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

All-in on Consumer Protection... Placing Supervision at the Center
Strong Leadership as Chief... Blocking Separation of Consumer Protection Bureau and Expanding Authority
Candid Remarks Spark Debate..."Down-to-Earth" vs "Activist Rhetoric"

"All-in focus on consumer protection and organizational stability are achievements, but restoring trust in the stock market remains a challenge."

This is the assessment from both inside and outside financial authorities regarding Chan-Jin Lee, the Governor of the Financial Supervisory Service, who marks his first year in office this month. His key achievements include placing consumer protection at the core of supervisory administration, stabilizing the organization, and raising the institution’s profile. However, due to the recent controversy over leveraged Exchange Traded Funds (ETFs) and the resulting instability in the stock market, as well as growing calls for accountability among financial regulators, resolving the incident and restoring market confidence have emerged as the most significant challenges for his second year.

Consumer Protection Takes Center Stage... Organizational Stability and Enhanced Authority Are Achievements

According to the financial authorities on August 6, Governor Lee will mark his first anniversary in office on the 14th. Originally taking office as a lawyer and former civic group member, there were concerns about his lack of financial expertise, but he is now being recognized for quickly grasping organizational issues and leading the supervisory authority stably.

The most consistent policy emphasized by Governor Lee since his inauguration is financial consumer protection. At the end of last year, he created a dedicated Consumer Protection Office reporting directly to the governor and shifted the supervisory focus from post-factum dispute resolution to preemptive prevention. The aim is to embed consumer protection from the product design and manufacturing stage. He also initiated the “Consumer Risk Response Committee” and the “Financial Consumer Protection Advisory Committee.” Elevating consumer protection from a departmental responsibility to a core duty for the entire Financial Supervisory Service is considered his hallmark achievement in the first year of his tenure.

Contrary to initial expectations that, as a former civic group member, he would forcefully push for aggressive reforms against the financial sector, his supervisory policy has been relatively flexible. In the process of imposing sanctions for the mis-selling of Hong Kong H-Index equity-linked securities (ELS), the Financial Supervisory Service decided on fines of 1.4 trillion won for banks but relayed a recommendation for reduction to the Financial Services Commission, considering the banks’ voluntary compensation efforts. While the Financial Supervisory Service does not have the authority to reduce fines, Governor Lee’s view that these efforts should be considered was reflected. Although there was criticism that this amounted to “excessive sanctions followed by reductions,” some say that it was a pragmatic decision that maintained the principle of consumer protection while avoiding rigid supervision.

Internally, organizational stability and expanded authority are regarded as the greatest achievements. During last year’s discussions on restructuring the financial supervisory system, Governor Lee prevented the separation of the Financial Consumer Protection Bureau from the Financial Supervisory Service, and secured investigative authority for special capital market prosecutors after taking office, thereby broadening the agency’s role. Based on his status as a former bar examination cohort with the president, he was able to strongly advocate for the agency's position, earning a reputation as a "powerful governor." His efforts to promote internal communication through departmental meetings and town hall gatherings have also been positively received by staff members.

Handling the Leveraged ETF Incident Is the Biggest Challenge... Controversy Over the Civic Group Style of Speech

On the other hand, Governor Lee’s direct and unfiltered statements, where he rarely couches his words, have repeatedly placed him at the center of controversy since his inauguration. For example, regarding a potential local relocation of the Financial Supervisory Service, he commented, "It makes no sense for a foreman to leave the construction site," and about leveraged ETFs, he stated, "We should have stopped it at all costs, even if it meant lying down in protest," which fueled debate. Some view this as "human and down-to-earth," but there are also substantial criticisms that he has not shed the activism style typical of civic group discourse.

In particular, Governor Lee’s statements regarding leveraged ETFs last June became a hot topic amid growing stock market volatility. While the remarks were carefully prepared in advance to strongly warn investors about the risks of the products, they ultimately drew criticism for coming across as the head of the regulatory authority shifting responsibility to other agencies—a so-called "out-of-body communication." A Financial Services Commission official noted, "While it is acceptable to engage in rigorous debate before a policy decision, the principle in public office is to refrain from issuing differing official messages once a decision has been made. Governor Lee’s comments have, in some respects, fueled both market confusion and inter-agency conflict."

Within the financial community, resolving the leveraged ETF incident and stabilizing the market are seen as Governor Lee’s top issues for his second year. Since last June, leveraged ETFs have been pinpointed as one of the main factors behind a sharp market decline, sparking controversy over the hasty implementation of the product and increasing calls for accountability from financial regulators. As the product was released after joint discussions by the Blue House, the Financial Services Commission, and the Financial Supervisory Service, Governor Lee cannot escape criticism. In particular, the significant losses suffered by investors due to stock market declines caused by leveraged ETFs are seen as especially painful for the governor, who has championed consumer protection as his foremost value.

An industry official stated, "If Governor Lee spent his first year emphasizing consumer protection and strengthening organizational stability and the status of the Financial Supervisory Service, his second-year evaluation will depend on whether he can resolve the leveraged ETF controversy, restore market stability, and regain public trust in the regulatory authorities. Establishing a firm consumer protection system in the financial sector and enhancing policy cooperation with the Financial Services Commission are also important tasks."

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