Front Matter Page
IMF Country Report No. 20/275
REPUBLIC OF KOREA
FINANCIAL SECTOR ASSESSMENT PROGRAM
TECHNICAL NOTE—FINANCIAL CONGLOMERATES SUPERVISIONS
September 2020
This Technical Note on Financial Conglomerates Supervisions for the Republic of Korea FSAP was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed in September 2020.
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Front Matter Page
REPUBLIC OF KOREA
FINANCIAL SECTOR ASSESSMENT PROGRAM
TECHNICAL NOTE
FINANCIAL CONGLOMERATES SUPERVISION
September 1, 2020
Prepared By
Monetary and Capital Markets Department
This Technical Note was prepared in the context of an IMF Financial Sector Assessment Program (FSAP) in the Republic of Korea in August 2019 and December 2019 that was led by Udaibir Das. Further information on the FSAP can be found at http://www.imf.org/external/np/fsap/fssa.aspx
Contents
Glossary
EXECUTIVE SUMMARY
INTRODUCTION
A. Scope and Approach
B. Market Landscape
C. Institutional Framework
MAIN FINDINGS AND RECOMMENDATIONS
A. Institutional Framework
B. Regulatory Frameworks
C. Supervision and Supervisory Cooperation
D. Cross-Border Activities
E. Climate Risk
FIGURES
1. Largest Financial Conglomerates: Assets Structure
2. Regulated Financial Conglomerates (Holding Groups) and 3 Largest (Unregulated) Nonholding Groups
3. Example of Simplified HFG Map
4. Example of Simplified NFG Map
TABLE
1. Main Recommendations
APPENDICES
I. Supporting Measures
II. Map of Financial Sector Oversight Structure
III. Institutional Architecture of Deposit Taking Institutions’ Supervision
IV. Organization Chart of FSC with Focus on Group/Cross-Sectoral Regulation
V. Organization Chart of FSS with Focus on Group/Cross-Sectoral Supervision
VI. Models of Organization of Sectoral Supervisory Activities
VII. Illustrative Example of Financial Holding Group Map
VIII. Overview of Financial Conglomerates (2019)
IX. Selected Prudential Limits for Deposit Taking Institutions
X. Prudential Framework for Internet Banks
XI. Organization of National Agricultural Cooperatives Federation (NACF)
Glossary
| ARFP |
Asia Region Funds Passport |
| AT1 |
Additional Tier 1 |
| AUM |
Assets Under Management |
| BCBS |
Basel Committee on Banking Supervision |
| BCP |
Basel Core Principles for Effective Banking Supervision |
| BoD |
Board of Directors |
| BoK |
Bank of Korea |
| CA |
Commercial Act |
| CAMEL |
Capital Adequacy, Asset Quality, Management, Earnings and Liquidity |
| CAMEL-R |
Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, Risks |
| CCyB |
Countercyclical Buffer |
| CEO |
Chief Executive Officer |
| CET1 |
Common Equity Tier 1 |
| CGA |
Corporate Governance Act on Financial Companies |
| CIS |
Collective Investment Schemes |
| CPFC |
Consultation Papers on the Supervision of Financial Conglomerates |
| D-SIB |
Domestic Systemically Important Bank |
| DART |
Data Analysis, Retrieval and Transfer System |
| DLS |
Derivative Linked Securities |
| DLF |
Derivative Linked Funds |
| DRSIB |
Detailed Regulation on Supervision of the Insurance Business |
| DRSBB |
Detailed Regulation on Supervision of Banking Business |
| EDIBA |
Enforcement Decree of the Insurance Business Act |
| ELS |
Equity Linked Securities |
| ERIBA |
Enforcement Rules of the Insurance Business Act |
| ESG |
Environmental Social Governance |
| ESMA |
European Securities and Markets Authority |
| FHC |
Financial Holding Company |
| FHCA |
Financial Holding Companies Act |
| FSAP |
Financial Sector Assessment Program |
| FSB |
Financial Stability Board |
| FSC |
Financial Services Commission |
| FSCMA |
Financial Investment Services and Capital Markets Act |
| FSS |
Financial Supervisory Service |
| FTC |
Fair-Trade Commission |
| GDP |
Gross Domestic Product |
| HFG |
Holding Financial Group |
| IASB |
International Accounting Standards Board |
| IBA |
Insurance Business Act |
| ICAAP |
Internal Capital Adequacy Assessment Process |
| ILAAP |
Internal Liquidity Adequacy Assessment Process |
| ICP |
Insurance Core Principle |
| IOP |
IOSCO Objectives and Principles for Securities Supervision |
| IOSCO |
International Organization of Securities Commissions |
| IFRS |
International Financial Reporting Standards |
| IMF |
International Monetary Fund |
| IRB |
Internal Ratings-Based Approach |
| KDB |
Korean Development Bank |
| KDIC |
Korea Deposit Insurance Corporation |
| K-ICS |
Korea Insurance Capital Standard |
| K-IFRS |
Korean International Financial Reporting Standards |
| KRW |
Korean Won |
| LCR |
Liquidity-Coverage Ratio |
| LTD |
Loans-to-Deposits Ratio |
| MCCs |
Mutual Credit Cooperatives |
| MCM |
IMF’s Monetary and Capital Markets Department |
| MID |
Management Improvement Demand |
| MIO |
Management Improvement Order |
| MIR |
Management Improvement Recommendation |
| MMF |
Money Market Fund |
| MOEF |
Ministry of Economy and Finance |
| MOU |
Memorandum of Understanding |
| MSBs |
Mutual Savings Bank |
| NCR |
Net Capital Ratio |
| NFG |
Nonholding Financial Group |
| NGFS |
Network for Greening Financial System |
| NPS |
National Pension System |
| NSFR |
Net Stable Funding Ratio |
| ODI |
Other Deposit Taking Institution |
| ORSA |
Own Risk and Solvency Assessment |
| PFCS |
Joint Forum Principles for Financial Conglomerate Supervision |
| RAAS |
Risk Assessment System |
| RBC |
Risk-Based Capital |
| RSBB |
Regulation on Supervision of Banking Business |
| RSIB |
Regulation on Supervision of the Insurance Business |
| RWA |
Risk-Weighted Asset |
| SIFI |
Systemically Important Financial Institution |
| SIB |
Systemically Important Bank |
| SFC |
Securities and Futures Commission |
| SMEs |
Small and Medium Enterprises |