FSS to inspect KB Financial Group’s operations, governance structure

2021.06.09 15:22:10 | 2021.06.09 15:23:00

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Korea’s financial watchdog will conduct a regular review on KB Financial Group to go over the financial conglomerate whose securities brokerage unit faces trials for allegedly misselling speculative derivative-linked funds.

The Financial Supervisory Service (FSS) has notified the group’s holding entity KB Financial Group Inc and main unit KB Kookmin Bank of conducting a comprehensive management review from June 14 to July 23. The financial watchdog’s regular review will look into the financial firms’ overall management practices including governance structure and global operations.

The financial authority’s inspection is expected to focus on KB Financial Group’s top executive appointments as lawmakers are currently readying a law that could limit the term of a financial firm’s CEO to six years, according to an industry source.

Last year, KB Kookmin Bank’s CEO Hur Yin was endorsed to serve his third term, which is rare in the Korean financial industry. Hur has been heading the commercial lender since 2017.

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The group’s global expansion also will come under scrutiny. KB Kookmin Bank acquired a small loan company in Cambodia for 700 billion won ($628 million) in April last year and purchased additional stake in an Indonesian bank three months later. The FSS will reportedly look for any irregularities in the overseas expansions.

The financial group’s data management system will also get a thorough examination for internet banking system’s recent failure.

The regular inspection comes at a time when KB Securities Co. faces a trial for allegedly neglecting its oversight duty by misselling Lime Asset Management’s risky derivates that caused 1.6 trillion won ($1.4 billion) losses for retail investors. The securities firm was indicted on Tuesday and five of its employees also face court trials for violating capital market laws.

Woori Financial Group, another major Korean financial player mired in a scandal over derivatives sales, is expected to get the FSS’s inspection this year as it has been nearly three years since the last review.

The financial authority already carried out an inspection on other major financial groups since it restored the comprehensive management review program in 2018.

By Moon Il-ho and Cho Jeehyun

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