Financial authority to strengthen direct communication with bank boards

• Published date: 23 February 2023
• Publication title: The Korea Times

In a move to improve financial groups' corporate governance and ethical management, the financial authority plans to strengthen direct communication with the boards of directors of major financial groups and local banks.

The plan aims at serving the Financial Supervisory Service's (FSS') key policy goal of formulating responsible management governance for financial companies. The goal is one of four key policy directions announced by the watchdog agency on Monday ? stabilization of local financial systems, strengthening supervisory functions, supporting financial sector innovation and improving responsible management governance of financial companies.

"The FSS plans to check on financial firms' board of directors, corporate governance and appropriateness of executive incentive systems so that banks' governance could run in a fair and transparent manner," FSS Governor Lee Bok-hyun said during a press conference held at FSS headquarters in Seoul, Monday.

He explained that the supervisory agency's direct communications with the boards of financial firms will be transparent and open to the public so as to dispel any unnecessary misinterpretations about the communications.

"Given that local financial companies' procedures on selecting a chairman are falling short of global standards, making efforts to raise transparency and fairness in boards' key decision-making processes is deemed necessary," he explained.

Regarding financial companies' hefty incentives for their executives, the FSS head recommended taking more medium- and long-term strategies and achievements into account, rather than considering short-term earnings only, in their incentive payout systems, especially when market uncertainties are as grave as now.

He also stressed that banks need to consider alternative factors to shareholders' economic returns, given the banks' special social role of providing liquidity to the real economy. The FSS chief said while he respects recent activist funds calling for increased dividend payouts from...