FSS will phase out biannual visitsThe Financial Supervisory Service (FSS), the private financial watchdog, will phase out regular examinations of financial institutions every two years to give them more autonomy and room for innovation.
FSS Gov. Zhin Woong-seob, who took office late last year after his predecessor stepped down because of criticism for failing to supervise financial institutions, came up with a package of plans to make the agency fairer and more trusted, and promote growth of the country’s financial industry.
“The FSS will seek innovation of supervisory practices in order to help financial institutions maximize their capabilities, while securing management soundness,” Zhin said at a press briefing Tuesday. “The agency will emerge from the past practice of intervening in the everyday issues of those institutions and get involved only when necessary.”
The focus of the latest overhaul is to minimize FSS interference in financial institutions, the organization said. It is the first time the agency has eliminated regular scrutiny.
In 2014, after the nation’s largest-ever leak of personal information from the three major credit card companies due to poor management, the FSS conducted several investigations into the companies that expanded to include related banks and other institutions. During the investigations, the regulator found ethical scams, too, and launched further investigations.
As a result, the FSS was buried by both routine checks on institutions and special probes of those with particular problems last year. Several hundred employees and executives were penalized by the FSS.
In a scandal involving KB Financial Group’s top management last year, the FSS was blamed for getting involved in a minor internal affair. The former group chairman and its bank president were at odds over changing the bank’s main computer system. At the request of the president, the FSS investigated and only made the situation worse, ousting both the chairman and president. As a result, former FSS Gov. Choi Soo-hyun resigned due to implicit pressure from both the industry and government.
Due in part to the agency’s regrettable handling of the KB case, the FSS under Zhin plans to end its every-other-year examinations of all financial institutions by 2017.
In the past three years, as many as 39 regular investigations took place annually. This year, the agency plans to decrease the number of investigations to 21 and to 10 in 2016.
The FSS also will scale back the number of spot investigations into institutions that often damage companies’ efficiency and ease regulations on dividends, interest rates, missions and the launch of new products. For some healthy financial institutions, more regulations will be loosened.
The FSS will provide only guidelines based on international standards, said Seo Tae-jong, senior deputy governor of the FSS. It also will make clear what is accepted and what is not to help institutions make autonomous management decisions.
Rather than comprehensive investigations into overall management, the FSS will start looking into specific operations, such as sales and consumer protection.
The FSS will allow more autonomy and step in only when there are problems, Zhin said. Violators will face stricter penalties, including business suspensions and dismissal of top management officials
The watchdog will run its business assessment test programs and strengthen its surveillance role to prevent any financial crisis, the governor said. It will give incentives to companies that receive high scores on the assessment test and support their overseas businesses.
BY SONG SU-HYUN [firstname.lastname@example.org]