"Strict Measures, Root Cause Eradication, Crime Elimination"… Lee Bok-hyun, Financial Supervisory Service Chief, Delivers Direct Blow to Financial Firms

November 11 National Assembly Political Affairs Committee Audit
Lee Bok-hyun, Governor: "Public Perception of Financial Sector Still Negative"
"Will Eradicate Illegal and Unfair Trading Practices"

Lee Bok-hyun, Governor of the Financial Supervisory Service. / Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Song Seung-seop] Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), sharply criticized private financial companies with strong expressions. This contrasts with his previous restraint in making harsh remarks while emphasizing harmony with the private sector. It appears to reflect his awareness of the deteriorating public opinion due to successive embezzlement incidents and abnormal foreign exchange transactions.

At the National Assembly’s Political Affairs Committee audit on the 11th, Governor Lee Bok-hyun stated in his opening remarks, “The public’s view of the financial sector remains unfavorable,” and added, “We will respond swiftly and strongly to embezzlement incidents and abnormal foreign exchange transactions that undermine public trust in the financial sector, and if illegal activities are found during inspections, we will take strict measures according to relevant laws and regulations.”

Governor Lee continued, “We are making efforts to improve systems to prevent similar cases, such as strengthening internal controls, and are committed to securing trust in the financial industry.” Regarding private financial companies, he emphasized, “We will encourage the establishment of a responsible management system that can correct risk factors on their own so that our financial sector can regain the trust of the people.”

These remarks were made in the presence of Lee Jae-geun, CEO of KB Kookmin Bank; Jin Ok-dong, CEO of Shinhan Bank; Park Sung-ho, CEO of Hana Bank; Lee Won-duk, CEO of Woori Bank; and Kwon Joon-hak, CEO of NH Nonghyup Bank. It is the first time in five years since 2017, the first year of the Moon Jae-in administration, that so many bank CEOs were summoned as witnesses to the audit. The Political Affairs Committee stated that the reason for the witness summons was “to address responsibility for financial accidents such as embezzlement, misuse, and breach of trust occurring in banks, and to discuss measures to strengthen internal controls and prevent recurrence.”

Within the financial sector, Governor Lee’s remarks are considered quite strong criticism. Since his remarks on “interest profiteering in the banking sector” after taking office, he has refrained from making harsh criticisms that could cause controversy at meetings. Even when meeting reporters, he consistently emphasized messages such as “respecting the market” or “not interfering with the market and being unable to do so.” Regarding sensitive issues like CEO sanctions, he only expressed a principled stance of “reviewing and handling according to principles.”

FSS Governor Issues Strong Warning Amid Worsening Public Opinion

Governor Lee’s first appearance at the audit is interpreted as reflecting his awareness of the worsening public opinion. According to So Byung-chul, a member of the Democratic Party of Korea, there have been a total of 210 financial accidents from 2017 to July this year, with the amount involved reaching 198.2 billion KRW. The scale of abnormal foreign exchange transactions in the banking sector, revealed to involve illegal remittances, is 7.22 billion USD (approximately 10.1686 trillion KRW) and continues to increase. Consequently, there were significant concerns within the financial sector that this audit could turn into a forum for condemning private banks.

Governor Lee also expressed his position on short selling, which has recently become controversial. He said, “Through inspections and investigations, we are thoroughly examining the appropriateness of short selling operations and related situations,” and added, “We will focus on cracking down on market disorderly conduct that pollutes the financial market by exploiting increased market volatility, and will strictly punish illegal and unfair trading activities.”

Additionally, Governor Lee stated, “For financial crimes that harm people’s livelihoods and whose methods are becoming increasingly sophisticated, we will issue consumer alerts immediately upon recognizing new crime methods to raise public awareness,” and “We will make every effort to eradicate financial crimes by strengthening the response system through government-wide cooperation.”

Regarding the soundness of financial companies, Governor Lee mentioned, “We will closely and continuously monitor risk factors related to economically sensitive exposures to prevent them from spreading as systemic risks,” and “We are strengthening supervision to enhance financial companies’ loss absorption capacity so that they can maintain soundness and smoothly perform their core functions such as fund intermediation despite internal and external shocks.”

Meanwhile, on the FSS’s supervisory and inspection duties, he promised, “We will execute them predictably according to rational procedures,” and “We will strive to become a Financial Supervisory Service trusted by financial market participants.”

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