Stricter compliance regulations are to be adopted for financial institutions within the watchdog’s jurisdiction to enforce stricter internal control and prevent errors and fraud, according to the market watchdog Financial Supervisory Service.

According to a preliminary set of measures unveiled Wednesday, at least 1 percent of the entire staff and executives in a financial institution should be assigned to compliance operations, while compliance officers must be executives of the company with at least two years of experience in the field.

Measures also include incentivizing local banks, brokerages, insurers and card companies with outstanding performance in internal control and specify roles of their board of directors in risk management. 

“The latest dividend mishap in Samsung Securities has shown how the mistakes and moral laxity of individual employees impact the entire financial market,” FSS Gov. Yoon Suk-heun said in a press conference.

Unlike previous cases, the fresh set of measures was made to reflect voices of experts in financial fields and the financial industry, making it easier for financial institutions to follow suit.

“We intend to provide a minimal policy-wise groundwork for financial industry development,” he said.

Details of measures are subject to change before the regulation goes into effect, while the FSS did not elaborate on the estimated date for execution. The FSS also hinted at plans to cooperate with the Financial Services Commission, a financial policymaker and regulator, to revise financial rules to enforce the measures.

The outline of the measures was based on a report drafted by an FSS task force comprising six external experts. The task force has operated for four months, led by Sungkyunkwan University’s financial law professor Ko Dong-won.

“What is the most desirable is that financial institutions come up with strong internal control with spontaneity, but it has not always been the case,” Ko said in a press conference.

The watchdog’s need to take pre-emptive actions was under the limelight with errors and following revelations of lax compliance by Korean financial business entities like Samsung Securities and Nonghyup Bank’s offshore branch in New York.

By Son Ji-hyoung 
(consnow@heraldcorp.com)