Financial regulator to tighten control over Samsung, Mirae Asset

Samsung Life headquarters in Seoul / Yonhap

By Park Jae-hyuk

The Financial Services Commission (FSC) will be allowed to tighten its control over Samsung and its financial arms, as a proposed law regarding supervision of financial conglomerates is highly likely to be legislated by the 21st National Assembly that opened this month.

According to the FSC's pre-announcement of the legislation, Sunday, the law will put financial conglomerates having over 5 trillion won ($4.1 billion) in financial assets, such as Samsung, Hyundai Motor, Hanwha, Mirae Asset, Kyobo and DB, under its control.

The FSC will submit the proposal to the National Assembly during its regular session in September.

If it takes effect, companies representing financial conglomerates will need to disclose their fiscal soundness and risk factors to the public. The FSC will also be able to order them to take measures to improve their fiscal soundness, if they fall short of the standard.

In Korea, a financial conglomerate refers to a conglomerate that engages in more than two businesses among banking, insurance and financial investment.

The International Monetary Fund urged Korea in April to enact laws to supervise financial conglomerates, pointing out the country's asymmetric financial regulations.

The FSC said the law will prevent risks in non-financial subsidiaries of financial conglomerates from spreading to their financial subsidiaries and damaging their customers.

“We have regulated financial holding companies with the Financial Holding Companies Act,” an FSC official said. “However, there have been blind spots about regulations on financial conglomerates, despite their proportion and influence over the financial sector.”

As of the end of 2018, the six financial conglomerates collectively had 900 trillion won in financial assets. The amount accounted for 18 percent of total financial assets held by financial firms here.

Against this backdrop, the FSC came up with standards of supervising financial conglomerates in July 2018. The Moon Jae-in administration also mentioned a tightened control over financial conglomerates as one of its 100 policy tasks announced in July 2017.

Although Rep. Park Sun-sook of the minor opposition Party for People's Livelihoods and Rep. Lee Hack-young of the ruling Democratic Party of Korea proposed bills to regulate financial conglomerates during the 20th National Assembly, they expired automatically with the end of the last session in May.

Considering the ruling party controls the majority with 177 seats in the 300-member National Assembly, the proposed law is expected to be passed without impedement.