Savings Banks Branch Installation Notification System... Legislative Notice of Mutual Savings Banks Act Amendment Bill

[Asia Economy Reporter Jo Gang-wook] Branch establishment, which was previously operated under an approval system, will be changed to a notification system, and for branch offices and specialized loan branch offices, it will be converted to a post-reporting system. In addition, the requirement for savings bank executives to bear joint liability with the savings bank for repayment related to deposits and other related debts will be improved from the current intentional/negligent standard to intentional/gross negligence.

The Financial Services Commission announced on the 23rd that it will publicly notify the amendment bill to the Mutual Savings Banks Act to improve the regulatory system for savings banks, reflecting the changed circumstances in the savings bank sector.

The savings bank sector has steadily grown, with total assets increasing from 69.8 trillion won at the end of June 2011 to 85.3 trillion won at the end of September this year, following large-scale restructuring from 2011 to 2014. The delinquency rate also decreased from 4.6% at the end of 2017 to 3.8% at the end of September this year, indicating improved asset size and soundness. However, internally, issues such as the widening gap in asset size and competitiveness between large/mid-small and metropolitan/regional savings banks have emerged. Accordingly, financial authorities have operated a working-level task force from January to July this year, involving related organizations such as the FSC, Financial Supervisory Service, Korea Institute of Finance, and Korea Deposit Insurance Corporation, aiming to reestablish the regulatory system for the sound development of savings banks.

Looking at the main contents of the amendment bill to the Mutual Savings Banks Act publicly notified this time, the regulation on branch establishment, which was operated under an approval system, will be relaxed first. Accordingly, branch establishment within the business area will be changed to prior notification, and the establishment of branch offices and specialized loan branch offices will be changed to post-reporting. The authority to accept notifications will be entrusted to the Savings Banks Association, a self-regulatory organization.

In addition, the regulatory system for the businesses that savings banks can engage in will be reorganized into a system of exclusive, concurrent, and incidental businesses, similar to other financial sectors such as banks. A basis will be established to allow concurrent businesses that savings banks can perform to be specified in the enforcement ordinance, and it will be concretized in the ordinance.

A grace period to resolve excess securities investment limits will be applied differentially within one year depending on the type of exception. When revising the enforcement ordinance, additional exception reasons for exceeding limits will be added, and a new exception for "cases where the limit is exceeded due to an increase in the value of held securities" will be established, with a grace period of three months granted. For existing exception reasons currently granted a one-year grace period, the same one-year period will be granted.

The joint liability of executives who cause damage to the savings bank or others in the course of their duties will be relaxed to apply only in cases of intentional or gross negligence.

The financial authorities expect that the relaxation of branch establishment regulations will enhance the management autonomy of savings banks, make it easier to secure customer contact points, facilitate the entry of savings banks into new businesses through improved regulation of incidental and concurrent businesses, and reduce the contraction of executives' duties and difficulties in attracting talented personnel by easing joint liability for executives.

The FSC plans to complete the public notification of the amendment bill to the Mutual Savings Banks Act by January 4 next year, finish the submission to the vice ministerial and Cabinet meetings by February next year, and submit the amended bill to the National Assembly. In addition, regulatory strengthening measures not included in this public notification among the improvement tasks of the Regulatory Verification Committee will also be prepared as amendment bills and publicly notified soon.

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