The Financial Supervisory Service ("FSS") announced its Work Plan for 2020 (the "2020 Work Plan"). Under the 2020 Work Plan, the FSS will continue to focus on strengthening the supervision framework for the Korean financial industry with particular focus on (i) protecting consumers of high-risk financial products; (ii) ensuring stability of the financial market; and (iii) enhancing the internal control system at financial companies.
We summarize below the key features of the 2020 Work Plan.
1. Focus on high-risk financial products
The FSS will continue to focus on protecting and strengthening the integrity of the Korean financial system and will continue to implement policy measures ensuring the protection of consumers. As part of this policy directive, the FSS plans to conduct targeted inspections focused on selling activities involving high-risk financial products, in particular, derivative-linked securities or funds, overseas real estate funds or investment in hedge-funds.
In addition, the FSS will strengthen its monitoring and inspection of unfair selling activities involving newly established funds or funds experiencing sudden increase in sales volume. It will also focus on the appropriateness of the underlying assets of the funds, investment strategy of the funds and the adequacy of disclosures provided to the investors. In reviewing these areas, the FSS will thoroughly review all stages of the selling activities from the structuring of financial products to post sale services extended to consumers.
2. Ensuring financial market stability
In order to ensure the stability of the Korean financial market, the FSS will further enhance monitoring and supervision of risk factors viewed as currently inherent in the financial market with particular focus on excessive concentration of investments in high risk assets such as overseas real property. In particular, the FSS will monitor the soundness of financial institutions as they expand their product offerings into higher risk assets for higher returns.
3. Enhanced internal control
The FSS recognizes that self-remediation of inadequate internal control procedures by the financial institution itself is a strong tool for early detection and prevention of financial incidents. As such, the FSS intends to implement a number of policy measures to incentivize financial institutions to take self-remediation measures to strengthen internal control. As such, the FSS plans to prioritize review of internal control planning and results of internal audits by financial institutions.
The FSS has also provided for the regulatory basis to account for self-reporting, implementation of self-disciplinary measures or self-remediation actions by the financial institution as a basis for reducing the level of sanctions for regulatory breaches against financial institutions or the responsible person.