November 21, 2024

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A Financial Services Commission signboard shows at the agency's headquarters in central Seoul. (Yonhap)

Executives of financial companies will be held accountable for misconduct within their assigned areas of responsibility starting in July.

The Financial Services Commission announced guidelines on Tuesday for the new "responsibilities map" system, requiring financial institutes to detail responsibilities for executives, including chief executive officer.

In December, the National Assembly passed a revised bill for the Act on Corporate Governance of Financial Companies, introducing the new system, which takes effect on July 3 after a legislative notice period starting Tuesday.

The new system aims to prevent corporate management from evading responsibility during major financial incidents, thereby reducing misconduct and internal breaches.

Companies need to draft a document that clearly defines specific executive responsibilities -- ensuring there are no overlaps or gaps -- and illustrates the structure of these responsibilities.

The document should be approved at board meetings and submitted to financial authorities within seven days of confirmation by the board.

The executives must establish internal control management standards and constantly examine the adequacy and compliance of the employees.

The top overseer of the company-wide system will be the CEO, who will ensure no conflicts arise about the assignment of duties and address regulatory breaches before they happen.

While there have been limited or unclear grounds to sanction CEOs for significant financial misconduct, such as embezzlement or misselling, they will now be held accountable in case of any systematic failures stemming from organized, repeated, or widespread incidents.

The revised financial corporate governance law will apply first to the financial conglomerates and major banks, requiring them to submit responsibilities maps within six months of legal implementation in July.

Deadlines extend to one year for investment companies and insurance firms with capital assets over 5 trillion won ($3.76 billion), and the remaining institutes will be obligated to comply in order in the coming years.

By Choi Ji-won (jwc@heraldcorp.com)