FSC aims to increase penalties up to fivefold

The Financial Services Commission (FSC) announced Tuesday it hopes to increase penalties and fines against companies that don’t comply with regulations by as much as five times.

The FSC said that current regulations are focused on penalizing an individual employee for malfeasance, and will be changed to hold the companies more responsible.

“In the past, even if a big violation was done consciously, the firm only had to fire an individual employee, pinning the responsibility to that person,” said an official at the FSC.

“This has given financial companies and employees more motivation to act selfishly,” he added.

The official also said that the FSC intends to raise the cap on fines to 100 million won. Current penalties range from 5 million won to 50 million won.

For more serious infractions, the FSC currently multiplies a firm’s irregular financial gains by a set of ratios. The FSC is planning to increase those ratios, which could result in penalties three to five times higher.

Other non-financial penalties will also be strengthened, the FSC said.

Even in cases where serious violations had occurred and caused big losses for clients, the FSC would usually give companies little more than a warning.

But the regulator plans to use more stringent measures, including halting business operations for up to a month.

The FSC said it plans to submit the proposals for review by the National Assembly next year.

Meanwhile, FSC Chairman Yim Jong-yong said the regulator was closely monitoring the financial health of corporations.

“We perceive corporate debts as potential risk factors for our economy,” said Yim Jong-yong, the chairman of the FSC, during a press conference held Tuesday. “But it is not right to take away an umbrella when it is raining outside. We nonetheless need to pick out zombie companies.

“We need to differentiate companies that can be resuscitated, and the zombie firms that cannot.”

Yim said the FSC also intends to address concerns about rising corporate debt.

“We will set up a company that specializes in corporate restructuring by the end of next month,” Yim said

On the continued rise in household debts, Yim said the FSC was closely monitoring debts issued to households by local commercial lenders.

The FSC unveiled new measures last month to discourage issuing loans to financially unfit individuals and households.

BY PARK JUNG-YOUN [park.jungyoun@joongang.co.kr]