As the outline of the financial supervisory system reform plan promoted by the Lee Jae-myung government gradually emerges, securities companies are increasingly sighing. Reflecting the fast capital flows characteristic of the industry, they have crunched the numbers on various possibilities, but no matter how much they analyze, the industry believes the cost-benefit ratio is not favorable. This is due to the various expenses expected to increase from the reform of the financial supervisory system.

The Presidential Committee on Policy Planning reported the financial supervisory system reform plan to the presidential office on the 3rd. The draft reported that it is known to contain a 'small-scale' reform plan that separates and establishes the Financial Consumer Protection Agency (금소처) from the Financial Supervisory Service (FSS). This marks a pivot from the initial plan that intended to establish both the Financial Supervisory Commission and the Financial Consumer Committee, placing the FSS and the Financial Consumer Protection Agency under each.

Chairperson Lee Han-joo is attending the 3rd plenary meeting held on the 30th of last month at the Presidential Committee on Policy Planning in Jongno-gu, Seoul./Courtesy of News1

Regardless of the method, the establishment of the Financial Consumer Protection Agency is expected to proceed as planned. The concerns of the financial investment industry are deepening precisely at this point. It is about the increase in 'expense' due to the separation and establishment of the Financial Consumer Protection Agency.

In the early discussions regarding the reform, there were somewhat nebulous concerns such as, 'Will the increased number of authorities lead to stronger regulations or disruptions in business due to regulatory misalignment?' However, recently, voices expressing concern about increasing expenses have become more concrete. There are fears that the contributions paid to regulatory authorities will effectively increase, akin to a tax.

The FSS is a private organization, but there are no separate revenue-generating businesses. Although the government provides some budget support, this is only partial; the rest consists of expenses incurred when the FSS supervises and inspects financial companies, including supervisory contributions and fees for submitting securities registration documents.

Recently, these fees have increased sharply. The supervisory contribution was 265.4 billion won in 2021, 287.2 billion won in 2022, 298 billion won in 2023, and 302.9 billion won in 2024, with 330.8 billion won allocated for this year. The contribution, which typically increases by around 10 billion won annually, has surged by nearly 30 billion won in just one year. This year's supervisory contribution makes up 85% of the FSS's entire budget. While the introduction of contributions from virtual asset businesses significantly impacted this, the rates for contributions related to the investment industry have also steadily increased.

The tension in the industry regarding the separation and establishment of the Financial Consumer Protection Agency also stems from this. If the Financial Consumer Protection Agency is established separately from the FSS, the contributions paid to the FSS itself may decrease; however, as contributions will eventually be levied on the Financial Consumer Protection Agency, the total contribution amount could increase. Particularly, if the Financial Consumer Protection Agency is granted inspection authority, the likelihood of imposing contributions rises.

A securities industry official said, 'The contribution itself is not an enormous burden, but it accounts for a significant portion of our expenses,' noting that 'while the industry's competitive pressures have left profitability stagnant, concerns about rising expenses are significant.'

Some speculate that the separation and establishment of the Financial Consumer Protection Agency might not be part of a 'job creation policy.' This reform of the supervisory system originated from President Lee Jae-myung's commitment to 'strengthening consumer protection.' Ultimately, if the Financial Consumer Protection Agency is established, the industry may also need to strengthen relevant personnel or establish a separate system.

Another official remarked, 'Recently, as the accountability structure has been enacted to strengthen internal controls, both monetary and non-monetary expenses have increased; if consumer protection is further strengthened, follow-up measures like the deployment of dedicated personnel will also be necessary,' adding that 'while we understand the intent behind strengthening internal controls and consumer protection, ultimately the expenses will be borne by consumers.'

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