Lee Jae-myung, the presidential candidate of the Democratic Party of Korea, is greeting citizens after finishing a campaign rally at the Starfield Hanam in Hanam, Gyeonggi Province, on Mar. 2. /Courtesy of News1

Lee Jae-myung, the Democratic Party of Korea's presidential candidate, hinted at restructuring the economic and financial ministries, putting the Financial Services Commission in a precarious position. The possibility of separating the functions of the Ministry of Economy and Finance and the Financial Supervisory Service, and establishing new organizations, has increased, but the critical issue is the Financial Services Commission. If financial policy functions are transferred to the Ministry of Economy and Finance and financial supervisory functions are handed over to the Financial Supervisory Service, the Financial Services Commission may have no choice but to disband, creating a sense of crisis within the organization.

According to the financial sector on the 3rd, Lee's campaign is discussing the reorganization plan for the Financial Services Commission. While the restructuring blueprint for the Ministry of Economy and Finance and the Financial Supervisory Service has been significantly fleshed out, the status of the Financial Services Commission remains undecided. On a YouTube broadcast last month on the 28th, Lee reiterated the partitioning stance of the Ministry of Economy and Finance, noting, "The Financial Services Commission is mixed up, handling both supervision and policy tasks. There seems to be a need to separate and organize them."

Lee stated in the campaign pledge book that the Ministry of Economy and Finance will be reorganized to focus on establishing and operating economic policies. The plan mainly involves partitioning the budget-planning and economic-fiscal policy functions of the ministry to disperse authority. Immediately after accepting the presidential nomination, Lee said, “There are significant criticisms that the Ministry of Economy and Finance is acting like a king. I partially agree.” The budget-planning function of the ministry is likely to be transferred to a newly established “Ministry of Planning and Budget,” with the remaining functions under the newly named “Department of Finance and Economy.” Democratic Party lawmaker Oh Ki-hyeong and others have proposed an amendment to the “Government Organization Act” that includes such changes.

Graphic by Son Min-kyun

The Financial Supervisory Service is also set to be divided into two. The establishment of a new “Consumer Protection Bureau” to transfer consumer protection functions is reportedly almost confirmed. The remaining financial supervisory functions may be merged with the Financial Services Commission to revive the “Financial Supervisory Commission (FSC),” a model that existed before the establishment of the Financial Services Commission in 2008. This structure would perform both the 'deliberation and resolution' functions currently under the Financial Services Commission and the 'execution' functions of the Financial Supervisory Service.

If so, only the financial policy function would remain in the Financial Services Commission, and if this too is transferred to the Department of Finance and Economy, the Financial Services Commission will be dissolved. The amendment to the law on the establishment of the Financial Services Commission, proposed by Democratic Party lawmaker Kim Hyun-jung last year, includes the establishment of the Financial Supervisory Commission along with the transfer of the financial policy function to the Ministry of Economy and Finance.

The scene of the Financial Services Commission. /Courtesy of News1

However, there is also a considerable argument for caution. Concerns arise over the potential overlap of tasks between ministries, power struggles, and unclear responsibilities. In a press conference last month, Financial Services Commission Chairman Kim Byung-hwan, emphasizing his personal opinion, stated, “While structural considerations are important, it is more desirable to make minor adjustments and coordinate gradually to enhance agency operations.”

There is considerable resistance from within the financial bureaucratic group regarding eliminating the ministerial-level Financial Services Commission. A financial authority official said, “There is significant opposition from current and former officials from the Financial Services Commission,” adding, “Abolishing the Financial Services Commission will not be easy.” In the financial sector, transferring the international finance and foreign exchange market tasks, managed by the Ministry of Economy and Finance, to the Financial Services Commission is considered an alternative. A Democratic Party representative commented there is “no confirmed decision yet.” Another official noted, “The restructuring of economic and financial ministries is expected to take time.”

The mood within the Financial Services Commission is unsettled. A commission official expressed a significant sense of crisis, noting, “The organization is at a crossroads of existence,” and added concerns about issues like staff turnover due to the transfer to Sejong.