FSS to Conduct Regular Inspections of KB, Jeonbuk, and K Bank...First Deployment of Consumer Protection Inspection Team

Stronger Crackdown on Consumer Protection...
Expected to Encourage Governance Reforms in the Banking Sector

This year, KB Kookmin Bank, Jeonbuk Bank, and K Bank will undergo regular inspections by the Financial Supervisory Service (FSS). Consumer protection enforcement is expected to be strengthened. Pressure to improve governance in the banking sector is also likely to intensify during the regular inspection process.

According to the financial sector on the 22nd, the FSS has selected KB Kookmin Bank, Jeonbuk Bank, and K Bank as targets for this year's regular inspections of banks, and is expected to proceed sequentially, starting with Jeonbuk Bank in the first half of the year.

In its work plan for this year, the FSS has announced that it will establish a supervisory framework that puts financial consumers first and that it will form a separate "consumer protection inspection team" when conducting regular inspections of financial companies.

Typically, during regular inspections of banks, the FSS organizes 3 to 5 inspection teams, including those in charge of credit, internal control, and information technology (IT) systems, as well as a general team that reviews overall business conditions. This year, it plans to set up an additional team dedicated to examining consumer protection separately.

The consumer protection inspection team is expected to review the entire process from the sale of financial products to post-management, and to check compliance with relevant laws such as the Financial Consumer Protection Act and the Personal Debtor Protection Act.

An FSS official said, "The intention is to bring consumer protection issues onto the main table of regular inspections," adding, "We plan to communicate the issues raised by the authorities to the financial sector during the regular inspection process so that improvements can be made."

In line with the government's stance of strengthening household debt management, it is also expected that the FSS will closely examine related indicators, as well as basic soundness items such as profitability and liquidity.

Governance is expected to come to the fore during the regular inspection process.

Jeonbuk Bank appointed Park Chunwon, CEO of JB Woori Capital, as its new bank president last year after former bank president Baek Jongil gave up seeking another term amid controversy over profiting from high interest rates.

During the appointment process, it became known that President Park, while serving as CEO of JB Woori Capital, had been questioned as a reference witness by a special prosecutor in connection with allegations related to the so-called "Kim Keon-hee butler gate," raising concerns about legal risks.

In the case of KB Kookmin Bank, the term of Yang Jonghee, chairman of KB Financial Group, is set to expire in November. If the procedures for his reappointment overlap with the regular inspection, this could act as a variable.

This year's regular inspections, combined with the activities of the financial authorities' task force (TF) on advancing governance, are expected to have the effect of pressuring banks to voluntarily improve their governance structures.

The TF is drawing up governance reform measures focused on making the chief executive officer (CEO) appointment process more transparent, strengthening the independence and expertise of boards of directors, and overhauling systems for deferring and clawing back performance-based compensation.

Aiming to produce results by the end of next month, it is discussing measures such as differentially introducing special resolutions at shareholders' meetings for CEO reappointment and third consecutive terms, and adopting a single three-year term limit for outside directors.