Kim So-Young Urges Financial Investment Industry to Strengthen Thorough Risk Management and Internal Control Capabilities

Global Competitiveness Enhancement 5th Relay Seminar Held

On the 8th, the Financial Services Commission announced at the ‘5th Relay Seminar for Strengthening the Global Competitiveness of the Financial Investment Industry’ held at the Korea Exchange in Yeouido, Seoul, that it will strengthen the responsibility management of financial investment companies' risk management capabilities through improvements in the calculation system of the Net Capital Ratio (NCR).

Kim So-young, Vice Chairman of the Financial Services Commission, is briefing on the launch of the 'Online One-Stop Debt Consolidation Loan Infrastructure' at the Government Seoul Office in Jongno-gu, Seoul, on the 30th. Photo by Yoon Dong-joo doso7@

At the seminar, Vice Chairman Kim So-young stated, “If financial investment companies do not have thorough risk management and internal control capabilities, any development plan will be nothing more than a slogan,” emphasizing that “it is important to improve the constitution of financial investment companies and strengthen internal capabilities.”

The seminar discussed topics such as ?strengthening risk management capabilities of securities firms ?directions for enhancing risk management of real estate trust companies ?strengthening internal controls of financial investment companies and improving performance-based compensation systems.

First, to strengthen risk management of securities firms, the FSC plans to improve the system so that practical factors such as the actual risk level of real estate PF (Project Financing) sites and repayment priority are reflected in the NCR risk value calculation system. When calculating the liquidity ratio, while previously only current assets and current liabilities were considered, going forward, the risk of securities firms’ debt guarantee fulfillment and the possibility of asset price declines under stress scenarios will also be reflected.

To preemptively block risks of real estate trust companies, management measures will also be announced in the third quarter of this year. Looking at the trust assets of real estate trust companies, as of last year, they amounted to KRW 391.9 trillion, expanding 39 times compared to KRW 10 trillion in 2000. However, during this period, the trust assets of responsibility completion guarantee management-type land trusts surged by KRW 10 trillion to KRW 17.8 trillion last year from KRW 5.7 trillion two years ago, indicating a high possibility of future issues such as continuous increases in unsold properties and construction company insolvencies.

There was an opinion that internal controls must be strengthened to reinforce responsible management of securities firms. Hwang Eun-ah, Compliance Officer at Samsung Securities, said, “It is necessary to establish an operational risk management organization under the compliance officer and to fully deploy senior personnel to the internal control organization,” adding, “Senior personnel have extensive work know-how and can identify problems and propose practical solutions based on concrete experience when launching new tasks or changing work processes.”

Additionally, there was a claim that the linkage between compensation and long-term performance should be strengthened through extending and adjusting the performance evaluation period and implementing clawback systems. Kwon Heung-jin, a research fellow at the Korea Institute of Finance, pointed out, “The performance evaluation period for executives’ compensation at domestic securities firms and asset management companies is typically one year, which is shorter compared to overseas (three years),” and warned, “Short-term performance orientation may hinder the long-term development of the financial industry.”

In response, Lee Yoon-soo, Director of the Capital Market Bureau at the FSC, said, “Based on the contents raised in the relay seminars so far, we will continue efforts to improve systems to strengthen the global competitiveness of the financial investment industry.”

Meanwhile, this seminar was the final event of the capital market relay seminars held by the financial investment industry this year to enhance the competitiveness of the financial investment sector.

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