The Financial Supervisory Service to Establish Measures to 'Strengthen Bank Executives' Responsibility' for Embezzlement and Other Financial Incidents

Financial Supervisory Service Governor Lee Bok-hyun is attending the National Assembly's audit of the Financial Supervisory Service held on the 11th, providing a business report. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Song Hwajeong] Amid ongoing financial accidents in the banking sector and growing calls for strengthening internal controls within banks, the Financial Supervisory Service (FSS) is preparing measures to enhance the accountability of bank executives.

According to materials from the FSS's national audit on the 12th, the FSS commissioned a research project in August titled "Measures to Strengthen the Accountability of Bank Executives."

On the 3rd, the FSS announced 20 internal control improvement tasks across four areas to prevent financial accidents. These measures included improvements in personnel management systems such as rotating duties for high-risk employees, mandatory leave policies, and job separation; enhancement of internal audit capabilities; continuous monitoring of internal control operations; and strengthening accident inspections. However, there were no direct improvement measures regarding the responsibility of executives.

It appears that the FSS commissioned the research project to develop measures that strengthen the accountability of executives for financial accidents.

At the National Assembly's Political Affairs Committee audit held the previous day, FSS Governor Lee Bok-hyun stated, "There is concern that top management may perceive internal controls merely as a cost rather than a substantive part of short-term business performance," adding, "I believe that not only imposing obligations related to internal controls but also establishing duties for management and compliance based on the Financial Company Governance Act is necessary." Governor Lee also mentioned, "We are conducting extensive research on internal controls and plan to explore laws that incorporate key performance indicators (KPIs) not only at the branch level but also at the upper management level."

Accordingly, the FSS is expected to propose measures to strengthen executives' obligations to comply with internal controls based on the research results. Since strengthening executives' responsibilities related to internal controls or employees' obligations to comply with internal control standards requires amendments to the Financial Company Governance Act, it is anticipated that the FSS will proceed in consultation with the Financial Services Commission.

According to the FSS, in the first half of this year, there were 40 monetary accidents in the banking and small-to-micro citizen sectors, amounting to 92.7 billion KRW. While the number of incidents decreased by one compared to the same period last year, the amount involved surged by 310.2%. Embezzlement incidents accounted for 74.7 billion KRW, representing the majority (80.6% by amount) of monetary accidents in the first half.

According to data submitted to independent National Assembly Political Affairs Committee member Yang Jeongsuk by the FSS, from 2017 to August this year, a total of 327 embezzlement incidents amounting to 170.4 billion KRW occurred across 78 financial institutions. Hana Bank, local Nonghyup cooperatives, and credit unions experienced embezzlement incidents for six consecutive years from 2017 to this year; Shinhan Bank and Nonghyup Bank for five consecutive years; Woori Bank for four consecutive years; and Kookmin Bank had three incidents during this period.

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