[2024 National Audit] Financial Sector Audit Approaching... Missing 2nd Tier Financial Sector Issues

Political Affairs Committee: Financial Services Commission on 10th, Financial Supervisory Service on 17th, Comprehensive Audit on 24th
Issues Focused on Bank Internal Controls and TiMeP
Lack of Issues in Secondary Financial Sectors like Insurance and Cards

The National Assembly's Financial Services Committee's audit of the financial sector will begin on the 10th, but there are opinions that the issue concentration phenomenon is excessive. There are concerns that issues in the secondary financial sector, such as insurance and credit cards, will not be properly addressed due to the focus on internal control issues in the banking sector.

According to the financial and political circles on the 8th, the National Assembly's Financial Services Committee will conduct a financial sector audit from the 10th to the 24th. Starting with the Financial Services Commission on the 10th, followed by the Financial Supervisory Service on the 17th, and a comprehensive audit on the 24th, financial sector issues are expected to be addressed. In the political sphere, preparations for questioning are underway regarding Lim Jong-ryong, chairman of Woori Financial Group, who will be the first chairman of a major financial group to testify at the audit. Materials related to the banking sector's internal control deficiencies submitted by financial authorities to the National Assembly are also pouring in.

National Assembly Committee on Political Affairs.

However, issues in the secondary financial sector have almost disappeared. In the insurance industry, major issues include the controversy over performance inflation related to the newly introduced International Financial Reporting Standard 17 (IFRS17) since last year, excessive competition among sales channels such as General Agencies (GA), and the computerization of indemnity insurance claims scheduled to be implemented on the 25th. However, there are hardly any politicians presenting materials or opinions on these matters. An insurance industry official said, "Unlike in the past, there are not many requests for materials this time, and even the always problematic indemnity insurance issues are being overlooked," adding, "Insurance issues will be mentioned during audits by the Financial Services Commission or the Financial Supervisory Service, but since there are such big issues in the banking sector, it is expected to quietly pass."

In the credit card industry, issues related to Timef (Timon and Wemakeprice) are expected to be the core agenda, but discussions on the recalculation of eligible costs for card fees, which the industry most desires, are unlikely to be deeply addressed. The recalculation of eligible costs is a procedure conducted every three years to analyze the cost of merchant fees, including card companies' funding costs, risk management costs, general management, and marketing costs, and then adjust the fee rates for preferred merchants with annual sales under 3 billion won. There has never been a case of fee increase so far. The card industry argues that fees should be raised due to deteriorating performance. A card industry official lamented, "Regarding the increase in card fees, it ultimately involves conflict with small business owners, so the political circles seem unwilling to touch it at all," adding, "Last year's audit focused on Apple Pay fees, but this year, even that will not be addressed, and it will end with only discussions about Timef."

The absence of secondary financial sector issues is evident from the list of witnesses and reference persons recently approved by the Financial Services Committee for the audit. Among the 30 people, including 28 witnesses and 2 reference persons, there is not a single insurance industry representative. Other secondary financial sector-related figures include Koo Young-bae, CEO of Qoo10 Group, and Lee Si-jun, CFO of Qoo10 Group, who are the main culprits in the Timef incident; Shin Won-geun, CEO of Kakao Pay, and Xinyi Han, CEO of Alipay Korea, related to the personal information leakage incident; and Jeong Gil-ho, CEO of OK Savings Bank, regarding the issue of multiple executive positions in OK Financial Group.

If key witnesses and reference persons related to major issues do not appear at the audit, the number of questions from lawmakers will decrease, and the depth of issues addressed will inevitably be shallow. Even if problems are raised, it is expected that only repeated responses such as "We will carefully review" from the heads of the Financial Services Commission, the Financial Supervisory Service, or responsible officials will be given. Although it is inevitable that issues will concentrate on matters of great public interest, the political circles must address industry demands, long-standing unethical practices, and longstanding conflicts, even in areas with low interest, to prevent the recurrence of problems.

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