Significant Expansion of Ownership Scope for Financial Companies' Overseas Subsidiaries...Easing of Funding Support Regulations

Financial Authorities Hold the 8th Financial Regulation Innovation Meeting

To encourage domestic financial companies to expand overseas, financial authorities will significantly expand the ownership scope of overseas subsidiaries. In addition, regulations on financial support for overseas subsidiaries will be eased to facilitate the smooth operation of local overseas corporations.

Financial Services Commission Chairman Kim Ju-hyun holds a press conference on the first anniversary of his inauguration at the Government Seoul Office in Jongno-gu, Seoul, on the 7th. Photo by Yoon Dong-joo doso7@

On the 17th, the Financial Services Commission held the "8th Financial Regulatory Innovation Meeting" at the Government Seoul Office in Jongno-gu, Seoul, and discussed regulatory improvement measures to revitalize the overseas expansion of financial companies.

According to this regulatory improvement plan, the authorities will first significantly expand the ownership scope of overseas subsidiaries of financial companies to globalize the financial industry. Within the scope permitted by local laws in overseas markets, restrictions on investments by banks, insurance companies, specialized credit finance companies, and fintech companies in overseas financial and non-financial companies will be relaxed.

For example, a domestic specialized credit finance company operating automobile financing in Korea may acquire a rental car company overseas to expand its business capacity, or an insurance company may be allowed to own an overseas bank. The authorities stated, "It is expected that domestic financial companies will be able to gain competitiveness in overseas markets through business diversification tailored to local financial demand."

Furthermore, the authorities will ease regulations on financial support for overseas subsidiaries. According to the current Financial Holding Companies Act, the credit extension limit to individual subsidiaries of domestic financial companies is set at 10% of their own capital. Overseas local corporations often face difficulties in raising funds during the initial stage of entry, and even funding from domestic affiliates was restricted.

Accordingly, the authorities plan to resolve funding difficulties by revising the Financial Holding Companies Supervisory Regulations to grant an additional credit extension limit within 10 percentage points for a certain period. They will also allow insurance companies to provide collateral to their subsidiaries. In this case, a domestic insurance company can provide government bonds or similar securities as collateral to an overseas bank it has acquired, and the local bank can guarantee debts for the overseas subsidiary (through a letter of credit system), thereby substituting operating funds.

In addition, the authorities will pursue measures such as ▲ creating exceptions or excluding the application of regulations that are difficult to apply to overseas branches because they were designed primarily for domestic application ▲ improving regulations related to reporting and disclosure for overseas expansion ▲ preparing inspection and sanction measures focused on soundness and internal control improvements.

Meanwhile, the authorities also discussed revisions to approval criteria related to mergers of mutual savings banks on the same day. To strengthen the competitiveness of savings banks, the authorities plan to relax ownership, control, and merger approval criteria for the same major shareholder, especially for non-metropolitan savings banks, accompanied by an expansion of business areas. Through this, the authorities expect that savings banks will enhance their fund intermediation functions and improve management soundness through economies of scale.

Kim Ju-hyun, Chairman of the Financial Services Commission, said, "Although uncertainties remain in domestic and international financial markets, it is a very important time to lay the foundation for long-term growth through financial regulatory innovation," adding, "This regulatory improvement plan will promote new overseas expansion of domestic financial companies and serve as a foundation for them to maximize creativity and capabilities locally and play an active role on the international stage."