[Accountability Structure Dilemma] ④ Shinhan and Woori Strengthen Internal Control Effectiveness... Nonghyup and Hana Establish Internal Control Culture

Major Banks Expand Dedicated Personnel and Legal Teams for Accountability Structure Chart
Digitalization of Internal Control Is Key at Shinhan Bank
Woori Bank Strengthens Human Resources and Systems
NongHyup and Hana Emphasize Establishing an 'Internal Control Culture'

Editor's NoteSince this year, the introduction of the 'Accountability Structure Chart' in the financial sector has heightened industry tensions. The Accountability Structure Chart is a system where each executive of a financial company clearly defines the scope and content of their internal control responsibilities. The government established this system as a preventive measure in response to recurring financial accidents, but in the field, there are concerns about increased responsibility burdens and disciplinary risks. There is also a significant fear that a single small mistake could lead to losing one's position. This special report examines the background and current status of the Accountability Structure Chart's introduction and explores directions for improvement to ensure the system is established more efficiently and rationally.

Since January this year, financial holding companies and banks have been implementing the Accountability Structure Chart. The operation of the Accountability Structure Chart can be understood through the status of internal controls in banks. Because the Accountability Structure Chart system designates the final person responsible for major tasks in financial companies in advance, it is related to internal control. Major banks share the commonality of expanding dedicated internal control personnel and related legal teams. Specifically, some have strengthened systems to monitor illegal or improper instructions, while others aim to establish an internal control culture among employees.

Shinhan and Woori Bank Revamp Internal Control 'Effectiveness'

Shinhan Bank was the first in the financial sector to introduce the 'Accountability Structure Chart' last year. The key focus is on 'digitalization of internal control.' Notably, they adopted a method of enhancing systems such as artificial intelligence (AI) to strengthen internal controls based on the Accountability Structure Chart.

For example, the bank established a 'self-assessment process for internal control' when launching new projects within the group. This means building a customized internal control system for each group instead of operating internal controls at a general principle level.

AI technology is also applied to unstructured data. Unstructured data refers to various types of data such as emails, reports, financial product information, work regulations, and official documents. They explained that by collecting such information and using search models, they aim to proactively enhance the internal control inspection system.

They are also raising the level of the internal control value chain. The procedures of employee training → internal control inspection → internal control improvement have been strengthened compared to before. Through this, they intend to make this year 'a year to enhance the completeness of internal controls across the entire bank.'

Woori Bank is characterized by deploying internal control inspection personnel centered on the Accountability Structure Chart throughout the organization. First, they newly established the 'Accountability Management Team' within the Compliance Office, which oversees internal control and is responsible for managing and inspecting the implementation of corrective actions. Specifically, they strengthened support for the bank president's overall management obligations under the Governance Act.

Additionally, they placed internal control managers, internal control specialists, and internal control branch managers at sales sites. This creates a triple-layered internal control management system. In the future, they plan to enhance the 'Accountability Management System,' a computerized system supporting accountability management for the bank president and executives, reflecting the status of the Accountability Structure Chart's establishment and related cases.

A Woori Bank official explained, "This year, Woori Bank is focusing company-wide on strengthening internal controls," adding, "We are not only reinforcing the human resources for internal control but also building the system itself anew."

'Internal Control Culture' Emphasized by NongHyup and Hana Bank

NongHyup Bank and Hana Bank take a different approach. They have a strong will to improve the 'culture' of internal control itself. NongHyup Bank plans to strengthen the internal control culture by solidifying the accountability system. Until now, the responsibility of the head of the headquarters was ambiguous when financial accidents occurred, but starting this year, if two or more publicized financial accidents (with amounts exceeding 1 billion KRW) occur at a jurisdictional office, the head of the headquarters will be subject to suspension and standby orders.

They will also officially introduce the 'Internal Control Expert Certification System' in the second half of this year to enhance expertise. Office managers and auditors must obtain internal control qualification certification through a computer-based exam using a problem bank method. From next year, this will be expanded to all employees. They are also considering applying this to the personnel scoring system.

Hana Bank also places emphasis on strengthening the internal control culture. Recently, they produced an etiquette book titled 'Professional Ethics and Manners Employees Should Have' and distributed it to all employees. They plan to raise employees' awareness of internal control through various methods such as quizzes, non-face-to-face, and on-site training.

They also plan to promote education and consulting for the CEO and executives regarding their internal control management obligations to ensure the Accountability Structure Chart system is firmly established. Alongside this, they announced plans to enhance the 'Accountability Structure Chart computerized system,' though specific details were not disclosed.

KB Kookmin Bank has built a company-wide 'Accountability Management System.' Under the Compliance Monitoring division, they created an 'Accountability Management Unit' responsible for inspecting the implementation of accountability management measures and post-management. Along with this, they developed 'Internal Control Work Manuals' tailored to each member. Not only for executives but also for branch managers, they operate a 'Branch Manager Internal Control Work Manual' to assist effective internal control management activities.