main goal was to achieve mutual checks and balance, as well as to promote integrity and efficiency.
The FSC was placed in charge of making policy decisions, while the FSS was made the official industry watchdog.
But the latest turf war between the two is once again raising questions on whether the current system is ideal.
Through a legislative pre-announcement on Monday, the FSC issued a law revision to claim direct authority for communicating with financial companies before handing down severe disciplinary actions. The revision also calls for the FSS, upon detecting suspected cases of irregularities, to report immediately to the FSC instead of its internal disciplinary committee. These changes will take effect after about a month.
The revision plans are obviously rubbing the FSS the wrong way, as so far it has been up to the FSS to issue sanctions or summon executives, while the FSC had only to give a final approval the other agency’s decisions.
Explaining the rationale behind the revision, an FSC official said the main purpose was to “promote faster and more efficient response channels.”
The market and the FSS, however, believe the FSC is attempting to gain the upper hand over the FSS, which has recently been voicing strong opinions on key financial policy issues.
One example is when the FSS delivered a prior notice to the leadership of KB Financial Group and KB Kookmin Bank last week to warn them that they may face punishment for a string of irregularities including data leaks and internal feuds.
The FSC, however, clearly expressed its discontent with the measures.
The FSS perceived this to be a clear interference with market supervision and criticized the policy arm for overstepping its boundaries.
“It is true that the FSC holds the supervisory power over the FSS, but their respective territory should be respected,” said an official of the FSS.
The feud between the two financial supervisory arms further intensified after FSS governor Choi Soo-hyun said that he will “consider readjusting” the loan-to-value ratio and the debt-to-income system.
How to coordinate RTV and DTI levels has recently become a bone of contention after Deputy Prime Minister nominee Choi Kyung-hwan said the two ceilings should be raised in order to boost real estate sales, which he believed would help rejuvenate the sluggish local economy.
Choi’s comments squarely contradict the view of the FSC Chairman Shin Je-yoon, who had repeatedly referred to the two systems as necessary key measures for stabilizing household debt and protecting financial consumers.
The power struggle between the pair is triggering renewed skepticism about whether the nation’s financial supervisory authority should be remain divided into the two separate arms.
“When the government divided the FSC and the FSS, the pretext was to operate the former as the policy arbiter and the latter as the implementer,” said an official of one of the nation’s top-ranking financial groups.
“But in fact, the division seems to be causing only inconvenience to the market as both organizations came to claim the commanding right whenever an issue would arise.”
Employees are also under pressure as those from each organization are known to engage in individual power struggles of their own due to the lack of respect that the top officials have for their counterparts.