The Financial Supervisory Commission (FSC), the top financial watchdog in Korea, has new chairman named Mr. Kim, Yong Duk, effective from August 6 of 2007. Mr. Kim is replacing Mr. Yoon, Jeung Hyun, who managed to become the first chairman to finish the prescribed 3-year term since FSC was established in 1998 pursuant to the Act on the Establishment, etc. of Financial Supervisory Organizations. During his tenure as chairman of FSC, Mr. Yoon was widely credited with having laid the groundwork for life insurance companies to go public and also worked to lower barriers that keep non-financial companies from owning banks. Mr. Kim, Mr. Yoon’s replacement, was economic policy advisor to President Roh before being appointed as new FSC chief.

Sometimes there is confusion as to the functions of FSC and the Financial Supervisory Service (FSS). FSC is part of Korean government under the Office of Prime Minister and consists of top bureaucrats while FSS is under the directions of FSC but is an organization independent of Korean government.

FSS monitors and supervises various kinds of financial companies and institutions and report any findings or results to FSC. FSC formulates regulations relevant to the financial institutions and supervises duties of FSS.

More specifically:

FSC consists of 9 commission members, which are as follows:
(i) The Vice Minister of Finance and Economy
(ii) The Deputy Governor of the Bank of Korea
(iii) The President of the Korea Deposit Insurance Corporation
(iv) An expert on accounting recommended by the Minister of Finance and Economy
(v) An expert on banking and finance recommended by the Chairman of FSC
(vi) An expert on law recommended by the Minister of Justice; and
(vii) A representative of business community recommended by the President of the Korea Chamber of Commerce and Industry

The Chairman of the FSC is appointed by the President of the Republic of Korea after deliberation by the State Council, and the Vice Chairman of the FSC is also appointed by the President of the Republic of Korea upon recommendation by the Minister of Finance and Economy.

FSC deliberates and makes resolutions concerning the following matters.

(a) Formulation of and amendment to regulations relevant to the supervision of financial institutions;
(b) Authorization or permission of establishment, merger, conversion, or transfer or takeover of business of financial institutions;
(c) Authorization and permission relevant to the operations of financial institutions;
(d) Important matters relevant to the examination of and sanction against financial institutions
(e) Important matters relevant to the administration, supervision, and surveillance of securities and futures market; and
(f) Other matters relevant to the authority vested in the FSC.

The Securities and Futures Commission (SFC) is separately established under the FSC to regulate and monitor companies in securities and futures industry.

The FSS is established (as a special corporation having no capital) in order to examine and supervise financial institutions under the directions of the FSC and SFC. The Chairman of the FSC concurrently holds the post of the Governor of FSS.

The FSS performs the following duties in accordance with the Act on the Establishment, etc. of Financial Supervisory Organizations (the Act).

-Examination of the business and asset status of the financial institutions
-Imposition of sanctions under the Act and other acts and subordinate statutes according to the findings as a result of the examinations
-Assistance in the duties of the FSS and the SFC; and
-Other duties which are entrusted to the FSS under the Act and other acts and subordinate statutes

The institutions which are subject to examination by the FSS are those falling under one of the following categories.

-Financial institutions established with the authorization under the Banking Act or the Long-Term Credit Bank Act
-Securities companies, securities finance corporations, and transfer agents established under the Securities and Exchange Act
-Asset management companies and investment counsel companies established under the Act on Business of Operating Indirect Investment and Assets
-Insurers established under the Insurance Business Act
-Merchant banks established under the Merchant Banks Act
-Mutual savings banks and the Federation of Saving Banks established under the Mutual Savings Banks Act
-Credit unions and the National Credit Union Federation established under the Credit Unions Act
-Trust companies established under the Trust Business Act
-Specialized credit financial companies and persons who engage concurrently in loan business established under the Specialized Credit Financial Business Act
-Futures dealer under the Futures Trading Act
-The credit business sector of the National Agricultural Cooperative Federation under the Agricultural Cooperatives Act
-The credit business sector of the National Federation of Fisheries Cooperatives under the Fisheries Cooperatives Act
-The institutions to be examined by the Financial Supervisory Service pursuant to the provisions of other Acts and subordinate statutes

As you can see above, the range of financial institutions monitored by FSS and FSC are all-encompassing, and, as such, the FSC and FSS play influential roles in shaping up the financial industry of Korea.