The South Korean financial regulator said Thursday that it will establish an independent state-run agency responsible for consumer protection in the financial sector next year, as part of the government's plan to revamp the financial regulatory system and beef up consumer protection functions.

The financial consumer protection body will enforce rules for the entire process of financial consumption, including the sale of financial products and remedies for financial losses, according to the Financial Services Commission (FSC).

Under the current rules, the Financial Supervisory Service (FSS) is in charge of inspecting and overseeing financial institutions but plays a peripheral role in protecting the rights of financial consumers.

"The recent change in the global financial market highlighted the need for more effective financial consumer protection measures as consumers face more sophisticated and complex financial markets," the FSC said. "The government will build and maintain consumer confidence and trust in the financial market."

The FSC said the new consumer agency will examine and monitor banks and non-bank companies, and collect and track consumer complaints to draw up an assessment test of consumer protection for financial companies. The test scores will be open to the public starting in 2016.

However, the exact schedule has not yet been decided as the new consumer protection law is still pending in the parliament.

"There seems to be no objection among lawmakers regarding the establishment of the consumer protection body, but they disagree on some details of the law," the FSC said. "The law is expected to be passed in the near future."

The breakup of the FSS and establishment of the separate consumer protection agency have long been debated in South Korea as critics pointed out that the present regulatory system has failed to prevent a series of irregularities and corruption in financial institutions that inflicted heavy losses on smaller investors.

The demand for setting up the consumer protection agency has increased since Tong Yang Group, the country's 38th-largest conglomerate, sold nonperforming debts to more than 40,000 individual investors since 2008, causing them to lose some 2 trillion won (US$1.8 billion) in investments.

The financial authorities have been under fire for taking no action against the company's illegal bond sales even though they detected it.

"The FSC is working on enhancing financial consumer protection and creating an accessible and reliable financial environment for the financially needy," the FSC said. (Yonhap)