[Initial Insight] Financial Services Commission and Bank of Korea, Show the Virtue of Cooperation

[Asia Economy Reporter Kwangho Lee] The turf war between the Financial Services Commission (FSC) and the Bank of Korea (BOK) over the amendment to the Electronic Financial Transactions Act (EFTA) is intensifying. Both institutions are arguing under the pretext of "consumer protection," but underlying this dispute is the practical interest in securing jurisdiction over the Korea Financial Telecommunications and Clearings Institute (KFTC).

The conflict between the two sides escalated when Yoon Kwan-seok, chairman of the National Assembly's Political Affairs Committee and a member of the Democratic Party, proposed the EFTA amendment last November. It was submitted to the Political Affairs Committee on the 17th, and on the morning of the 25th, a public hearing was held to gather opinions from relevant experts and stakeholders for the review of the bill.

The core of the EFTA amendment is to institutionalize electronic payment clearing services and grant the FSC the authority to license, supervise, and sanction clearing institutions. It formally requires external institutions like the KFTC to be involved in the payment clearing process of Naver and Kakao Pay. Until now, the payment clearing process of these pay services was handled internally, but the KFTC will now be responsible for the clearing operations of big tech companies.

The BOK is raising objections precisely to this point. The BOK strongly opposes, stating, "The FSC's designation of the KFTC as an electronic payment transaction clearing institution and its management and supervision is an attempt by the supervisory authority to control the operation and management of the payment and settlement system, which is an inherent function of the central bank."

On the other hand, the FSC argues that the amendment's supplementary provisions include a clause stating that "for the KFTC's tasks where the BOK, as a clearing institution, has established mechanisms to reduce default risk, data submission and inspection are excluded," making it difficult to see this as an infringement on the BOK's authority.

In particular, the BOK attacked the FSC by using the term "Big Brother." This is an unusually strong criticism rarely seen before. "Big Brother" refers to a fictional dictator in British novelist George Orwell's novel "1984," symbolizing an illegal state surveillance system.

Until recently, FSC Chairman Eun Sung-soo had been reserved, but in a recent meeting with reporters, he expressed discomfort, saying, "(The BOK's) Big Brother claim seems excessively exaggerated." He added, "Even now, when funds are transferred, all information goes through the KFTC. If so, the KFTC is Big Brother, and the BOK, which oversees the KFTC, is essentially calling itself Big Brother."

BOK Governor Lee Ju-yeol sharpened his stance again at the full meeting of the National Assembly's Planning and Finance Committee the day before, stating, "The EFTA amendment is indeed a Big Brother law." This was a rebuttal to the FSC chairman's remarks denying the Big Brother characterization.

As tensions between the two institutions escalate, there are calls to find a compromise. Since the bill has been proposed in the National Assembly, voices are urging thorough discussions during the legislative process to find reasonable measures for consumer protection.

Both institutions have entrenched positions, insisting they cannot concede, so the conflict is expected to continue for the time being. However, it should not be forgotten that the key issue is whether consumer protection is ensured. The FSC should step back if there is any consumer harm, and the BOK should support the law if it is for consumers. Maintaining a balance between principle and practical interests is not easy. We look forward to cooperation between the two institutions.