South Korea’s financial watchdog will phase out routine inspections of local financial companies by 2017 but ratchet up punishment for rule breakers in order to establish fair and due order in the industry, its chief said Tuesday.

“I will order routine comprehensive inspections only in case of financial accidents and limit on-site inspections,” Financial Supervisory Service Gov. Zhin Woong-seob said in a press conference.

“Instead, I will strictly punish those who heavily, repeatedly violate financial laws. They will be given business suspensions or be recommended to dismiss their management.”

The FSS has conducted an average of 38.5 customary inspections every year for the past three years. It routinely inspects a bank or an insurer every two years to monitor the industry. The practice has often been criticized as discouraging financial firms from engaging in bold businesses for fear of being reprimanded and for wasting time on customary procedures.

Zhin said the FSS will reduce the number of routine inspections to 21 and 10 in 2015 and 2016, respectively, and eliminate them all together after 2017.

The watchdog will simultaneously run business assessment test programs and strengthen its surveillance role to prevent any financial crisis, he said.

It will give incentives to companies who receive higher scores on the assessment test and support their overseas businesses, he said.

Zhin said the deregulation is aimed at spurring autonomy in the financial industry and creating a business-friendly environment.

The FSS will refrain from intervening in managerial decisions on dividend payouts, interest rates, commission fees and launching of new financial instruments, the FSS governor said.

Zhin emphasized the importance of restoring public confidence in its oversight function, referring to recent financial scandals including a massive data leak from credit card firms that have tarnished its reputation.

“The FSS will strive to rebuild our organization and regain confidence and trust from public and financial companies,” Zhin said. “The FSS will focus on our original mission.” 

(Yonhap)