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FSS Announces 2022 Work Plan


The Financial Supervisory Service (the “FSS”) announced its 2022 Work Plan which sets forth financial stability, financial innovation, and financial consumer protection as the key objectives of the FSS’s supervision agenda for 2022.  The Work Plan emphasizes, in particular, proactive supervision by the FSS in order to achieve early risk detection, support financial innovation and related risk management, manage corporate and household debt and extend support for the post COVID-19 transition phase. 

The key details of the 2022 Work Plan are as follows:

1.   General

  • Presently, the FSS’s approach in audits of financial institutions is that of a comprehensive review of all business areas through ad hoc, “as needed” basis audits.  From 2022, the FSS will adopt a different approach to audits such that they are thematic and targeting specific business areas through regular periodic audits.  With a view towards achieving early detection of risks, the FSS will apply a differentiated methodology for each firm ranging from review of core business areas to selective review of perceived areas of weaknesses. 

  • A pilot program for a “self-audit request system” will be launched.  Under the new system, the FSS can require financial institutions to first conduct a self-audit for prompt assessment of risk areas after which the FSS may follow-up with its own audit of the firm if the self-audit results are not satisfactory. 

  • A liaison officer from the FSS will be appointed for each financial institution.  The liaison officer will facilitate communications between the FSS audit team and the financial institution. 

  • More active information sharing between the FSS the financial institution will be promoted through bilateral discussions between the FSS and external auditors of financial institutions.

  • Financial Institutions will be encouraged to set aside sufficient reserves for potential deterioration in financial soundness caused by the prolonged COVID-19 pandemic and potential increase in debt repayment defaults by borrowers with low credit worthiness whose grace period for debt repayment are close to expiry.

  • New measures will be introduced to ensure loans to businesses operated by sole proprietors are used in accordance with the declared use of proceeds. 

  • A new supervisory regime will apply to administrators and contributors to the newly adopted risk-free rate of Korea, the Korea Overnight Financing Repo Rate (the “KOFR”) while the FSS will support the launch of various KOFR-linked products. 


2.   Digital Finance Sector

  • A framework to supervise BigTech firms will be introduced with a view to promoting competition and innovation following their entry into the financial market while ensuring that financial stability and consumer protection are not compromised. 

  • Market practice for charging of settlement fees in the electronic financial business sector will be reviewed based on which the FSS plans to establish a fee disclosure system for the market.


3.   Banking Sector

  • The scope of the ancillary businesses and the concurrent businesses that a bank is permitted to engage in will be broadened. 

  • The FSS will review liquidity ratio requirements and announce amendments to encourage capital flow into the economy in the near term.  As a counterbalance, the FSS will implement measures gradually to normalize liquidity ratios while moderating the adverse impact on outstanding loan balances stemming from normalizing liquidity requirements such as a tightened liquidity coverage ratio (“LCR”).

  • The supervisory framework for large bank holding companies and banks will be revamped.


4.   Insurance Sector

  • Necessary adjustments to the framework for car accident compensation payments will be reviewed in anticipation of the commercialization of autonomous vehicles.

  • Development of insurance products for vulnerable groups with inadequate insurance coverage such as part-time delivery service providers will be supported. 

  • Measures to prevent excessive insurance payments for medical treatments that are prone to over-treatment such as cataract surgery and chiropractic therapy will be considered.


5.   Capital Markets, Accounting, and Disclosure

  • Application of the BIS capital requirements to general financial services companies will be considered.

  • Licensing requirements for alternative trading systems will be introduced. 

  • Monitoring of unfair trading activities relating to politically-themed shares or IPOs will be strengthened while the fast-track investigation system will be deployed for suspected unfair trading activities, if warranted.  In addition, the investigative capabilities of the FSS will be enhanced by mobilization of the special judicial police for investigations of capital markets activities.

  • Improvements in the audit of internal accounting control systems will be promoted through FSS’s issuance of practice guidance and the heightened monitoring and review. 

  • On ESG, overall disclosure framework will be reviewed while standards to demonstrate compliance with ESG bond rating and methodology for disclosing ESG bond evaluation reports will be adopted.  The investment strategy of ESG funds will be subject to heightened review through special audits and other means. 


6.   Consumer Protection

  • Supplemental measures to supervise compliance with the six major conduct rules under the Financial Consumer Protection Act will be prepared: (i) suitability, (ii) appropriateness, (iii) duty to explain, (iv) prohibition on unfair trading activities, (v) prohibition on unfair solicitation, and (vi) prohibition on false or excessive advertisements.  In line with the three-year periodic evaluation of internal control for consumer protection by financial institutions, the FSS will implement a self-assessment framework as well as conduct category based evaluations of financial institutions after categorizing the 74 target financial institutions into three groups.

  • Monitoring of online alternative investments conducted via digital platforms will be strengthened through inspection and analysis of risk factors in consumer protection which may arise in the course of online investment sales processes and inducing the mitigation of such risk factors. 

  • In order to preempt the sale of financial products which are potentially harmful to consumers, new criteria will be added to the new product review checklist while the new product review process will be required to be strengthened.  For example, the new product review checklist will contain an additional item for preventing excessive marketing and mis-selling.

  • Financial product monitoring information system covering the full life cycle of a financial product from design to sales and post-sale management will be fully activated with the aim of detecting factors that can result in mis-selling of a financial product.

  • Big data platform for monitoring consumer complaints will be established.