The Financial Supervisory Service said on the 3rd that it formed a task force (TF) led by the Korea Federation of Banks and, for the first time in the financial sector, prepared "conflict of interest prevention guidelines."
The guidelines define stakeholders as employees themselves and those with private interests. They include not only major shareholders and related parties but also former and current employees and family members, as well as those whom the employee judges could affect fair job performance due to existing transaction relationships, school ties, regional ties, or relationships with superiors. The scope of family members follows the Act on the Prevention of Conflict of Interest Related to Duties of Public Servants.
The scope of stakeholder transactions is not limited to credit extensions but is broadly defined to include equity securities acquisitions, lease, asset, and service transactions, donations, and the provision of other tangible and intangible economic benefits. However, transactions with a low likelihood of conflicts of interest, such as electronic financial transactions, were excluded, and details such as transaction amounts and methods may be set autonomously by each bank.
As a preemptive measure, the guidelines specify a clause prohibiting the provision of terms more favorable than ordinary conditions when transacting with stakeholders. They also require step-by-step internal control procedures, including stakeholder identification, voluntary reporting, restrictions and recusal from duties, and strengthened handling standards.
Banks must check compliance with internal control standards related to stakeholder transactions and record and maintain the results for five years. To normalize employees' self-checks and encourage active reporting, they must clarify disciplinary standards and operate whistleblower protection and compensation systems together.
Violations of internal control standards are subject to discipline regardless of whether losses occur, and whether actual losses occurred will be reflected as an aggravating factor. Banks must comprehensively consider voluntary reporting, efforts to minimize losses, and whether the case is subject to criminal punishment or fines, and determine whether to discipline, mitigate, or grant immunity.
The Financial Supervisory Service said it prepared these guidelines after finding numerous cases of unfair transactions (loans, lease contracts, etc.) involving various stakeholders during inspections of the banking sector conducted this time.
The guidelines were established as a self-regulation measure on the 26th after a vote by the Korea Federation of Banks. Each bank will complete related internal rules and system development within the first half of this year and begin full implementation in July.