Desks dedicated to supporting victims of TMON and WeMakePrice's liquidity crisis are installed at the Financial Supervisory Service in Seoul, Wednesday. Yonhap

The Financial Supervisory Service (FSS) is considering an organizational restructuring to improve oversight of e-commerce platform operators following significant cash flow issues with TMON and WeMakePrice, according to political and financial sources, Thursday. These issues caused delays in payments to vendors and subsequently caused setbacks in refunds to customers.

The move comes as the liquidity crisis involving the two Korean affiliates of Singapore-based e-commerce platform Qoo10 has highlighted problems regarding the lax regulations and oversight by the financial watchdog in the rapidly growing industry.

“Internal discussions are taking place regarding organizational restructuring and personnel changes,” an FSS official said. “We need to consult with the Financial Services Commission (FSC) regarding the workforce expansion.”

Currently, the FSS has only four teams in charge of electronic financial services. About 20 officials are working there.

In contrast, 33 teams and 25 teams are assigned to the supervision of banks and insurers, respectively. The total workforce at the FSS is nearly 2,500.

During a National Assembly hearing over the two cash-strapped e-commerce platforms on July 30, lawmakers also pointed out that the FSS' supervision of non-bank institutions has been inadequate.

At the time, FSS Governor Lee Bok-hyun said, “We will consider expanding related teams and workforce.”

Financial Supervisory Service Governor Lee Bok-hyun, right, attends a National Assembly hearing on TMON and WeMakePrice's liquidity crisis in Seoul, July 30. Yonhap

While the organizational restructuring of the FSS falls under the discretion of its governor, increasing the workforce and the associated budget allocation require approval from the FSC, the country's top financial regulator.

As the TMON and WeMakePrice situation has brought supervisory issues to the fore, the FSS is expected to initiate discussions with the FSC soon.

Some politicians, meanwhile, argue that the financial watchdog should be split to address the fundamental issues, based on the judgment that the organization's functions are primarily focused on supervision, leading to inadequate consumer protection.

Rep. Kim Hyun-jung of the main opposition Democratic Party of Korea plans to submit a bill this month to split the FSS into two entities. Under this bill, one entity would be in charge of financial supervision, while the other would oversee consumer protection.

“Due to inadequate consumer protection, similar issues keep recurring. There is a need to prevent this by restructuring the financial watchdog,” Kim said.

In 2012, similar legislative efforts to split the FSS were made following the 2011 bank run on local savings banks, but to no avail.