Significantly Changed Financial Supervisory Service, Emphasizing 'Consumer Protection and Digital'... Major Expansion of Financial Consumer Protection Division (Comprehensive)

Major Reorganization of Financial Supervisory Service into 13 Departments and 40 Teams
Yoon Seok-heon, FSS Governor, "Strengthening Functional Supervision of High-Risk Financial Products"
Subtech Innovation Team Newly Established... Total Units Increased from 61 to 62
Expanded P2P Inspection Integrated Organization to Boost Innovative Finance Projects

[Asia Economy Reporter Kangwook Cho] On the 23rd, the Financial Supervisory Service (FSS) carried out a major organizational restructuring, significantly expanding the Financial Consumer Protection Division and establishing a new organization to support digital transformation and innovation in financial supervision. Accordingly, the Financial Consumer Protection Division will be greatly expanded from the current 6 departments and 26 teams to 13 departments and 40 teams. Additionally, a 'SupTech Innovation Team' will be newly established to build an efficient financial supervision system utilizing IT technology. As a result, the overall FSS organization will be reorganized from the current 61 departments (37 bureaus and 24 offices) to 62 departments (40 bureaus and 22 offices).

FSS Governor Seokheon Yoon stated at a briefing that "This organizational restructuring plan was prepared to respond to the recent trend of strengthening financial consumer protection, including the legislative promotion of the Financial Consumer Protection Act, and to strengthen functional supervision over high-risk financial products designed, solicited, and sold across various financial sectors."

According to this restructuring plan, the financial consumer protection sector under the current head of the Financial Consumer Protection Division (Vice Governor) will be expanded and reorganized into two main pillars: consumer damage prevention (preemptive) and rights protection (post-event). Each sector will be exclusively managed by a vice governor to establish a responsible management system. The Financial Consumer Protection Division will increase from the current 6 departments to 13 departments, adding 7 new ones, and from 26 teams to 40 teams, adding 14 new teams based on the consumer protection sector. The insurance supervision and inspection sector, previously organized within the Financial Consumer Protection Division, will be moved to the general management sector to focus on supervising the soundness of financial companies. This move is said to have benchmarked the UK's Financial Ombudsman Service (FOS).

Specifically, to strengthen preemptive damage prevention, the consumer damage prevention sector will be staffed with 7 departments and 19 teams, including the Financial Consumer Protection Supervision Bureau, Financial Product Sales Supervision Bureau, Financial Product Review Bureau, Financial Product Analysis Office, Pension Supervision Office, Financial Education Bureau, and Inclusive Finance Office. This sector will be responsible for preemptive supervisory functions related to financial product sales, such as reviewing financial product terms and conditions, solicitation and sales under the Financial Consumer Protection Act and individual business laws, financial product advertising and disclosure, and improving systems related to unfair trade practices. It will also be granted consultation authority on the establishment and revision of sector-specific rules related to consumer protection.

Furthermore, the division will strengthen continuous supervision functions by monitoring each stage of financial product design, solicitation, and sales, utilizing complaint databases, and transferring mystery shopping tasks. For financial products with a high risk of consumer damage, consumer alerts will be activated, and timely responses to new work demands upon the enforcement of the Financial Consumer Protection Act will be ensured. Pension supervision and inclusive finance support functions will also be transferred to the Financial Consumer Protection Division to support the economic self-reliance of consumers.

To strengthen post-event rights protection, the consumer rights protection sector will be staffed with 6 departments and 21 teams, including Dispute Resolution Bureau 1, Dispute Resolution Bureau 2, Rapid Complaint Handling Center, Complaint and Dispute Investigation Office, Illegal Finance Response Team, and Insurance Fraud Response Team. To improve consumer satisfaction, a 'Rapid Complaint Handling Center' will be newly established to enhance one-stop complaint processing functions. In particular, an on-site investigation function for major complaints and disputes across various sectors such as DLF will be newly established, and joint inspections with sector-specific inspection departments will be possible when necessary. Consultation authority on sanction cases causing significant consumer damage will also be granted. Additionally, active responses will be made to infringements of financial consumer rights caused by illegal private loans, voice phishing, and insurance fraud.

The digital transformation of financial supervision and support functions for innovative finance will also be strengthened. First, the Information Strategy Office, which oversees the digital transformation of financial supervision, will be expanded into the Information Strategy Bureau, becoming the overall department for financial supervision information systems. Within the Information Strategy Bureau, a 'SupTech Innovation Team' will be newly established to support the transition to an IT-based supervision and inspection system. The IT and Fintech Strategy Bureau, which oversees IT supervision and inspection of financial companies, will be assigned a 'RegTech' support function to streamline regulatory compliance tasks such as legal compliance, compliance monitoring, and internal control using information and communication technology. The P2P Financial Business Act, which will be enforced on August 27, as well as the support functions for innovative financial businesses, will be strengthened through the expansion and reorganization of the integrated P2P supervision and inspection organization.

In addition, to enhance consistency and efficiency in international affairs, the International Cooperation Bureau and the Financial Hub Support Center have been integrated into the International Bureau (Financial Hub Support Center). A dedicated organization called the 'New Southern Policy Entry Support Team' has also been established to support the entry of domestic financial companies into the New Southern region.

Governor Yoon explained, "The purpose of this organizational restructuring is largely focused on two aspects: strengthening the functions and roles of the Financial Consumer Protection Division and enhancing the digital transformation of financial supervision and support functions for innovative finance." He added, "Despite the expansion and reorganization of the Financial Consumer Protection Division with the establishment of 5 new departments and the transfer of 2 departments, the overall organization has been kept to the level of establishing only one new department as much as possible."

The total number of personnel in the Financial Consumer Protection Division will increase from the current 278 to 356. The FSS plans to further expand personnel once the Financial Consumer Protection Act is enacted and enforced. The implementation date of the organizational restructuring will be aligned with the personnel appointment schedule.

However, Min Byungjin, Vice Governor in charge of Planning and Management at the FSS, stated that the overall number of personnel has not increased so far. However, after the enactment and enforcement of the Financial Consumer Protection Act, additional personnel will be needed, and they plan to request an increase in personnel in consultation with the Financial Services Commission.

Vice Governor Min explained, "The reason the overall personnel did not increase with the organizational restructuring is mainly because the number of management departments decreased. Five departments were newly established, two were transferred from existing departments, and four departments were abolished." The Human Resources Development Institute merged with the Human Resources Development Office, and the International Cooperation Bureau and Financial Hub Support Center were integrated into the International Bureau. The Credit Information Office and Insurance Supervision Bureau were abolished, and their functions were transferred to other departments. The Pension Supervision Office and Financial Inclusion Office were transferred under the Financial Consumer Protection Division.

He also responded to concerns that the Financial Consumer Protection Division's joint supervision of all sectors, including financial product design and sales, might increase the supervisory burden on financial companies by saying, "There may be concerns about that, but we will coordinate work between departments well to prevent overlapping tasks. While some overlap may occur in overall supervision, we will activate the vice governors' consultative body to ensure that financial companies are not burdened redundantly."