FSS Announces Reform of Financial Supervision
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FSS Announces Reform of Financial Supervision
Measures are intended to ease general inspections of financial institutions but crack down on major financial regulatory violations and crimes

27(Fri), Feb, 2015


Gov. Zhin Woong-seob of Financial Supervisory Service expounds FSS policies during a recent meeting with reporters.(Photo:FSS)




Governor Zhin Woong-seob of the Financial Supervisory Service (FSS) believes that the FSS should take actions decisively when needed, although it should minimize its supervisory moves on financial institutions. He compared the role of the FSS to using a sword. He said at a meeting that the FSS should carry the sword but hide it behind its back, so it is not seen by people working for financial institutions.

But when it has to use the sword, it should be used decisively. The FSS should act to prevent financial violations of he financial regulations and laws through strong actions, but it should also act to deal harshly with any violations of the financial regulations involving an official of a financial institution by handing him or her severe punishments to make sure that similar violations would not happen again.

The FSS governor¡¯s idea for the management of the FSS has been included in the measures to reform the management of the FSS, which were announced on Feb. 10.

A key part of the reform included in the measures are changes how the FSS practices its inspection and supervision of financial institutions, while respecting their autonomous management rights. 

What the governor would like to see in the reform is the FSS not be seen carrying its sword all the time. Rather, it should supervise with principles, and the autonomous rights of the financial institutions should be respected.

Zhin wants to do away with some FSS practices by 2017, including checking financial institutions management results every two years for the soundness of their operations, internal management systems and the electronic risk and securities systems for CEOs and other diverse inspection practices by steps. Those inspections were conducted 38.5 times during the past three years and they will be reduced to 21 times this year, to 10 next year and then phased out completely by 2017.

On-the-spot inspections, too, will be done only when absolutely necessary from now on, while check-ups on capital adequacy, soundness of assets, management system, profitability, liquidity, watch on their operations will be strengthened to cover for reductions in overall inspections and on-the-spot inspection.

The reform measures also include changes in the FSS inspections and control methods on financial institutions. The exemption of punishment for officials and staff involved in loan defaults will be more enforced, while small violations of financial regulations will be left to the financial institutions for immediate punishment without FSS involvement.

The FSS time period for the inspection of financial wrongdoings will be cut to five years. The reform measures are intended to expand the self-enforcement of financial institutions and minimize meddling by the FSS in their operations. The financial institutions will be free to determine dividends, interest rates, service charges, and the introduction of new financial products if they can meet financial regulations to a minimum degree, so that they can run their businesses more freely than before.

The FSS will also allow the banks to take down the FSS evaluation class so called, ¡°Red Tags¡± on their websites and the entrances of their outlets.

But the FSS will take harsh actions on repeat violators of the financial regulations on the financial institutions involved, which may come to the release of CEOs or suspension of operation, in the worst cases. The FSS also aims to liberalize the conservative practices in the financial market through the Planning Inspection Bureau to be newly launched. The FSS will take tough actions to prevent the five largest financial crimes including ¡°voice fishing,¡± illegal loans and illegal actions to collect private loans, among others, through the new units to be created just for those purposes.

   
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