[1mm Finance Talk] Different Atmospheres at MOEF and FSC Ahead of Organizational Restructuring

MOEF to Separate Budget Organization
Ministerial Positions Expected to Increase
FSC Faces Uncertainty Over Its Future
Rising Unrest Among Assistant Directors

Yonhap News Agency

As the National Policy Planning Committee pushes for a reorganization of the financial authorities, a subtle difference in sentiment is emerging within the Ministry of Economy and Finance (MOEF) and the Financial Services Commission (FSC). While MOEF expresses concern about separating its budget functions, there is also a sense of anticipation regarding the potential expansion of its organization. In contrast, the FSC is experiencing growing internal unrest amid speculation about its possible dissolution.

Will the independence of the Budget Office increase the number of ministerial positions?

The Lee Jaemyung administration is considering separating MOEF's budget formulation function and dividing it into a Planning and Budget Office and a Ministry of Finance and Economy, while transferring the FSC's financial policy functions to the Ministry of Finance and Economy. As President Lee appointed vice ministers earlier than expected on June 10 and nominated key ministers on June 23, there is speculation that the reorganization of economic ministries could take place as early as July or August.

Within government circles, some say that the establishment of the Planning and Budget Office would not be disadvantageous for MOEF. Since a new economic ministry would be created, public officials specializing in economic affairs, such as those from MOEF, would inevitably stand out.

The Grade 5 civil service exam is largely divided into general administration and economic administration tracks. The economic administration track, often referred to as the "flower" of the civil service exam, leads to appointments in economic ministries such as MOEF, the FSC, and the Fair Trade Commission. While it is possible to transfer from other ministries to economic ministries, it is not easy. If the Planning and Budget Office is established, it is expected that economic administration officials will be prioritized for transfer.

An official in Sejong City said, "The minister and vice minister positions at the Budget Office will inevitably be filled by economic administration officials, effectively doubling the number of political appointments (minister and vice minister posts) available to MOEF. From MOEF's perspective, the reorganization is not necessarily a bad thing."

The source of MOEF's significant influence has been its control over the "budget." Since it holds the purse strings for each ministry, not only other central ministries but even the National Assembly could not easily challenge it. A notable example was last year's power struggle between the Democratic Party and MOEF over the livelihood recovery support fund. Even if the budget function is separated, it is highly likely that economic administration officials will continue to handle the work, leading to the assessment that "the number of political appointments at MOEF will simply increase."

In particular, if the Ministry of Finance and Economy is merged with the FSC, not only will it gain more policy authority, but the number of director-general and director-level positions will also increase. For MOEF, which suffers from chronic personnel bottlenecks, this is not a disadvantage. A financial industry insider said, "Although financial policy is a highly specialized area, MOEF already has an international finance department. Traditionally, many officials with international finance backgrounds have transferred to the FSC and risen to minister or vice minister positions, so MOEF may view the FSC's work as originally its own."

FSC tightens internal discipline amid growing unrest

The FSC, which is responsible for domestic financial policy and financial supervision policy, is now facing speculation that it may be dismantled. The most likely scenario is that domestic financial policy will be transferred to MOEF, while financial supervisory functions will be handed over to the Financial Supervisory Service.

As the likelihood of reorganization increases, FSC officials are unable to hide their unease. In particular, it is known that junior officials such as assistant directors are deeply concerned. An FSC assistant director said, "We have decided not to comment on the reorganization," but added, "It is certainly the biggest issue internally at the moment."

There are clear reasons for the FSC's agitation. Although the FSC is a "commission" and not a "ministry," it oversees around 40 statutes. The FSC does not only oversee the banking, secondary financial, securities, and insurance industries. Its responsibilities extend to real estate (household loans), corporate restructuring, project finance real estate, small business owners, and virtual assets, among others. In other words, while the FSC may not be a "ministry" in name, it often plays a practical role in major issues involving financial resources, even if it does not take center stage.

As a result, the FSC is an organization with long working hours and high work intensity, and it suffers from personnel bottlenecks similar to MOEF. However, because it handles specialized "finance" policies and is based in the Government Complex Seoul, it is highly favored by younger officials.

As the reorganization is now being seriously discussed and unrest among assistant directors grows, the FSC has reportedly begun efforts to maintain internal discipline. A senior FSC official is said to have told assistant directors, "The economic situation is grave, and our responsibilities are clear. Do not be swayed by talk of reorganization and fulfill your duties."

However, until the fate of the organization is decided, the unsettled atmosphere is expected to continue. A financial industry insider said, "If it is decided that the FSC will be merged with MOEF, there will likely be an increase in assistant directors leaving the organization. While those at the director level and above were originally part of MOEF before becoming independent with the FSC, since the 50th class of the civil service exam, many have chosen the FSC in Seoul without any prior connection to MOEF, so there are some assistant directors who are considering switching their career paths to law school."