Financial authorities are set to address major financial issues throughout July, ahead of the summer vacation in August. They plan to finalize sanctions related to the improper sale of Hong Kong H-index linked securities (ELS) and the data breach incident involving Lotte Card, as well as announce a governance improvement plan for financial holding companies this month.
According to the financial sector on July 1, the Financial Services Commission will sequentially decide on fines for ELS sellers and sanctions related to the Lotte Card data breach during its regular meeting this month. These meetings typically occur biweekly on Wednesdays, with sessions scheduled for July 1, 15, and 29. As the authorities will take a break in August, they aim to resolve key issues within July.
The most closely watched item is the sanctions related to ELS. Initially, the Financial Supervisory Service (FSS) considered imposing fines of approximately 4 trillion won on five banks, including KB Kookmin, Shinhan, Hana, NH Nonghyup, and SC First Bank. However, reflecting the banks' efforts for voluntary compensation, the proposed fines were reduced to around 2 trillion won during the preliminary notification phase and further decreased to 1.4 trillion won after deliberations.
However, the Financial Services Commission returned the sanctions proposal to the FSS, citing the need for further adjustments. A revised fine proposal of around 600 billion won has since been submitted to the Financial Services Commission, which is now awaiting final approval.
Sanctions related to the Lotte Card data breach are also expected to be finalized this month. The FSS has decided on a 4.5-month business suspension for Lotte Card, a fine of 5 billion won, and a reprimand for former CEO Jo Jae-jin. The 4.5-month suspension is a more severe penalty compared to the 3-month sanctions imposed during the 2014 data breach incident involving three credit card companies.
If the sanctions are confirmed as proposed by the FSS, Lotte Card's efforts to improve its performance will inevitably face setbacks. The business suspension will restrict the recruitment of new members and the issuance of new cards, making it difficult to expand its customer base.
A financial sector official stated, "While the schedule for the subcommittee has not been finalized, it is understood that the regular meeting this month will review the final sanctions for ELS and Lotte Card."
In terms of regulatory improvements, the governance improvement plan for financial holding companies is expected to be announced as early as the beginning of this month, but no later than mid-July. Originally scheduled for release in March, the announcement has been delayed several times due to consultations with relevant ministries. The improvement plan is expected to include measures such as limiting the reappointment of financial holding company chairs to three terms, enhancing the independence of outside directors, and expanding external verification of succession procedures.
Once the improvement plan is announced, KB Financial Group, which is currently undergoing succession procedures ahead of Chairman Yang Jong-hee's term expiration in November, is expected to be the first to face scrutiny. The reappointment of the heads of the five major commercial banks, whose terms end this year, is also anticipated to be influenced by the new governance standards.
Additionally, financial authorities plan to accelerate follow-up legislation to institutionalize the results of inspections conducted in the first half of the year. With the formation of the National Assembly's Political Affairs Committee nearing completion, related legislative amendments are expected to be pursued sequentially.
* This article has been translated by AI.
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