– The government has decided to postpone the designation of a public institution for the Financial Supervisory Service, which has been on the forefront of poor supervision of private equity funds and negligent management. Instead, it was conditional on implementing strong organizational improvement measures, such as further reducing the proportion of higher ranks. In this regard, experts are expressing concern, saying that the “prevention of the FSS and restructuring” may be a short-lived measure. The Ministry of Strategy and Finance announced on the 29th that it had held the Public Institution Steering Committee (Kongwoon Committee) presided over by Second Vice Minister Ahn Il-hwan at the Seoul Government Complex, and decided to defer the designation of a public institution by the FSS.
The Financial Supervisory Service, which was designated as other public institutions in 2007, was lifted from public institutions in January 2009 for independence and autonomy in supervisory work. Since then, in 2017, after the Board of Audit and Inspection pointed out the FSC’s negligent management and hiring corruption, the issue of public institution designation has been raised every year. The public agency designation agenda for the Financial Supervisory Service was also reviewed at this time. First of all, the KFTC evaluated that the Financial Supervisory Service is generally in normal implementation of the reservation conditions designated by existing public institutions.
In 2018, the Gongwoon Committee reserved the designation of public institutions conditionally on △ eradication of hiring corruption △ management disclosure at the level of public institutions △ strict management evaluation △ solving the problem of inefficient organizational operation.
However, the need for government control was also strongly raised as the FSS was recently in charge of the insolvent supervisor of Lime and Optimus private equity funds, and the need for government control was raised at the same time, as controversies constantly emerged, such as receiving a long-term dispatch without pay for more than 10 years from a private financial company.
After fierce discussions, the Gongun Committee decided to defer the designation of the FSS as a public institution, but impose stricter conditions. An official from the Ministry of Science and Technology explained, “It was a decision that comprehensively considered the recent cases of poor supervision and independence in the execution of financial supervision.”
First of all, the Gongun Committee demanded that the proportion of the FSS’s higher ranks (level 3 or higher) be further reduced. In 2019, the Gongwoon Committee reserved the designation of public institutions under the condition of reducing the top rank of the Financial Supervisory Service to 35% within the next five years, but it is said to be further reduced.
In addition, a total of 7 overseas offices including Washington will be restructured. In particular, the abolition of the Washington office is strong. The auditor pointed out to the Washington office, “There is a local FSS office in New York, where 25 overseas branches of domestic financial institutions are located, and we maintain an office in Washington, where there are no overseas branches.” In addition, the Gongwoon Committee decided to expand the proportion of quantitative indicators among the management performance evaluation indicators of the Financial Supervisory Service from the previous 30% to 40%. The aim is to secure objectivity of evaluation by reducing the proportion of qualitative indicators. In addition, if fraudulent behavior is identified during the evaluation process, the company decided to raise the fairness of the management performance evaluation by refunding the incentives. In addition, the Financial Supervisory Service’s customer satisfaction survey, which is currently a method of selecting some financial companies and conducting irregular surveys, has been reinforced at the level of public institutions, and the results will be reflected in the management evaluation. The Financial Services Commission plans to report the detailed implementation plan of the reinforced reservation conditions to the Gongun Committee in the first half of this year. The Kongwoon Committee plans to actively review the designation of public institutions if the results of future implementation are insufficient.
However, experts are agreeing that it will be difficult to resolve the FSS’s negligent management and troublesome problems under such strengthening conditions. Ewha Womans University professor Park Jeong-soo said, “Reducing the proportion of high-ranking jobs and eliminating overseas offices will not solve the FSS’ negligent management and troublesome problems,” he said. “It will be improved substantially only when it is designated as a public institution and is under strong government control.” Professor Park expressed serious concern that “if the Financial Supervisory Service commits poor supervision and negligent management again this year due to the decision of the Public luck Commission, the damage will be intact to the public.” If the Financial Supervisory Service is designated as a public institution, the budget and manpower must be approved by the Ministry of Science and Technology. In particular, for lazy management, they will be responsible for that.
[윤원섭 기자 / 양연호 기자]
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