'Enforcement Decree of the Supervision of Financial Conglomerates' to Take Effect from June 30
[Asia Economy Reporter Kwangho Lee] Financial authorities have designated six companies?Samsung, Hyundai Motor, Hanwha, Kyobo, Mirae Asset, and DB?as 'Financial Complex Corporate Groups' and will begin full-scale supervision from the end of June. Naver and Kakao are excluded as they do not meet the requirements.
The Financial Services Commission has drafted the "Enforcement Decree on the Supervision of Financial Complex Corporate Groups," which will be open for public comment from April 9 to April 19. After regulatory and legislative reviews, the decree will take effect on June 30.
The enforcement decree specifies the criteria for designation and cancellation of financial complex corporate groups, as well as standards for soundness supervision.
Groups with total assets of 5 trillion KRW or more and engaged in two or more financial sectors (deposit-taking and lending, securities, insurance) will be designated as financial complex corporate groups.
According to the Financial Services Commission, as of the end of 2019, six groups?Samsung, Hyundai Motor, Hanwha, Mirae Asset, Kyobo, and DB?meet the criteria based on asset and business sector standards and will be subject to the decree.
The representative financial companies are Samsung Life Insurance, Hyundai Capital, Hanwha Life Insurance, Mirae Asset Daewoo, Kyobo Life Insurance, and DB Insurance, respectively.
On the other hand, Kakao was excluded because although it has two or more financial companies such as Kakao Bank and Kakao Pay Securities, its securities assets are only around 100 billion KRW.
Naver did not meet the requirements as its financial assets fall below 5 trillion KRW.
Financial complex corporate groups must regularly conduct risk management performance evaluations. These evaluations include establishing risk management standards and setting up dedicated internal control departments.
Additionally, internal transactions exceeding 5 billion KRW must be approved by the board of directors of the respective financial company. This measure aims to prevent risk transfer due to increased internal transactions between financial and non-financial affiliates.
Disclosure requirements have also been specified. Ownership and governance structure, internal control and risk management, capital adequacy, internal transactions, and risk concentration are subject to disclosure.
If the capital adequacy ratio falls below 100% or the risk management performance evaluation results in a grade of 4 or lower, an improvement plan must be prepared. The Financial Services Commission may order modification, supplementation, or implementation of management improvement plans if financial soundness deteriorates significantly.
A Financial Services Commission official stated, "During the public comment period, we will thoroughly collect opinions from stakeholders and, after going through related procedures such as regulatory and legislative reviews, plan to submit the enforcement decree to the State Council."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
