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P.M.’s office soon to unveil plans to overhaul FSS

The Prime Minister’s Office is set to unveil a road map to reforming the nation’s financial regulatory body, which has been tarnished by a series of corruption scandals involving its staff and distressed savings banks.

The reform plan, to be unveiled this week, will aims to reestablish public confidence in the embattled Financial Supervisory Service, which has been harshly criticized for failing to supervise the secondary banking industry.

Under strong instructions from Cheong Wa Dae, the Prime Minister’s Office has been screening private experts to form a task force.

While the road map and details of the task force could be announced as early as Monday, FSS Governor Kwon Hyouk-se clarified Friday that staff of the regulatory body will not be included in the special team.

The FSS unveiled an internal reform plan Wednesday, but news reports said President Lee Myung-bak had ordered other government agencies to take the initiative to reform the regulatory body in a more objective manner.

“Renovating the FSS itself is important. But more importantly, the task force will contemplate whether there have been problems in the supervisory procedures and method,” a government official said.

A key issue is whether the task force will propose to revise the system under which only the FSS has the right to probe financial companies ― something other agencies have demanded.

A group of lawmakers have argued that past irregularities of several FSS staff were more or less attributable to its monopoly of power over banks or insurance firms.

They say that the allegedly cozy relations between the FSS and several financial companies have stood in the way of transparent probes.

In recent years, the Bank of Korea has stressed that it should also have independent probe rights. It is currently only entitled to conduct joint-inquiries with the FSS.

The Korea Deposit Insurance Corp., which has the right to examine financial companies designated as “insolvent,” hopes this right will be extended to companies “at risk of insolvency.”

The FSS is considering revising the methods of inspecting financial companies.

According to FSS officials, the regulator plans to allow the attendance of a lawyer appointed by a financial firm at regulatory inspections.

Currently, only executives and employees at financial companies under supervision are allowed at on-the-spot inspections.

By Kim Yon-se (kys@heraldcorp.com)
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