Financial Institutions Employing Former Government Officials as Auditors

About half of all auditors for domestic financial institutions are reportedly former Financial Supervisory Service (FSS) officials. Some say that such auditors are used as a window for lobbying to the FSS.

According to the data that the FSS submitted yesterday to Grand National Party Representative Kim Yang-soo of the National Assembly’s National Policy Committee, 48 percent of all auditors at the country’s financial institutions are former FSS officials.

Auditors for eight out of 12 Korean commercial banks, or 67 percent, formerly worked for the FSS. Such banks include the “leading banks,” including Shinhan Bank, Hana Bank and Korea Exchange Bank.

Auditors for 11 out of 21 securities firms, or 52 percent, worked for the FSS until recently. Among such securities firms are Hanwha Securities, Bridge Securities, and Kiwoom Securities.

Moreover, nine of 18 life insurers (50 percent), five of 16 property insurance companies (31 percent), seven of 17 large savings banks (41 percent), and two of four credit card issuers (50 percent) employ former FSS officials. These companies include Hung Kuk Life Insurance, Kumho Life Insurance, Tong Yang Life Insurance, Samsung Fire and Marine Insurance, and Meritz Fire and Marine Insurance.

In addition, many former officials at government and public agencies, including the Ministry of Finance and Economy, transfer to financial institutions as auditors.

Many auditors for the Korea Development Bank and the Export-Import Bank of Korea are former finance ministry officials, while Woori Finance Holdings has a former official at the Korea Deposit Insurance Corporation, a major shareholder of Woori Bank, as its auditor.

Rep. Kim said, “Such a situation is a result of the combination of financial supervisory authorities’ tendency to support its retired employees and the interest of financial institutions who want to blunt the edge of potential audits,” adding, “We need to come up with systems to strictly limit the re-employment of former FSS or government officials by financial institutions.”

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