[Song Seungseop's Financial Light] The 'Comprehensive Inspection' That Shook the Financial Sector... How Will It Change?

Jung Eun-bo, Governor of the Financial Supervisory Service, is taking a commemorative photo with the chairmen of financial holding companies at the Bankers' Hall in Jung-gu, Seoul on the 3rd. From the left, Kim Tae-o, Chairman of DGB Financial Group; Kim Ki-hong, Chairman of JB Financial Group; Kim Jung-tae, Chairman of Hana Financial Group; Governor Jung; Yoon Jong-kyu, Chairman of KB Financial Group; Sohn Tae-seung, Chairman of Woori Financial Group; Sohn Byung-hwan, Chairman of NH Financial Group; Kim Ji-wan, Chairman of BNK Financial Group. Photo by Moon Ho-nam munonam@

Finance is difficult. Confusing terms and complex backstories are all tangled together. Sometimes, you need to learn dozens of concepts just to understand a single word. Yet, finance is important. To understand the philosophy of fund management and consistently follow the flow of money, a foundation of financial knowledge is essential. Accordingly, Asia Economy selects one financial term each week and explains it in very simple language. Even if you know nothing about finance, you can immediately understand these 'light' stories that turn on the bright 'light' of finance for you.

[Asia Economy Reporter Song Seung-seop] When are financial companies most nervous? When launching a new product? Before announcing earnings? The answer is probably when a 'comprehensive inspection' is conducted. However, this comprehensive inspection is about to undergo a major change. Why have financial companies been so afraid of comprehensive inspections? And why is the system being changed?

The comprehensive inspection is a type of supervision and audit conducted by the Financial Supervisory Service (FSS) targeting financial companies. According to the 'Regulations on Financial Institution Inspections and Sanctions,' the head of the FSS conducts inspections on the operations, financial status, and specific sectors of financial institutions. This means they can review the entire private financial sector.

Inspections are divided into comprehensive inspections and sector-specific inspections. The actual inspection work is carried out either on-site or in writing. The head of the FSS annually prepares a plan outlining the basic direction of inspection work for the year, the institutions to be inspected, the purpose, scope, and duration, and reports it to the Financial Services Commission.

The history of comprehensive inspections dates back to 1962. At that time, the FSS was established and used this as a means to supervise the financial sector. Then, in 2015, Jin Woong-seop, who was the head of the FSS at the time, phased out the comprehensive inspection system, citing that it was a burden on the financial sector. After four years, in 2019, Yoon Seok-heon, the former head, reintroduced and revived it. And in 2021, the system is scheduled to be reformed again.

The financial sector pays close attention to comprehensive inspections because the impact of changes is significant. Sector-specific inspections only examine certain areas, but comprehensive inspections look into all management conditions. They focus intensively on sensitive areas like internal control systems or businesses with potential issues. There is a large amount of preliminary data to submit, and sometimes about 30 FSS staff members are deployed for a month. Naturally, financial companies cannot help but be nervous.

There have been many complaints within financial companies about the FSS's comprehensive inspections. They say it is an administrative process that tries to find any inappropriate points by 'thoroughly searching' everything. There were also complaints that the short inspection cycle burdens their core business.

However, last November, Jeong Eun-bo, the head of the FSS, expressed the intention to reform the inspection system. In a meeting with financial holding company chairpersons, he mentioned, "We plan to reform the FSS's inspection work into a sophisticated and balanced system that focuses on proactive risk identification and preventive measures." He also stated, "We will reasonably adjust the inspection cycle, scope, and methods according to the characteristics of each financial sector, such as the size of the financial company and the complexity of its operations."

Earlier, the comprehensive inspection schedules for Woori Financial Group and Woori Bank were postponed to next year. Woori Bank's last management evaluation was in October 2018, and Woori Financial Group has not yet undergone a comprehensive inspection since its establishment in 2019. Even this year, the FSS requested preliminary data from Woori Financial Group according to the plan, but it was deferred.

The FSS is currently considering different inspection cycles, scopes, and methods depending on the size and operations of banks, securities firms, insurance companies, and others. They are coordinating specific reform plans internally through a task force (TF) and plan to apply them next year.

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