S. Korea Progresses Bill on Financial Conglomerate Supervision

Source: Regulation Asia Editors, Regulation Asia 2020-08-26

The bill provides the legal basis for the supervision of non-holding financial groups such as Samsung, Hanwha, Kyobo, Mirae Asset, Hyundai Motor, and DB.

South Korea’s government on Tuesday (25 August) approved a bill on the supervision of financial conglomerates during a cabinet meeting.

To date, financial holding companies in Korea have been subject to supervision through the Financial Holding Companies Act. However, a regulatory blind spot has persisted for non-holding financial groups, despite their growing significance to the financial system. Such companies include groups like Samsung, Hanwha, Kyobo, Mirae Asset, Hyundai Motor, and DB.

The bill, once enacted, will provide a legal basis for the supervision of non-holding financial groups with financial assets of KRW 5 trillion or above, not including financial holding companies and state-owned banks.

Under the bill, non-holding financial groups will be required to establish and operate internal group-wide risk management bodies, led by the group’s top representative company, to oversee group-wide risk management policy, regulatory compliance, and prudential management

Non-holding financial groups will also be required to self-assess their capital adequacy, i.e. their ability to maintain financial soundness, while taking into account intra-group transactions and risk concentrations.

The group’s top representative company will also have to report and disclose the group-wide capital adequacy status and risk factors to the FSC (Financial Services Commission).

The bill will empower the FSC to demand a management improvement plan if deemed necessary to bolster capital, reduce risk exposures or improve financial soundness of the non-holding financial group.

The bill will be submitted to the National Assembly for enactment at the end of this month.

Samsung

S. Korea Progresses Bill on Financial Conglomerate Supervision

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