Financial Sector Responsibility Structure to be Implemented Next Month... Submission Timing Differentiated by Industry and Scale

To strengthen internal controls in the financial sector, a 'Responsibility Structure Chart' outlining the duties of each executive and employee of financial companies will be implemented starting from the 3rd of next month. However, the timing for preparing and submitting the Responsibility Structure Chart will vary depending on the industry sector and size of each financial company.

On the 11th, the Financial Services Commission announced that the amendment to the Enforcement Decree of the "Act on the Governance of Financial Companies," which includes these details, was approved at the Cabinet meeting. The amendment stipulates specific details of the responsibilities to be included in the Responsibility Structure Chart, submission timing by industry sector, and other delegated matters from the law.

First, the amendment defines the specific responsibilities that must be included in the Responsibility Structure Chart. Responsibilities refer to the accountability for the execution and operation of internal controls regarding matters that financial companies or their executives and employees must comply with under financial-related laws and regulations. These are categorized into ▲ responsibilities related to tasks performed by designated specific persons in charge ▲ responsibilities related to tasks to be performed by designated specific persons in charge ▲ and management-related responsibilities performed by financial companies to carry out licensed or authorized business activities.

Additionally, outside directors who are not the chairperson of the board are excluded from the financial company executives who can be assigned responsibilities in the Responsibility Structure Chart. Instead, compliance officers or risk management officers who are not executives may be included. Furthermore, according to the Financial Company Governance Supervision Regulation to be amended at the end of this month, responsibilities may also be assigned to "employees performing relevant duties equivalent to executives."

The amendment also regulates the submission timing of the Responsibility Structure Chart by financial industry sector. Financial holding companies and banks must submit the chart by January 2nd of next year. Financial investment firms with total assets of 5 trillion KRW or more and managed assets of 20 trillion KRW or more, or insurance companies with total assets of 5 trillion KRW or more, must submit by July 2nd of next year.

Other financial investment firms with total assets under 5 trillion KRW and managed assets under 20 trillion KRW, insurance companies with total assets under 5 trillion KRW, specialized credit finance companies with total assets of 5 trillion KRW or more, and mutual savings banks with total assets of 700 billion KRW or more must submit the Responsibility Structure Chart by July 2nd, 2026. Specialized credit finance companies with total assets under 5 trillion KRW or savings banks with total assets under 700 billion KRW must submit by July 2nd, 2027.

The amendment also specifies the detailed obligations of the CEO regarding internal control management. The CEO and others must take overall management measures for internal controls, inspect potential risks related to "identical or similar internal control matters reported by multiple executives," and check the possibility of similar violations occurring to prevent such breaches by employees.

The financial authorities plan to prepare guidelines that include explanations of responsibilities, methods of allocation, detailed obligations of the CEO for overall internal control management, and responses to inquiries from the financial sector. This is to ensure the new system is stably established in the financial industry through continuous discussions with the Financial Supervisory Service, various financial associations, and the financial sector.

The financial authorities will also prepare the "Operational Guidelines for Sanctions and Exemptions Related to Internal Control Responsibilities" to enhance the predictability and transparency of internal control sanctions. These guidelines will be finalized after reporting to the Financial Services Commission and then made public.

The Financial Services Commission stated, "With the enforcement of the amended Governance Act, financial company executives will be assigned responsibilities and given management obligations for internal controls related to their respective duties. We expect this to bring about a fundamental change in the internal control practices within the financial sector, including a significant shift in executives' awareness of internal controls."

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