Establishment of Exemption Committee and Exemption Application System... Comprehensive Reform of Financial Sector Exemption System

Financial Authorities Announce 'Comprehensive Reform Plan for Financial Sector Immunity System'
Clear Designation of Immunity Targets, Rationalization of Immunity Requirements, Enhancement of Transparency and Fairness in Immunity Procedures

[Asia Economy Reporter Kangwook Cho] An exemption committee involving external experts will be newly established under the financial authorities. The exemption requirements will be rationalized by introducing an exemption presumption system, and an exemption application system will be introduced allowing financial company executives and employees to directly apply for exemption. This is to provide institutional support so that financial support tasks related to the novel coronavirus infection (COVID-19) can be actively carried out without concerns about sanctions.

The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) announced on the 7th the "Comprehensive Reform Plan for the Financial Sector Exemption System" with these details.

According to this plan, in disaster situations such as COVID-19, financial support tasks for affected companies, various innovative financial tasks such as loans, investments, and fintech will be designated as exemption targets under supervisory regulations (Inspection and Sanction Regulations). To enhance operational flexibility, the FSC will be allowed to additionally designate targets considering innovation and urgency.

Also, if it is ambiguous whether specific tasks such as loan products or investment programs are subject to exemption, a procedure will be established for financial companies to apply in advance for designation as an exemption target to resolve uncertainty.

An "exemption presumption system" will be introduced, which presumes that executives and employees are not acting with intent or gross negligence if there are no significant procedural defects. The financial authorities explained that if there are no private conflicts of interest and no significant defects according to laws and internal regulations, it is presumed that there is no intent or gross negligence. However, exemption will be excluded in limited cases such as consumer damage or market stability impairment.

An exemption committee involving external experts will be newly established within the FSC and FSS. The FSC Exemption Deliberation Committee will be responsible for reviewing the overall operation of the system, including the maintenance and interpretation of exemption-related regulations and designation of exemption targets upon financial company applications. Additionally, the FSS Sanction Exemption Deliberation Committee will review whether individual sanction cases during FSS inspections and sanctions meet exemption targets and requirements.

An exemption application system allowing financial companies and their executives and employees to directly apply for exemption will be introduced. To determine whether specific loans or investment programs qualify as exemption targets, companies can apply to the FSC for designation, and if pointed out as sanction targets during inspections, they can apply to the FSS for exemption deliberation to argue exemption applicability.

The internal exemption system of financial companies will also be improved. Financial companies plan to establish exemption committees internally to collect diverse and neutral opinions and institutionalize the right of parties to apply for exemption.

To establish a virtuous cycle system, the FSC, FSS, and financial companies will regularly check progress and gather opinions through consultative bodies such as the Innovative Finance Public-Private Joint Task Force.

Along with this, on-site measures that conclude minor illegal or unfair acts without linking them to sanctions will be activated. Early next month, a dedicated window will be established to intensively support the preparation of licensing documents for prospective financial business operators.

A financial authority official said, "The new exemption system will also apply to tasks related to the '100 trillion won +@ Livelihood and Financial Stability Package Program' in response to COVID-19, so it is expected to minimize uncertainties about sanctions for frontline financial company executives and employees performing financial support tasks."