[1mm Finance Talk] FSS Chief’s Emphasis on ‘Internal Communication’ Raises Industry Tensions... Growing Concerns Over Excessive Regulation

Interpreted as 'Pressure for Results,' Not Just 'Harmony'
Concerns Grow Over Excessive Sanctions After 2 Trillion Won ELS Fines
Areas Remain Where Dispute Resolution Alone Is Insufficient
Responding to Cyber Incidents Requires More Personnel... Increasing Burden for FSS and Financial Firms

Lee Chanjin, Governor of the Financial Supervisory Service, has been emphasizing internal "communication" following an organizational restructuring focused on consumer protection. However, within the Financial Supervisory Service, this is being interpreted less as a general principle and more as a directive to "deliver results." Concerns are also spreading within the financial sector that increasing pressure for consumer protection achievements may lead to excessive regulatory actions. There is skepticism about whether the Governor's strong directives will actually result in tangible outcomes, such as a reduction in cyber incidents or the prevention of another case of misselling equity-linked securities (ELS).

Lee Chanjin, Governor of the Financial Supervisory Service, is delivering a New Year's address at the '2026 Opening Ceremony' held on the 2nd at the Financial Supervisory Service headquarters in Yeongdeungpo-gu, Seoul. Financial Supervisory Service

According to the Financial Supervisory Service on January 5, Governor Lee emphasized the importance of internal communication during his New Year's address at the '2026 Opening Ceremony' held at the headquarters in Yeongdeungpo-gu, Seoul, on January 2. He stated, "The main focus of this organizational restructuring has been to enhance the feedback functions among supervision, inspection, and dispute resolution," adding, "The most fundamental and essential basis for this is smooth communication and cooperation." He further urged employees, "Please work together to establish a horizontal organizational culture where colleagues actively share opinions across generations, ranks, and departments, and listen to and respect each other." This marks the first time in seven years, since former Governor Yoon Sukheon in 2019, that a New Year's address by the Governor has focused solely on internal communication, without mentioning engagement with external parties such as the market or government ministries.

Within the Financial Supervisory Service, many interpret these remarks not simply as a call for improved organizational culture, but as a message demanding concrete results. Since the dispute resolution function, which serves as a means of consumer protection, has been transferred to the supervisory department responsible for products and systems, there is a sense of pressure to deliver visible outcomes in reducing financial incidents and strengthening internal controls within financial companies.

However, there are also concerns that, despite the restructuring and encouragement, it will be difficult to enhance the actual effectiveness of supervision in certain areas. The financial sector believes that, in cases such as hacking and other cyber incidents, merely transferring the dispute resolution function is insufficient, and that it will be difficult to respond effectively without increasing supervisory staff.

The Financial Supervisory Service has acknowledged this by retaining the heads of key departments when making director-level appointments on December 22, focusing on issues such as information technology (IT), virtual assets, and market disruption. Seven directors, including Lee Jongoh, Deputy Governor for Digital and IT, and Lee Seungwoo, Deputy Governor for Disclosure Investigation, remained in their positions. At the time, the Financial Supervisory Service explained, "We maintained appointments for departments urgently responding to issues such as IT information leaks, virtual asset hacking, stock price manipulation, and sharp exchange rate increases."

A representative of the Financial Supervisory Service commented, "With issues such as the Lotte Card hacking disciplinary review, Financial Services Commission meeting procedures, and the possibility of inspections of Coupang's financial affiliates still pending, it was inevitable to retain the IT department head."

The problem is that increasing personnel for responding to cyber incidents is virtually impossible without approval from the Financial Services Commission. This is not an issue limited to the IT department. The Financial Services Commission has also shown caution regarding expanding the Financial Supervisory Service's special judicial police authority for financial crimes affecting the public.

In his New Year's address, Governor Lee stated, "We will build an artificial intelligence (AI)-based investigation system to concentrate our investigative capabilities on urgent and significant cases such as stock price manipulation," and "We will innovate the investigation process along with strengthening personnel." However, no specific implementation plan has been presented yet.

In the financial markets, there are growing concerns that the Governor's consumer protection-focused message may lead to excessive regulatory actions. A prime example is the recent case involving the misselling of Hong Kong H-share Index (Hang Seng China Enterprises Index, HSCEI) ELS products, one of the most pressing issues in the financial sector, where the Financial Supervisory Service notified financial institutions of fines totaling approximately 2 trillion won, the largest amount ever imposed.

Across the entire financial sector, including banks, insurance, securities, and card companies, there are expectations that the strengthened dispute resolution stance of the Financial Supervisory Service will not only increase the number of consumer dispute applications but also raise the level of sanctions against institutions. This is due to Governor Lee's policy of expanding the scope of supervision beyond product sales to include manufacturing, design, and review stages. As a result, the burden of management and supervision will inevitably increase for both Financial Supervisory Service employees and product managers and field staff at financial companies. In the event of an incident, the level of sanctions imposed on financial companies is also likely to be higher than before.

An insurance company representative said, "On the ground, there's even a joke that the Governor should be called the 'Financial Consumer Protection Governor' instead," adding, "There are significant concerns that dispute-related work will increase and become more demanding." Another financial industry official commented, "The stronger the Governor's encouragement message becomes, the more likely it is that complaints and dispute applications will also increase," and "There are concerns that the intensity of supervision, from preemptive oversight to post-incident sanctions, may rise across the board."