Lee Ju-yeol's Stern Criticism Met with FSC's Rebuttal: "Consumer Protection Comes First"

Conflict Intensifies Between Two Agencies Over Big Tech Oversight Authority
Governor Lee Ju-yeol Criticizes "Financial Services Commission Amendment Excessively Interferes with Central Bank"
Financial Services Commission States "Priority Should Be Consumer Protection, Starting with 'Efficient Discussion'"

Financial Services Commission, Institutionalization System for Digital Payment Transaction Clearing

[Asia Economy Reporter Jo Gang-wook] The conflict between the Bank of Korea and the Financial Services Commission (FSC) over the payment and settlement management authority of big tech companies such as Naver Pay and Kakao Pay is intensifying. While the Bank of Korea strongly opposes the new regulations on the 'payment and settlement' system being promoted by the FSC, calling it an 'infringement of authority,' the FSC insists that 'consumer protection' must take priority. Even in the National Assembly, the Planning and Finance Committee and the Political Affairs Committee are preparing bills emphasizing the authority of the Bank of Korea and the FSC respectively, leading to a direct confrontation between the two institutions.

FSC: "Consumer protection is fundamental... unproductive discussions should be avoided"

On the 27th, a senior FSC official told Asia Economy in a phone interview, "It is concerning that the proposed amendment is being perceived as a power struggle between institutions," but added, "The essential point is that consumer protection must come first." He emphasized, "If there are concerns about infringement on the Bank of Korea's payment and settlement authority, discussions should focus on how to respond efficiently rather than unproductively debating whose authority it is or whether there is an infringement."

He also rebutted the Bank of Korea labor union's criticism that 'consultation' was effectively a 'one-sided notification.' The official said, "We have visited the Bank of Korea several times to convey the FSC's opinions directly, and the Bank of Korea has also shared its views, so consultations have been ongoing. It was not a one-sided notification, and we will continue discussions prioritizing consumer protection."

Governor Lee Ju-yeol: "Payment and settlement is the central bank's inherent authority" Direct criticism of FSC

The conflict over payment and settlement between the FSC and the Bank of Korea escalated after Governor Lee Ju-yeol of the Bank of Korea unusually criticized the FSC directly.

At a press conference following the Monetary Policy Committee meeting the previous day, Governor Lee sharply criticized, saying, "The provisions related to payment and settlement clearing included in the FSC's amendment are excessive and unnecessary interference with the central bank," and added, "Operating and managing payment and settlement stably is the inherent authority of the central bank, and no country is an exception."

This was a direct warning against the FSC's recent push for the 'Electronic Financial Transactions Act amendment,' which includes mandatory processing of internal transactions of big tech and fintech companies through the Korea Financial Telecommunications and Clearings Institute's payment and settlement system.

Electronic Financial Business Act amendment entangled with Korea Financial Telecommunications and Clearings Institute's management and supervision rights

Yoon Kwan-seok, chairman of the National Assembly's Political Affairs Committee (Democratic Party), plans to propose an amendment to the Electronic Financial Business Act as early as this month to establish a 'payment transaction clearing institution' for big tech companies, managed by the FSC.

Payment transaction clearing is a method where, during fund transfers between financial institutions, money is not exchanged for each transaction but settled the next day from accounts held by individual banks. Currently, the Korea Financial Telecommunications and Clearings Institute handles interbank payment transaction clearing, and the Bank of Korea supervises the Institute. The FSC also intends to consider the existing Korea Financial Telecommunications and Clearings Institute as initially authorized as an electronic payment transaction clearing institution. Therefore, if the Political Affairs Committee's amendment to the Electronic Financial Business Act is proposed, the FSC's plan to transparently monitor fintech and big tech transactions through the payment and settlement system could become entangled with issues of management and supervisory rights over the Korea Financial Telecommunications and Clearings Institute.

However, the FSC's position differs. While electronic financial transactions centered on banks currently have a relatively stable system, the FSC argues that financial transactions through big tech and fintech companies like Kakao Pay lack a real-time monitoring system, necessitating a strengthened supervisory framework, which is the reason behind the proposed amendment.

Differences in the National Assembly as well... Amendment granting authority to the Bank of Korea proposed in the Planning and Finance Committee

Meanwhile, there are differing views in the National Assembly regarding the division of duties between the Bank of Korea and the FSC. On the 20th, Yang Kyung-sook, a member of the Planning and Finance Committee from the Democratic Party, proposed an amendment to the Bank of Korea Act granting the Bank of Korea management authority over the entire payment and settlement system of big tech companies. The amendment focuses on granting the Bank of Korea comprehensive management authority, including establishing and operating risk management measures for payment risks related to digital fund transfers and payment services. If the two bills maintain conflicting positions and pass through their respective standing committees, final coordination is expected to take place in the National Assembly's Legislation and Judiciary Committee.