The Financial Supervisory Service (the "FSS") announced its Work Plan for 2021 (the "2021 Work Plan"), which focuses on maintaining stability and promoting the continued growth of the Korean financial markets amid the ongoing global pandemic. The 2021 Work Plan sets forth the following key objectives: (i) ensuring the stability of the financial markets by overcoming the challenges caused by COVID-19, (ii) supporting the growth of the financial markets by strengthening their integrity and credibility, (iii) implementing new policies to address social inequality and (iv) improving the supervision framework for the financial markets to account for anticipated developments.
We summarize below the key features of the 2021 Work Plan.
1. Stability of the Financial Markets
The FSS plans to closely monitor financial companies' management of credit risks, including those associated with defaults related to COVID-19. This will include ensuring compliance with relevant regulatory capital and reserve requirements, which could potentially lead to the introduction of more stringent requirements.
In addition, the FSS intends to improve its market surveillance and monitoring system with the aim of better managing systemic risks that have the potential to significantly disrupt the industry or the broader economy. Given investors' increased demand for high-risk financial investment products in the current low interest rate environment, the FSS also plans to promote more robust risk management practices by financial companies in marketing and selling high-yield alternative investment products.
2. Strengthening the Integrity and Credibility of the Financial Markets
In line with the implementation of the new Financial Consumer Protection Act and an increased focus on financial consumer protection, the FSS plans to make changes to the existing regulatory framework governing marketing and selling activities by financial companies and to strictly enforce its regulations by punishing breaches. To achieve this policy objective, the FSS will seek to, among other things, make senior management of financial companies more accountable for complying with regulatory requirements.
The FSS will further enhance its monitoring of short sales executed by market makers on the Korea Exchange and take actions against breaches of short sale and other securities regulations in coordination with the Special Investigation Unit, a cross-agency body responsible for investigating financial crimes.
The FSS also plans to review and make necessary changes to relevant regulations to ensure that financial regulations are applied consistently across financial companies and internet platform businesses that provide financial services (e.g., payments, cash deposits and lending) in the course of their ordinary businesses.
3. Financial Consumer Complaints and Dispute Resolution
As part of its efforts to address social inequality, the FSS is working to expand the scope of cases that can be brought before the Financial Dispute Mediation Committee, an internal organization within the FSS. Specifically, the FSS is contemplating (i) mandating certain types of financial transaction-related disputes to be handled by the Financial Dispute Mediation Committee and (ii) increasing the resources dedicated to resolving investor complaints and financial disputes to expedite the resolution process.
4. Improvement of the Supervision Framework
The FSS is striving to embrace innovation in the financial markets by taking a proactive stance in reviewing and granting licenses for new types of financial businesses. At the same time, in light of the significant increase in the number of online financial transactions, the FSS is focused on enhanced management of cybersecurity risks faced by financial companies. The FSS also plans to implement changes and innovations in its examination and supervision methods and processes.