FSS: "Supervision of Small Financial Institutions Focuses on Risk Management and Strengthening Internal Controls"

Financial Supervisory Service, Yeouido, Seoul. Photo by Younghan Heo younghan@

The Financial Supervisory Service (FSS) urged savings banks, mutual finance institutions, and specialized credit finance companies to strengthen risk management and enhance internal controls to prevent financial accidents.

On the 13th, the FSS held a 'Financial Supervision Briefing for the Small and Medium Finance Sector' and announced this.

Park Sang-won, Deputy Governor of the FSS, requested, "Considering the prolonged high interest rates and high inflation, please improve loss absorption capacity through the accumulation of provisions and strengthen crisis response capabilities." He also emphasized the need to faithfully fulfill their fundamental roles, such as providing funds to low-income earners and small business owners.

He also called for efforts to strengthen internal controls to prevent financial accidents. Deputy Governor Park explained, "The more difficult the economy, the higher the possibility of financial accidents occurring, especially in financial companies with weak internal controls," adding, "This is a time to further strengthen internal controls." He also urged efforts to discover new growth engines such as product development and market expansion.

The FSS presented this year’s supervisory and inspection directions for the small and medium finance sector, including stabilizing the financial market and expanding the foundation for sound management, strengthening finance for low-income groups and enhancing financial consumer rights, establishing market order to build trust in finance, and supporting financial innovation to build a foundation for future growth.

First, to prepare for a possible rise in delinquency rates, the FSS plans to proactively increase provisions for loan losses to enhance loss absorption capacity. It will also strengthen risk response systems such as conducting crisis situation analyses, improving liquidity ratio systems, and monitoring using leading indicators.

To support low-income and vulnerable borrowers, plans include revitalizing internal debt restructuring to support self-sufficiency among low-income groups and expanding fund supply to vulnerable groups through increased guaranteed loans. Inconveniences related to savings banks, such as the disclosure of deposit and savings interest rates, will also be improved.

The FSS plans to strengthen inspections of the timeliness of the mutual finance central association’s financial accident response system. To enhance inspection effectiveness, pinpoint inspections will be conducted in addition to continuous monitoring, and inspection personnel will be intensively deployed if there are concerns about systemic risks materializing. Since a dedicated team for Saemaeul Geumgo was established earlier this year, information sharing with related agencies will also be expanded.

Furthermore, the FSS will review advanced regulatory measures for the soundness of large savings banks and promote differentiated regulations according to the size of mutual finance cooperatives.

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