Lee Chanjin: "Financial Holding Company Governance Reform Aims for Implementation in October After Legislation"

Household Debt Management Plan to Be Announced Next Week
Comprehensive Oversight of Credit Loans and ETF Leverage... Warning on Debt Investment Among Young Adults
Thorough Management of Exposure to Overseas Private Debt Funds and Others

The advanced governance reform plan for financial holding companies, scheduled to be announced next month, is expected to take effect as early as October following the completion of legislative procedures. As a result, there is growing interest in whether the governance reform plan will become a variable in the decision on the reappointment of Yang Jonghee, Chairman of KB Financial Group, whose term expires in November. Amid President Lee Jaemyung's directive to tighten regulations on real estate-related loans, a comprehensive plan to manage total household debt, including lending restrictions for multiple-home owners, will be released next week.

Lee Chanjin, Governor of the Financial Supervisory Service, is attending the signing ceremony for a business agreement to eradicate cross-border crime, illicit funds, and money laundering at the Seoul Headquarters Customs in Gangnam-gu, Seoul on the 17th, delivering a speech. 2026.03.17 Photo by Yoon Dongju

Lee Chanjin, Governor of the Financial Supervisory Service, stated at a press briefing with reporters held at the FSS headquarters in Yeouido, Seoul on March 26, "We expect a conclusion by April, and the plan reflecting the legislative tasks is likely to be implemented in the second half of the year at the earliest, possibly as soon as October."

Previously, on March 12, financial authorities had scheduled an announcement of the "financial holding company governance improvement plan" after meeting with chairmen of major financial holding companies, but the announcement was abruptly canceled on the day.

Governor Lee explained, "The overall direction will be to elevate areas identified for improvement in best practices to the level of legislation, and some governance reform items may also be included in the legislative process. After the government announcement, we expect financial holding companies to comply with this direction, and as the supervisory authority, we will rigorously monitor and supervise these changes."

With Chairman Yang Jonghee's term set to expire in November, he is likely to become the first case to which the new system will be applied. KB Financial Group has completed the formation of its outside directors and plans to convene its Chairman Candidate Recommendation Committee as early as next month, with a final decision on the next chairman to be made by September at the latest. Chairman Yang's term runs until November 20, 2026.

The "2026 Household Debt Management Plan," which will be announced next week, is expected to include even stricter targets. Governor Lee said, "Whereas in the past, lending was managed at about half the rate of nominal GDP growth, going forward, it is likely to be managed at a much lower level. Each bank will also be assigned its own individual cap, leading to significantly stricter control over household loans."

Separately, the FSS plans to conduct on-site inspections of business loans for non-designated uses by dividing them into four high-risk sectors. Governor Lee stated, "We are preparing inspections for both commercial banks and mutual finance institutions. For mutual finance institutions, inspections will be conducted in parallel through their central association according to inspection guidelines. If non-designated use is confirmed, we will impose strict sanctions on the financial company employees and loan brokers involved, and if it constitutes a criminal offense, we will also initiate criminal proceedings by notifying investigative authorities."

Regulations on real estate and construction loans will be implemented in phases. He explained, "Prudential regulations, such as provisioning requirements, will take effect in the second half of this year, while project finance (PF) cap management and risk-weighted asset (RWA) regulations are scheduled to be implemented starting in 2027."

Regarding the Middle East situation, he expressed concern that a prolonged crisis could have wider impacts on the financial market. Governor Lee said, "Potential disruptions in the energy supply chain could significantly affect the real economy and financial markets. The FSS is closely monitoring potential risks by business sector, liquidity, and funding conditions through its emergency response task force."

On so-called "debt investment" (Bittu), he said that the FSS is comprehensively managing credit loans, ETFs, and leveraged products. He pointed out, "If market risk increases, it could trigger further stock price declines, worsening collateral ratios and leading to a chain of forced sales."

However, he added, "So far, the soundness of credit loan and securities-backed loan accounts remains relatively stable. Nevertheless, there are cases of economic shock caused by debt investment, particularly among people in their 20s and 30s, so special caution is required."

Accordingly, the FSS will guide investors to fully understand the risks of credit loans and forced sale structures and review for any unfair elements from the perspective of investor protection.

Additionally, regarding overseas private debt funds, he pointed out, "Behind the target returns, there are aspects similar to high-risk products that have caused large-scale losses in the past, such as information opacity and low levels of control. We will closely monitor exposure risks going forward to minimize potential losses."

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