FSS pressures banks to improve corporate governance, raise transparency

Financial Supervisory Service Gov. Lee Bok-hyun speaks at a press event held in Yeouido, western Seoul, on Monday. [FSS]

The financial regulator pressured banks to improve corporate governance and raise transparency.

The Financial Supervisory Service (FSS) will “review the appropriateness of the board operation to make sure bank’s corporate governance is fairly and transparently operated,” said FSS chief Lee Bok-hyun at a press conference held in Yeouido, western Seoul, on Monday.

Lee also urged banks to refrain from raising dividends, saying “loans to people with low credit ratings could become difficult.”

He said banks carry the characteristics of a “public” service, a characteristic highlighted by President Yoon Suk Yeol last week.

“Banks will be shunned by the public and the market in the mid- to long-run, and sustainable growth will become difficult if they are negligent about their social role and pursue excessive profitability,” Lee added.

He pointed out the protests by bank labor unions when banks decided to extend their operating hours back to the pre-pandemic era after regulations on the indoor mask mandate were lifted late last month. Closures of branches have also brought inconveniences to senior customers that aren’t comfortable with digital banking services, Lee added.

“Efforts to improve board functions are needed to make sure corporate governance is operated fairly and transparently at banks, which have the characteristics of public goods,” Lee said.

To make that happen, the FSS chief plans to meet banks’ boards at least once every year.

Lee also warned that raising dividends could make it difficult for banks to provide loan services to people with mid- to low-credit ratings.

“Unlike ordinary companies, banks play a pivotal role in the public economy as they provide funds to the real economy.”

Lee implied offering large amounts of monetary incentives and dividends to bank executives and shareholders is inappropriate in difficult times.

Other agendas Lee mentioned at the press event included risk management involving project financing loans by property developers and supervision of financial incidents, including embezzlement and unusual foreign exchange transactions.

The FSS will recognize financial firms whose soundness aggravates at their early stages and encourage them to raise the allowance for bad debts.

The number of unsold houses in Korea surpassed 68,000 units last year, the largest in more than 9 years. Korea’s property market started to fall last year, triggered by a number of factors including the rapid rise of the Bank of Korea’s base interest rate and the Legoland theme park debacle at the end of September.

BY JIN MIN-JI [jin.minji@joongang.co.kr]