Value context and insight. lkm@koreatimes.co.kr
FSS to launch 'comprehensive audit' in March
Financial Supervisory Service Governor Yoon Suk-heun
By Lee Kyung-min
By Lee Kyung-min
The Financial Supervisory Service (FSS) will launch a “comprehensive audit” as early as March, according to industry sources and the financial watchdog, Sunday.
The sources expect the FSS will first target major insurance companies, particularly Samsung Life, the nation's largest life insurer.
They said the financial watchdog is now selecting the list of companies subject to the inspection and plans to make audit preparations. Given that the FSS' personnel reshuffle is due in February, it is likely the audit will start in March.
“We have decided to resume a comprehensive audit this year but the timing and target have yet to be decided because we have to consider various factors,” an FSS official said.
Under the comprehensive audit, which was abolished in 2015, up to 30 FSS officials look into a firm's affairs in general for over a month without any limitations.
This is a wildly greater discretion from the current “partial” inspection whereby only 10 or fewer officials review a specified issue over less than two weeks.
The return of the comprehensive audit was largely expected following remarks made by FSS Governor Yoon Suk-heun who said last July that the earlier method will better help identify failures in corporate structure, internal control, financial health and customer protection.
The change also reflects criticism and frustration within the FSS that the partial, “toothless” inspection fails to provide the authority to question figures involved or request related documents, and only helps financial services firms remain “unruly.”
Samsung Life Insurance is highly likely to be the first target of such inspection with a “show of force,” given the ongoing conflict over about 1 trillion won ($895 million) in unpaid immediate annuity payouts involving life insurers in Korea.
But the FSS denied the allegation. "Nothing has been decided over which firm we will inspect first," the FSS official said.
With the largest market capitalization, Samsung filed a civil suit against the FSS last September, seeking to nullify the latter's recommendation to pay out about 430 billion won to immediate annuity subscribers who the FSS concluded had not been fully informed about certain insurance plan terms.
The insurance plan in question became a source of heated dispute after a subscriber filed a petition with the FSS, claiming the firm had failed to pay the full amount in both the principal and interest promised in the plan terms.
The dispute mediation unit under the FSS in a unanimous decision said the firm had neglected to specify how the payout is calculated in the terms ― a subscriber's right to know ― and subsequently recommended three life insurers pay what became “unpaid” payout some 160,000 subscribers were entitled to.
Of the three firms, Samsung and Hanwha are awaiting a court order, while only KDB complied.
Fear is spreading among life insurers that the FSS will take a harsher approach, indicated by an industry-wide inspection where the regulator requested the submission of insurance plan sales records in detail involving the 160,000 subscribers.
While the FSS said the request was a follow-up measure to an inquiry made at the National Assembly audit in October 2018, life insurers consider the move a precursor to a broader scrutiny they cannot avoid.
Meanwhile, the return could develop into a major bone of contention between the FSS and the Financial Services Commission (FSC), its supervisor.
The FSC says it remains opposed to the return of the comprehensive audit mostly due to confusion following a policy flipflop. But critics say the bigger reason is to rein in the FSS from exerting “gratuitous” pressure with the financial industry.
The brewing conflict between the two escalated recently after the FSC cut the budget and manpower of FSS for the second year in a row, deepening an earlier rift over the past few months over differing stances involving how to handle high-profile cases such as Samsung BioLogics.