FSS Union: Single-Stock Leverage Debacle Caused by Structural Flaws in Financial Supervisory System

The labor union of the Financial Supervisory Service (FSS) has argued that the root cause of the introduction of single-stock leverage products lies in the structural limitations of the financial supervisory system, which makes it difficult for the FSS to effectively check executive branch policies. The union has proposed a system overhaul to guarantee the independence of the FSS.

In a statement released today (October 21) titled "The Culprit is the Financial Supervisory System Subordinate to Policy," the FSS union pointed out that the main culprit behind the introduction of single-stock leverage is the current financial supervisory system, which makes it difficult for the FSS to raise issues with policy authorities that hold guidance and regulatory powers.

Considering the current system in which the FSS receives guidance and supervision from the Financial Services Commission (FSC), the union claimed that "due to concerns over institutional disadvantages such as budget cuts, there is a structural limitation that makes it difficult to voice independent opinions even when side effects and problems arise in financial policies pursued by the executive branch."

The union also stated that even if side effects and problems are detected early on during the implementation process after policy formulation, the FSS lacks the authority to enact or amend supervisory regulations or submit agenda items, leaving it unable to respond in a timely manner.

Ultimately, when financial consumer damages materialize, a vicious cycle continues in which post-hoc supervisory responsibility is pinned on the FSS, thereby strengthening control by the executive branch, according to the union.

It added that past incidents such as the savings bank insolvency crisis in 2011, the Tongyang Group commercial paper (CP) crisis in 2013, and the private equity fund scandals in 2020 also exposed the problems of the current system.

The union emphasized that the authority of the executive branch (the Financial Services Commission) to guide, supervise, and approve the budget of the FSS should be transferred to the National Assembly to guarantee the managerial independence of the FSS. It also stressed the need to establish a verification process by introducing a National Assembly confirmation hearing for the appointment of the FSS governor, preventing the financial supervisory body from becoming overly subordinate to policies.

In addition, the union pointed out that the FSS should be granted the authority to enact and amend supervisory regulations and submit agenda items to the Financial Services Commission to guarantee the freedom to express opinions independently from policy authorities. It also called for revising the Act on the Management of Public Institutions to exclude the FSS from designation as a public institution to ensure its permanent independence.

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.