Financial Supervisory Service and Woori Financial Group 'Head-on Clash'... Emerging Debate on Financial Services Commission's Role

[Asia Economy Reporter Kangwook Cho] As the Financial Supervisory Service (FSS) and Woori Financial Group clash head-on, voices criticizing the role of the Financial Services Commission (FSC) are emerging. While the FSS and financial companies are taking a 'strong versus strong' confrontational stance, the FSC, the higher authority, is being criticized for showing no presence and remaining passive.

According to financial authorities on the 10th, it has been confirmed that the FSS has internally decided to bring the case of unauthorized password misuse of dormant accounts by Woori Bank employees to the disciplinary committee as soon as possible. The core of the incident is that some branch employees increased their customer acquisition performance by changing customers' dormant account passwords without authorization. Woori Bank reported to the FSS that approximately 23,000 customers' passwords were unauthorizedly used at about 200 branches. The FSS, having learned of the audit details during a management evaluation rather than from Woori Bank's report, conducted additional investigations and stated that altogether about 40,000 cases of unauthorized use were found.

The problem lies in the timing when the incident surfaced. The FSS had already been aware of this case more than a year ago but did not notify customers of the related facts, and this unauthorized use incident was revealed through media reports rather than an FSS announcement. In particular, suspicions arise because the incident resurfaced just after the CEO's heavy disciplinary action related to the DLF (Derivative Linked Fund) scandal was confirmed and Woori Financial Group showed signs of appealing against it.

As the conflict between the FSS and financial companies deepens, calls for the FSC's role are also growing. The FSC is the main agency overseeing financial supervision and overall financial policy. In short, in financial incidents, the FSS acts as the 'prosecutor,' and the FSC as the 'court.' However, criticism has emerged that the opposite situation occurred during the DLF disciplinary process.

The FSS applied the Financial Company Governance Act to the CEO's heavy disciplinary action related to the overseas interest rate-linked derivative-linked fund (DLF) scandal, but it is argued that the Capital Markets Act should have been applied for the disciplinary action related to mis-selling. The key issue is whether there is sufficient legal basis to impose disciplinary action under the Governance Act. Article 24 of the Governance Act stipulates that 'internal control standards must be established,' but there is no provision for sanctions if this is not followed. The amendment to the Governance Act, which includes grounds for disciplining executives, is currently pending in the National Assembly. Specifically, according to Article 35 of the Governance Act, the FSS Governor can take measures such as reprimands, cautionary warnings, and warnings against executives who violate the Governance Act. On the other hand, under Article 438 of the Capital Markets Act, the FSS can only impose cautionary warnings and warnings for executive sanctions. Severe disciplinary actions such as dismissal requests, suspension of duties, and reprimands are decisions made by the FSC.

However, the FSC did not express any particular dissent during this disciplinary committee. In an official explanation, it also stated, "It is not true that there is a disagreement between the FSC and the FSS regarding the disciplinary committee's decision." Leaving aside the controversy over the FSS 'passing over' the FSC, criticism arises because the FSC is simply watching the conflict between the FSS and financial companies passively.

A financial industry insider said, "Chairman Sohn Tae-seung of Woori Financial, who received a heavy disciplinary action in the DLF disciplinary committee, is appealing and pushing for reappointment, so the FSS is expected to increase pressure," adding, "Whether there is any consultation or conflict between the FSS and the FSC is unknown, but it is inevitably questionable that the FSC, as the highest authority, is acting as if it does not care."