Announcement of 'Banking Sector Internal Control Inspection Results for Accident Prevention' on the 12th
Advancing the Implementation Timeline for Internal Control Measures
The Financial Supervisory Service (FSS) has established accident prevention control measures for employees exempted from rotational work within commercial banks' internal controls. Asia Economy previously pointed out issues regarding employees exempted from rotational work in the article '[Current Status of Internal Control]② Embezzlement after 15 years of service... Long-term service in specialized fields is 'widely permitted' (September 21)'.
According to the "Banking Sector Internal Control Inspection Results for Accident Prevention" announced by the FSS on the 12th, separate accident prevention measures have been established for employees exempted from rotational work who are in charge of corporate finance, foreign exchange, and derivatives operations. Currently, under the Bankers Association's model regulations, "for duties requiring high expertise, the personnel management system for long-term employees, such as the approval system for long-term service, is excluded." For these rotational work-exempt employees, a special ordered leave system will be introduced, along with rotation of assigned tasks and companies within departments, and clear separation of duties between front-office (sales) and back-office (fund settlement) operations.
Furthermore, the FSS has decided to advance the implementation schedule of key tasks to ensure that internal control innovation measures are established early in the banking sector. The target deadlines for tasks requiring time due to personnel management and IT system development have been shortened.
The "long-term employee management ratio," which was to be reduced to within 5% by the end of 2025, has been moved up to the end of 2024. The "compliance monitoring department staffing expansion," originally planned to increase to 0.8% or more by the end of 2027, has been changed to the end of 2025. For "strengthening IT system controls," the introduction of a password replacement authentication method, initially scheduled by the end of 2024, has been moved up to the end of June 2024. For "strengthening fund withdrawal system verification," the mandatory verification of critical matters, planned to be completed by the end of 2024, has been shortened to the end of June 2024.
The FSS also plans to reform supervisory systems, including the management evaluation system, to enhance supervision of banks' internal controls. First, the weight of internal control evaluations will be increased. The internal control section, currently a sub-item under management, will be separated into an independent item, and its evaluation weight will be expanded from the current 5.3% to 10%. The inspection manual will also be revised. Items evaluating the adequacy of internal control innovation measures and accident prevention devices will be substantially reflected in the checklist used during FSS inspections.
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