Home > National > Politics

Korean gov't cancels plan to dismantle Financial Services Commission

Published: 26 Sep. 2025, 11:27

Democratic Party leader Rep. Jung Chung-rae, right, and Kang Hoon-sik, presidential chief of staff, center, shake hands after a meeting at the party leader’s office in the National Assembly on Sept. 25. Prime Minister Kim Min-seok is seen on the left. [YONHAP]

The government’s plan to dismantle the Financial Services Commission (FSC) for the first time in 17 years was scrapped Thursday, a mere 18 days after it was announced.

The ruling liberal Democratic Party (DP), the government and the presidential office — collectively known as the party-government-presidential office consultative body — said they decided not to include in the government organization bill the separation of the FSC’s policy and supervisory functions or the creation of a new Financial Consumer Agency.

The bill had been set to be submitted to the National Assembly for a plenary vote.

“At a time when a filibuster or even fast-track designation was being considered, the government organization bill should not become a source of futile political strife and division,” said Han Jeoung-ae, chair of the DP’s policy committee. “We also reached a consensus that leaving the country’s financial system unstable for more than six months would not help overcome the ongoing economic crisis.”

The Ministry of Economy and Finance building in Sejong is seen in this file photo. [YONHAP]

Pushback from financial sector and regulators

Earlier, the consultative body had approved a plan to transfer financial policymaking functions to a newly established Ministry of Economy and Finance and restructure the FSC into a Financial Supervisory Commission. The plan also called for spinning off the Financial Supervisory Service’s (FSS) consumer protection role into a separate Financial Consumer Agency.

But in less than three weeks, the government reversed course, choosing to keep the financial regulatory framework intact.

While the official explanation was to secure cooperation from the opposition conservative People Power Party — which threatened to launch a filibuster to block the changes — critics argue the real reason was a lack of preparation and widespread opposition from financial institutions, regulators and employees.

The Presidential Committee on Policy Planning, which spearheaded the overhaul, presented no detailed blueprint for dividing responsibilities.

Chairman of Financial Supervisory Services Lee Eog-weon on Sept. 2. [YONHAP]

As a result, FSC and FSS employees had been tasked with combing through more than 9,000 provisions in financial laws to determine how they might be split — a process experts warned could take months.

The financial sector also strongly objected, warning of redundancy and confusion in oversight with four separate institutions — the new ministry, the supervisory commission, the FSS and the consumer agency. Some industry voices lamented they would be forced to answer to “four different bosses.”

Resistance also grew within the FSS, especially after the government simultaneously pushed to reclassify the agency as a state-run public institution — seen by critics as a move to tighten state control. Employees staged large protests, but the consultative body clarified Thursday that the reclassification plan has not been withdrawn.

The lack of public input was another sticking point. Neither the FSC nor the FSS, the very institutions subject to restructuring, were formally consulted. Even agency heads appointed by the Lee Jae Myung administration were excluded from discussions.

FSC Chairman Lee Eog-weon was reportedly notified of the commission’s dismantling during his confirmation hearing, sparking controversy.

The Financial Supervisory Service's headquarters in Yeouido, western Seoul [YONHAP]

Reversal raises concerns over new ministry’s role

The abrupt retreat has fueled concerns that the newly established Ministry of Economy and Finance will be weakened.

The government had originally sought to strengthen the ministry’s role as the nation’s economic command center by shifting financial policymaking authority from the FSC, while separating out budget functions.

With the overhaul abandoned, however, the ministry is left with only tax and international finance functions.

“This withdrawal shows that the government and ruling party themselves admit they pushed through the restructuring hastily,” said Seok Byoung-hoon, an economics professor at Ewha Womans University. “As a result, only the functions of the new ministry have been reduced, raising fears that Korea’s economic control tower has been weakened.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM NAM-JUN, KIM NA-HUN [[email protected]]