Financial Services Commission Presidential Briefing on the 30th
[Asia Economy Reporter Yoo Je-hoon] An internal control improvement plan is being prepared to strengthen the final responsibility of financial company CEOs in the event of a major financial accident. Additionally, a plan is being promoted to codify the supervisory duty of the board of directors to closely scrutinize the implementation of internal control-related matters by management.
On the 30th, the Financial Services Commission (FSC) announced its major work plan for 2023 during the presidential briefing held at the Blue House State Guest House in Jongno-gu, Seoul. The FSC plans to complete the preparation and legislative notice procedures for the amendment of the "Financial Company Governance Act" containing these contents within the first quarter.
The FSC is pushing for improvements to the internal control system because, despite the current governance law's obligation to establish internal control standards, large-scale financial accidents such as incomplete sales and embezzlement continue to occur. Representative cases include suspicions of recruitment corruption at commercial banks (2015?2017), the Lime Asset Management fund redemption suspension incident (2019), the massive loss incident of overseas interest rate-linked derivative-linked funds (DLF) (2019), the Optimus incident (2020), and the Discovery Asset Management fund redemption suspension incident (2020).
The FSC stated, "The current system faces criticism for unclear standards in judging compliance and responsibility, raising questions about the effectiveness of regulation," adding, "It is necessary to encourage companies to establish a certain level of internal control on their own."
Accordingly, the authorities will strengthen the final responsibility of senior executives, including CEOs who have control authority affecting organizational culture and performance, regarding internal control. The CEO will be given the most comprehensive internal control management obligations and the duty to take appropriate measures to prevent financial accidents. However, the scope of responsibility will be limited to "major financial accidents" that have significant social impact or affect consumers and financial soundness. Furthermore, incentives such as reduced or exempted responsibility will be provided if "reasonable measures" expected to prevent accidents are taken.
The regulations related to the board of directors will also codify the duty to supervise and monitor internal control. The board will oversee whether key executives, including the CEO, properly perform internal control management duties and will be granted the authority to receive reports on the CEO's fulfillment of internal control obligations. Additionally, a plan to clarify the accountability structure for each executive to fulfill their roles and responsibilities related to internal control in their respective areas will be pursued.
Kim Ju-hyun, chairman of the FSC, said at a pre-briefing on the 27th, "Even with the same government, the role of the CEO is so important that Mao Zedong's China and Deng Xiaoping's China are different. The same applies to financial companies," adding, "We will review foreign internal control systems and promote improvement plans that minimize the burden of implementation on the industry while effectively changing the behavior of financial companies."
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