FSA takes administrative action against Kookmin Bank 

The Financial Services Agency (FSA) has taken some administrative actions against Kookmin Bank, Japan Branches.

Following its on-site inspection and the report prepared by the Japan Branches based on Article 24, paragraph 1, and Article 48 of the Banking Act, etc., fundamental problems regarding the operation and management of the Japan Branches’ businesses were identified in the branch’s credit risk management, legal/regulatory compliance and governance framework.

As a result, FSA concluded to the following actions:

1) Suspend new transactions by the Japan Branches in the period from September 4, 2014, to January 3, 2015, (however, this shall not preclude transactions based on existing contracts [including letters of intent, etc.] signed prior to September 3, 2014, the provision of refinancing to existing customers, outward and inward remittances through existing deposit accounts of customers, financing and investment management transactions with other financial institutions, and other business activities individually approved by the FSA).

2) In order to ensure appropriate and sound business operations, review and restructure the Japan Branches’ current governance and internal control system in connection with its credit risk management and legal/regulatory compliance, from the following perspectives:

• Clarify the Japan Branches’ management stance and responsibilities regarding credit risk management and legal/regulatory compliance (including clarification as to authorities and responsibilities between the headquarters and the Japan Branches);
• Restructure and improve the credit risk management function (including a complete restructure of the control system to implement credit screening and management appropriately and strengthen the check-and-balance function, and a review of related internal regulations and sound implementation thereof);
• Restructure and improve the legal/regulatory compliance function (including actions to ensure the thorough understanding and full compliance of branch officers as to laws and regulations and internal regulations, and actions to nurture and improve the awareness of branch officers as to legal compliance);

Review the audit methodology, frequency, etc. to ensure appropriate and sound business operations of the Japan Branches.

3) Submit to the FSA by September 29, 2014, a plan to improve business operations (“Business Improvement Plan”) pertaining to 2 above and matters described in the notice of inspection results as well as the report prepared by the Japan Branches, and implement such plan immediately.

Further, verify and ensure the appropriateness of the Business Improvement Plan by utilizing neutral, external experts in addition to the internal audit division, and confirm the status of improvement and effectiveness of such plan.

4) Subsequent to the implementation and until the completion of the Business Improvement Plan described in 3 above, generate a report on such plan’s status, including the progress, implemented measures, and improvement, every three months, starting with the period ending at the end of October 2014, and submit it to the FSA by the 15th day of the following month.

 

Source: FSA

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