Financial institutions face ongoing restructuring, shrouded in uncertainty
In the heart of South Korea's financial sector, the Lee Jae Myung administration is actively progressing with organizational restructuring of its top financial regulators, particularly the Bank of Korea and the Financial Intelligence Unit (FIU), with a focus on enhancing oversight of stablecoins and improving financial system stability.
The Bank of Korea (BOK) has recently restructured its internal divisions to strengthen its digital currency and stablecoin regulatory capabilities. The 'Digital Currency Research Office' was renamed the 'Digital Currency Division', signifying a shift from research towards commercial Central Bank Digital Currency (CBDC) deployment.
Meanwhile, the Financial Intelligence Unit (FIU) is planning a comprehensive overhaul of its Anti-Money Laundering (AML) protocols by December 2024, partly in response to the growth of stablecoins and the impending stablecoin legislation being considered by the National Assembly.
The Financial Services Commission (FSC), on the other hand, is focused on approving and advancing recovery and resolution plans for Domestic Systemically Important Financial Institutions (D-SIFIs) to enhance the resilience of large financial firms.
Despite the ongoing debate over the restructuring of financial institutions, the Lee administration has appointed a new head of South Korea's Financial Services Commission, former First Vice Finance Minister Lee Eog-weon, and Kwon Dae-young, who was lauded by President Lee for overseeing new mortgage lending restrictions, as the FSC's vice chair.
The FSC has also been holding meetings within financial circles to assert its presence as the country's top financial regulator. The FSC's recommendation for the FSS governor, Lee Chan-jin, is yet to be finalized by the president.
However, there is no recent evidence of a planned merger or fundamental restructuring of the top-level financial regulatory bodies like the FSC. Instead, reforms are targeted and functional, with the Financial Services Commission's policy functions expected to be transferred to the Ministry of Economy and Finance, effectively dismantling the FSC.
The Financial Supervisory Service's supervisory role is expected to be merged with the Financial Services Commission. The FSC's recent move to hold an unscheduled briefing on Monday to announce the implementation of a debt forgiveness policy was widely seen as a deliberate effort to signal its influence.
The Lee administration is expected to tackle the reorganization plan after the Korea-US summit, which is scheduled for Aug. 25. All possibilities remain open regarding the restructuring of these institutions.
In summary, the Lee Jae Myung administration is advancing targeted organizational and regulatory reforms in South Korea’s key financial regulators—particularly around stablecoins and digital finance—but no sweeping merger or top-level institutional restructuring has yet been publicly announced or implemented as of mid-2025.
The Bank of Korea is strengthening its digital currency and stablecoin regulatory capabilities within its finance business, by restructuring its internal divisions. The Financial Intelligence Unit is planning to comprehensively overhaul its Anti-Money Laundering protocols in response to the growth of stablecoins and the pending legislation under consideration by the National Assembly, all part of the active progression of the Lee Jae Myung administration within South Korea's financial sector.
