The Financial Supervisory Service (“FSS”) announced its “work plan” for 2019 (the “2019 Work Plan”).  The 2019 Work Plan continues to build on the subject of innovation and the seventeen priorities identified by the FSS earlier in July 2018 under its policy announcement, “Priorities for Financial Supervisory Innovation.”

Under the 2019 Work Plan, the FSS will strive to establish an effective supervision and inspection system and strengthen its ability to protect the integrity of the financial market and the consumers.  The FSS will do so based on the four core principles of (i) stability; (ii) responsiveness; (iii) fairness; and (iv) innovation. 

The detailed goals of the 2019 Work Plan are as follows: 

1. Stability:  The FSS, aiming to ensure the integrity of the financial market and strengthen measures for consumer protection, will establish an effective supervision system that involves ongoing monitoring, targeted inspections focused on identified issues and comprehensive inspections of financial institutions. 

• The criteria for selecting those financial institutions which will undergo a comprehensive inspection will be based on a number of factors, such as “the institution's level of consumer protection policies, corporate governance, internal control, and market influence.”  The FSS is due to follow up with the announcement of the detailed criteria and implementation measures.  At the same time, the FSS will alleviate the burden of financial institutions undergoing comprehensive inspection by minimizing the inspection materials requested in advance and taking the approach of on-site remedial measures for minor breaches found during the inspections.

2. Responsiveness:  The FSS will respond proactively to significant consumer disputes with their priorities focused on protection of consumer rights and interests.  In the course of resolving public complaints, if the FSS becomes aware of new issues resulting in loss to consumers, they will proactively address those issues through their supervision and inspection actions.  

3. Fairness:  The FSS will strive to support an environment for fair competition in the financial industry.  To this end, the FSS will actively examine unfair practices such as the abusive exercise of superior bargaining power, unfair transactions amongst interested parties, risks from investments in non-financial affiliates – for example, extending illegal loans to major shareholders, funneling business to affiliates, and anti-competitive practices by large financial institutions – for example, charging excessively low fees or restricting product offerings to the detriment of new small to mid-sized financial institutions.  The FSS will also conduct special inspections on activities involving short-selling, high-frequency trading and unfair disclosures to the extent warranted.  Finally, the FSS will strengthen its inspection of high-risk foreign exchange transactions such as those transactions posing risk of money laundering, use of tax haven, large capital transactions and outbound foreign direct investments. 

4. Innovation:  The FSS will seek early implementation of its regulatory sandbox in order to introduce “innovative services” through deregulation.  The “innovative services” in this context mean those recognized as being different from traditional financial services in their form, substance, or methodology.  The FSS will also prepare a supervisory plan for the sale and management of passport funds to deal with the Asia Region Funds Passport regime.  The regime is a multilateral regulatory framework in the Asia-Pacific region allowing cross-border marketing and distribution of eligible funds among its member countries, such as Korea, Japan, Thailand, Australia and New Zealand. 

The FSS has indicated that it expects the 2019 Work Plan to have the effects of (i) strengthening the risk management of financial institutions allowing them to preemptively address unstable market conditions, such as high consumer debts; and (ii) improving the corporate governance structure and internal control of financial institutions and ultimately facilitate management autonomy and accountability.  In order to meet such expectations of the FSS, financial institutions will need to prepare and maintain a suitable risk management system, identify and mitigate factors that can hinder fair competition, and strengthen their efforts for consumer protection.