Emphasizing 'Fair Finance,' Lee Bok-hyun Warns "Financial Firms Avoiding Responsibility May Face Market Expulsion"

Ignoring Customer Interests and Delaying Loss Recognition Will Be Firmly Addressed
Accelerating Real Estate PF Restructuring to Prevent Spread of Insolvency
Strengthening Soundness Management Compared to Household and Corporate Debt
Operating 'Fair Finance Promotion Committee' to Improve Unfair Trading Practices
Establishing Response Council within FSC for Financial Crime 대응

The Financial Supervisory Service (FSS) has set "fair finance" as its key supervisory direction for this year and will accelerate the restructuring and reorganization of real estate project financing (PF), a critical risk factor in our economy. In particular, it will strengthen the loss-absorbing capacity of financial companies to preemptively block the spread of insolvency, while also enhancing soundness management to prepare for increases in household and corporate debt, thereby ensuring thorough risk management.

Additionally, the FSS will operate the "Fair Finance Promotion Committee" to block unfair trading practices such as excessive interest profiteering and unfair fee collection by banks, loan flipping, and refusal to pay insurance claims, thereby enhancing the rights and interests of financial consumers. It will also establish an "in-house response consultative body" to eradicate financial crimes that harm people's livelihoods, such as stock price manipulation, insurance fraud, and illegal debt collection, responding comprehensively from prevention to crackdown and victim relief.

On the 5th, Lee Bok-hyun, Governor of the FSS, held a briefing and related press conference at the FSS in Yeouido, Seoul, outlining 12 core tasks incorporating four keywords: stability, livelihood, trust, and future, as the direction for financial supervision and inspection. He stated, "The key supervisory direction for this year is 'fair finance,'" adding, "While we have carefully considered various conditions such as the financial market environment, from this year onward, companies that make wrong decisions such as ignoring customer interests or delaying rightful loss recognition, or evade their natural responsibilities as financial institutions, will be firmly dealt with under the principle of not hesitating to expel them from the market."

The FSS plans to first conduct a thorough assessment of real estate PF projects, aiming for a soft landing, and then proceed with restructuring and reorganization after meticulously checking risk factors. Governor Lee emphasized, "We will induce financial companies to enhance their loss-absorbing capacity to prevent the spread of individual asset insolvency to the entire financial market," and added, "We will restore a virtuous cycle in the capital market so that funds tied up in non-performing assets flow efficiently and productively."

The level of risk management in response to increases in household and corporate debt will also be significantly raised. Governor Lee explained, "We will greatly enhance management levels for vulnerable areas such as soundness strengthening and activate an emergency response system in case of sudden money movements or market fluctuations to maintain financial market stability."

The FSS will identify and improve unfair trading practices by financial companies and will respond with full force to financial crimes harming livelihoods by establishing a response consultative body within the FSS. Governor Lee said, "Through the 'Fair Finance Promotion Committee,' we will actively identify on-site practices and change them so that the public can feel the changed environment," adding, "To ensure that efforts to improve practices do not end as one-time events, we will establish various communication channels such as an online reporting center and implement them systematically across the organization." Regarding livelihood-related issues, he added, "We will establish a response consultative body within the FSS and respond comprehensively at all stages from prevention to crackdown and victim relief."

He also announced plans to strictly take action against unfair trading in the capital market and incomplete sales by financial companies, while preparing fundamental measures to prevent repeated damage. Regarding short selling, the FSS plans to normalize the uneven playing field by equalizing trading conditions between institutions and individuals in cooperation with the Financial Services Commission. For Hong Kong H-Share Index (HSCEI) equity-linked securities (ELS), confirmed cases of incomplete sales will be strictly dealt with, and appropriate victim relief will be pursued.

Governor Lee stated, "We will eradicate illegal short selling in the Korean financial market by establishing a short selling transaction IT system and thoroughly investigating global investment banks (IBs)," and added, "We will strive to prevent the recurrence of backward forms of incomplete sales damage through detailed analysis of high-risk product sales regulations." He emphasized, "When illegal or unsound acts threatening consumers are detected, inspection personnel will be immediately concentrated and integrated linked inspections will be conducted to root out problems early."

He expressed a strong commitment to actively support financial innovation, noting that digitalization presents new growth opportunities and challenges for the financial industry. He also pledged to thoroughly prepare related systems, including climate risk management reflecting international responses to climate change, measures to prevent greenwashing, and the establishment of green loan management guidelines.

Governor Lee explained, "We will actively pursue tasks such as strengthening cybersecurity, establishing consumer protection systems suitable for the digital environment, and improving regulatory frameworks for data combination and artificial intelligence (AI) utilization," adding, "We will build related supervisory systems and infrastructure to ensure early settlement of virtual asset user protection measures under the Virtual Asset User Protection Act, which will be enforced from July."

Meanwhile, he emphasized that "fair finance" is the key supervisory direction this year and stated that unfair practices such as short-term performance orientation by financial companies, excessive interest profiteering, and unfair fee collection in an oligopolistic system will not be tolerated. He expressed his intention to focus on financial companies' behaviors that prioritize short-term profits without considering risks, such as concentrated investment in PF, privatizing short-term gains, and passing on subsequent risks to consumers and society.

He added, "We will strictly block acts that enjoy regulatory arbitrage or exploit the superior position of financial companies to seize consumers' shares without efforts to innovate or improve consumer benefits while resting on an oligopolistic system," and emphasized, "We will severely punish shameless livelihood financial crimes such as stock price manipulation, insurance fraud, and illegal debt collection with the strongest sanctions as a deterrent."

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