Lee Chan-jin, head of the Financial Supervisory Service (FSS), said he will launch a task force (TF) to overhaul financial firms' governance and push for a plan to require financial holding company boards to include at least one outside director with expertise in IT or consumer affairs.
On the afternoon of the 10th at the Korea Federation of Banks in Jung-gu, Seoul, the chief stated accordingly during a meeting with the chairs of financial holding companies. Attending were the chief; Yang Jong-hee, chair of KB Financial Group; Jin Ok-dong, chair of Shinhan Financial Group; Ham Young-joo, chair of Hana Financial Group; Yim Jong-ryong, chair of Woori Financial Group; Lee Chan-woo, chair of NongHyup Financial Group; Hwang Byung-woo, chair of iM Financial Group; Bin Dae-in, chair of BNK Financial Group; and Kim Ki-hong, chair of JB Financial Group.
The chief said, "A holding company can earn the trust of shareholders and the market when it has a transparent succession system and a system of checks and balances by independent directors," adding, "The requirements and procedures for management succession must be clear and transparent, and must have fair and objective functions."
The chief went on to say, "We will diversify the channels for recommending outside directors, including shareholder recommendations from institutions representing the public," and added, "Independently composed candidate recommendation committees and fair operations must be supported, including by staggering the terms of outside directors." The chief said a "governance improvement TF" including industry and academia will be launched within this month to address issues related to succession in the governance of financial holding companies.
The chief also said oversight of financial firms' misselling will be strengthened. The chief said, "Dismissing misselling as mere deviations at some sales sites as in the past, or responding only with ex post compensation, can undermine trust in finance," adding, "The Financial Supervisory Service (FSS) will make ex ante financial consumer protection the top priority in all ongoing tasks and focus its supervisory and inspection capabilities to the fullest."
The chief said supervision of financial holding companies' IT security systems will also be strengthened. The chief said, "When examining financial firms, we plan to focus on the adequacy of IT governance and security systems," adding, "We will also strengthen ex ante security supervision, including analysis and assessment of security vulnerabilities."
The chief also emphasized the importance of productive finance. The chief told the holding company chairs, "The loan structure centered on real estate collateral that we have relied on for a long time cannot continue," and asked, "Please broaden the scope of finance so that funding can flow more widely into productive areas such as technology innovation corporations and regional economic revitalization." The chief pledged to actively seek ways to reduce the capital burden on the financial sector in the process.
The chief said he will build a comprehensive assessment system for inclusive finance and introduce a win-win finance index to promote financial holding companies' fulfillment of social responsibility. Through this, the Financial Supervisory Service (FSS) plans to evaluate the level of inclusive finance, including support for low-income people and small business owners and social contribution by financial holding companies, as well as the level of win-win cooperation with small and midsize enterprises.