Gov¡¯t to revamp financial supervision mechanism; FSS to be fully reorganized by year-end

The government has decided to carry out a comprehensive reorganization of the Financial Supervisory Service (FSS) by the end of the year in a reaction to the illegal loan scandal involving Dongbang Mutual Savings and Finance Co.

The projected reform of the financial oversight system features, among others, a plan to separate the chairmanship of the Financial Supervisory Commission (FSC) and the chairmanship of the FSS now held by one person.

Under the planned separation of the leadership of the two organizations, the FSC will deal mainly with financial supervision policies, while the FSS will handle financial inspections.

The reform plan of the financial watchdog was confirmed in an inter-ministry economic policy coordination meeting presided over by Finance-Economy Minister Jin Nyum on Monday.

To carry out the retooling programs, the government will form a special task force to work out detailed plans for the reform of the financial supervision system and the reorganization of the FSS by the end of the year, an official at the Ministry of Economy and Finance said.

Major ideas of the reform include a plan to reinforce the supervising system in such a way as to entrust related agencies such as the Bank of Korea, Korea Deposit Insurance Corp. and Financial Institutions Association with inspections.

Others include reestablishing the functions of the FSC and FSS such as the separation of the supervision policies and inspections and a plan to revamp the organization and the personnel management of the FSS.

The government is also considering granting responsibility and duties akin to those of government officials to the executives and officials of the FSS.

The government, at the same time, decided to supervise stock transactions, including those which are not listed or registered, and bonds owned by the FSS employees and the fluctuations of their assets.

The FSS ranking officials above the second class will be obliged to register their personal property with related authorities under the reform plan, according to the official.

The government will restrict FSS officials from acquiring stocks which are not listed or registered and investing in private funds, and any change in their possession of stocks should be reported to the authorities immediately.

In order to raise the efficiency of management guidance or inspection business on financial institutions for people in the low-income brackets such as mutual savings and finance companies and credit cooperatives, the government will prepare plans to renovate the FSS¡¯s financial supervision system and its organization by the end of the year.

Minister Jin told reporters that the government will confirm the plan to reorganize the FSS, including upgrading it to the Office of Financial Supervision, after a careful study lasting about two or three months.