Financial Supervisory Service Chief Plans Embezzlement Countermeasures... "No Uniform Strengthening of CEO Sanctions"

Meeting between Financial Supervisory Service Chief and Savings Bank CEOs on the 8th
"CEO Responsibility May Vary by Case"

Lee Bok-hyun, Governor of the Financial Supervisory Service

[Asia Economy Reporter Song Seung-seop] Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), stated that he is not considering a uniform strengthening of sanctions against CEOs of financial companies or institutions. This is the first time the head of the financial supervisory authority has directly revealed a blueprint regarding measures for recent financial accidents.

On the 8th, after holding a meeting with CEOs of savings banks at the Savings Bank Central Association building in Mapo-gu, Seoul, Governor Lee met with reporters and said, “We do not have any consideration or direction to uniformly strengthen (CEOs’) responsibilities and to prevent such issues.” He added, “Although cautiously, the responsibility of CEOs and others may vary depending on the case,” emphasizing, “We will review the overall system and strive to prevent recurrence in the future.”

The FSS is currently discussing systems to prevent embezzlement incidents and illegal or fraudulent loans occurring in each financial sector. It is known that the representatives of the savings banks also conveyed their methods of fund management and plans to improve internal controls. The FSS plans to disclose improvement measures for internal control systems together with the Financial Services Commission once the ongoing financial accident investigations are completed. However, regarding specific details, they refrained from commenting, saying, “If we discuss individual details before outlining the overall framework, it could lead to exaggeration.”

Concerns were also raised about whether post-inspections can be properly conducted. Business loans are excluded from post-inspections as long as they are under 100 million KRW per financial company and total less than 500 million KRW. Governor Lee said, “In fact, we have confirmed cases where the system was effectively rendered ineffective by forging or altering documents to obtain loans,” adding, “I have asked CEOs to inspect such illegal methods and have requested system improvements.”

When asked if there is an intention to increase the loan loss provision rate related to mortgage loans, he responded, “The CEOs also recognize the need for focused management,” and added, “They mentioned managing the speed of asset growth, lowering the pace, or, if necessary, reducing negative growth while strengthening soundness.”

Regarding the complex governance issues of savings banks, he said, “We are aware of the current situation,” but added, “It is cautious to bring up this issue at the meeting. We did not have a formal discussion on this today.”

When asked about his impressions after one month since taking office on the 7th of last month, he said, “I am making sincere efforts, but I think there may be a lack of communication or preparation regarding that,” and added, “If I receive constructive criticism, I will listen as much as possible and reflect it in policies.”

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