FSS union: “A supervisory system subservient to policy is behind the single-stock leveraged ETF controversy”

[The Financial News] The Financial Supervisory Service (FSS) labor union pointed to the FSS’s lack of structural independence as the reason behind controversy over harm to financial consumers that arose during the introduction of single-stock leveraged exchange-traded funds (ETFs). The union argued that it is difficult to identify or respond early to the adverse effects of financial policies because the Financial Services Commission (FSC) controls the FSS’s budget and staffing and also has the authority to amend supervisory regulations.
In a statement on the 21st, the FSS union said, “The main culprit behind the introduction of single-stock leveraged ETFs is the current financial supervisory system, which has been made worse so that it is inevitably subservient to policy,” and argued that “the Financial Supervisory Service faces structural limitations that make it difficult to express its independent views, even when financial policies pursued by the executive branch have adverse effects or problems, because of concerns that the institution could face disadvantages, including budgetary ones.”
The union pointed out that the FSC has the authority to direct and supervise the FSS and approve its budget and staffing, and that authority to enact and amend supervisory regulations and submit agenda items to the FSC is also concentrated in the FSC. This means the FSS has difficulty responding in a timely manner, even when adverse effects or problems emerge early in the policy implementation process.
The union said, “Because the FSS lacks the authority to enact or amend supervisory regulations and submit agenda items, it inevitably has difficulty responding in a timely manner.” It also argued that when consumer harm materializes, responsibility for subsequent supervision falls to the FSS, perpetuating a vicious cycle in which the executive branch tightens its control.
At the National Assembly’s National Policy Committee audit of the FSS on the 19th, questions continued about harm to financial consumers resulting from the introduction of single-stock leveraged ETFs and where responsibility lay.
The union cited the savings bank insolvency crisis, the Tongyang Group commercial paper (CP) crisis, and the private equity fund redemption suspension crisis as examples illustrating the limitations of the current system. In particular, regarding the CFD-related stock price plunge and the TMON-WeMakePrice unpaid settlement crisis, the union claimed that the FSS had conveyed the risks and need for institutional improvements to the FSC, but that CFD-related improvements were limited to some measures, major improvements were pursued only after the stock price plunge, and improvements related to TMON and WeMakePrice were also pursued only after the crisis occurred.
The union proposed the following directions for reforming the financial supervisory system: transferring the FSC’s authority to direct and supervise the FSS and approve its budget to the National Assembly; holding a National Assembly confirmation hearing when appointing the FSS governor; granting the FSS authority to enact and amend supervisory regulations and submit agenda items to the FSC; and excluding the FSS from designation as a public institution.
The union said, “The system must be reformed to prevent policy failures and harm to financial consumers in advance, and to enable the FSS to fulfill its role as an independent financial supervisory body.”

[email protected] Lee Jeong-hwa Reporter