Delayed Restructuring of Financial Authorities... Financial Services Commission Must Justify Its Existence

No Details on Reorganization in the August 13 Committee Briefing
Presidential Office Deliberates on Financial Services Commission Restructuring
Additional 2-3 Weeks of Discussion Expected
President Lee Draws Attention with Continued Praise

The National Policy Planning Committee decided on August 13 not to mention the government reorganization plan during its public briefing. There are internal disagreements within the committee regarding the direction of restructuring the financial authorities, and as President Lee Jaemyung has repeatedly praised the Financial Services Commission's (FSC) policies, there is speculation that the reorganization of the financial authorities could be prolonged. Given that the FSC has gained additional time, it is now expected to prove its value to the public.

According to political and government sources on August 13, the committee will announce 123 national policy tasks at the public briefing that day. However, the reorganization plan is not included in these announcements.

A source familiar with the committee's situation stated, "The Presidential Office has not provided a response regarding the reorganization plan," and added, "The reorganization plan will not be included in the public briefing."

There are two main reasons cited for the delay in reorganizing the financial authorities. First, there are internal disagreements within the committee regarding the direction of the reorganization. While there is consensus on separating the budget function from the Ministry of Economy and Finance, opinions differ significantly regarding the future of the FSC, both in terms of the general direction and the details.

The source explained, "Even within the committee's reorganization task force, there are negative views about dismantling the FSC," and added, "Since suddenly dismantling a government organization is a major issue, it is necessary to listen to a wide range of opinions before making a decision."

Moreover, the fact that President Lee is carefully considering the reorganization of the financial authorities has also contributed to the slowdown. The committee reported the reorganization plan to the Presidential Office at the beginning of this month, but it is understood that no response has been received yet.

Meanwhile, President Lee has been publicly praising the FSC's policies. At the cabinet meeting on June 24, President Lee directly mentioned the FSC's policy on securitizing death insurance payouts, saying, "You have created a good system, but it seems many citizens are unaware of it."

When the FSC announced the June 27 loan regulations, President Lee publicly commended the FSC Vice Chairman, who was responsible for the policy, by having him stand up at the Chungcheong region town hall meeting on July 4. At the cabinet meeting on July 29, President Lee also praised FSC Chairman Kim Byunghwan's proposal to impose financial penalties on companies involved in serious industrial accidents, saying, "It seems effective. The FSC's proposal is interesting."

This indicates that the FSC is heavily involved in major government policies and has demonstrated its policy capabilities since the launch of the new administration. In fact, the FSC is responsible for many of the president's campaign pledges, including household debt management, the bad bank initiative, eradicating stock price manipulation, the advanced strategic industry fund, transitioning to productive finance, and establishing insurance reform. As a result, there are growing voices that transferring the FSC to the Ministry of Economy and Finance would do more harm than good.

Some interpret that political considerations by the Presidential Office have also played a role. With the Korea-U.S. summit scheduled for August 25 and important issues such as U.S. tariffs pending, the reorganization discussion is inevitably being pushed back. It is reported that the committee will report the reorganization plan to the Presidential Office again after the Korea-U.S. summit.

From the FSC's perspective, it has effectively gained an additional two to three weeks. However, it cannot afford to be complacent. A source familiar with the committee's situation said, "It appears that the Presidential Office wants the FSC to prove its value from the public's perspective," and added, "If the FSC develops financial policies that citizens can feel in their daily lives, the discussion on reorganization may change."

In this context, the FSC appears to be holding a series of on-site meetings and immediately reflecting the discussions in its policies. The FSC is introducing policies tailored to public expectations, such as easing industry restrictions for the New Start Fund and introducing customized credit evaluations for small business owners based on feedback from these meetings.

In particular, on August 11, the FSC held an unscheduled briefing to announce the implementation of a "credit amnesty." It decided to erase delinquency records for debts of up to 50 million won that occurred after 2020, provided the entire amount is repaid by the end of this year. This is also seen as a policy that citizens can tangibly experience.

A committee official stated, "The decision on government reorganization is up to the president," and added, "Nothing has been finalized yet."