South Korean authorities will back off from intervening in key business decisions of local insurance companies, banks and other financial institutions, particularly in setting product prices and commissions on sales, the Financial Services Commission (FSC) has announced.
The move is seen as part of President Park Geun-hye government’s efforts to reduce government control that is seen as excessive or unnecessary in the financial sector, reported the Korea Joong Ang Daily.
A group of high-ranking government officials and researchers from the FSC, Ministry of Strategy and Finance, Financial Supervisory Service and other state-run institutes have held an initial closed-door discussion on reforming regulations in the financial sector.
One of the key decisions made at the meeting last month was to stop the authorities’ intervention in prices and commissions as well as some key management judgments by institutions, according to the FSC.
Mr Son Byeong-du, a senior FSC official, said that “shadow instructions” will be also foresworn. These are informal, verbal orders or non-binding guidelines that are not stated in the law. In FSC surveys of those who work in the financial industry, many said that they were effectively under the strict control of government officials in their business. For example, they had to seek advance approval from officials on certain issues although the law does not require them to do so.
Even though the government abolished several regulations last year, executives at insurance companies, banks and other financial institutions, said that they still felt pressured to conform as if the regulations had not been lifted.
To effectively remove behind-the-scenes regulations, the FSC has announced a so-called ombudsman system, in which a third-party organisation unrelated to the government will receive complaints from the financial sector about excessive regulation.
“Although I strived for a series of reforms in regulations, it is still true that current regulations are hindering competition and are unreasonable and inconvenient,” FSC Chairman, Mr Yim Jong-yong reportedly said at the meeting. “We will put our focus on easing regulations to boost competition in the finance industry,” he said.