Financial Supervisory Service Public Institution Designation Requires Simultaneous Assessment of 'Independence and Autonomy' and 'Effective Management'

[Asia Economy Reporter Kwangho Lee] There has been a suggestion that the designation of the Financial Supervisory Service (FSS) as a public institution should simultaneously consider both the 'guarantee of independence and autonomy' and the 'management supervision of reckless management.'

On the 3rd, the National Assembly Research Service published a report titled '2021 National Audit Issue Analysis' containing these details.

The report analyzed that although the Ministry of Economy and Finance held a Public Institution Management Committee earlier this year and decided to conditionally withhold designation of the FSS, there is ongoing debate with opposing views as claims persist that the FSS should be designated as a public institution due to reckless management and hiring irregularities.

Those in favor cited reasons such as ▲ the 2017 hiring irregularities and reckless management ▲ inadequate supervision during the 2020 Lime and Optimus private equity fund scandals. Accordingly, they argue that the FSS should be designated as a public institution under the Public Institution Management Act to be subject to controls like budget allocation, management evaluation, and personnel evaluation similar to other public institutions.

Opponents argue that the FSS is an organization that performs business conduct and soundness supervision of the financial market, and to ensure the independence of its supervisory function, it should remain a private organization as it currently is. The Ministry of Economy and Finance, as a department that carries out economic policies and various industrial promotion policies, raises concerns that if the FSS is designated as a public institution under its control, the supervisory function could be influenced by the needs of economic policy.

The Research Service explained that the discussion on designating the FSS as a public institution ultimately pertains to a policy judgment balancing the public interest between guaranteeing the independence and autonomy of the supervisory agency and preventing reckless management at the FSS.

The Research Service noted that there are currently calls to separate policy functions and supervisory functions within financial supervision to enhance the substance of financial supervision, and international organizations such as the International Monetary Fund (IMF) also recommend enhancing the independence of financial supervisory agencies. Thus, there is considerable discussion on the importance of securing the independence of financial supervisory agencies. In other words, designating the FSS as a public institution subject to the Ministry of Economy and Finance’s control may face institutional resistance.

On the other hand, it emphasized the necessity of strict supervision to prevent reckless hiring and management, given that it is difficult to view the FSS simply as a private organization.

The Research Service recommended that, considering the purpose of independent and sound execution of financial supervisory functions, management and supervision should be conducted in a way that promotes both the independence of the institution and its normal and substantive operation.

Meanwhile, the Research Service addressed 22 issues by topic concerning the Financial Services Commission and the FSS, which are agencies under the jurisdiction of the Political Affairs Committee.