The top financial regulatory entity is at stake as voices are rising to abolish or disassemble it in the upcoming administration.

Presidential candidates and financial experts argued that the over-empowered Financial Services Commission should be repealed or split into two different organizations.

A financial regulator should primarily be independent from the government and politically neutral, said Kim In-cheol, economics professor at Sungkyunkwan University and new president of the Korean Economic Association, on Wednesday.

The comment, which came during his keynote speech at KEA’s symposium implies that the FSC ― an entity regarded as a government ministry ― should let go of its financial regulatory functions.

Professor Kim Hong-gi at Yonsei University Law School also pointed out the abuse of a government-controlled financial regulator.

“The biggest problem of Korea’s financial regulatory system is that the same organization (FSC) is in charge of both financial policies and superintendence,” he said.

The FSC was established in 1998 following the demand for a united financial regulatory organization to overcome the 1997-98 Asian currency crisis. Four private-owned watchdogs at the time ― each responsible for banks, securities, insurers and credit management ― unified to become the Financial Supervisory Commission.

Since its establishment, the financial regulator has been at the center of the financial world with the power to authorize and abolish thousands of financial companies here as well as take disciplinary actions against employees. Its power grew especially during the current administration when the FSC was divided into the current Financial Services Commission, which also picked up the Finance Ministry’s policy-making function, and the Financial Supervisory Service.

“The FSS built up its frame through time, breaking the promise to be a ‘light’ organization,” said Oh Jeong-geun, economics professor at Korea University.

Oh asserted that the financial policy-making functions should be moved back to the Finance Ministry, and roles of the FSS and FSC should be reestablished.

Presidential candidate Ahn Cheol-soo earlier expressed a similar opinion.

Ahn announced plans to transfer the FSC’s policy-making function to the Finance Ministry and the regulatory function to the FSS. He also said he will divide the FSS into two separate parts that each keep watch over the health of financial companies, and consumer protection.

Other candidates did not announce detailed plans yet but the prevailing speculation from the financial industry is that they will have to accord with the overriding opinion to abolish or divide the top financial regulator.

FSC chairman Kim Seok-dong expressed a negative opinion on the rising arguments to abolish or divide the organization.

“It was possible to cope with the global financial crisis more swiftly and successfully because we had the FSS, an independent financial regulator,” he said, according to reports.

By Park Min-young  (claire@heraldcorp.com)