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Newsletter | May 2014, Issue 2 |
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BANKING |
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Amendments to Bank Business Supervisory Regulations |
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On February 25, 2014, the Financial Services Commission (“FSC”) announced amendments to the Bank Business Supervisory Regulations (“Amended Regulation”) effective as of March 1, 2014. The Amended Regulation, among other things, includes measures for increasing the soundness of bank management, such as expanding the scope of companies that should be included in a bank’s main debtor group. The Amended Regulation also strengthens the government’s risk management powers by allowing the Bank Risk Management Commission to deliberate and resolve a greater number of matters, allowing subsidiaries of banks to engage in more businesses to support such subsidiaries expanding their business to overseas and strengthening internal control over the provision of economic benefits to transaction counterparties. Further details are provided below. |
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Expanded Scope of Companies Included in Main Debtor Group |
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The following companies should be included in a bank’s main debtor group: group companies and their affiliates whose credit balance from a financial institution as of the previous year was 75/100,000 or more compared to the aggregate credit balance from all financial institutions as of one year prior to that previous year. |
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Strengthen ex ante management of new main debtor groups to reduce insolvency risk and increase soundness in bank management. |
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Increased Risk Management |
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Risk Management Commission to undertake risk analysis and, based on such analysis, deliberate and determine capital management and procurement plans, criteria for categorizing soundness of assets, and criteria on accumulation of allowance for bad debts. |
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Expand Scope of Businesses for Subsidiaries |
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Allow banks to own overseas subsidiaries that operate as bank holding companies (decrease restrictions on acquisition of foreign banks). |
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Increase Notification Requirement regarding Late Payment Charges |
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Require banks to publish data and comparison notices regarding late payment charges on their websites (must publish amounts as well as rates) so as to allow consumers to have a better idea of the potential penalties. |
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Tighten Internal Controls on Provision of Economic Benefits to Trading Counterparties |
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Persons who provide or receive cash or other valuables to or from entities or affiliated personnel must in principle make prior report to a compliance auditor and retain related records for 5 years (exception made for goods or meals of less than KRW 30,000, and condolence/congratulation payments, condolence flowers and wreaths of KRW 200,000 or less). |
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Provision of benefits in excess of KRW 1 billion to transaction counterparty must be published on the website. |
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