One Year of Lee Chanjin’s FSS: Achievements in Consumer Protection and Organizational Stability, but Leveraged ETF Poses a Major Test

Consumer Protection as the Central Supervisory Policy
Blocked Split of Consumer Protection Bureau and Expanded Authority as a ‘Powerful Governor’
Blunt Communication Style Draws Debate: “Unpretentious” vs “Civic Activist Approach”
Restoring Marke

'All-in on Consumer Protection and Organizational Stability are Achievements, but Restoring Trust in the Stock Market Remains a Challenge.'

This is the evaluation from the financial sector regarding Financial Supervisory Service (FSS) Governor Lee Chanjin, who marks his first year in office this month. Bringing financial consumer protection to the forefront of supervisory policy, stabilizing the organization, and enhancing the FSS’s presence are cited as major achievements. However, as instability in the stock market and blame for financial authorities have grown amidst the recent leveraged exchange-traded fund (ETF) controversy, resolving the crisis and restoring market trust have emerged as the top priorities for his second year in office.

Consumer Protection at the Forefront... Organizational Stability and Expanded Authority as Achievements

According to financial authorities on August 6, Governor Lee will reach his one-year anniversary in office on August 14. Despite initial concerns over his lack of experience in finance, given his background as a lawyer and civic activist, he quickly grasped both the organization and key issues, earning credit for steering the supervisory authority in a stable manner.

The guiding principle that Governor Lee has most consistently emphasized since taking office is consumer protection. At the end of last year, he established a Consumer Protection Supervisory Division directly under the Governor, shifting the supervisory focus from post-incident relief to proactive prevention. The aim is to internalize consumer protection from the very stages of financial product design and manufacturing. In addition, he launched both the "Consumer Risk Response Council" and the "Financial Consumer Protection Advisory Committee." Elevating consumer protection from the responsibility of a single department to a core duty of the entire FSS is also cited as one of his main achievements in the first year.

Although, as a former civic activist, he was expected to drive aggressive reforms against the financial sector, there is a view that his supervisory policy reflected pragmatic judgement. In February, the FSS imposed fines amounting to 1.4 trillion won on banks for the misselling of equity-linked securities (ELS) tied to the Hong Kong H-Index (Hang Seng China Enterprises Index·HSCEI). This was the first case where the Financial Consumer Protection Act was invoked, resulting in strong punitive measures. However, the FSS conveyed to the Financial Services Commission that the fines should be reduced, taking into account the banks' voluntary compensation efforts and the need for a productive financial environment. There was criticism over the so-called "excessive penalties followed by mitigation," but Lee was also credited for balancing principle and practicality, despite lacking formal authority to reduce penalties.

Internally, organizational stability and expanded authority are recognized as the biggest achievements. Last year, during discussions on reforms to the financial supervisory structure, Governor Lee prevented the splitting of the FSS and the Financial Consumer Protection Bureau, and, after taking office, he secured investigative powers for special judicial police officers in the capital markets, thereby expanding the FSS's role. The financial sector notes that, buoyed in part by being a classmate of the President from the bar exam, Lee has actively championed the FSS's position, asserting a "powerful Governor" presence. Through department-level meetings and town hall gatherings, he has promoted internal communication and has earned positive reviews from employees.

Handling the Leveraged ETF Controversy Is the Top Issue... Civic Activist Communication Style Also Sparks Debate

By contrast, Governor Lee has often found himself at the center of controversy due to his direct communication style, which eschews indirect language. Comments such as "It would be ridiculous for a site supervisor to leave the construction site" regarding the possibility of relocating the FSS outside Seoul, and "We should have stopped it lying down if necessary" referring to leveraged ETFs, have come to represent his characteristic mode of speech. While some see this as "uninhibited and candid," others criticize that he has not yet moved beyond the communication style of a civic activist.

In particular, his remarks about leveraged ETFs this past June became controversial as stock market volatility increased. Although Governor Lee’s intent was to deliver a stern warning to investors about product risks, his comments were ultimately criticized for appearing to shift blame to other agencies—an approach described as “out-of-body” communication for the head of a supervisory authority. An official from the Financial Services Commission pointed out, "It is a principle in public service to debate thoroughly before adopting a policy, but once decided, to speak with one voice," adding, "Governor Lee’s remarks have contributed to both market confusion and conflict between organizations."

According to the financial sector, the most pressing issue for Governor Lee in his second year is resolving the leveraged ETF situation and restoring market stability. Since June, leveraged ETFs have been cited as a major cause of the sharp decline in the stock market, fueling accusations that the authorities pushed the products without adequate review, and the responsibility of financial regulators has been increasingly called into question. As these products were launched by the joint efforts of the Financial Services Commission and the FSS under Blue House direction, Governor Lee, along with Financial Services Commission Chairman Lee Eogwon, cannot be exempt from criticism. The fact that investor losses have increased significantly due to stock market plunges caused by leveraged ETFs is particularly painful for Governor Lee, who has championed consumer protection as his highest value.

A financial industry official said, "If Governor Lee spent his first year putting consumer protection at the forefront and strengthening organizational stability and the FSS’s authority, in his second year, his ability to resolve the leveraged ETF controversy and lead market stabilization—thereby restoring trust in the supervisory authorities—will be the key to future evaluations. It is also an important task to further embed the consumer protection framework within the financial sector, while strengthening policy coordination with the Financial Services Commission."

This content was produced with the assistance of AI translation services.