Weakened Financial Supervisory Service Comprehensive Inspection... Uncertainty Continues in the Second Half Due to COVID-19 and Leadership Changes

COVID-19 4th Wave
On-site Testing All Stop
Resumption Uncertain

[Asia Economy Reporter Oh Hyung-gil] The comprehensive inspection by the Financial Supervisory Service (FSS), which caused significant tension in the financial sector upon its revival in 2018, has reached a crossroads. The ongoing comprehensive inspections were abruptly halted due to the fourth wave of COVID-19, making the possibility of resuming them in the second half of the year uncertain. Additionally, with the new head of financial supervision signaling policy changes, the continuation of these inspections has become unclear.

According to the financial sector on the 12th, the comprehensive inspections initiated in June on KB Financial Group, KB Kookmin Bank, NongHyup Life Insurance, Samsung Fire & Marine Insurance, and Meritz Securities were effectively stopped last month due to the escalation to Level 4 social distancing. Depending on the financial institution’s situation, some only underwent preliminary investigations, while others began the main inspection, but there were cases where no on-site inspections were conducted even once. It is also reported that the comprehensive inspection of the Korea Exchange, which was being pursued for the first time in 11 years, has entered a schedule adjustment phase.

A representative from one of the inspected financial institutions said, "The inspection is neither stopped nor ongoing; it’s ambiguous. Occasionally, inquiry letters come by phone, and we respond, but that’s all that continues." They added, "Since there is no clear answer on whether the inspection will resume, we are left waiting indefinitely, which only increases the fatigue of the staff in the relevant departments."

Another financial institution representative said, "The inspection was interrupted midway, and we expect on-site inspections to resume once the social distancing level is lowered, but as the inspected party, we cannot be certain about the specific schedule."

Initially, the FSS stated it would flexibly adjust inspection plans according to the COVID-19 situation, but with the implementation of Level 4 social distancing, inspections became impossible.

The progress of the comprehensive inspections planned for earlier this year has also become uncertain. In February, the FSS announced plans to conduct comprehensive inspections on a total of 16 institutions, including banks and holding companies, securities firms, insurance companies, asset management companies, specialized credit finance companies, and mutual finance companies.

The remaining financial institutions targeted for inspection in the second half of the year are also uncertain about when they will be inspected. It was known that comprehensive inspections would be conducted on institutions such as Woori Financial Group, Kakao Bank, Dongyang Life Insurance, and KB Insurance. However, there is now a possibility that these inspections may be postponed until next year or later.

[Image source=Yonhap News]

Inspected Institutions Complain of Frustration, Saying "Waiting Indefinitely Is Exhausting"

Last year, there was a plan to conduct comprehensive inspections on 17 institutions, but only 7 were completed due to COVID-19. For banks and holding companies, it was expected that Hana and Woori Financial Groups would be inspected, but only Hana Financial Group completed its inspection.

Comprehensive inspections examine overall operations including consumer protection and internal controls, as well as management practices. They were revived by former FSS Chairman Yoon Seok-heon, who declared a strengthening of financial supervision. However, with the new FSS head, uncertainty about the continuation of comprehensive inspections has increased within the financial sector.

Newly appointed Governor Jeong Eun-bo emphasized support over regulation as his inaugural message, highlighting the importance of preventive measures as much as post-regulation. In his inaugural speech, Governor Jeong stated, "Relying on post-sanctions makes it difficult to gain cooperation from the financial sector and ultimately weakens consumer protection. Please always remember that the essence of financial supervision lies in support, not regulation."

A financial authority official said, "We are considering resuming comprehensive inspections once Level 4 social distancing is lowered, but no schedule has been set yet," adding, "It is difficult to give a definite answer regarding future inspection schedules or plans."

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