Financial Supervisory Service Chief Reviews Governance Act Amid Various Financial Incidents... "Will Serve as Key Motivation"

June 6, 1st Bank Sector Linked Business Restructuring Strategy Meeting
"Looking at Governance Law Responsibility Issues from a Broad Perspective"
Maintaining Position That Banks Are Responsible for Foreign Remittances

Lee Bok-hyun, Governor of the Financial Supervisory Service, is delivering a welcoming speech at the 'Ministry of Trade, Industry and Energy and Financial Supervisory Service Jointly Hosted Business Restructuring-Banking Sector Linked Strategy Meeting and Business Agreement Ceremony' held on the 6th at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Song Seung-seop] It has been confirmed that the financial sector is discussing improvements under the Financial Governance Act, including changes to supervision and inspection methods. This is to fundamentally prevent various financial accidents, ranging from embezzlement incidents originating in the banking sector, controversies over foreign exchange remittances mixed with illegal activities such as hawala transactions, to suspicions of solar power bad loans.

On the 6th, immediately after completing the '1st Bank-linked Business Restructuring Strategy Meeting' at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul, Financial Supervisory Service (FSS) Governor Lee Bok-hyun responded to a reporter's question asking, "Do you have any thoughts on changing the FSS's supervision and inspection methods?" by saying, "I have thought about it." This implies that measures will be prepared to eradicate illegal and corrupt incidents or financial accidents in the financial sector. So far, there has been no internal reform of the FSS's supervision and inspection system or legal amendments related to the current financial accidents.

Governor Lee Bok-hyun explained, "Regarding embezzlement, urgent measures to prevent recurrence have been announced with the relevant industry," adding, "We are looking at the issue of responsibility under the governance law on a broad scale." He further stated, "Essentially, the forthcoming measures will serve as core motivation beyond profitability in the operation of financial institutions." This is interpreted as meaning that banks will be compelled to comply with laws such as the Governance Act that they must observe and prevent violations of.

The measures that Governor Lee mentioned as "urgently prepared" appear to be the internal control strengthening system announced by the FSS on the 3rd. The FSS stated that it will enhance mutual checks and balances through rotational duties and ordered leave systems and improve capabilities such as in-house compliance monitoring. However, these measures did not include strengthening the responsibilities of CEOs and executives under the Financial Governance Act or increasing sanctions for non-compliance with internal controls.

Regarding the ongoing financial issues, Governor Lee maintained the existing view that there is fault on the part of the banks. He explained, "There are legitimate criticisms that it might be difficult to hold banks too responsible," but added, "I said that not all parts are like that because (illegal) behaviors have been observed." He continued, "Additional materials were submitted recently, and there will be more this week." Last month, Governor Lee stated concerning foreign exchange transactions involving trillions of won, "It will be hard for banks to claim they have no responsibility."

When asked whether the additional submitted materials indicate further involvement of bank executives and employees, he cautiously replied, "It is difficult to say how the investigation will conclude," but indirectly acknowledged, "There are indeed various details that have not been disclosed externally."

Regarding sanctions on banks related to foreign exchange remittances, he said, "Whether to view it as a personal deviation by the person in charge or as institutional neglect is another area of judgment," adding, "We will judge based on principles without prejudice."

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