Amid discussions about the Financial Services Commission and Financial Supervisory Service being considered for a second round of public institutional investor relocations, the financial sector warns that a forced relocation could cause confusion and inefficiency within financial companies and the financial market. This is because the core duties of the financial authorities involve inspecting and licensing financial firms, over 90% of which are concentrated in Seoul and the Seoul metropolitan area.
According to the financial sector on the 18th, if the Financial Supervisory Service, headquartered on Yeouido in Seoul, relocates to local areas such as Sejong City, practical concerns are being raised about its ability to properly carry out its core functions of inspecting and supervising financial companies. The Financial Supervisory Service plans to conduct a total of 707 inspections this year. These include regular and ad hoc inspections targeting banks, securities firms, insurance companies, credit card issuers, mutual financial institutions, and savings banks. The number of Financial Supervisory Service personnel involved in these inspections alone reaches 28,229 (calculated as person-days).
If the Financial Supervisory Service relocates to local areas, nearly 30,000 inspection personnel annually would need to travel to Seoul or the Seoul metropolitan area for "reverse commutes." This is because 91.6% of financial company headquarters are located in the Seoul metropolitan area, and 88.3% of the financial firms subject to on-site inspections by the Financial Supervisory Service are also concentrated there.
Financial Supervisory Service staff must travel to the relevant financial companies for extended periods—sometimes over a month—for regular inspections. In some cases involving banks, more than 20 personnel are deployed simultaneously. If the Financial Supervisory Service moves to Sejong, dozens of personnel would need to undertake long-term assignments in Seoul lasting over a month for each regular inspection.
Travel expenses could also become "unrealistically" inflated. According to internal regulations of the Financial Supervisory Service, daily allowances for inspection trips (excluding transportation costs) are around 150,000 won. Of this, accommodation costs range from 80,000 to 100,000 won depending on the region. These figures assume travel to local areas. If travel is instead to Seoul, accommodation and living expenses would need to be significantly increased. Assuming 30,000 personnel travel to Seoul annually, an additional cost of 30 thousand won to 4 billion won would be incurred. Over a decade, this could amount to hundreds of billions of won.
Relocation costs could also exceed those for general institutional investors due to the sensitive and complex nature of the financial sector as their primary field of operation. For example, when the Ministry of Oceans and Fisheries completed its headquarters relocation from Sejong City to Busan last year, direct moving costs were reported at approximately 118.9 billion won. The ministry's headquarters staff numbered around 600 to 700 people. In contrast, the Financial Supervisory Service has about 2,200 employees—roughly three times that number. While direct comparison is difficult, the financial sector estimates that relocation costs for the Financial Supervisory Service could reach 300 billion won, with additional expenses for IT infrastructure relocation potentially running into hundreds of billions of won.
◇Relocation Costs in the Trillions of Won Fall on Financial Companies=The relocation of financial authorities would place a heavy burden primarily on financial companies. The Financial Services Commission and the Financial Supervisory Service are responsible for licensing and permitting financial firms. These companies would frequently need to travel to local areas to obtain necessary approvals, severely reducing operational efficiency. Moreover, the trillions of won in costs associated with relocation would ultimately be borne by the financial companies themselves. The Financial Supervisory Service operates as a special public institution without capital (other public institutional investors), and the supervisory fees it collects annually from financial companies amount to 350 billion won, which accounts for 70% of its budget.
Such relocation would also run counter to consumer protection in finance. Currently, 81.4% of financial complaints are concentrated in the Seoul metropolitan area. Vulnerable groups, including the elderly, have traditionally filed complaints at the Yeouido Financial Supervisory Service complaint center. Relocation could create "blind spots" from a consumer protection perspective.
The government plans to announce its plan for relocating public institutional investors as early as this month or by the end of the year. However, it is reported that when selecting targets for relocation, the functional efficiency of each institutional investor post-relocation will be an important consideration. Lee Chan-jin, head of the Financial Supervisory Service, stated at a press conference held in March: "It is simply the reality of finance that everything is concentrated in Seoul and the Seoul metropolitan area," adding, "It is difficult to imagine leaving the field and going anywhere else."
in FINANCE
