By Kang Seung-woo
Local banks and financial services companies are expected to undergo much tighter checks on their internal control system, as the nation’s top regulating agency has decided to beef up on-site inspection in the wake of frequent financial incidents.
The Financial Supervisory Service (FSS) said Sunday that it has come up with 10 plans to prevent financial problems in a preemptive manner, which will soon be in place.
The FSS said that it will form a check list of financial incidents by type and inspect financial firms ― banks including savings banks, insurers and securities companies ― by October.
The financial watchdog ordered the companies to report back if they are prepared for their shortcomings after self-inspections. For firms, where financial problems often happen or a large-scaled one occurs, the FSS will sign a memorandum of understanding (MOU) to keep them in check.
Frequent financial troubles have the FSS, headed by governor Kim Jong-chang, on his toes.
Earlier this month, a former branch manager of Korea Exchange Bank (KEB), identified by his last name Jeong, was caught on charges of embezzlement worth 68 billion won ($57.46 million).
According to the police, Jeong secretly lent the money from accounts of 15 VIP customers of the bank to listed companies on the KOSDAQ and KOSPI from last year to early 2010.
In addition, last week, the FSS slapped former Kookmin Bank CEO Kang Chung-won and other 87 executives and employees of the bank with heavy and light penalties for mismanagement, while 72 executives and employees from nine local banks, which sold Knock-in, Knock-out (KIKO) contracts to a range of small and mid-size exporters, were reprimanded by the FSS for causing heavy losses from their sales of derivative financial product.
The FSS also plans to make use of the Key Risk Indicator (KRI) invented earlier this month in closely monitoring financial companies.
In cases such as breach of trust and embezzlement, the FSS will file a charge against them to root out paternalism in dealing with the incidents, while it will punish those who are in the supervisor’s role, including executives, auditors, and watchmen for neglect of surveillance.
It plans to strengthen an internal whistle-blowing system and hold workshops against financial faults.