Financial Companies Allowed Post-Reporting for Overseas Direct Investment Under $30 Million Within One Year

Notice of Phase 1 Amendment to the 'Financial Institutions Overseas Expansion Regulations' to Promote Overseas Expansion of Financial Companies

[Asia Economy Reporter Kangwook Cho] Going forward, financial companies will be allowed to report retrospectively if their overseas direct investment amount is $30 million or less per year. Additionally, the obligation for prior notification will be changed to retrospective reporting when liquidating overseas branches or changing the originally reported contents.

On the 12th, the Financial Services Commission announced that it will amend the "Regulations on Overseas Expansion of Financial Institutions" to activate the overseas expansion of financial institutions.

This is a follow-up measure to the "Financial Services Commission Work Report" announced on the 18th of last month, reflecting changes in domestic and international financial environments and industry demands. It aims to simplify procedures that cause unnecessary burdens on financial institutions' overseas business activities and support the strengthening of financial companies' overseas competitiveness.

According to the amendment, the scope of retrospective reporting for new overseas direct investments, which generally require prior notification, will be expanded to include investments with a cumulative amount of $30 million or less over the past year.

For example, before the amendment, Company A, which was planning to establish a local corporation in Vietnam, could face delays in the payment schedule of investment funds because the prior notification for overseas direct investment had not yet been approved, even though it had obtained a license from Vietnamese authorities and finalized a contract with a local joint investment partner. However, after the amendment, once the local authority's license is obtained and the contract is finalized, the investment funds can be paid and remitted first, and retrospective reporting must be done within one month.

The Financial Services Commission expects that applying this standard will convert about 70% of investment cases from prior notification to retrospective reporting based on last year's data, contributing to many financial companies' ability to seize business opportunities and make timely investments. Furthermore, the Commission plans to monitor the soundness requirements of overseas direct investment institutions retrospectively and impose fines if standards are not met, thereby contributing to the stability of the foreign exchange market.

The reporting procedure for the establishment and operation status of offshore financial companies will be improved by consolidating reporting agencies from the current Financial Supervisory Service and Bank of Korea to the Financial Supervisory Service alone, and the reporting frequency will be relaxed from quarterly to once a year. This is expected to reduce the burden of preparing offshore financial company establishment and operation status reports, which was heavier compared to general overseas direct investment (once a year), and ease the penalty burden for non-reporting. However, if the report is not submitted for one year, a fine of up to 56 million KRW per offshore financial company may be imposed.

The obligation for prior notification will be converted and unified to retrospective reporting when liquidating overseas branches or changing the originally reported contents.

For example, in the case of Company B's Myanmar branch, which has been incurring losses for several months, before the amendment, the branch liquidation was delayed because the notification had not yet been approved, causing continued investment losses. However, after the amendment, once the decision to liquidate the local branch is made, liquidation can proceed first and reporting can be done afterward, reducing the possibility of delays in liquidation schedules or investment losses due to administrative processing.

However, the Financial Services Commission plans to continuously monitor whether principal and interest are recovered from overseas direct investments by requiring immediate reporting after funds are repatriated to Korea upon branch liquidation. If funds are not repatriated to Korea, retrospective reporting must be done within one month from the date the liquidation reason occurs.

This first-stage amendment is scheduled to be implemented from the 29th of next month after approval by the Financial Services Commission.

The Financial Services Commission stated, "In the second stage, we plan to eliminate overlapping regulations by improving or abolishing overseas direct investment regulations for substitutable matters regarding sector-specific soundness regulations," and added, "We will review regulatory substitutability and revise within the year through stakeholder consultations."

This content was produced with the assistance of AI translation services.