The practice of former Financial Supervisory Service executives sweeping up permanent auditor posts at domestic banks is continuing this year. Former Financial Supervisory Service (FSS) executives are passing down permanent auditor posts at 10 of the 11 domestic banks. Although Lee Chan-jin, governor of the Financial Supervisory Service, has criticized loose internal controls in the financial sector, voices in the industry say the dominance of former FSS executives in permanent auditor roles undermines banks' internal controls and the quality of examinations.
According to the banking sector on the 6th, Hana Bank recently appointed former FSS deputy vice governor Lee Jin-seok as permanent auditor. Woori Bank also hired former FSS vice governor Kim Jong-min as permanent auditor. The predecessors of the two banks' permanent auditors were also all former FSS deputy vice governors.
In the process of selecting a permanent auditor, Hana Bank attempted to appoint another former FSS official but withdrew midway.
Former FSS deputy vice governors Lee Seong-jae and Kim Seong-ung are serving as auditors at KB Kookmin Bank and Shinhan Bank, respectively. Their terms run until the end of this year. The full-time auditor at NongHyup Bank is Hong Gil, former head of the FSS Busan-Ulsan Regional Office. iM Bank likewise has former head of the FSS Gyeongnam Regional Office Ahn Byung-gyu as its permanent auditor. Ahn recently won a one-year extension.
The monopoly on permanent auditor posts by former FSS officials is the same at regional banks. Busan Bank has Jeong In-hwa, former head of the FSS London Office; Kwangju Bank has Yoon Chang-ui, former FSS deputy vice governor; and Jeonbuk Bank has Seo Jeong-ho, former FSS Director-General, each serving as permanent auditor.
Kyongnam Bank recently appointed Jang Jin-taek, a former FSS Director-General, as permanent auditor. Kyongnam Bank had initially designated a person surnamed Song, a former FSS Director-General, as permanent auditor but is said to have withdrawn the plan. Song is reportedly designated as the permanent auditor of BNK Capital, an affiliate of BNK Financial Group. The previous full-time auditor at BNK Capital, whose term ended on the of last month, was also from the FSS.
Jeju Bank is the only domestic bank to appoint a former Bank of Korea official, Oh Geum-hwa, former Director-General of the International Department, as its permanent auditor. At Jeju Bank, it has become customary for a former Bank of Korea official to serve as permanent auditor.
There are also voices of self-reflection within the FSS over the practice of former FSS officials monopolizing banks' permanent auditor posts. That is because most who move to bank auditor roles are used as a "lobby channel" to the financial authorities. An FSS employee said, "It's not that having a former FSS official as an auditor affects examinations, but it is true that it's hard to keep refusing when seniors ask to meet."
Some question whether they are properly performing audit duties. A permanent auditor is the chief officer responsible for accounting and audit work and plays a role in monitoring management. However, with financial accidents continuing, critics say the check-and-balance function is effectively nominal.
A bank official said, "As the duty structure chart has been introduced and the yellow envelope law (Trade Union and Labor Relations Adjustment Act Articles 2 and 3 amendment) is being implemented, active communication with the financial authorities is necessary."