By Kim Jae-won
The financial regulator said Wednesday that it will strengthen the role and status of compliance officers in banks from September, allowing them more authority in overseeing lenders’ business and management.
The Financial Supervisory Service (FSS) said that banks should appoint their compliance officer to the level of director or higher and guarantee their term for at least two years. Compliance officers can take part in all key business meetings, including those of the board of directors, and demand a halt to business they deem illegal.
“We expect banks to control themselves and prevent financial accidents with the new regulations. This is part of our strategy to give more autonomy and responsibility to financial institutions,” said Lim Jong-geon, head of the bank risk management bureau at the FSS.
The measures came a year after the financial regulator announced ways to strengthen internal controls in banks. Financial institutions had drawn strong criticisms in 2014 for their wrongdoings, including the leak of customers’ information from credit card companies and selling financial products to customers without notifying them of the related risks.
Market watchers wonder whether Korea’s loose compliance system will be reformed with the new rules. The nation’s compliance officers have played little role in overseeing companies’ illegal practices because they were given few options to control them. Observers said the nation’s authoritative office culture also limited compliance officers ability to exercise their check-and-balance role.
The regulator also banned compliance officers from having additional jobs, letting them focus on overseeing bank business. They were often given multiple jobs, being in charge of public relations or lobbying lawmakers or government officers on behalf of lenders. They also have had jobs of litigation, money laundering prevention and consumer protection, among others, according to the FSS.
The regulator recommended banks set up internal control committees to deal with such issues. CEOs are encouraged to chair the committees and host meetings at least once each quarter.