Financial Supervisory Service Governor Lee Chan-jin (이찬진) on Feb. 10 called for "deep self-reflection," saying unfair trading and financial incidents involving some employees still occur in the securities industry.

He said the securities industry's cleanup of troubled real estate project financing (PF) is relatively sluggish compared with other sectors. He said he will conduct on-site inspections at firms where cleanup is delayed or work handling during the normalisation process is improper.

Lee made the remarks at a meeting with securities firm chief executives in Seoul's Yeouido district. "I have a request for the KOSPI 5,000 achievement to take root as a springboard for a leap forward," he said. The meeting was attended by Financial Investment Association Chairman Hwang Sung-yup (황성엽) and CEOs from 23 securities firms.

Lee said unfair trading by some employees and unending financial incidents are clear cases of failed internal controls. "Now, we must establish and internalise responsible management as a principle through deep self-reflection," he said.

He also said he will continue to check operating conditions so that the accountability structure system, which will be applied more broadly to small and mid-sized securities firms from this year, is stably established.

He also urged securities firms to step up the supply of venture capital now that they have funding means such as short-term notes and integrated investment management accounts (IMA).

Lee said precisely assessing corporate potential, assuming related risks and allocating funds are functions unique to securities firms. "Securities firms must discover innovative companies and become a key conduit for capital market funds to flow into the real economy," he said.

At the same time, he urged firms to strengthen soundness and risk management, which underpin the supply of venture capital. "If you fail in soundness management, investor protection and the revitalisation of venture capital are nothing more than a hollow cry," he said.

According to FSS statistics, as of the end of September last year the securities industry's balance of troubled real estate PF loans stood at 3.6 trillion won. That is less than mutual finance at 10.2 trillion won, but more than credit-specialised finance companies at 1.8 trillion won and savings banks at 1.7 trillion won.

Lee urged firms to prevent improper work handling that uses a dominant position during the real estate PF normalisation process. He said he plans on-site inspections targeting securities firms where cleanup is delayed or there are issues in business conduct.

He also urged firms to embed a financial consumer-centric DNA across overall management. He called in particular for high-risk products to be assessed from the investor's perspective across every stage of the product life cycle and for their rationality to be thoroughly verified.

Participants said securities firms will fulfill their essential role as leading players in productive finance. They said they will make financial consumer protection the top management value and closely review internal controls at the CEO level, the FSS said.

[Yonhap News Agency]