Rep. Kim Han-jung Proposes Amendment to the Financial Holding Companies Act Specifying Responsibilities of Board and CEO

Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Kiho Sung] A bill to amend the Financial Holding Companies Act, which imposes responsibilities commensurate with the authority of financial holding companies, has been proposed by the ruling party. This reflects concerns that although disciplinary actions against CEOs of financial companies have been increasing recently due to inadequate internal controls, the legal basis for such actions remains ambiguous.

According to the National Assembly on the 18th, Kim Han-jung, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, has introduced a bill to amend the Financial Holding Companies Act, mandating financial holding companies to establish group-wide internal control standards encompassing subsidiaries.

The bill requires financial holding companies to establish group internal control standards that cover subsidiaries and others. In particular, it clearly defines responsibilities for internal control and risk management in line with the trend of diversifying non-bank sectors such as securities and insurance and expanding inter-subsidiary linked operations.

The core of the bill is the introduction of penalty provisions related to internal controls. Failure to establish internal control standards or neglecting this obligation will result in a fine of up to 100 million KRW. While no personal sanctions are specified, these can be determined by enforcement ordinances. To this end, the amendment explicitly specifies the duties and responsibilities related to group-level internal controls for entities such as the board of directors, CEO, and compliance officers.

Assemblyman Kim Han-jung pointed out, “The current Financial Holding Companies Act specifies ‘internal control and risk management over subsidiaries’ as one of the main duties of financial holding companies, but lacks detailed provisions. As a result, despite the expansion of organizational units by business sector, there is almost no corresponding group-level internal control system.”

According to the amendment, financial holding companies must establish group internal control standards including subsidiaries, and subsidiaries must establish their own standards accordingly. The board of directors is responsible for deliberation and resolution on the establishment and revision of internal control standards and policies to ensure employee compliance. The CEO oversees the formulation of effective preventive measures to avoid violations of the group internal control system, thorough inspections of compliance, and disciplinary actions in case of violations. Compliance officers are tasked with performing internal control duties and reporting the results to the CEO or the chief executive officer.

Assemblyman Kim stated, “The amendment imposes responsibilities commensurate with the expanded authority of financial holding companies, aiming to balance authority and responsibility, and through this, we expect to enhance the soundness of management in the domestic financial industry.”

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