Most of six firms under review likely to face sanctions for irregular practicesThe Financial Supervisory Service is moving to reprimand chief executives of major credit card companies for irregular business practices.
While the FSS is considering handing down sanctions on several companies for irregularities including reckless issuance of credit cards, the regulator also plans to penalize their CEOs under its earlier commitment.
The regulatory stance reportedly came in the second quarter from Kim Seok-dong, chairman of the Financial Services Commission, the decision-making panel of the FSS.
In late May, top regulator Kim instructed his staff to take tough disciplinary action against CEOs to curb excessive competition in the local credit card market, a regulatory official said.
“Chairman Kim’s resolution to weed out unfair practices in the credit card industry is quite strong. Two or three CEOs could be subject to warning or caution,” he said.
In 2002, financial regulators issued sanctions on CEOs of three credit card firms and suspended issuance business of the companies for one or two months.
More and more market observers and analysts say the current situation resembles the 2002-2003 credit card fiasco under which the industry suffered a liquidity crisis.
Since May, the FSS has been inspecting six major credit card issuers ― Shinhan, Hyundai, KB Kookmin, Samsung, Lotte and Hana-SK.
While most of them are expected to face penalties, the FSS is poised to review its inspection and finalize sanction-levels against rule-violators in two or three months.
The level of sanctions could vary according to the scale of their irregular issuance, officials said.
In the wake of their excessive business expansion mode, the FSS has obliged them to set their own guidelines, curbing expansion, in three major business sectors ― company assets, issuance of cards and costs for promotion activities.
Companies failing to meet the guidelines ― or which surpass the growth limit at certain times ― will be subject to a special regulatory probe.
The FSS is also set to introduce a new regulation on the ratio of total assets to equity capital in the credit card industry.
Under the coming regulation, companies may be banned from issuing corporate bonds worth for more than their equity capital.
Credit card firms saw their combined assets, including insolvent loans, reach 76.6 trillion won ($69.6 billion) at the end of June after continuing to expand over the past few years ― approaching the critical level of 78.9 trillion won reached at the end of 2003.
Card issuers have been fighting a marketing war since last year, vying for a bigger slice of consumer spending as it gets on track to recovery.
By Kim Yon-se (
kys@heraldcorp.com)
