'August to September to the Fourth Quarter Again': Relocation Fears Persist as Financial Regulators Become Pawns in Political Calculations

FSC Relocation Decision Delayed Again

"Minimizing Retention in the Capital Area"

"Finance Is a Cluster Industry... Leaving Seoul Would Weaken Policy and Supervisory Capabilities"

Busan Politicians Already Vying to Attract Institutions

Concerns That the Debate Could Reignite Ahead of the 2028 General Elections

Uncertainty surrounding the financial regulatory authorities has continued to linger as the government has yet to make a final decision regarding the potential relocation of the Financial Services Commission (FSC), which has long been considered a likely candidate for a move to Sejong. With the government now set to finalize which institutions will be subject to relocation in the fourth quarter, the fate of not only the FSC, but also the Financial Supervisory Service (FSS) and state-run banks, remains unclear. Both inside and outside the financial authorities, concerns are mounting that even if the decision is to remain in Seoul, the political calculations involving balanced regional development and appealing to local constituencies could lead to the relocation debate resurfacing repeatedly ahead of the 2028 general elections.

On August 24, in front of the Love House at the Blue House in Seoul, union members spoke at a joint press conference held by the Deposit Insurance Corporation and the Financial Supervisory Service labor unions to resolutely oppose the relocation of public institutions. At the press conference, they urged that "the Deposit Insurance Corporation and the Financial Supervisory Service be excluded from the second public institution relocation plan and that the plan be reconsidered from the beginning based on the effectiveness of financial system protection and crisis response." Photo by Yonhap News

According to financial authorities on September 4, the relocation plan for administrative and public institutions announced by the government the previous day did not include the FSC. While it was confirmed that the Ministry of Justice and the Ministry of Gender Equality and Family would relocate to Sejong, decisions regarding the relocation of financial public institutions such as the FSC, FSS, Deposit Insurance Corporation, and state-run banks have been postponed once again.

Minister of the Interior and Safety Ho-joong Yun commented on the potential relocation of the financial authorities, stating, "Just because an institution was not mentioned today does not mean it is excluded from the list of institutions to relocate," and added, "We will finalize the list of institutions subject to relocation in the fourth quarter." The decision was further delayed to the fourth quarter, as scheduled deliberation by the Cabinet at the end of August was canceled and the decision was again postponed during the September announcement.

Internally, financial authorities do not see the latest announcement as a signal of remaining in Seoul. This is because the government has reaffirmed its "minimize capital area retention" principle and Minister Yun has left open the possibility of later including the FSC among institutions slated for relocation.

An official from the FSC said, "Since the government stated we are not excluded from consideration, we believe there is still a high possibility that the agency will be relocated to Sejong. While staying in Seoul would be preferable, if relocation is the decided direction, we hope a conclusion is reached quickly so we have time to prepare."

Some observers argue that not including the FSC in the latest announcement is of limited significance. Unlike the Ministry of Justice and the Ministry of Gender Equality and Family, which are designated as exceptions to relocation under the Multifunctional Administrative City Act, requiring legal amendment for a move, the FSC could be relocated without such legislative changes and therefore may not have been addressed separately in the announcement.

The FSS, which is also being discussed as a possible candidate for relocation alongside the FSC, remains on high alert. An FSS official said, "Although I was relieved to see the government soften its stance by moving from talking about 'zero retention in Seoul' to an announcement in October or November, the reaffirmation of the policy to minimize capital area retention and announce relocations in the fourth quarter has caused concern among employees."

As the discussion drags on, the financial sector's backlash is intensifying, with fears that political considerations for regional balance may take precedence over the unique characteristics of finance as a cluster industry.

Finance is a representative cluster industry, where proximity and rapid information sharing among financial regulatory authorities, financial companies, and professionals enhance competitiveness. Given that financial companies and related infrastructure are heavily concentrated in Seoul and the greater capital area, the financial sector widely believes relocating the authorities to other regions would inevitably reduce policymaking and supervisory capabilities, create inefficiencies in work execution, and cause the attrition of skilled personnel. The FSS labor union recently stated, "91.6% of financial company headquarters and 72.7% of listed company headquarters are concentrated in the capital region," arguing that relocation to the provinces would result in a surge of business trips for inspections and supervision, leading to significant additional costs.

Diminished crisis response capabilities are also cited as a concern. For example, during the 2011 mass bank run among savings banks, financial regulators convened meetings just after midnight to formulate countermeasures. Similarly, at the end of 2024, when fears of a financial market shock arose due to emergency martial law, financial authorities and related agencies held emergency meetings from early morning. The increased physical distance between financial authorities and the market could hinder rapid coordination and response in critical situations.

Financial institutions advocating to remain in Seoul are becoming increasingly active. Labor unions at agencies being considered for relocation, such as the FSS and Deposit Insurance Corporation, plan to continue collective actions, including press conferences and petition submissions. The FSS labor union, for example, will submit a petition opposing relocation to the government at 2 p.m. today, signed by 1,679 employees.

While the government's decision remains delayed, political circles have already begun competition to attract financial institutions. On September 2, members of the People Power Party representing Busan publicly called for the FSC, FSS, and the headquarters of the Korea Development Bank to be relocated to Busan, arguing that consolidating regulatory, supervisory, and policy finance functions in the city would help establish Busan as a financial center.

An official from the financial authorities said, "Even if the conclusion is to remain in Seoul at the end of the year, arguments for relocation, justified by balanced development and revitalizing regional economies, could easily reignite. There are significant concerns that this will remain a political issue through the 2028 general elections."

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