'Hong Kong ELS and Real Estate PF' Financial Supervisory Service Focused Inspection... "Strengthening Emergency Issue Response Capability"

Announcement of This Year's Inspection Operation Plan
Fair Finance, Soundness Enhancement, Eradication of Unsound Business Practices
Focused Inspection on Internal Control and Incomplete Sales of Hong Kong ELS
Reducing Inspection Frequency to Ease Financial Institutions' Burden

Seoul Yeouido Financial Supervisory Service building. Photo by Younghan Heo younghan@

The Financial Supervisory Service (FSS) will focus on key issues this year, including Hong Kong H-Share Index (Hang Seng China Enterprises Index·HSCEI)-based equity-linked securities (ELS) and real estate project financing (PF).

On the 21st, the FSS announced that it has prepared the "2024 Inspection Operation Plan" containing these details. The FSS has identified three key inspection areas for this year: ▲fair finance ▲enhancement of soundness ▲eradication of unsound business practices. It plans to adjust the scale of inspections to reduce the burden on those being inspected while strengthening response capabilities for key inspection items.

In the area of fair finance, the FSS will check the appropriateness of internal controls related to the sale of financial products such as Hong Kong H-Share Index-based ELS, including whether there are any illegal acts such as incomplete sales, and will also inspect risk management practices for high-risk assets such as real estate PF. Additionally, it will focus on incomplete sales related to insurance product sales, standards for calculating loan interest rate premiums, fee charging systems, operation of the right to request interest rate reductions and loan application withdrawal rights, and whether there are any illegal debt collection practices.

In the soundness area, the FSS will encourage the expansion of loss absorption capacity through the accumulation of loan loss provisions and will concentrate inspection personnel if there are concerns about systemic risks. It will check the funding status of securities firms and specialized credit finance companies, and examine risk management systems in preparation for increased losses from overseas alternative investments by insurance companies. Management of financial companies facing liquidity crises will also be strengthened.

Regarding business practices, the FSS will inspect the appropriateness of credit screening and management systems for small and medium-sized enterprises and self-employed individuals. Regular inspections will be conducted on ultra-large corporate agency firms (GA). Joint inspections with associations will be carried out on loan solicitation corporations to check internal controls and improve unsound business practices such as multi-level solicitation.

Meanwhile, the FSS plans to enhance collaboration and linked inspections among inspection departments and increase inspection efficiency by concentrating necessary personnel in important sectors. Inspection personnel in the same jurisdiction will be managed collectively so that when serious or urgent incidents occur, available inspection personnel can be concentrated for rapid response. The target number of inspections this year is 622, and the total number of inspection personnel is 21,154, which is 40 fewer inspections and 2,245 fewer personnel than last year.

The FSS stated, "As this is the first year of reorganizing all inspection departments into a 1 to 3 bureau system, we will reduce the number of inspections to lessen the burden on financial companies, while concentrating necessary personnel in core areas to solidify inspections and sanctions."

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