Responsibility Maps for Specialized Credit Finance Companies and Savings Banks Lacking... "Conflict-of-Interest Prevention Needed When CEO Also Chairs Board"

FSS Consults 52 Large Credit Finance Companies and Savings Banks
Concentration, Duplication, and Omission of Executive Responsibilities Identified

With about ten days remaining until the deadline for submitting responsibility maps for large specialized credit finance companies and savings banks, a number of shortcomings have been identified. It was found that even basic requirements of the responsibility map were not properly fulfilled, such as documenting conflict-of-interest prevention measures when the CEO also serves as the chairperson of the board of directors. The financial supervisory authorities announced that they will seek ways to strengthen the accountability of senior management and are working to ensure the proper establishment of the system.

On June 21, the Financial Supervisory Service announced the "Status of Pilot Operations and Future Plans for Responsibility Maps of Large Specialized Credit Finance Companies and Savings Banks." The Financial Supervisory Service is conducting a pilot program for a total of 52 institutions, including 22 specialized credit finance companies with total assets of at least 5 trillion won and 30 savings banks with total assets of at least 700 billion won, all of which must implement responsibility maps by July 2.

As a result of consulting with the financial companies participating in the pilot program, the Financial Supervisory Service identified several problems: ▲ insufficient documentation of recommendations regarding the CEO also serving as chairperson of the board ▲ concentration of responsibilities on executives in charge of management ▲ duplication and omission of responsibilities related to financial business ▲ inadequate documentation in the responsibility map.

First, the pilot operation of responsibility maps in the financial investment and insurance sectors revealed the same deficiencies that had previously been pointed out. Specifically, shortcomings were found in the following areas: ▲ failure to establish internal controls to prevent conflicts of interest ▲ the need to allocate responsibilities by considering actual management and supervisory authority, regardless of whether outside directors are full-time or whether inside directors have decision-making authority ▲ when the responsibilities of senior and junior executives overlap, insufficient allocation of responsibilities to the senior executive.

A Financial Supervisory Service official emphasized, "Effective internal control mechanisms must be established, including measures to prevent conflicts of interest when the CEO also serves as chairperson of the board."

There were also cases where an executive was assigned responsibilities unrelated to their primary work. For example, the head of the management department at Company A was found to be responsible for a total of 19 distinct duties, including not only core management work such as HR and compensation, but also highly specialized tasks such as operating and managing IT systems, responsibility for internal accounting controls, and financial business tasks such as loan operations.

There were also many cases where executives' responsibilities were duplicated or omitted. At Company B, the head of the loan review department and two sales executives were each assigned loan review responsibilities, but the responsibility map did not clearly differentiate the scope and management actions of each executive. At Company C, three executives were each assigned responsibilities related to loan operations for products handled by their respective departments, but details regarding post-management before product planning or transfer were omitted for some executives.

There were also cases where the details of responsibilities and management actions were described ambiguously or included irrelevant content. In addition, many companies listed management obligations in a manner that merely repeated the details of responsibilities or described them at the level of individual work tasks.

A Financial Supervisory Service official stated, "Given that the need for improvements among large companies was confirmed through this consulting process, we anticipate that small and medium-sized companies scheduled to introduce responsibility maps in the future will also face practical difficulties. We will strive to ease the burden on financial companies and seek ways to further strengthen senior management accountability, as long as such measures do not undermine the effectiveness of the system."

This content was produced with the assistance of AI translation services.