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Foreign financial firms urged to bolster internal controls

Foreign financial firms urged to bolster internal controls

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Published : 2013-12-03 20:13
Updated : 2013-12-04 13:24

The nation’s top financial watchdog urged foreign financial firms operating in Korea to strengthen their internal controls to prevent financial wrongdoings.

Financial Supervisory Service Governor Choi Soo-hyun issued the call when he met a group of CEOs of foreign financial companies in Seoul on Tuesday.

“Foreign financial firm CEOs need to pay attention to in-house control and involve themselves directly in the efforts to prevent financial mishaps,” he said, adding that the misconduct and wrongdoings of some financial firms “have made headlines” over the past few months ― namely financial scandals surrounding Tong Yang Group and KB Kookmin Bank.

“The Tong Yang debacle has put a significant dent in public confidence in the entire financial market,” he said, pointing to the conglomerate’s alleged stock price-rigging plot and incomplete sales of corporate bonds and commercial papers, all of which led to financial damage to investors.

“To prevent the recurrence of a similar failure, we will keep a closer watch on the financing of large companies, one of the sources of risk to the financial system, as demonstrated by Tong Yang Group,” he said.

The failures of management and supervision, and belated restructuring together caused the collapse of the group as well as losses for small investors, he said.

The governor also dismissed some complaints that government regulation is responsible for the exit of some foreign financial firms from Korea, including Goldman Sachs’ asset management operation and ING Life Insurance.

“Foreign firms pulling out their Korean operations were doing so because of their global restructuring programs and the decline of their competitive edge in Korean markets,” he said.

The meeting is the second of two biannual meetings ― the annual SPEAKS and the annual executive meeting ― between the regulator chief and the heads of foreign financial firms operating in Korea.

Upon his inauguration in March, Choi pledged to strengthen communication with the foreign financial firms and ensure predictable financial policy enforcement.

After the morning meeting, the Financial Services Commission, the state’s top financial decision maker, announced plans to strengthen the internal controls of the banking sector.

The FSC’s new plan underscores the chief executive’s responsibility for the company’s internal controls and duty to prevent illegal actions from taking place.

By Chung Joo-won (joowonc@heraldcorp.com)

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