During COVID... Authorities Pressuring Financial Groups for 'Yurial Disclosure' Transparency

Detailed Disclosure of Non-Financial Factors Including Background and Work History of Executive Appointments
Criticism of Excessive Control During the COVID-19 Situation

[Asia Economy Reporter Kwon Haeyoung] The detailed contents of the 'Glass Disclosure' that six financial groups?Samsung, Hanwha, Mirae Asset, Kyobo, Hyundai Motor, and DB?must mandatorily disclose on their websites from June as part of comprehensive risk management at the group level have been finalized. Financial authorities have mandated the disclosure of not only financial factors but also non-financial factors such as the background of financial company executives' appointments and work history in non-financial affiliates. There are concerns that this increases the burden on companies struggling due to the impact of the novel coronavirus disease (COVID-19) and excessively strengthens control over non-financial affiliates.

According to financial authorities on the 3rd, the Financial Supervisory Service is preparing detailed items that financial groups must disclose following the revision of the Financial Group Supervision Best Practices and is gathering industry opinions. This is a follow-up measure to implement the financial group supervision system improvement plan announced by the Financial Services Commission in February.

A financial industry official said, "The main point is to have financial groups compile and disclose scattered disclosure details of each affiliate to show group-level risks at a glance and strengthen market evaluation and monitoring functions," adding, "Such status is not visible even under the Fair Trade Act, so it will be considerable pressure from the financial groups' perspective."

Reviewing the financial group disclosure forms, as previously announced by the Financial Services Commission, detailed information such as the entire shareholding structure, financial affiliates' shareholding and management status, internal transactions, investment, and credit provision status are included. For example, Samsung Life Insurance's investment status in Samsung Electronics and the proportion of Samsung Electronics stocks in Samsung Life Insurance's assets will be disclosed. Sales of products and services between Samsung Electronics and Samsung SDS, as well as the proportion of Samsung Securities' sales of Samsung Asset Management funds and retirement pensions, will also be revealed. Financial groups must also form an internal control consultative body and disclose it.

Disclosure items also include the major shareholder's stockholding status and transactions that may affect changes in the largest shareholder. This includes the largest shareholder's stock-backed loans, third-party collateral provision of the company's stocks, and contracts between the largest shareholder and financial investors (FI).

Another notable item is the detailed quarterly disclosure of financial company executives' status. In particular, details of transfers from affiliated non-financial companies, concurrent positions in affiliated non-financial companies, and reasons for executive appointments are disclosed in detail by expertise, field, and practical experience. If an executive has worked or transferred as an executive in a non-financial affiliate within five years from the previous quarter-end, it is a mandatory disclosure item. This reflects the intention to monitor whether executives from non-financial affiliates move to financial affiliates to provide support. Additionally, the status of financial company executives' sanctions and lawsuits, as well as counterparties and amounts in case of non-performing loans, must be disclosed.

Although this disclosure is an administrative guidance without legal binding force, financial groups are treating it as a mandatory compliance matter. A financial group official lamented, "Authorities are requiring detailed disclosure of non-financial elements and are intervening in control and management of non-financial affiliates," adding, "With all affiliates focusing on responding to COVID-19, the increased level of control by authorities is a heavy burden."

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