Korea’s Big Reform Shuffle: Agencies Clash Over Power Division
Seoul, July 15, 2025 – As President Lee Jae Myung’s administration rolls out sweeping reforms across South Korea’s financial ecosystem, a tug of war is unfolding among major institutions—including the Ministry of Economy and Finance, the Financial Services Commission (FSC), Financial Supervisory Service (FSS), and the Bank of Korea (BOK)—sparking delays in key appointments and policy rollouts. Financial Times+6Daum+6Asia News Network+6
What’s Being Reshaped?
A draft reform blueprint, submitted on July 3, proposes three major changes:
- Separating budget authority from policy functions within the Ministry of Economy and Finance.
- Creating a dedicated Financial Supervisory Committee to clearly distinguish rule-making from oversight.
- Spinning off the FSC’s consumer protection arm into an independent regulator.
These changes aim to streamline supervision and reduce policy overlap. Asia News Network+6Daum+6Korea Herald+6
Why Agencies Are Pushing Back
- FSS resistance: The supervisory body argues that fragmenting its consumer protection team would hamper holistic oversight and delay response times to financial misconduct. Its union warns that such a split would introduce ambiguity during urgent crises. Daum
- Leadership squeeze: Meanwhile, crucial vacancies for FSC and FSS leadership remain unfilled, even as 19 other ministerial posts were confirmed—signaling a deeper dispute over reform scope. Korea Herald+2Daum+2en.wikipedia.org+2
- Bank of Korea’s bid: Governor Rhee Chang‑yong is advocating for the central bank to take on macroprudential duties—from managing credit and liquidity to enforcing loan-to-value and debt-service-ratio caps—functions currently held by FSC and FSS. Daum
Policy on Hold as Debate Continues
Several high-priority initiatives have been stalled due to the institutional limbo:
- Authorization for the fourth internet-only bank was delayed.
- The Virtual Assets Committee, tasked with shaping stablecoin regulations, has not convened since May. Daum
Why It Matters
These reforms reflect Lee Jae Myung’s intent to rebalance Korea’s financial regulation toward greater specialization and efficiency. Yet striking the right balance—between agency independence and inter-agency cooperation—remains a formidable challenge.
Pressing questions include:
- Can the BOK effectively absorb macroprudential controls without overstepping its mandate?
- Will creating new regulatory bodies better serve consumers—or generate further bureaucratic fragmentation?
- Can the government decouple these reforms from leadership appointments to revive stalled initiatives?
Heading into the Future
As the political drama unfolds behind the scenes, the pace and coherence of South Korea’s financial policy—especially on fintech, consumer protection, and household debt—hang in the balance. Both investors and consumers will be watching closely for when new agency heads are confirmed and how swiftly Lee’s reform agenda advances.
