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2024 | OriginalPaper | Buchkapitel

19. Recent Changes and Prospects of Banking Services Regulations and Supervision in Korea

verfasst von : Sung-Seung Yun, GiJin Yang

Erschienen in: Commercial Banking in Transition

Verlag: Springer International Publishing

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Abstract

Fintech innovations as well as the Covid-19 pandemic and UN SDGs have made a huge impact on banking businesses and supervision in Korea. Fintechs are replacing the substantial part of traditional commercial banking services, thereby raising questions about the future of commercial banking. With a high level of financial accessibility and well-developed digital payment systems, Korea experiences advanced financial inclusion and efficiency of payment services. In Korea, BigTech companies are now competing with traditional financial companies as BigTechs are making full use of big data under the revised Korean Personal Information Act system to facilitate the processing of personal information. However, there are still ongoing debates on issues of how to deal with the banking industry under the changing digital environment, such as pseudo-banking issue, regulation of BigTechs as financial conglomerates under the Act on the Supervision of Financial Conglomerates (SFCA), virtual asset (mostly crypto-assets) regulation, issue of separation of banking and commerce, and Central Bank Digital Currency (CBDC). During the Covid-19 pandemic, pandemic emergency financing made a huge increase of debt ratio for the individuals and SMEs in Korea. If the Covid-19 pandemic continues and it takes some time to recovery after the pandemic, non-performing loans will be a significant burden for the financial institutions. Even credit crunch may be expected in such a situation. In order to prevent such situation in advance, it is urgent to prepare legal measures before such problem becomes reality. The Korean government gives guidance and plans on Environmental, Social, and Governance (ESG) reporting, disclosure, and business operation. Currently ESG is regulated by self-regulation by the ESG Disclosure Guidance in 2021. However, Korean Financial Supervisory Commission announced its comprehensive plan to change on the Korean corporate disclosure system, which includes the staged mandatory disclosure on ESG report in the coming years.

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Vorheriges Kapitel Prudential Regulation of the Banking-Like Business of Fintech Companies in China

Nächstes Kapitel Final Remarks

FSB, Financial Stability Implications from FinTech, Supervisory and Regulatory Issues that Merit Authorities’ Attention (27 June 2017), at 7.

BIS, Sound Practices: implications of fintech developments for banks and bank supervisors (19 Feb. 2018), at 9–10, available at https://www.bis.org/bcbs/publ/d431.htm.

The account ownership in Korea currently stands at 95%, and Korea has a sophisticated fast payment system as it launched in 2001. J. Bae, The Bank of Korea’s CBDC Research: Current Status and Key Considerations, BIS Papers No. 123 (14 April 2022), at 107–108, available at https://www.bis.org/publ/bppdf/bispap123.htm.

Ibid.

For the five scenarios of future banks’ roles by the BCBS, see BIS, supra note 2, at 16.

Naver Q4 2022 Business Report disclosed in the Korean Dart disclosure system.

In Sect. 2, see the Korean Exchange (KRX) data for market capital data for Naver, Kakao and KB financial group, and the preseneted market capital was calculated on the won-dollar exchange rate of 1,274.6 which was so as of the end of 2022.

Kakao Q4 2022 Business Report disclosed in the Korean Dart disclosure system.

The Act on Special Cases concerning Establishment and Operation of Internet-only Banks enacted on 19 May 2020 in Korea allows BigTechs in Korea to operate banking business in the presence of their major shareholders thereby trimming existing legal barriers for launching of internet-only banks.

As of November 2021, approximately 20 million transactions worth KRW 1 trillion are processed through Open Banking every day. Not only 19 banks but also 19 financial investment companies, 8 credit card companies and 68 small and large fintechs are participating in the open banking system. Financial Services Commission, Digital Financial Innovation Achieved in 2 Years of Open Banking—2 Years of Full Implementation of Open Banking, Exceeded 30 Million Net Subscribers, Press Release (21 Dec. 2021).

The EFTA bill introduces consolidated business categories such as payment instruction delivery business (so-called MyPayment business), payment agency business and payment business, and money transfer business, thereby replacing the current seven categories of businesses.

As for the regulatory arbitrage that will be enjoyed by CPS providers conducting banking business in reality, see G. Yang, Some Legal Issues on Introduction of Comprehensive Payment and Settlement Business under Revised Bill on Korean Electronic Financial Transactions Act, Journal of Law and Business Research vol. 11, no. 2, Seoul, Sogang University Law Institute, 2021.

See OCC, Comptroller’s Licensing Manual Supplement: Considering Charter Applications From Financial Technology Companies (July 2018), available at https://www.occ.gov/publications-and-resources/publications/comptrollers-licensing-manual/files/considering-charter-apps-from-fin-tech-companies.html.

See J. C. Crisanto, et al., Bigtech Regulation: What Is Going On?, FSI Insights on Policy Implementation No. 36, Financial Stability Institute, BIS (Sept. 2021) 2–6.

The SFCA was enacted on 29 Dec. 29, 2020 and effective on 30 June 2021.

A representative financial company is selected in consideration of the investment relationship of the affiliated financial company, total assets and capital, etc.

This can be a blind spot of the current SFCA.

