Supervision on Non-bank Financial Groups Tightened
South Korea’s six non-bank financial groups -- Samsung, Hyundai Motor, Mirae Asset, Hanwha, Kyobo, and DB -- will be required to disclose their ownership and governance structures, internal control and risk management systems, capital adequacy, and internal transactions starting in September.
The Financial Services Commission announced on April 29 that it has decided to revise its regulations on the supervision of financial groups and implement them for one more year. This amendment included clauses on improving the financial adequacy evaluation system of financial groups, establishing an internal control system, and introducing financial disclosures by groups.
The Capital Adequacy Evaluation System previously measured concentration risk and transfer risk separately, but the amendment adopted a method of evaluating concentration risk and transfer risk as a group risk.
Regarding the establishment of the financial groups’ internal control systems, the rules of the internal control system of the financial group were introduced, focusing on representative companies. Through discussions among affiliated financial companies, a common internal control policy at the financial group level will be established, and the Internal Control Standards on Financial Groups will be established based on the common internal control policy.
Moreover, beginning this September, financial group level disclosures will be become mandatory. Previously, discussions were conducted in the form of public disclosures after the provision of laws in the model standards, but the amendment removed the provision for the suspension of disclosures. Companies representing financial groups will have to disclose their financial companies’ ownership and governance structures, internal control and risk management systems, capital adequacy, and internal transactions every quarter and every year.