Ruling Party Revives Plan to Split Korea's Financial Regulator

Rep. Oh Ki-hyoung of the ruling Democratic Party of Korea said he would push for discussions on separating the Financial Services Commission's financial industry promotion functions from its supervisory functions, citing the controversy over single-stock leveraged exchange-traded funds. The dispute over single-stock leveraged ETFs appears to be triggering a revival of dormant plans to restructure the FSC, going beyond the resignation of former Presidential Policy Chief Kim Yong-beom.

Oh, the ruling party's chief negotiator on the National Assembly's Finance and Economy Committee, revisited proposals to overhaul the financial supervisory framework in a radio interview on the 2nd. The overhaul had collapsed during last year's government reorganization process.

"We have some soul-searching to do on this," Oh said, referring to the single-stock leveraged ETFs. "When we revised the Government Organization Act, we proposed a reorganization plan that would separate the Financial Services Commission into a Financial Supervisory Commission and merge financial promotion policy into the Ministry of Finance and Economy, but we could not move forward because the opposition party blocked it last year. I think the policy separation of supervisory functions is something that should be debated more broadly in society."

Oh said the supervisory function serves market stability and consumer protection, but that proposals aimed at invigorating markets have at times been overwhelmed by the voice of financial policy focused on promoting the financial industry, sparking public disputes. "We had the private equity fund scandal, the derivative-linked fund scandal, the equity-linked securities scandal, and now this single-stock leveraged ETF blowup on top of them," he said.

The reorganization plan Oh referred to would convert the Financial Services Commission into a Financial Supervisory Commission and transfer financial promotion policy to the Ministry of Finance and Economy. It was pursued when the Lee Jae-myung administration took office last year but was scrapped amid opposition party resistance. While stressing that it was "my own view," Oh said he intended to "open a debate within the party." Another Democratic Party official said the push could gain considerable momentum this time, given that the party now holds the chairmanship of the National Policy Committee.