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| Financial Supervisory Service (FSS) Senior Deputy Governor Lee Joon-soo speaks during a press conference held at the headquarters of the FSS in Seoul, Tuesday. Yonhap |
FSS to hold regular meetings with bank boards
By Anna J. Park
The Financial Supervisory Service (FSS), the country's financial watchdog agency, has once again urged the banking sector to equip itself with sound corporate governance and effective internal controls to prevent any possible banking crises. To this end, the financial authority said it will overhaul its bank management evaluation system, a core of the FSS' supervisory role, while planning to hold meetings with bank boards on a regular basis.
"The FSS will strengthen both its off-site and on-site inspections on local banks," FSS Senior Deputy Governor Lee Joon-soo said during a press conference, Tuesday. "Off-site inspections include evaluating a bank's board governance by analyzing various reports, documents and minutes of board meetings. On-site inspections, meanwhile, assess a bank's overall management through regular inspections or ones to address specific issues."
With regard to the overall management assessments, the FSS will increase the proportion of evaluative items on the subjects of corporate governance and internal controls. Currently, the two subjects are part of a management assessment category, which takes up only about 15 percent of the overall management evaluation; the weight of the two subjects will be increased in the FSS' future assessments to secure more robust corporate governance and transparency in banking governance.
The FSS will confirm the details of the changes to its management evaluations, after consulting with the Financial Services Commission (FSC), Korea's top financial regulator. It plans to implement revised regulations and manuals next year.
Strengthening communication with bank boards is the other key axis of the FSS' policy directions announced on Tuesday. The FSS plans to meet each bank's board at least once every year.
"The specific details on the FSS' regular meetings with the bank boards haven't yet been confirmed. The meetings could take place with several banks together, or could be a separate meeting with each financial group," Lee said.
The FSS said local banks' governance falls short compared to global standards, due to various reasons including a lack of checks and balances by boards on companies' management and the lack of transparency in CEO appointments. The financial watchdog agency views that while banks generally abide by the Act on Corporate Governance of Financial Companies, they fail at yielding so-called "best practices," a voluntary exemplary corporate governance on their own.
"The FSS aims to narrow the gap between actual practices by local lenders and global standards of transparent corporate governance, as stipulated in international agreements including Basel Committee's Corporate Governance Principles for Banks," Lee said.
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