Lee Chan-jin, head of the Financial Supervisory Service, said on the 1st that domestic financial firms' security system investments are at a "terrible level" and that he will push to revise laws to strengthen regulation. On market concerns that a "loan cliff" from commercial banks' suspension of household loans will continue into next year, he said, "We will make sure no loan shock or cliff occurs."
At the Financial Supervisory Service in Yeouido, Seoul, on this day, Lee held his first press briefing since taking office and stated accordingly on pending issues in the financial sector. Citing recent hacking incidents at financial firms that repeatedly leaked customers' personal information or assets, Lee noted, "Compared with other countries, security system investment in Korea is at a terrible level."
Last month, a hacking incident at the virtual asset exchange Upbit led to the external leak of 44.5 billion won in member assets, and in Aug., personal information of 2.97 million Lotte Card members was also leaked. Recently, a case of 33.7 million items of customer personal information being leaked occurred at Coupang.
Lee said, "If security is breached, companies must recognize that it is a dangerous level that could put them out of business," adding, "To instill that security is for survival, we will push to amend the law to strengthen regulations to the level of the Financial Investment Services and Capital Markets Act." As for the leak of Coupang customer information, Lee said, "It is not subject to (the FSS's) regulation."
Lee said the "loan cliff" at commercial banks will not continue into next year. Lee said, "It has been confirmed that many commercial banks at year-end exceeded the loan limit guidelines," adding, "However, we do not think this problem will carry over into next year. There will be no situation in which a shock or cliff related to lending occurs." He said he will work with the Financial Services Commission (FSC) to ensure there are no concerns about a loan cliff.
Regarding the chairs of financial holding companies, Lee said, "They all seem to have a desire to extend their terms," adding, "We will monitor whether a particular executive builds a board with close associates to secure another term, or intentionally fields less competitive candidates when running the executive recommendation committee." The Financial Supervisory Service (FSS) plans to form a task force (TF) to improve the supervisory system for financial holding companies.
On the misselling of equity-linked securities (ELS) tied to the Hang Seng China Enterprises Index in the banking sector, he said sanctions could be eased depending on ex post relief efforts. Recently, the Financial Supervisory Service (FSS) gave prior notice of a 2 trillion won penalty surcharge to five banks that sold Hong Kong ELS products, including KB Kookmin, Shinhan, Hana, NH Nonghyup and SC First.
Lee said he plans to end from next year the exception applied to Samsung Life Insurance under International Financial Reporting Standard 17 (IFRS 17). Recently, Samsung Life Insurance drew criticism for "deviant accounting" by not paying out part of its investment gains as dividends to participating policyholders and instead listing them as a separate liability item called "contractor equity adjustment." Lee also said he plans to work with the Ministry of Health and Welfare to reform the structure of indemnity health insurance, which has caused insurer losses due to excessive noncovered care.
Lee also said he will examine whether there are any issues with big tech entering the financial industry. The remark was made with the recent merger of Naver Financial and Dunamu in mind. Lee said, "We plan to look at big tech's impact when it enters the financial market and whether safeguards are in place for this."
Lee explained that he is carrying out a reorganization and personnel moves with the goal of wrapping up around Jan. 10 next year. He said, "We are vetting executives and department heads, and results appear likely soon," adding, "Some units have been newly established and some areas have been assigned new state tasks, so we are proceeding with a reorganization that reflects these matters broadly." Through the reorganization, the plan is to strengthen consumer protection by supervising financial firms from the product design stage.
Lee said, "We are reorganizing with the aim of consumer protection of a preventive nature," adding, "The current consumer protection function of the FSS focuses on relief after an incident, but with this reorganization we will also address financial firms' responsibility for defects in product design."
Lee also argued for the need to expand the authority of special judicial police (special investigators) within the FSS. Following the stock price manipulation special investigators, the FSS is pushing to establish special investigators for livelihood-related financial crimes, to directly respond to voice phishing, insurance fraud and illegal private lending. Lee said, "Special investigators in the FSS do not have compulsory investigation powers or the authority to initiate investigations," adding, "As a result, it takes more than two weeks to launch a probe into a specific matter, during which time evidence can be destroyed."
Lee continued, "Even if special investigators for livelihood-related financial crimes are established this time, if they cannot function for these reasons, the public will be very disappointed," adding, "We expect related issues will be improved."