It is expected that the Financial Supervisory Service will announce the test results midway, reducing the number of controversies. In principle, it will be limited, but we plan to create exception standards for situations where damage to financial consumers is concerned.
In addition, when requesting e-mail and messenger content from financial companies during the inspection process, the practice is changed to select those related to the private lives of executives and employees and submit only those related to the inspection.
According to the financial authorities on the 27th, the Financial Services Commission and the Financial Supervisory Service were found to be pursuing a plan to reform financial administration that includes these details.
Previously, the Financial Supervisory Service announced in its work plan at the beginning of the year that it would make interim announcements only when there is a need for public interest, but did not disclose specific standards regarding 'need for public interest'. This is the first time that the outlines of the exception criteria have been revealed.
Financial consumer protection, including concerns about consumer damage, is expected to be the main exception standard.
A high-ranking official from the financial authorities said, “Exceptions could be made in urgent situations where damage to consumers is concerned, or in cases where it could escalate into a major financial accident.”
The authorities are said to also refer to overseas cases such as the United States and the United Kingdom.
For example, the UK's Financial Conduct Authority (FCA) maintains non-disclosure of inspection-related facts, but allows the results to be disclosed even during the inspection if there are exceptional reasons such as protecting consumers and investors, maintaining trust in the financial system, and preventing widespread illegal activities.
The U.S. Consumer Financial Protection Bureau (CFPB), Securities and Exchange Commission (SEC), and Office of the Comptroller of the Currency (OCC) also treat test information confidentially as a rule, but in some exceptional circumstances such as public interest or consumer protection, information can be disclosed regardless of whether the test has been completed.
The interim announcement of the Financial Supervisory Service's inspection results became controversial during the time of former Director Lee Bok-hyeon.
A representative example is the interim announcement by the Financial Supervisory Service, ahead of the general elections in April 2024, that it had begun an on-site inspection related to suspicions of Saemaeul Geumgo's illegal lending by Democratic Party candidate Yang Moon-seok and confirmed misappropriation of the loan for purposes other than the intended purpose and submission of false evidence. At the time, criticism of the ‘official election’ was raised, especially from the Democratic Party and others.
Afterwards, the Board of Audit and Inspection also looked into issues related to interim announcements in the process of auditing the status of financial investor protection for the Financial Services Commission and Financial Supervisory Service in June of this year.
Measures to improve other problematic inspection practices, such as data request procedures, will also be prepared.
For example, when the Financial Supervisory Service requests the business messengers and emails of executives and employees of financial companies during the inspection process, it plans to select private information that is unrelated to the inspection and submit the data.
The format of the pre-notification of sanctions that the Financial Supervisory Service sends to the relevant financial company before submitting the sanctions plan to the Sanctions Deliberation Committee after the inspection is expected to be improved to include issues and sanctions-related information so that the parties involved can easily understand. Currently, it has been pointed out that it is difficult to guarantee the parties' right to defense because the contents of the prior notice are compressed.
This plan to reform financial administration is a follow-up measure to the decision of the Public Institutions Management Committee (Public Service Commission) earlier this year. Last January, the Public Service Commission postponed the Financial Supervisory Service's designation as a public institution under the condition that management and supervision be 'above the level of a public institution' in overall business management.
Accordingly, it is known that the Financial Administration Reform Task Force (TF), a joint effort between the Financial Services Commission and the Financial Supervisory Service, is preparing reform plans and is currently in the final stage of consultation.
