Is It Going to Be Enforced After All... Financial Companies on High Alert as 'Financial Group Supervision Act' Processing Steps Proceed (Comprehensive)

[Asia Economy Reporter Kangwook Cho] Concerns are growing in the related industry as the passage of the 'Financial Group Supervision Act' bill, which manages financial companies belonging to large business groups such as Samsung, Hyundai Motor, and Mirae Asset as financial groups, is being pushed through. If the bill passes, financial authorities will regularly inspect and evaluate the risk status and management practices of these financial groups. However, there are criticisms that it could become a 'super regulation' that ultimately tightens control over financial companies and leading corporations due to essentially being double regulation and ambiguous evaluation criteria.

Despite 'Double Regulation' Controversy, Passage of Financial Group Supervision Act Bill is Pushed Through

According to political and financial circles on the 8th, the passage of the controversial Financial Group Supervision Act bill is imminent following the ruling party's push yesterday. The core of this bill is to designate a group consisting of financial companies belonging to a corporate group with two or more financial companies as a financial group, allowing financial authorities to supervise and inspect them. A financial group refers to large corporations with assets exceeding 5 trillion won that operate two or more financial companies such as securities, insurance, and cards, but are not bank-based financial holding companies composed solely of financial companies. Six groups including Samsung, Hyundai Motor, Hanwha, Mirae Asset, Kyobo, and DB are subject to this.

Once the bill is enacted, financial authorities will regularly evaluate the risk status and management practices of these financial groups. They may order the representative financial company of the group to submit a management improvement plan at the financial group level. If the representative financial company fails to submit or implement the management improvement plan, compulsory measures such as suspending the use of the financial group name can be taken.

"Sector-specific regulations are already in place... Excessive Overregulation"

Regarding the enactment of this bill, controversy continues not only in the related industry but also in academia, calling it double regulation. Currently, soundness regulations are already applied by sector such as insurance, banking, and cards, so adding group-level regulations is considered excessive. Especially at the group level, it is argued to be a 'regulation on top of regulation' while the Fair Trade Act is already applied.

Kim Sun-jung, Chair Professor of Law at Dongguk University, said, "Currently, sector-specific supervision is being implemented for financial companies, and the Fair Trade Act is applied at the group level. In this situation, additionally regulating financial affiliates within the group is excessive duplication and overregulation."

Criticism has also been raised that the government's claim that integrated financial group supervision is a 'global standard' is flawed. The government initially explained that the International Monetary Fund (IMF) continuously recommends managing risks at the financial group level, but the IMF has not recommended supervision or capital adequacy regulation for complex financial groups encompassing industries other than banking.

Concerns Raised Over Arbitrary Evaluation of Capital Adequacy Ratio as a Soundness Indicator

There are also concerns that the evaluation of the capital adequacy ratio, presented as an indicator to measure the soundness of financial groups, could be arbitrary. The government included group risk in the denominator of the capital adequacy ratio, but has not yet determined how to specifically calculate group risk. The Financial Services Commission plans to reflect this through enforcement ordinances and rules after conducting research once the bill passes.

The Federation of Korean Industries (FKI) issued a statement yesterday regarding the amendment of the three corporate regulation laws, including the Financial Group Supervision Act currently under discussion in the National Assembly, asking for "careful consideration so that companies can focus on their core management activities and contribute to overcoming the economic crisis."

Additionally, the FKI expressed concerns that "the three corporate regulation laws will worsen the corporate management environment due to overseas speculative capital intervention and increased litigation costs from nuisance lawsuits, negatively impacting corporate investment and job creation."

A financial industry official lamented, "Not only are the criteria for selecting supervision targets vague, but there is also controversy over reverse discrimination as big tech companies like Naver and Kakao are excluded," adding, "In the emergency situation caused by the COVID-19 pandemic, the tightening of the financial industry through overregulation laws such as the integrated supervision law, class action system, and punitive damages system is excessive."

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