An independent watchdog aimed at strengthening the rights of financial consumers will be set up during the first half of 2012, after a decision by the Financial Services Commission on Wednesday.
At the nine-member panel discussion, the FSC decided to spin off the department in charge of consumer protection from the Financial Supervisory Service, an executive arm of the FSC.
FSS Gov. Kwon Hyouk-se, who took his office as the top regulator in March, finalized the move for a larger consumer protection center, regarded as a department of the FSS.
The new organization will be entitled to call for FSS inspectors to conduct a joint probe into financial companies engaged in irregular practices, such as pressuring customers to apply for deposit products instead issuing them loans.
The chief of the financial consumer protection center will be appointed by the FSS after the FSS governor recommends a candidate. The new agency head will be equivalent to a deputy governor of the FSS.
The FSC and the FSS recently agreed to set up the agency after ironing out many of their differences of opinion.
The FSC, whose primary role is to set financial policy, and the FSS, an agency authorized to investigate and penalize financial firms that fail to protect consumers, were locked in a battle for influence over the new organization.
Earlier this month, FSC officials said senior officials from the two agencies met and agreed to go ahead with the plan to set up the new agency.
The FSS also confirmed that a broader agreement was reached over drafting a bill for the new agency, though differences in minor details had to be worked out further.
To avoid conflicts with the existing regulatory structure, the envisioned agency would not have any power to inspect or penalize financial firms in the field of consumer protection.
The turf war over the management of the new agency between the two agencies dragged on amid growing public distrust of the regulatory bodies as some FSS officials were found to have improper ties to the suspended savings banks.
The FSS is set to levy penalties on several banks for habitual irregular loan issuances which burdened borrowers.
The banks to face sanctions will likely include major commercial banks, according to recent remarks by FSS Gov. Kwon.
KB Kookmin Bank was fined for irregular lending practices on Nov. 4 and several others including the state-run Industrial Bank of Korea have also faced sanctions.
By Kim Yon-se (email@example.com