The possibility of the Financial Supervisory Service (FSS) not being designated as a public institution in exchange for its relocation has been discussed among government and financial authorities. This so-called 'trade-off' would allow the FSS to accept relocation while avoiding organizational and budgetary controls associated with public institution status. However, the designation of public institutions is a long-term commitment that the government may find difficult to guarantee, and the FSS labor union opposes the idea, stating that the two issues cannot be exchanged.
According to the financial sector on August 26, discussions among the government and related agencies regarding a second round of public institution relocations have included the option of linking the FSS's relocation to its non-designation as a public institution. Given the government's strong commitment to relocation, the argument is that providing the FSS with some autonomy in its operations could mitigate backlash against the move.
Currently, the FSS is not designated as a public institution, but the possibility of such designation arises every year. After being placed under conditions for public institution designation in 2018, the FSS implemented requirements such as organizational and senior position reductions, fulfilling all conditions by 2024. Although it was not included in the designation agenda for 2025, the issue was revisited in January of this year and again postponed under new conditions.
The main limitation of the trade-off proposal lies in this context. While the Ministry of Land, Infrastructure and Transport oversees the relocation, the designation of public institutions is determined annually by the Public Institution Operation Committee. Even if the current government promises not to designate the FSS, discussions could resume in the following year or under the next administration. While relocation is difficult to reverse, the promise of non-designation is an asymmetric exchange that can change at any time.
The FSS union has expressed a firm stance against linking relocation to non-designation. Kim Sang-woo, the union chairman, stated, “Public institution designation is a matter of independence in financial supervision, while relocation concerns the ability to closely monitor and supervise the financial industry. Both independence and on-site accessibility are necessary, so it is difficult to approach this by sacrificing one for the other.”
The FSS is concerned that relocating to a regional area could reduce the efficiency of inspections and supervision, as financial companies and market infrastructure are concentrated in Seoul. Conversely, the government views the relocation of financial institutions as an opportunity to foster regional financial industries and promote balanced development. The trade-off proposal, which asks both sides to choose between organizational autonomy and on-site accessibility, is likely to spark new debates rather than bridge the gap between the two parties.
The government plans to review the potential for relocating approximately 350 institutions and will finalize the relocation targets and placement plans after gathering opinions from local governments and labor unions through a public consultation process in October and November.
* This article has been translated by AI.
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