Lee Chan-jin: “FSS reform plan to be submitted in November as talks with FSC near conclusion”

[Financial News] The Financial Supervisory Service’s reform plan will be unveiled in November. At the National Assembly, lawmakers said the financial supervisory structure was to blame for losses in the single-stock leveraged exchange-traded fund (ETF) debacle. They said the failure to fully separate financial policymaking from supervisory enforcement had led to the “single-stock leverage” crisis.
Lee Chan-jin, Governor of the Financial Supervisory Service, said on the 19th, in response to a question from Han Chang-min of the Social Democratic Party about delays in announcing the reform plan at a National Assembly audit held at the National Assembly in Yeouido, Seoul, “Consultations with the Financial Services Commission are nearly complete, and there are no significant differences of opinion.” He added, “I expect it to be submitted sometime in November.”
Earlier, in January, the Public Institutions Management Committee deferred designating the FSS as a public institution while calling for reforms. Han pressed the FSS over its failure to announce the reform plan even by this month. “It should already be at the stage where a reform plan is out and being implemented,” Han said.
Han also raised delays in handling inspections and sanctions as a problem. According to Han, as of June this year, the FSS took an average of 237 days to process an inspection. That was more than twice the roughly 110 days recorded in 2021–2023. The number of cases reported to the FSC for exceeding standard processing times rose from just five in 2021 to 366 last year.
Han cited interim announcements of inspection results made during the tenure of former FSS Governor Lee Bok-hyeon as a reason inspection and sanction decisions were taking longer. He said the interim announcements were dragging out the handling of cases.
Lee said, “There are structural causes behind delays in processing inspections, including staffing issues, so we have begun improvement efforts across the entire organization.”
Han also called for financial policymaking to be separated from supervision. Referring to the recent single-stock leveraged ETF debacle, he said the structure that allows financial supervision to be sidelined by policy judgments needs to be improved.
“Oversight should be kept in check through a system, rather than relying on an individual (the FSS governor) to personally throw themselves in the way to stop it,” Han said, stressing the need to separate policy from supervision.
Lee replied, “To prevent this from happening again, I will closely monitor the situation on the ground where supervision is enforced and work to ensure the FSS’s position prevails.”
Lee acknowledged that the introduction of single-stock leveraged ETFs had contributed to some extent to the recent sharp fall in the domestic stock market. He expressed regret over the harm suffered by investors. Kim Jae-seop of the People Power Party asked, “Last Thursday, the KOSPI fell 41% from its peak. Since the launch of single-stock leverage (hereafter, ‘single-stock leverage’), there hasn’t been a single day that wasn’t a down day. Do you think the launch of single-stock leverage caused the sharp market decline?” Lee replied, “I do think that was also a contributing factor to some extent.”
Kim said, “The Financial Services Commission chairman apologized over single-stock leverage, while the vice chairman was promoted,” and criticized the government for not taking adequate responsibility.
[email protected] Park Mun-su Reporter