This paper clarifies and emphasizes the purposes of the financial supervisory system and the importance for restructuring the FSC (Financial Supervisory Commission) and the FSS (Financial Supervisory Service).
The objectives of the financial regulation are to fix the market order, to maintain the safety and soundness of financial institutions, and to protect the consumer. The economic rationale for the regulation and supervision of the banking and financial services is related to market failure due to externalities, moral hazard, Grid Lock problem, etc., economies of scale that exist in supervisory activity, and consumer demand for regulation to gain a degree of assurance and lower transactions costs.
There has been a trend toward establishing a single financial regulator both before and after the financial crisis. Some say that a single financial regulator is able to generate a number of efficiency gains and achieve the purpose of regulation effectively, because a single financial regulator is advantageous to keep the regulatory principle consistent and avoid the unnecessary duplication or underlap across multiple specialized regulators. Another reason is the blurred distinction between financial services business. But others argue that it is doubtful that the single regulator can ensure the effectiveness and stability of the system, because there are several drawbacks in terms of increasing compliance and structural cost and a single regulator is liable to become super-powered, which will lead to over-regulation.
England had experienced many financial scandals (or scams) and had many problems that had been attributable to over- and under-regulation by scattered regulators (especially by self-regulatory agents). Now, England has been the model for the integrated Korean financial supervisory agents. There were also discussions regarding the financial regulatory system reforms in England. In the course of those discussions, some argued that the financial regulatory agent be integrated because a single regulator is useful to keep the regulatory principle consistent and avoid regulatory duplication. Opponents were concerned about the appearance of the so-called "regulatory Leviathan", which in turn will stifle financial innovation.
To solve that structural problem and to constitute a single regulator that is able to fulfill the aims of financial regulation efficiently and effectively, in England, the government has taken advantage of the utilities regulatory system that is characterized as a regulation by contract, regulation by an incentive system, and regulation by a private regulatory institute which is independent from the government and the regulated industry. Then, their integrated single financial regulator, the FSA (Financial Services Authority), has not merely been implemented legally but also reinforced by informal ethos, such as informal independence and accountability, as the utilities regulatory system has.
The most important criteria for evaluating a regulation system is not the institution itself, but its operation. But for Korea, where the government has long had strong, authoritative power, the financial regulatory system modeled after the FSA has many structural and operational problems together. Korea's regulatory system severely lacks appropriate independence, accountability, transparency, and cooperation with other relative organizations to fulfil the objectives of financial supervision.
The first step to securing independence is to distinguish prudential supervision from financial restructuring. However, accountability and independence can be in conflict, and the single regulator can easily be super-powered. The resolution is to resort to transparency. Regulation by contract is important in the same context. (The rest is omitted)
금융감독체제의 개선 방향
|Series Title; No||금융조사보고서 / 2001-02|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||한국금융연구원; KDI 국제정책대학원|