SEOUL, Nov. 7 (Yonhap) -- South Korea's two financial regulators have been under pressure from presidential candidates to revamp their supervisory frameworks to be more efficient ahead of the presidential election next month, officials said Wednesday.
Local academics and lawmakers have raised their voices against the Financial Services Commission (FSC), the top financial watchdog established by the government, arguing for either a break-up or dissolution of the bureau and questioning the FSC's independence and political impartiality.
The FSC, set up in 2007 under the President Lee Myung-bak administration, holds the authority to not only shape rules for the local financial market but also to supervise foul play by financial firms and impose restrictions.
On the other hand, the Financial Supervisory Service (FSS) is a private entity by law that carries out inspections and monitoring on financial firms based on the policy made by the FSC.
The establishment of two watchdogs, one public and the other private, has often resulted in overlaps in inspections and led to disagreements between the two chiefs of each institution over some policies.
The latest spark came as FSS Gov. Kwon Hyeok-se has been explicit about the need for a government-led rescue plan to ease the burden of delinquent borrowers from the low-income group. In contrast, Chairman Kim Seok-dong of the FSC has strongly disapproved of such an idea, ruling out government intervention with taxpayer money.
With the presidential election less than a month away, presidential candidates came up with their own plans over the future of the regulatory offices, but most of them have proposed to dissolve the FSC.
Independent candidate Ahn Cheol-soo pledged to transfer the policymaking authority to the finance ministry from the FSC and leave the full supervising power to the FSS. Opposition party candidate Moon Jae-in proposed a similar scheme to split the FSC into two entities. Rep. Park Geun-hye, the ruling Saenuri Party's candidate, supports retaining a state-run regulatory office but agrees with downsizing the FSC.
Experts said the principle underlying the issue is that a financial market controlled by bureaucracy could hinder proper inspections and supervision.
"The major problem of our financial regulatory system is that the FSC handles both policymaking and supervisory work. Only Japan and we have such a system," said Kim Hong-ki, a law professor at Yonsei University.
They noted that the current system runs counter to the international standard framed by the Basel Committee on Banking Supervision, which stresses political neutrality of the financial watchdog.
FSC Chairman Kim expressed regrets over the issue at a few public appearances, refuting the idea of the FSC's tamed independence.
He told reporters at a seminar earlier in the day that "changing the financial regulatory system is no cure-all," adding that government offices have been revamped every five years with a new president.
"The FSC played a vital role as an independent financial regulator in taking full and prompt counteractions at the time of the 2008 financial meltdown," Kim added.
The heated debate also touches on the issue of splitting the consumer protection office from the supervision sector, aimed at separating the two areas that often cause conflicts of interest, according to global standards.
The government has been reluctant to introduce such a system, on grounds of inefficiency. The main presidential hopefuls, in contrast, seem to be giving weight to the break-up option.
"The current regulating system is so focused on keeping banks' health intact that it overlooks consumer rights," said Rep. Kim Ki-sik of the opposition Democratic United Party at a recent seminar.
According to data by the International Monetary Fund, South Korea ranked 52nd out of 55 countries examined on the extent of the government's intervention in regulatory institutions.
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