In a significant call to action, Lee Bok-hyun, governor of South Korea’s Financial Supervisory Service (FSS), has urged local banks to enhance their internal control systems and risk management strategies.
According to Korea Herald, this appeal was made during a meeting with the heads of local lenders, highlighting the urgent need to prevent financial accidents by tightening internal controls.
The FSS recently revealed that major banks, including Woori Bank, KB, and NH Nonghyup, have extended inappropriate loans totaling approximately 387 billion won ($264m). Notably, Woori Bank issued dubious loans amounting to 233 billion won, with 70 billion won inappropriately extended to relatives of a former chairman of its parent company. This revelation underscores the potential risks lurking within unchecked financial practices.
Governor Lee emphasized the necessity of establishing an effective internal control system and bolstering IT-related risk defenses. He pointed out that banks need to manage risks against what he described as “lopsided” asset allocations. Over the mid and long term, he stressed that banks must rigorously manage risks associated with assets and financial products, ensuring a stable financial environment.
These statements from the FSS chief underscore a crucial moment for South Korean banks as they are called upon to reevaluate and strengthen their risk management frameworks to avoid similar pitfalls in the future.
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