The Financial Supervisory Service will conduct a comprehensive inspection of KB Financial Group(105560) Holdings and KB Kookmin Bank in mid-next month. The inspection will deploy a consumer protection team to closely check whether KB Financial Group and KB Kookmin Bank comply with consumer protection regulations.
According to the financial sector on the 27th, the Financial Supervisory Service (FSS) recently completed a preliminary inspection of KB Financial Group and KB Kookmin Bank and decided to begin the main inspection in mid-next month. A preliminary inspection is preparatory work in which the financial authority requests materials from a financial company ahead of the main inspection.
About 30 inspectors are expected to be deployed for this inspection. A separate consumer protection team will be deployed to monitor the scale of sales of high-risk products, excessive promotions, and complaints and dispute cases, and to check compliance with related laws such as the Financial Consumer Protection Act and the Personal Debtor Protection Act. This is the first time a consumer protection team has been deployed for a comprehensive inspection of a commercial bank.
In the case of KB Kookmin Bank, since it had the largest sales volume of Hong Kong H-index equity-linked securities (ELS) in the banking sector, the entire process of reviewing, selling, and post-managing high-risk products is expected to be a key focus of the inspection.
In this inspection, the Financial Supervisory Service (FSS) will check the promotion of institutional improvements and their implementation to enhance board independence, fairness and transparency in selecting the chief executive officer (CEO), and the rational operation of performance-based pay. It will also review the results of implementing the "internal control innovation plan," guide the remediation of deficiencies, and look into the operation of the "compliance whistleblowing activation plan."
In addition, it decided to check the implementation of measures to improve credit operations processes to prevent improper lending, and to inspect for potential legal violations and risk factors in the use of new technologies such as artificial intelligence (AI).
Separately, the Financial Supervisory Service (FSS) is reviewing whether to impose sanctions over KB Kookmin Bank's circumvention support for Bank Bukopin. In the 2024 regular inspection of KB Financial Group and KB Kookmin Bank, the Financial Supervisory Service (FSS) found that KB Kookmin Bank had provided 700 billion won in funds through a detour to improve the soundness indicators of its Indonesian subsidiary, Bank Bukopin.
In the process, the Financial Supervisory Service (FSS) pointed out that the risk of the subsidiary's insolvency spreading to KB Kookmin Bank had increased, and that the decision-making on the funding support was inadequate. The Financial Supervisory Service (FSS) is reportedly conducting a legal review of the matter.