[DigitalToday reporter Ji-young Lee (이지영)] The savings bank industry is being fully brought into a system of accountability maps that clarifies each executive’s responsibilities and management duties. Savings banks have not been free from concerns over weak soundness management and internal controls. Some see the introduction of the maps as putting internal control frameworks under fuller scrutiny for whether they operate as genuine accountability management.

Financial industry officials said savings banks with assets of 700 billion won or more must submit and adopt accountability maps by July 2. An accountability map is a system that sets out each financial company executive’s duties and the scope of internal control responsibility in advance. The aim is to move beyond assigning responsibility only after financial accidents occur and to raise the effectiveness of internal controls by clarifying executives’ duties and management obligations beforehand.

The adoption of accountability maps is expected to be a chance for savings banks to take internal control systems up a notch. Savings banks have been under continuous scrutiny for soundness and trust as weak real estate project financing (PF), loan screening and post-lending management, and governance and internal control issues have overlapped. As responsibilities become more specific by executive, it is expected to become more important to move away from formal internal controls and establish a practical management system.

The Financial Supervisory Service previously carried out pre-consulting on accountability maps for major credit-specialised financial companies and 52 savings banks. Pilot participants included 24 credit-specialised firms with total assets of 5 trillion won or more and 33 savings banks with total assets of 700 billion won or more, based on the end of the most recent business year. A total of 52 firms participated, including 22 credit-specialised firms and 30 savings banks. That was about 91 percent of eligible companies.

The FSS said the pilot participation rate was higher than 29 percent during pilots for banks and financial holding companies and 79 percent during pilots for large financial investment firms and insurers. The industry generally shares the intent of the system. There is also a view that the consulting was positive because it allowed firms to check the policy direction against their practical working environments.

The consulting process also identified cases needing improvement in the allocation of duties and how they are recorded. The FSS saw a risk that internal controls could become formalised if duties are overly concentrated on a particular executive due to conflicts of interest or a lack of expertise. It recommended allocating responsibilities with consideration for the link between an executive’s expertise and assigned duties and potential conflicts of interest.

◆Duties revised after consulting; submission likely on track

The savings bank industry is reported to have revised and supplemented parts of accountability maps after the FSS pre-consulting. Some firms integrated the chief executive officer’s duties and systematised shared duties, while adding duties related to innovative finance work. Revisions were also made by assigning duties in a way that distinguishes between outsourcing and delegation of tasks and outsourcing and delegation of information processing work.

Many savings banks also used external consulting to prepare accountability maps. They are known to have checked duty allocation, how management obligations are drafted, and consistency with internal rules through accounting and law firms. The industry as a whole also focused on building accountability management models suited to each firm’s organisational structure based on a joint standard draft, it said.

The industry believes there will be no major disruption in meeting the submission deadline.

Most eligible savings banks are expected to complete submission by the deadline. Some may further revise and supplement detailed wording or how duties are allocated before submission.

Some large savings banks said the flagged issue of duty concentration by executive is not significant for them. They said firms above a certain size have relatively segmented divisions of work among executives, meaning duties are not structured to be excessively concentrated on a particular executive. As a result, they are reported not to have considered separate organisational reshuffles or executive changes because of the adoption of accountability maps.

◆Beyond documentation, the key is embedding accountability management

Expectations for the system’s effectiveness are mentioned alongside practical burdens. While clarifying responsibility in advance is expected to raise internal control standards and prevent financial accidents, there is also a view that regular checks on duty performance and the burden of documentary evidence could increase on the ground.

From the perspective of frontline employees, the burden of documentation and evidence management could increase because they must record required actions under the accountability maps by cycle and leave electronic evidence. The burden of expanded responsibility could grow for management and executives, while the burden of regular checks on duty performance and documentary evidence could grow for frontline staff.

Ultimately, the key is ensuring the accountability maps do not remain merely submitted documents. If they stay at the level of formally listing each executive’s duties, the effect of adopting the system will inevitably be limited. If a system takes hold in which each executive actually checks and manages risk factors in their area, it could become an opportunity to raise trust in internal controls across the savings bank sector.

The accountability management stance is expected to become more important as the system expands to smaller savings banks with assets below 700 billion won. Mid- and small-sized credit-specialised firms and savings banks must adopt accountability maps by July 2, 2027. Mid- and small-sized firms may face greater preparation burdens than larger firms due to fewer executives and dedicated staff, but the system’s intent to reduce blind spots in internal controls and clarify responsibility applies in the same way.

In particular, it is not uncommon for mid- and small-sized savings banks to have executives doubling up roles or to find it difficult to place dedicated internal control staff independently. Many savings banks also operate under an unlisted owner-management system, and there has also been an aspect of maintaining a structure in which the CEO also serves as board chair for efficiency in board operations. As a result, a key task as the system expands will be how to harmonise dual-role executive structures with principles for allocating duties within regulatory guidelines.

◆Internal control improvements and financial accident prevention expected

Calls are also growing for sector-wide support such as standard drafts, training and consulting. Opinions say that for the new system to take root without confusion in the field, continued support and communication are needed at the level of financial authorities and the central association, in addition to individual firms’ own efforts. Still, the core of the system’s settlement is seen as whether each firm can link accountability maps to its actual internal control operating framework and implement accountability management.

An industry official said, "The adoption of accountability maps visualises responsibility clearly in advance, and ultimately we expect it to have definite positive functions in improving company-wide internal control levels and preventing financial accidents." The official added, "But we see it not as an abrupt turning point but as a process of changing some of the risk management constitution."

Another industry official said, "Because it is a system that can hold executives directly responsible when internal controls are insufficient, risk reviews could be strengthened further in the process of pursuing new businesses or supplying finance to mid- and low-credit borrowers." The official added, "Decision-making may be run somewhat conservatively, but since there is agreement with the system’s intent of strengthening internal controls, it will be important to strike a balance with the financial supply function."

The FSS plans to hear opinions from companies that adopt accountability maps and check operating conditions, then inform financial companies of difficulties and shortcomings. It also plans to seek ways to ease burdens on financial companies and strengthen senior management responsibility to the extent that it does not undermine the system’s effectiveness.