[Political Affairs Committee Emergency Survey] Ruling and Opposition Clash Over 'Unilateral Binding Force Introduction'

Survey on 'Major Financial Sector Issues' for National Assembly Political Affairs Committee Members
Opposition Against Introducing One-Sided Binding Force, Saying "Severely Infringes on Financial Companies' Rights"
Many Support "Necessity" of Financial Supervisory Service Independence, but...
Claims of Shifting Responsibility for Supervisory Failures Also Raised

[Asia Economy Reporter Park Sun-mi] Opinions among ruling and opposition members of the Political Affairs Committee sharply diverged on major financial sector issues such as the introduction of one-sided binding force, the independence of the Financial Supervisory Service (FSS), simplification of claims for indemnity insurance, and further reduction of credit card company merchant fees. The most contentious issue was whether to introduce the ‘one-sided binding force’ that FSS Governor Yoon Seok-heon is pushing. One-sided binding force means that only consumers can file lawsuits by rejecting the FSS’s dispute resolution decisions, while financial institutions cannot contest them.

Following sluggish acceptance of dispute resolutions by financial companies related to foreign exchange derivatives like KIKO and the Lime incident, Governor Yoon mentioned the need to introduce the one-sided binding force system in August last year, and the ruling party has already proposed a bill. However, Financial Services Commission Chairman Eun Sung-soo expressed reluctance toward the one-sided binding force, citing it as a ‘deprivation of financial companies’ right to trial,’ and no consensus has been reached within financial authorities. There is also a significant gap in opinions between the ruling and opposition parties in the political arena.

In particular, the opposition strongly opposes the introduction of one-sided binding force, arguing that it seriously infringes on the rights of financial companies by focusing solely on consumer protection. Kim Hee-gon, a member of the People Power Party, opposed it, saying, "The introduction of one-sided binding force infringes on financial companies’ right to file lawsuits and violates the purpose of dispute resolution."

Yoon Doo-hyun, also from the same party, said, "It is a system that excessively infringes on financial companies’ right to trial and prioritizes only consumer rights," adding, "Its strong coerciveness greatly contradicts the essence of dispute resolution, which is based on agreement. It is necessary to first resolve issues of abuse prevention and then propose alternatives with lower binding force." On the other hand, Kim Han-jung of the Democratic Party, who supported the measure, stated, "To protect financial consumers vulnerable to legal litigation procedures, it is desirable that in specific cases such as small claims, if consumers accept the FSS mediation results, financial institutions should comply."

Need for FSS Independence... Nearly 80% 'Support'
"Is supervisory failure due to lack of independence?" Opposing views also exist

Regarding the issue of FSS independence, most members of the Political Affairs Committee responded that it is "necessary." Bae Jin-kyo of the Justice Party argued, "We must lead consumer trust recovery, damage prevention, and financial industry development by strengthening the independence of financial supervision," adding, "Currently, the Financial Services Commission is a single organization with conflicting purposes of financial industry promotion and financial supervision, which is a limitation." He also said, "Under the current system, responsibility between policy and supervision becomes unclear, and post-policy improvements are difficult to implement properly."

Amid the recent private equity fund scandals and controversies over FSS’s supervisory failures, Governor Yoon emphasized the problem of unclear responsibility between the Financial Services Commission’s supervisory policies and the FSS’s supervisory execution, advocating for the independence of the FSS. Currently, the Financial Services Commission oversees financial policy and supervision, while the FSS is entrusted with inspection, supervision, administrative sanctions, and other duties and authorities.

However, a minority of opposing views expressed concern that the FSS is blaming supervisory failures on lack of independence. They argue that discussing the system is meaningless when internal controls within the FSS are not properly implemented. Yoon Doo-hyun said, "The issue is whether the FSS has properly fulfilled its fundamental role of sound monitoring and supervision," adding, "They are blaming the financial supervisory system for failing to properly manage the market and advocating for FSS independence, but self-reflection should come first."

Meanwhile, regarding the need to simplify indemnity insurance claims, lawmakers agreed that it must be passed for customer convenience but expressed concerns that the simplification could practically maximize the insurance industry’s profits rather than those of customers. On the additional reduction of credit card merchant fees, opinions were that it should be actively pursued from the perspective of small business owners, but caution is needed considering the financial capacity of credit card companies, which face threats to their survival due to deteriorating profitability.