Financial Services Commission Approves Self-Normalization and Non-Performing Asset Resolution Plans of Five Major Financial Holding Companies

"Strengthening Rapid and Systematic Crisis Response Capabilities"

The Financial Services Commission (FSC) has approved the self-recovery plans and resolution plans for 10 “financial institutions of systemic importance in the financial system for 2024,” which were prepared for the third time since the revision and implementation of the “Act on the Structural Improvement of the Financial Industry” in accordance with the recommendations of the Financial Stability Board (FSB).

In July last year, at the 13th regular meeting of the FSC, considering the size, complexity, and interconnectedness with other financial institutions, KB, Shinhan, Hana, Woori, NongHyup Financial Group, and KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, and NongHyup Bank were selected as the relevant financial institutions. In October of the same year, they submitted their self-recovery plans to the Financial Supervisory Service (FSS). The FSS prepared an evaluation report on these plans over three months and submitted it to the FSC in January this year. The FSC conducted a two-month review through a deliberation committee and finally approved the plans submitted by the selected institutions in April.

This system operates on an annual cycle, and the evaluation, review, and approval of the plans for the 10 institutions selected by the FSC on the 10th for 2025 (the same as in 2024) will be conducted later.

The authorities judged that the self-recovery plans and resolution plans generally comply with international standards such as the FSB recommendations and the preparation criteria under the Financial Industry Structure Improvement Act, and that no significant vulnerabilities were found. Issues raised during the evaluation and review process that require supplementation or improvement, as well as anticipated obstacles during resolution, were communicated to the Korea Deposit Insurance Corporation (KDIC) and the selected institutions.

The deliberation committee evaluated that the financial institutions had largely implemented the issues raised for supplementation and improvement during the previous year’s approval process for their self-recovery plans, and presented supplementary matters to be reflected in the preparation of next year’s plans. Representative examples include analyses of potential disruptions if core shared services such as information technology (IT) services are interrupted, and guidelines to prevent confusion in the event of a bank run.

Since October last year, the KDIC has been preparing resolution plans for the relevant institutions and submitted them to the FSC in April this year as well. On the 10th, the FSC gave final approval to the resolution plans. The KDIC added liquidity crisis scenarios to the resolution scenarios and reviewed various resolution methods, faithfully reflecting the supplementary matters from the previous year. The KDIC also explained that it conducted resolution simulation drills to protect depositors’ assets in times of crisis.

The FSC stated, “Compared to the previous year, it is expected to contribute to enhancing the stability of the financial system by strengthening the systems and means for large financial companies to proactively respond to crisis situations, and enabling resolution authorities to carry out faster and more orderly resolutions in case of insolvency.”