After String of Overseas Financial Accidents, Lee Chanjin: "Prevention Systems Are Weak... Headquarters Oversight Must Be Strengthened"

Overseas branch financial accident losses surged from 150 million won to 124.9 billion won last year
Held a "regular meeting" with board chairs of eight financial holding companies
Risk management capabilities to be reflected in personnel evaluation

Financial Supervisory Service Governor Lee Chanjin has called on domestic banks to strengthen internal controls and risk management at their overseas branches. Financial incidents at overseas branches are increasing, and incidents are recurring at the same branches. Lee stressed that preventing repeat incidents requires stronger management and oversight by bank head offices, and that risk management capabilities and performance should be reflected in personnel systems.

Financial Supervisory Service Governor Lee Chanjin answers lawmakers' questions during a parliamentary audit of the Financial Supervisory Service and other agencies at the National Assembly on Oct. 19, 2026. Photo by Yoon Dongju

Lee made the remarks on Oct. 28 at the 2026 regular meeting, which he held with the board chairs of eight financial holding companies: KB Financial Group, Shinhan Financial Group, Hana Financial Group, Woori Financial Group, NH Financial Group, BNK Financial Group, iM Financial Group and JB Financial Group. "Recently, a series of major financial incidents have occurred at overseas branches of domestic banks," he said. The meeting was arranged to discuss the role of boards in addressing pressing issues facing the financial sector and hear the sector's requests. Key topics included the rise in financial incidents at overseas branches of domestic banks and ways to strengthen internal controls. This was the first time this year that Lee had met face-to-face with the board chairs of the eight financial holding companies.

According to the Financial Supervisory Service, losses from financial incidents at overseas branches of domestic banks surged from KRW 150 million across 7 cases in 2024 to KRW 124.9 billion across 12 cases in 2025. Another 11 incidents were reported through September 2026, with losses totaling KRW 84 billion. "This shows that systems for preventing incidents at overseas branches are relatively weak," Lee said.

Lee said that fostering an organizational culture centered on internal controls and risk management is essential to preventing financial incidents. "Overseas, laws and regulations and business practices differ from those in Korea, and locally tailored products with different transaction structures are available. This means we need to pay particular attention to new risks," he said, urging banks to "reestablish principles at every stage, from risk awareness to measurement and response."

He also called for overseas branches to have management and oversight systems on par with those at head offices. "Please strengthen management and oversight so that head-office policies and standards are applied consistently to local operations," Lee said. He specifically proposed analyzing cases of financial incidents at overseas branches, establishing integrated IT systems at head offices to oversee overseas branches, conducting regular inspections of overseas branches, and improving internal and external reporting systems for financial incidents.

He also stressed that internal control performance should be meaningfully reflected in personnel policies and performance evaluation systems. The aim is to prevent banks from neglecting internal controls in favor of business results. "Please work to establish systems and an organizational culture centered on internal controls and risk management, including by meaningfully reflecting internal control and risk management capabilities and performance in personnel and evaluation systems," he said.

Lee also asked boards to check whether internal control systems are working properly in practice. The Financial Supervisory Service announced measures to improve internal controls in November 2022, drew up measures to improve lending processes in 2024, and pursued the introduction of a responsibility mapping system in 2025. "Various measures have been developed to address internal control weaknesses arising from branch staff reductions and digitized lending processes at branches," he said. "I ask boards to pay particular attention to ensuring these measures work properly in practice."

Earlier, The Asia Business Daily examined recurring financial incidents, including embezzlement and fraud, at overseas branches of Korea's five major commercial banks over the past five years in its special report, "The True Face of K Bank Beyond the Border." The report noted that incidents were recurring at the same overseas subsidiaries due to constraints on financial authorities' supervisory powers under local regulations, inadequate internal controls at bank head offices, and poor management of local employees.

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