Important Measures
The FSC issued a circular on May 14, 2025 that sets out a risk-based approach for financial institutions to address examination findings uncovered by the FSC.
2025-05-27
The FSC issued a circular on May 14, 2025 that sets out a risk-based approach for financial institutions to address examination findings uncovered by the FSC.
The summary of this circular is as below.
1.Financial institutions should have the corresponding and expected/completed corrective actions for addressing significant examination findings (Form A) scheduled as a report item into the agenda of board of directors (or board of supervisors) meetings, and the report item should not be arranged as an ad hoc one on the agenda for the benefit of board members having sufficient time to fully comprehend and discuss the content of such report item. Financial institutions should not report to the FSC with such expected/completed corrective actions without finishing the above procedure.
2.Financial institutions should report to the FSC with verified follow-ups and adopt a risk-based approach to verify the remedial actions taken as below.
(1)For significant examination findings (Form A), on-site or off-site reviews are acceptable depending on the essence of corresponding examination findings and the suggested solutions by the FSC. Internal audit units should increase testing samples for better supporting the follow-ups with sufficient evidence.
(2)For general examination findings (Form B), on-site or off-site reviews conducted by internal audit units, or desk reviews with sufficient documentary evidence provided by the audited units for internal audit units to verify corrective actions taken are all acceptable depending on the essence of corresponding examination findings and the suggested solutions by the FSC.
(3)For the other examination findings assigned to follow up by internal audit units, the way of verification and the duration of following up are determined at the discretion of internal audit units.
3.The FSC would inspect whether internal audit units follow up the examination findings and consider the related inspection results by the FSC’s assessment of the effectiveness of the internal audit function.
The summary of this circular is as below.
1.Financial institutions should have the corresponding and expected/completed corrective actions for addressing significant examination findings (Form A) scheduled as a report item into the agenda of board of directors (or board of supervisors) meetings, and the report item should not be arranged as an ad hoc one on the agenda for the benefit of board members having sufficient time to fully comprehend and discuss the content of such report item. Financial institutions should not report to the FSC with such expected/completed corrective actions without finishing the above procedure.
2.Financial institutions should report to the FSC with verified follow-ups and adopt a risk-based approach to verify the remedial actions taken as below.
(1)For significant examination findings (Form A), on-site or off-site reviews are acceptable depending on the essence of corresponding examination findings and the suggested solutions by the FSC. Internal audit units should increase testing samples for better supporting the follow-ups with sufficient evidence.
(2)For general examination findings (Form B), on-site or off-site reviews conducted by internal audit units, or desk reviews with sufficient documentary evidence provided by the audited units for internal audit units to verify corrective actions taken are all acceptable depending on the essence of corresponding examination findings and the suggested solutions by the FSC.
(3)For the other examination findings assigned to follow up by internal audit units, the way of verification and the duration of following up are determined at the discretion of internal audit units.
3.The FSC would inspect whether internal audit units follow up the examination findings and consider the related inspection results by the FSC’s assessment of the effectiveness of the internal audit function.
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- Update： 2025-05-28
