[2023 National Audit] Lee Bok-hyun "Strict Measures Against Illegal Short Selling and Unfair Business Practices"

October 17 Financial Supervisory Service National Audit
Lee Bok-hyun, Governor, "Strengthening Supervision of Bank Internal Control Operations"

Lee Bok-hyun, Governor of the Financial Supervisory Service

Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), stated, "We will take strict measures if illegal short selling and self-serving acts by employees of financial investment companies are discovered."

On the 17th, during the FSS audit by the National Assembly's Political Affairs Committee, Governor Lee expressed his determination to "respond swiftly to unfair practices in the capital market." This statement came after detecting large-scale illegal short selling through post-borrowing methods by global investment banks (IBs), a sharp decline in stock prices of multiple stocks due to large-scale market manipulation, and private investments in privately placed convertible bonds by employees of securities companies' corporate finance departments using undisclosed information. He vowed to strictly punish such acts.

Governor Lee also addressed financial accidents, including embezzlement in the banking sector, stating, "In the event of a large-scale financial accident, we will immediately conduct on-site inspections and strengthen supervision until internal controls for accident prevention in the banking sector operate effectively." The FSS plans to hold a meeting with chairpersons of bank holding companies' boards in December. They will also announce the final draft of the 'Best Practice for Bank Governance,' which includes CEO appointment and management succession procedures, and a support system that provides sufficient information to outside directors.

Regarding factors causing financial market instability, Governor Lee said, "To ensure financial system stability, we are conducting close monitoring of the economy and financial markets to detect potential risk factors early." He added, "We are focusing inspections on high-risk assets such as real estate project financing (PF) and overseas alternative investments to prevent them from becoming burdens on the real economy."

The FSS is conducting liquidity stress tests on deposit-taking institutions assuming a digital bank run scenario and is developing analytical models to respond accordingly. For real estate PF, liquidity will be supplied through policy financial institutions such as the Korea Housing & Urban Guarantee Corporation and the Korea Housing Finance Corporation to provide tailored responses for each project site. The status of securities companies' real estate PF exposure is also checked monthly, and non-performing loans are written off early to strengthen risk management.

Regarding virtual assets, Governor Lee stated, "We will establish a foundation for a sound virtual asset market." The 'Virtual Asset User Protection Act' will be enforced starting July next year. Even before the law takes effect, the FSS plans to take measures such as providing policy advice on internal controls, investor protection, and listing guidelines prepared by the virtual asset exchange consultative body (DAXA).

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