[Financial Microscope] FSC Focuses on On-Site Roundtables Ahead of Organizational Restructuring

FSC Holds On-Site Roundtables Like the President
Demonstrates Policy Capability with June 27 Loan Regulations
National Policy Planning Committee to Announce Government Restructuring on August 13

Since the inauguration of the Lee Jaemyung administration, the Financial Services Commission (FSC) has been drawing attention by immediately reflecting field opinions in its policies after visiting sites in person. While the FSC explains that this is to create effective policies for the recovery of people's livelihoods, some interpret it as an aggressive attempt to prove its necessity ahead of an upcoming organizational restructuring announcement.

According to financial authorities and the financial industry, the FSC held a closed-door "on-site roundtable on managing individual overdue claims" on the morning of July 29. This meeting was organized to gather opinions on improving the system for selling and collecting overdue claims, which have been subject to criticism. The FSC plans to compile the discussions and prepare measures to improve the system.

The FSC began visiting sites after completing a town hall meeting in the Chungcheong region on July 4. At that event, President Lee Jaemyung instructed the accompanying FSC officials, "Be sure to ask, 'If you were the financial authority, what would you do?'."

Since then, the FSC has been holding various on-site meetings, including: ▲ a roundtable to eradicate voice phishing ▲ a closed-door meeting on expanding productive finance ▲ an on-site roundtable to address financial difficulties for small business owners using artificial intelligence (AI) and data ▲ and a communication roundtable on financial difficulties for small business owners.

The roundtable with the Korea Federation of Micro Enterprise is a representative example of reflecting field voices in policy. The reporter had expected the roundtable to be a mere formality, but the outcome was completely different. The FSC handed over the floor to 15 small business owners from various regions across the country. Suggestions raised at the meeting?such as allowing individual business owners to refinance loans, easing early repayment fees, and making the right to request interest rate reductions more realistic?were immediately put under review.

FSC Immediately Implements Presidential Directives

In particular, the FSC has been convening on-site roundtables and reflecting them in policy immediately whenever the president issues directives or mentions financial-related policies. Some inside and outside the FSC interpret this as an effort to prove its competence and necessity through performance, especially with the organizational restructuring announcement imminent.

On July 15, the FSC visited a Woori Bank branch to inspect the operation of "heat shelters." This was in response to President Lee's request five days earlier at a senior aides meeting to check on "heat shelters" and other facilities to alleviate the suffering of vulnerable groups during the heatwave.

The FSC also announced plans to expand the number of "financial sector heat shelters" to 14,000 within the year. Currently, there are about 9,600 such shelters. Furthermore, the FSC decided to extend the operation of these shelters, which was originally scheduled to end in late August, until the end of September.

When President Lee criticized banks' "interest profiteering" on July 24, the FSC convened an unscheduled closed-door meeting on expanding productive finance just four days later. At this meeting, the FSC listened to the banks' opinions and announced that it would soon unveil improvements to the risk-weighted assets (RWA) system.

The RWA system requires banks to assign different risk weights to their loan assets and hold more capital accordingly. Under current regulations, mortgage loans are considered safer assets than corporate loans and are therefore subject to less capital regulation. The FSC plans to adjust the risk weights for mortgage and corporate loans to ensure that financial resources can be supplied to growth industries.

Changing Atmosphere in Financial Authority's Organizational Restructuring... Strong Voices for Major Changes

As the FSC works with utmost dedication, the atmosphere surrounding the organizational restructuring of the financial authorities has also changed. The National Policy Planning Committee is currently discussing government-wide organizational restructuring. As part of this, transferring the FSC's domestic financial policy functions to the Ministry of Economy and Finance and handing over supervisory functions to a newly established Financial Supervisory Commission are under consideration.

However, after President Lee praised the FSC for "achieving significant results through appropriate regulation" and promoted an internal candidate to the previously vacant position of FSC vice chairman, a shift in mood has been detected. There are also reports of differing opinions between the National Policy Planning Committee and the Presidential Office regarding the restructuring of the financial authorities.

Meanwhile, it is noteworthy that ten lawmakers, including Yoon Junbyung of the Democratic Party, have submitted a bill to amend the Government Organization Act. The amendment proposes transferring the international finance functions of the Ministry of Economy and Finance to the FSC, effectively expanding the FSC's organization.

From the FSC's perspective, there is still no room for complacency. The overall direction of the restructuring has already been set, and voices calling for the dissolution of the FSC still exist within the National Policy Planning Committee. This is why some explain that the FSC, having demonstrated its policy capabilities, is focusing on holding on-site roundtables and creating highly effective policies.

Meanwhile, the National Policy Planning Committee is expected to announce the final plan on August 13 after further discussions on organizational restructuring, including the financial authorities, taking into account the recently raised opinions.