FSS: "At Least One Annual Interview per Bank... Actively Utilized Overseas as Well"

Lee Bok-hyun, Governor of the Financial Supervisory Service

[Asia Economy Reporter Bu Aeri] The Financial Supervisory Service (FSS) announced on the 23rd that "this is a recommendation from international organizations and is actively utilized by overseas supervisory authorities as part of the supervision and inspection process" regarding the regular communication plan with bank holding companies and bank boards of directors.

On the same day, the FSS introduced the international standards of the Basel Committee on Banking Supervision (BCBS) through a press reference material titled 'Overseas Cases of Communication Between Supervisory Authorities and Bank Boards.'

Earlier, the FSS revealed its plan to regularize communication by conducting at least one meeting annually with each bank's board of directors in its business plan announcement this year. It appears that this explanation was made in response to concerns about government intervention raised by some quarters.

According to the FSS, the BCBS recommends maintaining sufficient contact with bank boards of directors for risk assessment and other purposes through core principles on bank supervision.

The FSS added, "The Financial Stability Board (FSB), established after the 2008 global financial crisis, also recommends that supervisory authorities confirm the board’s views on risk policies through meetings and take necessary measures."

The FSS explained that, in accordance with these international standards, supervisory authorities such as the U.S. Office of the Comptroller of the Currency (OCC), the UK Prudential Regulation Authority (PRA), and the Australian Prudential Regulation Authority (APRA) specify board meeting procedures in their inspection processes or business plans and conduct regular or ad hoc meetings with bank boards.

The U.S. OCC inspection manual states, "At least one board meeting is held during the supervisory cycle (12 to 18 months), and more frequent meetings are conducted if necessary."

The PRA also stated that financial supervision includes all senior positions and operations of banks, and bank boards should expect regular meetings with the PRA.

The FSS noted that reflecting these international standards, exchanges with bank boards had been expanding even before COVID-19.

Between July 2015 and February 2019, before COVID-19, the FSS held more than 22 meetings with bank board chairs and others, led by FSS executives in charge, and meetings between the FSS governor and board chairs were continuously held, the FSS explained.

Regarding future meeting schedules, the FSS stated, "At least one meeting will be held annually for each bank," and "separately, meetings with chairs of boards of all banks and bank holding companies will be held twice a year, in the first and second halves of the year."

The FSS emphasized, "Through meetings with bank boards, we plan to share recent financial market issues and results from FSS inspections and ongoing monitoring, as well as listen to difficulties and suggestions," adding, "We expect this to support balanced decision-making by bank boards and enhance their functions."