All Electronic Financial Service Providers Now Subject to Internal Control of Financial Conglomerates
Financial Services Commission Approves Amendments to Supervisory Regulations
Regulations Now Apply to Entities Not Classified as Financial or Insurance Businesses under KSCI
Until now, electronic financial service providers that were not classified as “financial and insurance business” under the Korean Standard Classification of Industries (KSCI) will also be subject to internal control and risk management requirements for financial conglomerates going forward.
On July 31, the Financial Services Commission held a regular meeting and announced that it had approved a partial amendment to the “Supervisory Regulations for Financial Conglomerates” reflecting these changes.
Previously, fintech and big tech companies expanded their influence in the financial market by entering not only the electronic financial service sector but also licensed financial services through platform-based business models. As a result, group-wide interconnectivity increased and the risk of operational issues spreading to affiliates also grew. However, some electronic financial service providers were excluded from internal control and risk management regulations at the group level because they were not regarded as affiliated financial companies under the Act on the Supervision of Financial Conglomerates.
In response, the Financial Services Commission has amended the supervisory regulations so that electronic financial service providers not classified as “financial and insurance business” under KSCI will now be included as affiliated financial companies under the Act on the Supervision of Financial Conglomerates. With this change, the regulator aims to eliminate regulatory arbitrage and apply a consistent group-level risk management framework.
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A representative from the Financial Services Commission stated, “This revision will enhance the effectiveness of internal control and risk management for financial conglomerates, as well as strengthen sound management and consumer protection. We will continue to develop the regulatory framework for financial conglomerates in line with evolving market conditions.”
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