Financial Supervisory Service's Comprehensive Inspection Stumbles Again Amid COVID-19 Spread... 'This Year Seems Difficult' 전망

Main Inspection Schedule at Naeju Postponed One After Another
"Full Resumption Difficult Even After September"
Some Voices Call for 'System Overhaul'

[Asia Economy Reporters Kim Hyo-jin and Park Ji-hwan] The rapid resurgence of the novel coronavirus infection (COVID-19) is causing disruptions across the Financial Supervisory Service's (FSS) comprehensive inspection plans for financial companies.

The FSS plans to temporarily suspend comprehensive inspections until the end of this month in line with the government's strengthened social distancing policies. However, financial circles both inside and outside the industry point out that it would be difficult to resume activities immediately unless the spread significantly subsides in the remaining 10 days.

Some speculate that a full-scale comprehensive inspection within this year may be practically impossible.

Temporary Suspension Policy Until End of August
Rescheduling of Hana Financial Investment's Inspection

According to financial circles on the 19th, the FSS has completely rescheduled the previously planned preliminary and main inspections following the temporary suspension policy. Additionally, the FSS plans to formally notify Hana Financial Investment as early as today about the postponement of the main inspection originally scheduled from the 24th of this month to the 16th of next month.

Since mid-last month, the FSS has been conducting preliminary inspections for the main inspection by receiving written materials from Hana Financial Investment. The comprehensive inspection schedule for Hana Financial Group, centered on Hana Bank, which was to be conducted soon, has also become inevitably subject to adjustment.

In this regard, FSS Governor Yoon Seok-heon instructed at an executive meeting yesterday to postpone the comprehensive inspections until the end of this month, considering the spread of COVID-19. This decision was based on concerns about COVID-19 infections among institutional personnel due to the nature of the main comprehensive inspections, which involve deploying staff to financial company sites.

The FSS had planned to deploy about 6,000 personnel this year to conduct comprehensive inspections on 17 financial companies, but since the full-scale spread of COVID-19 in February, the plan has been repeatedly delayed and scaled down, preventing full-scale activities.

The situation has been further strained by manpower allocation issues caused by the full inspection of private equity funds triggered by the Lime and Optimus Asset Management scandals.

When the COVID-19 spread slowed down in early last month, the FSS began practical preparations to resume comprehensive inspections under Governor Yoon's directive. The plan was to intensify inspections in the second half of the year for Hana Financial Investment, Hana Bank, Woori Financial Group, Woori Bank, and Kyobo Life Insurance.

Even if the schedule resumes after September, the general consensus is that typical comprehensive inspections will be difficult. Governor Yoon also urged that, considering these concerns, flexible operation of inspections should be ensured by utilizing non-face-to-face inspection techniques during future on-site inspections.

Within the financial sector, there are calls for the FSS to adopt a more flexible approach that takes into account the overall economic situation rather than being fixated on goals such as "conducting comprehensive inspections on certain institutions within this year."

"Should Not Be Obsessed with Conducting Comprehensive Inspections Themselves"
Calls for Systematizing Governor Yoon's Mentioned 'Non-Face-to-Face Techniques'

A financial industry official said, "According to the Financial Supervisory Service's 'Regulations on Inspection and Sanctions of Financial Institutions,' on-site inspections require notifying the financial company one month in advance. Considering this, it would be physically very difficult to conduct a series of substantial comprehensive inspections, especially on-site inspections, during the remaining period of this year," adding, "There is a risk of side effects if procedures are rushed."

An official from a commercial bank said, "Since additional extensions of loan maturities related to COVID-19 are already planned, and due to the recent surge in cases, the demand for additional financial support that banks and others must bear could rapidly increase. Therefore, the FSS needs to take a magnanimous approach," adding, "Systematically researching the 'non-face-to-face inspection techniques' mentioned by Governor Yoon and reorganizing the methodology of comprehensive inspections itself could be one way forward."

The FSS's comprehensive inspections were effectively abolished after 2015 but were 'revived' in 2018 when Governor Yoon took office. Since then, the FSS has conducted comprehensive inspections on KB Financial Group and KB Kookmin Bank, as well as Shinhan Financial Group and Shinhan Bank.

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