FSS probe to assess K bank's financial soundness

The headquarters of K bank located in central Seoul / Courtesy of K bank

By Anna J. Park

The Financial Supervisory Service (FSS) is planning to inspect K bank next month to check its financial soundness as part of the financial authority's regular monitoring on financial institutions in the country, according to financial industry officials Friday.

The FSS is in its final stage of arranging specific details and dates of the two-week-long inspection. However, FSS officials declined to confirm the plan, saying it is not within its policy publicly to announce inspection details.

This inspection will be the FSS' first comprehensive assessment on the internet-only bank since the bank's founding in 2017. Banks are exempt from the financial regulator's comprehensive inspection during the first three years following their opening. The bank, commemorating its fifth anniversary this year, received two partial assessments by the FSS in April and October last year, respectively, on the bank's money laundering prevention system and liquidity risks.

The bank's main competitor, KakaoBank, had undergone an FSS inspection last April, ahead of the bank's IPO in the same year. Toss Bank, another internet-only fintech lender, is still exempt from the FSS inspection, as its launch took place last year.

Given that the incumbent FSS chief, Jeong Eun-bo, started his term in August of last year, K bank will be the first internet-only bank subject to the financial authority's regular inspections under the new leadership.

K bank officials say that the bank is fully ready to cooperate with the financial authority's inspection plans.

“The specific details of the inspection haven't yet been announced; once dates and a schedule are confirmed, the bank will be fully cooperating sincerely with the FSS' assessment plan,” a company official said.

Earlier this year, the FSS overhauled and transformed its regular inspection system. To avert excessive inspections that place burden on banks' resources, the FSS explained that the newly-adopted inspection process focuses more on providing necessary advice and consulting for banks, raising both predictability and effectiveness of the inspection.

Considering the FSS' inspection guidelines on banks released early this year, the assessment on K bank would largely emphasize the bank's risk management system. In particular, whether or not K bank's household lending business can maintain sound management in a time of increasing interest rates is expected to be subject to scrutiny.