On February 19, 2025, the Financial Supervisory Service (“FSS”) announced its “2025 Examination Plan,” which sets out the annual examination direction and key focus areas aimed at establishing a financial industry trusted by consumers.

The FSS’s examination plan indicates the fundamental direction of inspections to be “proactive examinations to address potential risk factors” and “prompt responses to ongoing and significant incidents” and the main focus areas to include “preemptive inspections to prevent consumer harm and financial accidents,” “examinations to enhance risk management and financial soundness” and “inspections to establish market order.”

Based on this examination plan and recent press releases, future FSS inspections are expected to focus on the following areas.
 

• The FSS is expected to monitor high-risk product concentration and examine the adequacy of product manufacture, sales, and post-management processes for anomalies. With the reorganization of the FSS, a new Financial Consumer Protection Investigation Bureau has been established to oversee inspections of financial product sales practices and to handle related complaints and disputes, likely strengthening on-site investigations into issues such as mis-selling and connecting these investigations to systemic improvements and examinations.
   

• Preemptive inspections of high-risk branches and general agencies (“GAs”) prone to causing consumer harm through unsound practices may be intensified. In particular, the FSS is expected to concentrate its inspection capabilities on unsound sales activities within insurance channels. For effective examinations, the FSS may expand joint inspections (between insurance companies and subsidiary GAs) and simultaneous inspections (between insurance companies and large related GAs). The FSS may also inspect and assess the implementation of strengthened accountability measures for GAs.
   

• In view of the belief that recent instances of widespread consumer loss and financial incidents stem from management cultures focused on short-term results, the FSS will examine the adequacy of compensation systems to address that culture.
   

• Financial holding companies and banks recently submitted responsibilities maps; since then, their CEOs have become accountable for overall internal control management, and each of their executives responsible for managing internal controls under his or her purview. Inspections are expected to take place, potentially within this year, to assess internal control management systems and their operational status based on responsibilities maps.
   

• Given the recent frequency of large-scale mis-selling cases and significant credit incidents, inspections are expected to focus on the effectiveness of internal controls aimed at preventing such incidents. To prepare for these inspections, financial companies should consider existing legal principles and cases of sanctions relating to the obligation to establish internal control standards. In addition, they should look to supplement the management duties for internal control and their fulfillment under the revised Act on Corporate Governance of Financial Companies to ensure effective internal controls.
   

• Regular inspections will likely cover major technology companies’ response systems for service disruptions, payment gateway-related settlement fund management systems and user protection frameworks, as well as risks emanating from non-financial subsidiaries.
   

• To prevent consumer harm arising from online platform sales channels, inspections will likely focus on user authentication systems and the appropriateness of comparison and recommendation algorithms.
   

• For virtual asset service providers, the FSS will likely concentrate on compliance with laws and self-regulatory measures while monitoring financially vulnerable businesses.
   

To address the rapid growth of electronic finance and related consumer harm in the event of disruptions and incidents, the FSS has elevated its digital and IT regulatory unit in status to an independent division, promoting its head to the deputy governor level and significantly expanding teams dedicated to electronic financial services. The reorganization has increased personnel from 14 members across two teams to approximately 40 members distributed over two departments and seven teams, which now include the IT Inspection Bureau, Electronic Financial Inspection Bureau and Virtual Asset Investigation Bureau. Through these changes, the financial regulatory agencies have consistently emphasized their strengthened stance towards supervision and inspection of the digital and IT sectors. Furthermore, following the TMON and WeMakePrice crisis, the FSS has announced plans to implement active regulations focused on preventing consumer harm, targeting major technology companies operating online platforms and virtual asset businesses.
 

• The FSS is expected to inspect and reinforce monitoring of risk management at financial companies handling real estate project financing (“PF”).
   

• The FSS will likely conduct swift on-site inspections at financial institutions experiencing weakened soundness or liquidity shortages and take prompt corrective measures as necessary. The FSS is also expected to enhance its monitoring of financially vulnerable firms, encouraging them to improve their loss absorption capabilities by assessing their loan loss provisions.
   

• For effective risk management and proactive responsiveness, intensive monitoring of financial institutions’ soundness will likely continue, with inspections linked to supervisory guidance on issues such as household loan management and distressed real estate PF resolution.
   

• For significant incidents resulting in financial disorder or consumer harm, the FSS will likely mobilize inspection resources, integrating personnel from inspection departments within the same region, to prevent the spread of losses.
   

While many focus areas from past plans persist - such as inspections related to illegal and unfair business practices, internal controls and real estate PF risk management - the FSS has integrated new priorities reflecting current challenges. These include inspecting newly introduced responsibilities maps, managing risks associated with major technology firms and online platforms and monitoring high-risk financial institutions. Moreover, relative to last year, the FSS will increase the frequency of inspections while reducing the number of inspection personnel, and perform flexible yet intensive inspections by quickly reallocating personnel to address urgent issues and consumer harm.

In light of the above, financial companies should prepare themselves against potential inspections by (i) systematically managing risks consistent with changes in the financial environment, (ii) checking in advance compliance with relevant laws and guidelines from financial authorities, and (iii) strengthening internal controls to elevate preparedness for the FSS’s focus this year on significant risk areas and financial incidents.

[Korean Version]