Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Regulators to allow shareholders to check banks' compensation plans
Financial Services Commission (FSC) Kim So-young speaks during a working-level task force meeting to ameliorate banking management and practices held at the government complex in central Seoul, Thursday afternoon. Courtesy of FSC
By Anna J. Park
Gov't accelerates overhaul on banking sector with task force meetings
By Anna J. Park
As the government is speeding up its moves to promote competition in the local banking industry, it plans to adopt a system of “say on pay,” through which shareholders of a firm can vote on the payment and remuneration policies for executives. The introduction of the system into the country's banking sector will allow shareholders to actively participate in lenders' decision-making processes about executive compensation plans.
Financial authorities also plan to introduce “clawback” policies, through which money already paid to company management can be returned, sometimes with a penalty, as a way to exert checks and balances on banks' “excessive” bonus payments.
The decisions were discussed during the first working-level meeting of the task force on improving bank management and practices held on Thursday afternoon. The task force ― comprised of officials of the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS), along with financial industry associations as well as scholars ― was officially launched a week ago, aiming at breaking the current oligopoly system enjoyed by local banks by inviting new entrants into the market.
Following President Yoon Suk Yeol's criticisms in mid-February against banks' management practices, including hefty bonus parties for executives, amid soaring interest rates, the financial regulators have been considering various measures that could function as checks and balances to increase competition in the banking industry.
“The task force meetings are focusing on yielding results that actually increase the public's real benefits, such as consumers' better accessibility to financial products and lowered burden from interest rates, instead of turning up industry players' interests,” an FSC official said.
The task force team is also continuing to examine potential effects of allowing card companies, insurers and brokerages to enter into the payment, loan and foreign exchange markets, which used to be only accessed by bank licenses. The purpose of granting such fragmented bank licenses is aimed at promoting competition by inviting non-bank players into the market.
The FSC stressed that the decision will be made by prioritizing the public's increased utility, consumer protection and financial market stability. The top financial regulator said it is now considering to grant fragmented bank licenses only to financial firms that guarantee to hold ample liquidity and internal consumer protection systems, for the sake of safeguarding market soundness.
The next working-level meeting of the task force is slated to be held next Wednesday.