Put FSS on right track to reform

Mr. K is president of a small financial company that was established last year. He said that he was surprised to hear the remarks of officials at the Financial Supervisory Commission when he visited the office to report the foundation of the company.

"If you wish to engage in a financial service business, you have to report everything to us first,¡± Mr. K quoted the FSS officials as saying. ¡°You would be in trouble if other organizations know about what's happening in your company ahead of us."

It means that he had a hard time because of not reporting the company's foundation to the FSS beforehand.

It seems that officials working for financial institutions have complained about the FSS in that they faced difficulties by challenging the powerful organization.

Following the so-called ¡°Chung Hyun-Joon Gate,¡± company executives tend to criticize FSS officials' attitude without reservation. And they are demanding that the FSS needs to be reformed as soon as possible.

The government plans to carry forward reform through the Ministry of Planning and Budget. It will revise relevant laws by the end of this year and implement it from the first quarter of 2001.

Experts say that the reform has to be made in a way to reduce the powerful authority of the FSS and trim its organization. Among the suggestions are to transfer the FSS's authority to license financial institutions to the Ministry of Finance and Economy or separate the function of supervision and examination.

However, the reaction of the financial institutions is saucy. The government, which initially showed strong will for reform, is the same. In fact, bankers are not expecting any drastic changes in the FSS. Why? They believe nothing much will change even if the FSS undergoes reform.

They are questioning whether there will be any fundamental plans for reform. It is because the FSS was born through an integration of three supervising organizations for banking, securities and insurance as part of the reform efforts.

The reform of supervising organizations is important, but the way that it supervises also has to be changed. The FSS tries to control all financial information, involving itself in all financial activities. It seems that the FSS understands it can even control the financial market, although its responsibility is to prevent insolvency of financial institutions through supervision.

It is required that FSS officials will have to change their way of thinking. Currently, the FSS officials are complaining about their involvement in financial scandals. What is more, they reportedly claim that the FSS is vital for financial restructuring.

However, it is time that the FSS needs to reflect on itself, rather than worrying about insolvency of corporations or financial institutions. It is certain that restructuring might fail unless there is reform in the FSS. How about transferring the job of financial supervision to a private organization?

Park Young-Gyun parkyk@donga.com