[Column] Financial Authorities Finally Properly Dividing Roles

One Month Since Kim Byung-hwan's Appointment as Financial Services Commission Chairman
Consistent Messages from FSC and FSS
Clear Distinction Between Policy and Supervisory Authorities Roles

The financial authorities have changed since Kim Byung-hwan took office as the Chairman of the Financial Services Commission (FSC). There is an evaluation that the division of roles between the FSC, which formulates policies, and the Financial Supervisory Service (FSS), which supervises the financial sectors, has become clearer. The previously controversial message confusion has also disappeared.

The most noticeable point is the clear division of roles between the financial policy authority (FSC) and the financial supervisory authority (FSS). Chairman Kim held a series of sector meetings: banking sector on August 20, specialized credit finance sector on August 22, insurance sector on August 28, and securities sector on August 29. In addition, he plans to continue meetings with financial holding companies, savings banks, and other sectors before the Chuseok holiday.

The new FSC Chairman is actively increasing contact points with the industry immediately after taking office. Communicating with the sectors and delivering messages about policies is the responsibility of the FSC Chairman. Before Chairman Kim’s appointment, reporters more frequently met the FSS Governor at such meetings.

Message coordination has also been strengthened. A representative example is the 'Corporate Value-Up Listed Companies Meeting' chaired by Chairman Kim on the 12th. At this meeting, Chairman Kim reaffirmed the commitment to promote value-up programs including tax incentives. Before Chairman Kim’s appointment, the two institutions expressed different voices regarding the corporate value-up program. The FSC emphasized that the policy direction would focus on incentives rather than penalties. However, two days after the FSC announcement, the FSS Governor suggested strengthening penalties by considering delisting listed companies that did not meet certain conditions such as shareholder returns, which sparked controversy.

The market and sectors were confused. It appeared as if the FSS was leading issues related to policies such as win-win finance, value-up penalties, and abolition of breach of trust charges. As a result, both the media and the market paid more attention to the FSS Governor’s actions. Although no one said it aloud, it was a shared feeling. However, since Chairman Kim’s appointment, uncoordinated messages have not been heard.

After the first official meeting between Chairman Kim and the FSS Governor, the FSC stated in a press release that "Chairman Kim Byung-hwan of the FSC and Governor Lee Bok-hyun of the FSS have agreed to promote financial administration by closely communicating and coordinating to further enhance market trust." This can be interpreted as the financial authorities themselves having a sense of the problem.

The FSC has the obligation to nurture the financial industry along with regulation. The FSC, responsible for policy, should adopt a cautious and meticulous approach, like 호시우보 (虎視牛步, meaning "watching like a tiger and walking like an ox"). On the other hand, the supervisory agency, the FSS, is like a sword. Inspection and investigation tasks require speed and decisiveness. And a sword is more formidable when it knows its role and acts accordingly. Although the two institutions need close cooperation on policies, they are distinctly different organizations.

When policy and supervision raise their voices in their proper places, the financial authorities’ command (令) stands firm. The one who should establish this command is the head of the policy authority. It will be one month since Chairman Kim’s appointment on the 31st. The financial authorities face considerable pending issues such as value-up, real estate project financing (PF) restructuring, capital market advancement, and win-win finance. During Chairman Kim’s tenure, there should be no confusion in the division of roles or messages among the authorities.