FSS to Conduct Special Governance Inspection of Eight Domestic Banking Groups in January
President Lee Jaemyung Points to Corrupt 'Inner Circle'
FSS Governor Lee Chanjin to Examine Board Independence
Lee Chanjin, Governor of the Financial Supervisory Service, is delivering a New Year's address at the "2026 Pan-Financial New Year's Meeting" held at Lotte Hotel in Jung-gu, Seoul on the afternoon of the 5th. 2026.1.5 Photo by Kang Jinhyung
The Financial Supervisory Service announced on January 14 that it will conduct a special inspection on the governance structures of eight domestic banking holding companies this month.
The Financial Supervisory Service explained that, rather than focusing on the formal aspects of governance such as internal regulations and organizational structure, the inspection will concentrate on whether governance is functioning soundly, as well as on the formal implementation that undermines the intent of best practices. This will be based on issues raised by the media and cases identified during the agency's on-site inspections.
In December 2023, the Financial Supervisory Service established and implemented "Best Practices for Governance" to advance the governance of the banking sector. However, the agency emphasized that this special inspection was prompted by ongoing concerns that these improvements are not being fully reflected in actual management decision-making processes, and that the intent of best practices is being implemented only superficially or circumvented through expedient means during the operational phase.
Representative issues cited include the weakening of the board of directors’ substantive vetting function in the process of appointing chief executive officers (CEOs), often due to entrenched relationships with the board, resulting in frequent self-renewals of CEO terms; the board of directors and various committees merely ratifying important decisions after the fact; and the weakening of the effective oversight and monitoring functions of outside directors.
Previously, Lee Chanjin, Governor of the Financial Supervisory Service, had repeatedly pointed out governance issues at financial holding companies. On January 5, during a meeting with reporters, Governor Lee stated, "The core concern regarding the governance of financial companies is whether the independence of the board of directors is functioning properly," and added, "We will consider ways to rationally improve the structure where the terms of directors are aligned around a particular CEO."
President Lee Jaemyung also addressed the issue of financial institution governance during a Financial Services Commission work report on December 19, pointing out, "The so-called problem of government-directed finance means the government does not directly intervene, but when left alone, a corrupt 'inner circle' emerges, and a small group continues to exercise control at their discretion."
The Financial Supervisory Service plans to use the results of this inspection to identify best practices and areas for improvement at each banking holding company, and to incorporate these findings into future discussions of the "Governance Advancement Task Force."
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