Measures, Inspections, and Sanctions to Prevent Financial Accidents Specified as Mandatory Duties for Bank Presidents

Revision of Bank Federation Standard Internal Control Criteria
Specification and Clarification of Internal Control Roles

[Asia Economy Reporter Park Sun-mi] To prevent internal control issues such as financial accidents, the role of bank presidents will include obligations to establish measures, conduct inspections, and set sanction standards to prevent violations of internal control standards.

On the 24th, the Korea Federation of Banks announced that, as a follow-up to the "Internal Control Improvement Plan" announced on September 7, it has revised the "Standard Internal Control Standards for Banks" and the "Governance Annual Report" to specify the board of directors' internal control roles and clarify the division of roles among executives and employees. According to the Act on the Governance of Financial Companies, the Korea Federation of Banks can recommend banks to create standards for internal control and governance annual report preparation as a self-implementation measure, even without legal amendments or follow-up actions from financial authorities.

First, the internal control role of the board of directors was specified. It was clarified that when internal control issues occur in a bank, the board of directors can request management to submit an internal control improvement plan and demand disciplinary actions against responsible executives and employees. Previously, the board's role was defined as "deliberation and resolution of major internal control matters," which was criticized for lacking specificity.

The division of roles among internal control officers was also clearly defined. In particular, the internal control-related obligations of the bank president include ▲ the obligation to establish preventive measures to avoid violations of internal control standards, ▲ the obligation to inspect the internal control system and its operational status, and ▲ the obligation to establish sanction standards for violations of internal control standards. Additionally, the subjects of individual internal control activities were specified from the previous "bank" to the president, compliance officer,reporting officer,and organizational unit heads, clarifying the division of roles among executives and employees.

Furthermore, an "obligation to complete" internal control education for compliance officers was introduced, and major internal control activities of the bank's board of directors are to be disclosed through the governance annual report.

A Korea Federation of Banks official explained, "Although legal amendments necessary for implementing the 'Internal Control Improvement Plan' announced in early September have not yet been completed, internal control is essentially something that financial companies must autonomously establish and operate," adding, "By proactively revising the standard internal control standards in the banking sector, it is expected that internal control in the banking sector will be established and operated more effectively."

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