Separation of Ownership and Management and Business Consignment Improvement Plan to Be Released Early Next Year

[Asia Economy Reporter Song Hwajeong] Financial authorities are set to actively pursue the relaxation of the separation of banking and commerce regulations, which restrict the merger of financial capital and industrial capital, aiming for implementation next year. The plan is to expand and improve the scope of ancillary businesses and subsidiary investments of financial companies within the interest separation system to promote financial and non-financial convergence.

According to the Financial Services Commission on the 15th, the 4th Financial Regulatory Innovation Meeting held the previous day discussed directions for improving the separation of banking and commerce and the outsourcing system.

The FSC maintains the basic framework of the separation of banking and commerce to ensure financial stability but sees the need to rationally improve regulations on ancillary businesses and subsidiary investments so that the financial industry can flexibly respond to environmental changes such as digitalization and big blur and continue to develop sustainably. They are reviewing various measures including ▲expanding the positive list ▲switching to a negative list and total risk regulation ▲making subsidiary investments negative and expanding ancillary businesses positively.

The first option, expanding the positive list, involves enumerating industries where ancillary businesses and subsidiary investments are allowed, as is currently done, but adding new industries related to digital transformation and industries related to the social contribution of finance beyond the existing permitted industries. Shin Jinchang, Director of the Financial Industry Bureau at the FSC, explained, "This option can be processed quickly because it maintains the current system and has the advantage of limiting risks arising from financial companies entering non-financial businesses," adding, "However, adding new industries requires separate measures such as regulatory amendments and authoritative interpretations, and there may be controversy over whether this falls within the scope of legal delegation during this process."

The second option, switching to a negative list and total risk regulation, allows full permission except for certain industries such as product manufacturing and production, but sets total risk limits such as subsidiary investment caps to control risks from non-financial businesses. Director Shin said, "Because ancillary businesses or subsidiary investments can be freely conducted, it allows quick response to necessary tasks and efficient use of personnel and resources," but added, "However, since this changes the current system, legal amendments are required, and there is an increased burden in managing new risks or the possibility of risk transmission from non-financial sectors to the financial sector."

The third option separates subsidiary investments and ancillary businesses, applying the second option to subsidiary investments and the first option to ancillary businesses.

The FSC also plans to improve the outsourcing system, considering that the legal basis for outsourcing differs by industry and the application of outsourcing for essential tasks varies. Currently, the Capital Markets Act applies to outsourcing by financial investment businesses, while other sectors are governed by the 'Regulations on Outsourcing of Financial Institutions.' The Capital Markets Act allows outsourcing of essential tasks except for internal controls, whereas the outsourcing regulations generally prohibit outsourcing of essential tasks. Accordingly, the FSC plans to review whether to establish a higher legal delegation basis for outsourcing regulations, whether to integrate and unify the outsourcing regulatory system, the method of permitting outsourcing of essential tasks under outsourcing regulations, and whether to introduce inspection authority over trustees.

The FSC plans to prepare improvement measures for the separation of banking and commerce and outsourcing, gather opinions from various stakeholders, and submit and deliberate specific measures at the Financial Regulatory Innovation Meeting early next year.

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