(1) Reasons for Proposal

This enactment aims to specifically define the matters entrusted  to the Enforcement Decree of the Financial Conglomerates Supervision Act, to be enforced on June 30, 2021, such as the requirements for the designation and cancellation of a financial conglomerate, standards for soundness supervision, etc.

(2) Major Provisions

A. Designation and cancellation of financial conglomerates (Articles 6 and 8) 

- Designate as a financial conglomerate if it has more than 5 trillion won in total assets and operates two or more businesses (loan and fund-raising business, financial investment business, insurance business).

- However, exclude any group whose total non-core business assets are less than 5 trillion won from designation as a financial conglomerate.

- If the total assets of any group designated as a financial conglomerate temporarily falls short of the designated criteria, the designation shall be maintained for a maximum of three years.

* Non-core businesses: All businesses besides the one with the largest total assets among loan and fund-raising businesses, financial investment businesses, and insurance businesses operated by a financial conglomerate 

B. Internal control and risk management of financial conglomerates (Articles 10 through 13 and Article 17) 

- Reflect the matters that must be observed for sound management, such as compliance with laws and regulations at a group level, in the internal control standards.

* Procedures that employees of affiliated financial companies must follow in common, the preparation of measures to prevent conflicts of interest that may occur in a financial conglomerate, and the establishment, operation, etc., of a dedicated internal control department

- Reflect specific procedures and methods for managing risk at a group level in risk management standards.

* Perception, assessment, and control method for risks at a group level and methods, procedures, etc., for allocating risk-bearing limits between affiliated financial companies

- Conduct regular assessments to ensure that risk management, internal control, and capital adequacy are properly managed within a group.

C. Capital adequacy evaluation, etc., of financial conglomerates (Article 14) 

- Establish capital adequacy standards to maintain actual loss-absorption capacity (integrated equity capital) considering the overlapping use of capital above the minimum capital criteria (integrated capital required) taking into account additional risk at a group level.

D. Management, report, disclosure, etc., of internal transactions (Articles 15 and 16) 

- In the case of an internal transaction worth 5 billion won or more (or 5% of equity capital, whichever is less), approval from the board of directors of the affiliated financial company shall be required.

- Specify the matters that a financial conglomerate must report and disclose (ownership, governance, internal control, risk management, capital adequacy, internal transactions, risk concentration, etc.).

E. Submission, implementation, etc., of management improvement plans (Articles 18 and 19) 

- Submit a management improvement plan that contains measures to increase financial soundness if there is a problem with the soundness of a financial conglomerate.

- If a management improvement plan is insufficient or the conglomerate fails to implement it, financial authorities will demand the revision, supplementation, and implementation of the plan.