"To Innovate Financial Regulation, Exclusive Principle and Geumsan Separation Must Be Relaxed"

On the afternoon of the 29th, Kim So-young, Vice Chairman of the Financial Services Commission, listened to the opinions of private experts on the new government's financial policy directions, including financial system stability, support for vulnerable groups, and financial regulation innovation, at an expert meeting on the new government’s financial policy held at the Government Seoul Office in Jongno-gu, Seoul.

[Asia Economy Reporter Song Hwajeong] Private experts emphasized the need for active regulatory improvements to enable domestic financial companies to enter non-financial sectors and diversify financial services and businesses in order to enhance the competitiveness of the financial industry.

According to the Financial Services Commission (FSC) on the 29th, Kim Soyoung, Vice Chairman of the FSC, held a meeting to listen to suggestions from private experts and requests from the financial sector regarding the new government's financial policies. The meeting was attended by private experts from the Korea Institute of Finance, the Korea Insurance Research Institute, the Capital Market Institute, associations from banking, life and non-life insurance, financial investment, credit finance companies, savings banks, fintech industries, and various policy fields.

Vice Chairman Kim shared opinions with experts on three policy directions: ▲ financial system stability ▲ livelihood stability to alleviate financial difficulties of vulnerable groups ▲ financial regulatory innovation to enhance the competitiveness of the financial industry.

Regarding financial system stability, experts emphasized that since it is a time requiring tight macroeconomic management and flexible exchange rate policies, it is most important to strengthen the capital soundness of financial companies to prepare for debt deterioration of marginal companies and self-employed individuals and to promote restructuring. They also noted that while soundness regulations have been strengthened mainly for banks, actual crisis transmission routes may originate from the secondary financial sector, so there is a need to redefine soundness regulations for non-bank financial institutions. Experts suggested conducting stress tests assuming complex shocks such as growth rate decline, exchange rate fluctuations, and real estate market downturns, and considering measures to stabilize market sentiment by publicly disclosing stress test results, similar to the U.S. Federal Reserve.

Regarding real estate, experts pointed out that due to the global tightening process, the real estate market is increasingly likely to stagnate or decline, so it is time to carefully manage financial sector real estate-related exposures such as project financing (PF) loans. They emphasized the need to strengthen safety nets against household debt deterioration by expanding provisions for loan losses and allowances for household loans in preparation for real estate market instability.

Regarding support for vulnerable groups, experts recommended actively exploring measures such as supplying safe conversion loans to allow variable-rate loans to be converted to fixed-rate loans during periods of rising interest rates, reducing prepayment penalties on general policy mortgages, and lowering banks’ fixed-rate loan selection costs (such as additional interest rates). Many shared the common view that tailored financial support by life cycle should be strengthened to help citizens form assets stably while mitigating debt risks.

Regarding financial regulatory innovation, experts agreed that since global financial companies that enter the financial industry based on platforms or expand services through financial-non-financial convergence receive higher valuations, active regulatory improvements are needed to enable domestic financial companies to enter non-financial sectors and diversify financial services and businesses. They also emphasized the need to gradually relax the exclusivity principle in the long term and expand the scope of concurrent and incidental businesses of financial companies beyond fintech to real estate, health, automobiles, telecommunications, and distribution to provide customized services. Concerning digital assets, as the regulatory framework is still insufficient, they stressed the necessity of creating and distributing guidelines for security tokens among digital assets to minimize market confusion caused by the sudden introduction of new regulations.

Each financial sector association attending the meeting submitted about 230 specific business models being prepared by financial companies in their sectors and regulatory improvement tasks needed to promote them to the FSC as a first step.

Vice Chairman Kim Soyoung stated, "We will thoroughly review the advice received and reflect it in future policy tasks," adding, "We will make every effort to stabilize the financial system in preparation for complex shocks, prepare timely market stabilization measures proactively by comparing the current situation with global financial crises and COVID-19, and provide various supports to vulnerable groups who are facing increased difficulties due to expanded market volatility." In addition, Vice Chairman Kim promised to form a task force (TF) with private experts to review and announce the regulatory improvement proposals suggested by the financial industry as quickly as possible in sequence.

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