[Editorial] The "Pachoseon" Wind Blowing Through the Financial Sector

Responsibilities Map. This is a document in which a financial company pre-defines the areas of internal control responsibility for each member of its management team. It consists of a Responsibilities Description and a Responsibilities Structure Diagram. The system was introduced with the intention of clarifying accountability in the event of a financial incident. Although the name is unfamiliar, this document is shaking up the financial sector. There are concerns that it could become the "financial sector's Serious Accidents Punishment Act."

The arrow has already left the bow. Financial holding companies and banks introduced and began implementing the system in January this year. Starting from the 3rd, the system has also been introduced to investment firms (with total assets of at least 5 trillion won or managed assets of at least 20 trillion won) and insurance companies (with total assets of at least 5 trillion won). Then, from July 3 next year, other investment firms and insurance companies, specialized credit finance companies (with total assets of at least 5 trillion won), and mutual savings banks (with total assets of at least 700 billion won) will be required to establish a Responsibilities Map. From July 3 the year after next, it will be implemented across the entire financial sector.

At the end of April, I met with President B of Bank A, who expressed his frustration. He had experienced the Responsibilities Map for about four months. "I'm not even a registered executive, but whenever we appoint someone at the executive level, we have to revise the Responsibilities Map, submit it to the board of directors for approval, and report it to the Financial Supervisory Service for review. We make so many personnel changes each week, and having to go through this process every time just doesn't make sense."

In mid-May, I met with CEO D of Securities Firm C, who was also worried. It was because the Responsibilities Map would be implemented in a month and a half (on July 3). "The Responsibilities Map for securities firms is a different story from banks. Banks mostly deal with deposits and loans, so their product structure is simple, and their Responsibilities Maps are not complicated. On the other hand, securities firms have a wide variety of complex products, including many high-risk products, making them more vulnerable to incidents. Since we have to specify all of this in detail, the Responsibilities Map inevitably becomes much more complex."

This is why creating a Responsibilities Map for investment firms (securities firms) is no easy task. Because of the rule that there must be no redundancy, concentration, or omissions, the number of responsibilities in Securities Firm C's map has grown to as many as 13,000. Yet concerns remain. "What if we missed something?" It is enough to drive someone to neurosis. If a new business is added, the worries only increase. CEO D said, "We have to integrate new businesses with existing responsibilities and reflect them in the Responsibilities Map, but this is an extremely complex task."

There is an even more serious problem. When I relayed President B's complaints, CEO D said he agreed 100%, raising his voice. He argued that it could become a serious issue that infringes on management's authority over personnel decisions. For example, every time there is a personnel appointment or organizational restructuring, the process must go through 'Responsibilities Map revision → board reporting and approval → reporting and review by the Financial Supervisory Service.' If the authorities request modifications or supplements for various reasons, companies have no choice but to comply. In a structure where the CEO cannot freely manage personnel or organizational changes, or even if they do, they inevitably miss the right timing, can the company really be managed properly?

The supervisory authorities are also facing a difficult situation. How can they handle the flood of review requests from countless financial companies with their current staffing levels? This is already causing concerns throughout the financial sector about abnormal or dysfunctional operations. At a cabinet meeting last month, President Lee Jaemyung mentioned the "Pachoseon" fan while discussing the authority and responsibility of public officials. Its power is described as follows: "If you wave it once, thunder and lightning strike; if you wave it twice, the world is turned upside down." This is not something to be used excessively.