Korea’s policy of separation of banking and commerce has been enforced since 1995. This policy has been enforced in Korea not by a single law but by several laws such as Fair Trade Act, Banking Act, and Financial Holding Company Act.

See Bae, supra note 3, at 111.

This part was modified and revised from the article, Sung-Seung Yun, COVID-19 Impact on Financial Contracts and Pandemic Emergency Financing and Debt Relief, Korean Journal of Financial Law vol. 18 no. 2 (2021).

Loan agreement under Civil Code is as follows:

Article 397 (Special Rules as to Non-performance of Monetary Debt)

(1) The amount of damages for non-performance of a monetary debt shall be determined by the legal rate of interest: Provided, that in a case where there exists an agreed rate of interest which does not exceed the limitation provided by Acts and subordinate decrees, that agreed rate of interest shall prevail.

(2) With regard to the damages mentioned in the preceding paragraph, the obligee is not bound to prove the actual damages nor can the obligor assert the absence of negligence as a defense.

During the Covid-19 pandemic, force majeure issues is reexamined because traditional force majeure clause has not included pandemic as an example of force majeure event. However, from the experience of the Covid-19, there is need to specify pandemic as a force majeure even to prepare any future huge pandemic situation like the Covid-19. Since the courts are very stringent to allow force majeure defense to excuse the obligation, definition of the force majeure to include pandemic in the international financial contract will be a better contractual solution to the parties to prepare the disputes of failure of performance in any current and future pandemics considering the uncertainty of court’s decision in any jurisdiction.

See J. Kim, Disaster Emergency Payment and its Economic Effect and Future Tasks, Current Issue Analysis vol. 182, NAR, Dec. 30. 2020.

Ibid.

Korea Policy Briefing, Economic Measures to Covid-19, Jan. 6, 2021, https://www.korea.kr/special/policyCurationView.do?newsId=148872965.

Korea Policy Briefing, supra note 25.

Ibid.

Kim, supra note 23.

The Hankyoreh, COVID Financing Loan ‘Soft Landing’ for 1 Year… Only 7% Started Repaying, March 15, 2022, https://www.hankyung.com/economy/article/2022030702541.

FSC, Extension of Maturity and Repayment Deferment by 6 Months in the Financial Sector, Press Release, Mar. 23, 2022.

Covid-19 Economic Support-Emergency Economic Meeting, Plans to Expand the Loan Maturity Extension and Interest Repayment Deferral Program from the Current SME Loans to Household Loans Are Not Being Considered, April 6, 2020, https://www.moef.go.kr/sns/2020/emgncEcnmyMtg.do?category1=nes.

Korea Policy Briefing, Small Business Owner 10 Million KRW Emergency Loan Starts, April 1, 2020, https://www.korea.kr/special/policyFocusView.do?newsId=148871062&pkgId=49500742.

Ministry of Economy and Finance, Covid-19 Economic Support-Emergency Economy Commission, https://www.moef.go.kr/sns/2020/emgncEcnmyMtg.do?category1=detail&type=02#02.

Korea Policy Briefing, Economic Measures to Covid-19, Jan. 6, 2021, https://www.korea.kr/special/policyCurationView.do?newsId=148872965.

FSC, Reduction of debt burden for the vulnerable groups under the Covid-19 will be push forward, Press Release, March 11, 2020.

FSC, supra note 35.

Ministry of Economy and Finance, supra note 33.

ChosunBiz, The Amount of COVID Pandemic Financing to Be Repaid Someday Exceeds KRW 250 trillion (about USD 189 million), https://biz.chosun.com/site/data/html_dir/2020/11/29/2020112900194.html, Nov. 29, 2020.

Ibid.

FSC, Maturity Extension, Deferment of Repayment, and Assisting Soft Landing, Press Release, Sep. 27, 2022.

See C. Reinhart, The coming COVID-19 credit crunch (worldbank.org), Dec. 2, 2020; Loren Crow, Carmen Reinhart on the Consequences of the Pandemic, The World Ahead, The Economist, Nov. 17, 2020, https://www.economist.com/the-world-ahead/2020/11/17/carmen-reinhart-on-the-consequences-of-the-pandemic.

FSC, supra note 41.

KRX, Securities Disclosure Regulation Art. 24–2 and its enforcement rule Art. 7–2(1).

See K. Taek Lee, Social Enterprise Promotion Act: The Case of South Korea, Asian Dialogue on Oeconomy, 2010, http://www.socioeco.org/bdf_auteur-957_en.html.

Ibid.

E-media, Financial Industry strives to ESG management, Dec. 6, 2021.

See J. Min-kyung, S. Korean Banking Groups Race for Global ESG Approval, The Korean Herald, Nov. 9, 2021, at https://www.koreaherald.com/view.php?ud=20211109000787.

FSC, the Comprehensive Improvement Plan on the Corporate Disclosure System, Jan. 21, 2021.

Ibid., at 16.

Titel: Recent Changes and Prospects of Banking Services Regulations and Supervision in Korea
verfasst von: Sung-Seung Yun
GiJin Yang
Verlag: Springer International Publishing
Buch: Commercial Banking in Transition
Print ISBN: 978-3-031-45288-8

Electronic ISBN: 978-3-031-45289-5

Copyright-Jahr: 2024
DOI: https://doi.org/10.1007/978-3-031-45289-5_19

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