Strengthening Crisis Response Capabilities of Shinhyup... Financial Services Commission Announces Legislative Notice for Enforcement Decree Amendment

Exclusion of Bank of Korea and RP Transactions from Financial Services Commission Approval
Relaxation to Allow Depositor Protection Fund to Exceed Target Reserve Amount

On the 11th, the Financial Services Commission announced that it will conduct a legislative notice period until the 21st of next month for the amendment of the "Credit Cooperatives Act Enforcement Decree" to enhance the Shinhan Central Association's capability to respond to soundness and liquidity crises.

The amendment excludes repurchase agreement (RP) transactions with the Bank of Korea with maturities within 91 days from the Financial Services Commission's approval requirement for temporary liquidity procurement. Currently, the Shinhan Central Association must obtain approval from the Financial Services Commission when borrowing funds and is only exempted from approval in limited cases for temporary liquidity supply.

Considering that in February the Bank of Korea included non-bank deposit-taking institution central associations as targets for open market operations, the Financial Services Commission has allowed other mutual financial institutions to be exempt from approval without borrowing limits when conducting RP transactions with the Bank of Korea with maturities within 91 days, enabling faster liquidity supply.

Furthermore, the amendment allows the Shinhan Central Association's Depositor Protection Fund to make additional reserves even after reaching the target reserve amount. Currently, if the Shinhan Central Association has accumulated the Depositor Protection Fund up to the target reserve amount, the association's contribution fee to the Depositor Protection Fund must be exempted, which restricts flexible formation of the fund in response to market conditions such as a downturn in the real estate market. Accordingly, the amendment permits additional accumulation of the Depositor Protection Fund when necessary, even if the target reserve upper limit has been reached, similar to other mutual financial institutions.

Meanwhile, the amendment to the Credit Cooperatives Act Enforcement Decree will be completed by the end of this year after going through procedures such as review by the Office for Government Policy Coordination, the Vice-Ministerial Meeting, and the Cabinet Meeting following the legislative notice period.