Conglomerates, financial firms to face tougher investigations
By Park Hyong-ki
Financial Services Commission Chairman Choi Jong-ku / Yonhap
The financial regulator will reset an oversight system enabling it to comprehensively monitor and supervise financial companies affiliated with local family-run conglomerates or chaebol, according to the Financial Services Commission (FSC), Tuesday.
The FSC plans to draw up the integrated system for a public hearing by the end of this year, and run it next year.
This means it will no longer supervise and implement its preemptive and disciplinary measures on companies in financial sectors such as banking, insurance and brokerage separately.
Those firms and their parent companies, whether financial or nonfinancial, will both be held accountable if the groups’ financial units fail to meet regulatory standards.
Conglomerates such as Samsung, Hanwha and Hyundai Motor that hold financial companies will face further scrutiny under this integrated supervision.
“We will establish a system supervising the groups’ financial soundness and managing their risks that can have an effect on market stability,” FSC Chairman Choi Jong-ku said in a recent briefing to the National Assembly’s Policy Committee.
This includes monitoring their overall capital adequacy in relations to their parent conglomerates, as well as their business dealings and transactions with the groups and affiliates.
Its extended jurisdiction is expected to be overlapped with the Fair Trade Commission (FTC).
Previously, the FSC was only limited to regulating financial companies, and not their manufacturing parent groups.
Although the FTC and the FSC have a non-binding pact to collaborate on ensuring market fairness and protecting consumer, the financial and antitrust regulators have overseen the industries separately.
President Moon Jae-in proposed the integration of a regulatory oversight system to protect consumers from corporate and financial malpractice as part of chaebol reform.
This would enable regulators to oversee the whole market and dealings between financial and non-financial companies.
The FSC noted Europe and Japan’s financial regulators have already been doing it like this.
The urgency for this new regulatory system came in 2013 when a crisis erupted and corruption was found at Tongyang Group and its financial subsidiaries.
Companies will also face tougher regulations on their disclosure of information.
The regulator also seeks to have them release information on how much they have contributed to improving the environment and resolving labor-management tension for investors.