Samsung, Hanwha, and Other Financial Groups Must Disclose Risk Factors Starting September

[Asia Economy Reporter Oh Hyung-gil] Six financial groups including Samsung, Hanwha, Mirae Asset, Kyobo, Hyundai Motor, and DB will be required to disclose their group financial status, investment structure, and risk status starting from September.

Financial groups must establish a council composed of the representative company and compliance officers of affiliated financial companies to form an internal control council.

On the 29th, the Financial Services Commission held the 8th regular meeting and approved the amendment to the "Model Code on Supervision of Financial Groups," which includes these details, and announced that the model code will be extended and implemented for one year from next month until April of next year.

To prepare this model code, the Financial Services Commission reflected institutional improvement tasks and proposals from financial groups raised through over two years of pilot operations, joint seminars with financial research institutions, and CEO meetings.

Financial groups have pointed out that the existing method of evaluating capital adequacy by dividing risks into concentration risk and contagion risk has overlapping evaluation factors and is difficult to quantify. Accordingly, the evaluation method was improved to unify and evaluate various group risk factors, including concentration and contagion risks.

Additionally, to enhance the level of internal control at the financial group level, regulations on the internal control system centered on the representative company were introduced. When calculating the capital adequacy of overseas local subsidiaries, if there are no standards in the host country or if stricter standards than domestic regulations apply, standards for similar domestic industries may be applied.

In particular, due to the COVID-19 pandemic, the initial implementation date for financial group disclosures was postponed by three months from June to September.

The disclosure targets include 25 items across eight areas related to ownership and governance structure, internal control and risk management systems, capital adequacy, and internal transactions of financial groups. The representative company will collect and verify disclosure contents for each affiliated financial company and post them on its website. The disclosures will be based on accounting standards from the end of 2019 to the second quarter of 2020.

Furthermore, active support will be provided for the legislation of the financial group supervision system. On the 21st, the International Monetary Fund (IMF) recommended establishing a legal basis for financial group supervision and strengthening supervision through the Financial Sector Assessment Program (FSAP) evaluation of Korea's financial sector.

A Financial Services Commission official said, "We plan to actively support the legislation of the financial group supervision system" and added, "If necessary, we will promote incorporating the model code into legislation."

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