The Financial Services Commission, which oversees South Korea's financial policy, will relocate to Sejong in the second half of next year, raising concerns about a gap in financial oversight. With the headquarters of major banks, insurers and brokerages concentrated in Seoul, policy and crisis response will inevitably slow, critics say.
Under the second phase of the central government relocation plan announced by the Ministry of the Interior and Safety on the 13th, the FSC will leave the Government Complex Seoul in the second half of next year for leased offices in Sejong. The Korea Financial Intelligence Unit, which operates under the FSC, is also included in the move. The FSC has 340 staff and the FIU 80, for a combined 420.
Observers say the relocation will slow responses to financial incidents and crises. Major financial holding companies, along with the head offices of banks, insurers and brokerages, as well as industry associations and related institutions, are mostly located in Seoul. Financial markets can escalate from minor shocks into systemic crises such as bank runs or funding market freezes, and the greater the physical distance from the market, the slower regulators will be to grasp situations and make decisions.
The FSC moved quickly to identify causes and respond when a series of cyberattacks targeted the financial sector earlier this month. It convened an emergency meeting at 2 p.m. on Sunday the 4th, during a holiday period. Although notice of the meeting was given only late the previous afternoon, chief executives of financial companies and the heads of industry associations all attended to discuss countermeasures. The timely response was possible because the FSC and other key institutions were gathered in Seoul, officials said.
An outflow of specialist staff from the FSC also appears unavoidable. Voices are already being raised inside the commission over the difficulties the move presents, from securing housing to spouses' jobs and children's education. The more staff with expertise in financial policy leave, the weaker the agency's crisis response capacity could become.
Some observers say the move to Sejong, which brings the FSC closer to the Ministry of Finance and Economy, could revive discussion of merging the two bodies. During last year's government reorganization, a plan to transfer the FSC's domestic financial policy functions to the Ministry of Finance and Economy and combine its remaining functions with the Financial Supervisory Service to handle supervisory policy was floated but shelved. At this year's parliamentary audit by the National Assembly's Finance, Economy and Planning Committee, lawmakers also argued that the ministry needed stronger instruments, including domestic finance, if it was to oversee economic policy. Because Kwon Dae-young, appointed first vice minister of finance and economy last month, previously served as FSC vice chairman, there is speculation the merger could be pursued again.
Following the announcement of the FSC's move, financial public institutions including the FSS are watching closely. Labor unions are weighing responses, expecting the government to press ahead with relocating state-run banks such as the Korea Development Bank, the Export-Import Bank of Korea and Industrial Bank of Korea. If financial authorities and policy finance institutions are scattered across the country, work will become less efficient and responses to financial issues will be delayed. An official at the Ministry of the Interior and Safety said: "We judged that the FSC does not necessarily have to remain in Seoul, because financial policy also requires policy consultation among relevant ministries." The official added that the relocation of public institutions such as the FSS is being reviewed separately.