Home Business Six financial complex groups, including Samsung and Hyundai Motors, are also supervised like financial holdings.

Six financial complex groups, including Samsung and Hyundai Motors, are also supervised like financial holdings.

by news dir
[한국금융신문 한아란 기자] On the 9th, a bill to strengthen the soundness management of financial conglomerates and to establish a risk management system passed the National Assembly plenary session. Accordingly, six financial complex groups, including Samsung, Mirae Asset, Hanwha, Hyundai Motor, Kyobo, and DB, will also be supervised by the financial authorities along with financial holding companies.

The Financial Services Commission announced that the’Act on Supervision of Financial Complex Business Groups’ passed the National Assembly plenary session. The Financial Complex Business Group Act is a bill promoted by the ruling party as the’Three Fair Economy Act’ along with amendments to the Commercial Act and the Fair Trade Act.

Korea’s individual financial companies are supervised by the Individual Financial Business Act and financial holding companies under the Financial Holding Companies Act, but there are no group-level supervisory regulations for non-holding-type financial conglomerates. Accordingly, the government enacted the’Financial Group Supervision Act’ in order to eliminate regulatory blind spots and promote sound management of financial complex business groups.

In July 2018, the Financial Services Commission enacted the’Best Standards for Financial Group Supervision’ and has been piloting a supervisory system for financial conglomerates. Taking into account the opinions raised in the process of operating the model standards and conformity with international standards, the legislation was submitted to the National Assembly, and on that day, it exceeded the threshold of the National Assembly plenary session. In this process, the name of the bill was amended to the’Act on Supervision of Financial Complex Enterprise Groups’.

The Financial Consolidated Enterprise Group Act contains the details of designating, managing, and supervising a group with a total assets of 5 trillion won or more that operate financial companies in two or more types of loans, insurance, and financial investment businesses as a financial complex.

The financial conglomerate should select a representative financial company among its affiliated financial companies, and aggregate and submit all tasks such as internal control and risk management, soundness management, and reporting and disclosure. In addition, financial information at the group level must be reported to the financial authorities through a representative financial company and disclosed to the market.

Policies for group-level internal control and risk management should also be established. To this end, a council composed of affiliated financial companies was established and operated to promote internal control and risk management.

It is also compulsory for the financial conglomerate group to evaluate and check the capital adequacy at the level of the financial conglomerate in consideration of the possibility of loss due to internal transactions and risk concentration, and the redundant use of capital between affiliated financial companies. The Financial Services Commission may order the submission and implementation of a management improvement plan if the results of the assessment of the financial adequacy and risk management status of the financial complex enterprise group do not meet certain standards.

The Financial Services Commission said, “It is expected that an autonomous risk management system will be established that recognizes and manages risks at the level of the business group that the financial complex has been neglected so far.” “Financial authorities receive reports on financial matters from the financial complex “By regularly conducting risk management assessments, we will be able to preemptively manage system risks in the financial market and secure market stability.”

Reporter Han Aran [email protected]

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