Approaching Deliberation of the Legislative Affairs Committee Bill... Financial Sector Holds Its Breath

Legislation Driving Financial Environment Changes
Electronic Financial Transactions Act and Social Solidarity Fund Act, etc.

[Asia Economy Reporter Kiho Sung] As the March extraordinary session of the National Assembly begins, the National Assembly's Political Affairs Committee is in the final stages of coordinating the review of bills, causing heightened tension in the financial sector. Bills signaling a drastic change in the financial environment, such as the Electronic Financial Transactions Act Amendment (Jeongeum Act) and the Social Solidarity Fund Act, have been submitted for review, and the financial sector's attention is expected to remain fixed on the National Assembly for the time being.

According to political circles on the 8th, the Political Affairs Committee will hold the Bill Review Subcommittee starting from the 15th to begin a full-scale review of the bills. A representative from the office of Kim Byung-wook, the ruling party's secretary of the Political Affairs Committee and a member of the Democratic Party of Korea, stated, "The first Bill Review Subcommittee is scheduled for the 15th, and the second Bill Review Subcommittee for the 16th," adding, "We are in the final stages of coordination between the ruling and opposition party secretaries to select the bills to be submitted."

The bill attracting the most attention in this review is the Jeongeum Act. The core of the amendment to the Jeongeum Act is the transition to a financial platform form of electronic financial services linked to bank accounts and the establishment of measures to protect digital financial users. In particular, it includes comprehensive reforms related to electronic finance such as △ introduction of payment instruction transmission services (MyPayment) and comprehensive payment settlement operators △ allowance of small-scale deferred payments △ integration of electronic financial business functions △ mandatory customer fund protection △ establishment of platform business regulations △ institutionalization of open banking △ institutionalization of digital payment transaction clearing △ reform of authentication systems.

A contentious issue is the conflict between the Financial Services Commission and the Bank of Korea. The Jeongeum Act is sharply divided over the establishment of the 'electronic payment transaction clearing business' to ensure transparency in fund transactions by fintech and big tech (large information and communication companies). The Financial Services Commission insists on mandatory external clearing to secure transaction transparency, but the Bank of Korea opposes this, arguing that the Financial Services Commission gaining supervisory authority over the Korea Financial Telecommunications & Clearings Institute would ultimately infringe upon the central bank's payment and settlement management domain. With both sides firmly holding their positions, it is uncertain whether the Jeongeum Act will pass the National Assembly.

The Social Solidarity Fund Act, which includes a profit-sharing system for the financial sector, is also expected to be reviewed by the Political Affairs Committee. This bill is one of the 'Lee Nak-yeon-type Win-Win Solidarity Three Laws' and was proposed to address inequality through solidarity and fund formation amid the prolonged COVID-19 situation. The main point is to establish a Social Cooperation Foundation with approval from the National Assembly Budget Office to alleviate deepened inequality and polarization caused by national disasters, with the fund being formed from cash, goods, or other assets contributed or donated by entities other than the government.

While the financial sector expresses concern, viewing it as legal preparation for participation in the profit-sharing system, there is a prevailing view within the ruling party that the opposition will find it difficult to oppose the bill to provide relief for COVID-19 damages until the end.

The amendment to the Act on Support for the Financial Life of the Underprivileged, which includes securing resources for the low-income financial fund by receiving an annual contribution of 200 billion KRW from banks and insurance companies, failed to pass the Political Affairs Committee during the February extraordinary session. The core of the bill is to expand the funding sources for low-income financial loans, such as 'Sunshine Loans,' to include banks, insurance companies, and credit finance companies, making contributions a regular obligation. However, criticism has arisen that this imposes welfare funding burdens on private financial companies, leading to sharp disagreements between the ruling and opposition parties.

A financial sector official said, "Because the bills under review have a significant impact on the financial market, financial companies' attention is focused on the National Assembly," adding, "There are concerns about future repercussions from the push to force through populist bills or regulations that are out of touch with reality."