With the advent of the new Lee, Myung Bak administration in Korea last February 2008, one of the key regulatory structure changes taken place relate to the financial authority structure in Korea. Specifically, the formerly known as the Financial Supervisory Commission has been now renamed to the Financial Services Commission (the “FSC”), and such name change has come with more regulatory authority than ever before.
Prior to the Lee Administration, the main functions of the FSC were formulation of and amendment to regulations relevant to the supervision of financial institutions and issuing authorization and permits related to establishment and operation of the financial institutions. Now, adding to these powers of the FSC is formulation of and amendment to regulations relevant to the financial policies, which function previously belonged to the former Ministry of Finance and Economy (now known as the Ministry of Strategy and Finance).
So, the FSC now effectively controls both aspects of the financial policy and the financial supervision, and such consolidation of power clearly worry some people about going back to the old days of the government sector controlling the financial private sector. That is, after the foreign exchange crisis in the late 1990s, the authority relevant to the financial policy was given to the then Ministry of Finance and Economy (the “MOFE”) with the authority relevant to the financial supervision going to the then Financial Supervisory Commission and the Financial Supervisory Service (the “FSS”), to avoid abuse of the government’s power in managing the financial sector. But, some 10 years later, now with the FSC absorbing the rule-making authority concerning the financial policy, there are voices expressing concerns about the FSC wielding too much power in the finance industry.
To be sure, there are also people welcoming the change, mainly on the ground that the efficiency in overseeing the financial sector will improve. Specifically, the FSC will take care of the matters pertaining to the financial system, and the FSS will take care of the matters pertaining to examination of the financial institutions. Before the change, the overall structure of the financial authority was said to be loose as the MOFE, the FSC and the FSS took separate functions of overseeing the financial industry.
It should be noted that the entity that cannot be happy with all this change in the financial regulatory structure is the FSS. With the FSC having become a much wider financial authority, the FSS is worried that it will merely be reduced to conducting examination of the financial institutions under the directions of the FSC. (The FSC is part of Korean government under the Office of Prime Minister and consists of top bureaucrats while the FSS is under the directions of the FSC but is an organization independent of Korean government.)
As the first Chairman of the FSC, the Lee Administration appointed Jun, Kwang Woo, who was formerly chairman of Deloitte Korea. Mr. Jun, an international finance expert who has served in various posts both in the government and private sectors the past 25 years, is expected to ease regulations in efforts to bolster the competitiveness of the Korean finance industry; but, in such process, he would be certainly challenged by the tough task of effectively running his powerful agency without creating perceptions of wielding its power to an unnecessary extent.