[DigitalToday reporter Ji-young Lee] Lee Chanjin, head of the Financial Supervisory Service, demanded strong improvements from financial holding firms across the role of outside directors and overall management succession procedures. The FSS plans to launch a "corporate governance improvement TF" related to succession within this month to draw up improvement measures.

Lee met eight financial holding company chief executives and the head of the Korea Federation of Banks on Wednesday afternoon at the Bankers Association building in Seoul’s Myongdong district. He said CEO succession at holding companies is very important for financial system stability.

He stressed that holding companies can gain the trust of shareholders and the market when they secure a transparent succession system and checks and balances by independent directors.

Lee said requirements and procedures for management succession must be clear and transparent, and must have fair and objective standards.

He also stressed creating a fair competitive environment and strengthening verification of management capability.

On outside directors, Lee said he would push for financial holding boards to include outside directors in areas such as information technology security and financial consumers.

He said nomination committees should be able to operate independently and fairly by diversifying channels for recommending outside directors and differentiating outside director terms, among other steps.

Lee referred to failures in consumer protection, including mis-selling, as a "survival risk" and stressed the role of the chief executive as the group’s overall person responsible for internal control.

Lee pointed out that an inspection of how the accountability structure is run found executives’ internal control activities were limited to formal checks, and that building internal rules or IT systems to support them was insufficient.

He said the accountability structure did not sufficiently reflect the importance of the chief executive’s role and responsibility, and stressed that firms should play a leading role in consumer protection.

He also stressed the need to establish more sophisticated standards for verifying customer understanding and suitability from the product design stage.

Lee also urged holding companies to upgrade feasibility reviews and evaluations of innovative companies so that productive finance can take root. He said the FSS would also seek ways to ease capital burdens within the range permitted by international standards.

He also stressed the banking sector’s social responsibility. Lee said he would encourage banks’ social role through steps such as establishing a comprehensive evaluation system for inclusive finance and introducing a win-win finance index.

In response, Cho Yong-byoung, head of the Korea Federation of Banks, said all bank holding companies deeply sympathise with the FSS chief’s emphasis on preventive consumer protection and the need to integrate internal controls and IT security. He said they would work harder, in close consultation with financial authorities, to build practical internal control systems, establish a consumer protection-centred management culture and settle sound corporate governance.

Cho added that the effectiveness of corporate governance depends on reflecting each company’s management strategy and organisational characteristics, and asked that individual circumstances be sufficiently considered.