Editorial from Korea Herald on Aug. 14: Reinforcing Regulations to Combat Bank Misappropriation


Financial authorities in South Korea are deliberating on revising the Act on Corporate Governance of Financial Companies, which would impose responsibility on senior bank executives for their employees’ misdeeds. The decision to amend the regulation is a response to a series of financial irregularities, such as embezzlement and insider trading, that have recently occurred in the country.

Currently, the law does not hold top-level officials accountable for the misconduct of their subordinates. The proposed amendment would rectify this, with the CEO of a bank being held responsible for any repeated embezzlement cases or other illegal activities. The revision is based on a proposal from a lawmaker, which is expected to be implemented faster than a government-initiated bill.

The Financial Services Commission is also planning to carry out unannounced inspections at banks, in order to monitor their operations more effectively. Whether or not these steps will be able to prevent further misappropriation remains to be seen.

Recent events have highlighted the need for greater vigilance on the part of financial authorities. In one instance, KB Kookmin Bank employees utilized insider information to manipulate stock prices and generate illicit profits, while DGB Daegu Bank employees opened accounts without customers’ consent. In yet another case, an employee of BNK Kyongnam Bank was found to have stolen 56.2 billion won over a period of fifteen years. In each of these instances, both the banks and the financial authorities failed to recognize the misdeeds.

The total amount of money misappropriated by financial firms from 2017 to July this year is estimated to be 181.6 billion won, involving 202 bank employees. This figure is a stark reminder of the urgent need for stricter regulations.

The financial authorities had already proposed a plan to strengthen internal supervision rules in April 2020, following a major embezzlement incident at Woori Bank. However, the plan failed to produce the desired results. It is now time for the authorities to take concrete steps to prevent further financial crimes.

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