The Financial Supervisory Service (FSS) recently completed a regular inspection of KakaoBank and is preparing the inspection report. The FSS plans to sequentially check the digital risks of Kbank and Toss Bank, starting with KakaoBank.
According to the financial sector on the 19th, the FSS, in collaboration with the Korea Deposit Insurance Corporation (KDIC), recently concluded a regular inspection of KakaoBank and is reviewing the inspection results. It is reported that the FSS plans to announce the inspection results next year.
This inspection focused on internal controls, asset soundness, and information technology (IT) related risks. It also checked whether consumer protection is adequately maintained given the non-face-to-face sales characteristics. The FSS also reviewed whether violations identified during the initial regular inspection in 2021 had been rectified.
KakaoBank was fined 77.6 million won and subjected to a penalty surcharge of 75 million won for violations, including a ban on lending to major shareholders. Internet banks are not allowed to lend to major shareholders and their affiliates, but KakaoBank lent tens of millions of won to employees of its affiliates.
Separately, the KDIC inspected liquidity and risk management against digital bank runs (massive deposit withdrawals) during this KakaoBank regular inspection. This is the first joint inspection by the FSS and the KDIC for internet banks, reportedly conducted at the request of the KDIC.
The KDIC plans to inspect the risk management practices across the entire internet banking industry, as the possibility of a 'massive fund movement' increased with the increase of the deposit protection limit to 100 million won in September, especially highlighted by the collapse of Silicon Valley Bank (SVB) exposing the risks of digital bank runs. The FSS and the KDIC plan to conduct joint inspections of KakaoBank, Kbank, and Toss Bank sequentially, looking into the overall digital risks of internet banks.
A representative from the financial sector noted, 'The purpose of this joint inspection was not to focus solely on KakaoBank as an individual company but to examine the risks across all internet banks.'