The Financial Services Commission held the 3rd consultative body meeting on mutual financial businesses with related government ministries and mutual financial businesses on September 26. At the meeting, the authorities decided to draw up a joint plan to overhaul and update the current regulatory framework on mutual financial businesses in line with the growth of the sector and changes in their operating environment. The authorities also decided to set up and operate a daily monitoring system from mid-October to closely check the liquidity condition of mutual financial businesses.
In terms of the size of total assets, between end-2013 and end-June 2023, the mutual finance industry has grown from KRW475 trillion to more than KRW1 quadrillion, with some entities growing to the level equivalent to a commercial financial institution within a region. In addition, the nature of their operation has shifted as loans extended to households by mutual financial businesses declined in recent years, while the volume of corporate lending from them has expanded significantly. Considering this growth and change in the operating environment of mutual financial businesses, the authorities exchanged views on the need to shore up rules on their prudential management and governance structure. Amid ongoing concerns about the soundness and liquidity conditions of the mutual finance industry, the authorities also shared views on the need to strengthen risk management in vulnerable areas while ensuring the provision of prompt liquidity support if needed. With regard to the application of key consumer safeguard measures guaranteed under the Financial Consumer Protection Act, for which most mutual financial businesses other than credit unions are exempted, the authorities talked about the need to introduce safeguard measures even before they are put into relevant laws. Lastly, the authorities went over the liquidity condition of mutual financial businesses. Although it is stable currently, the authorities decided to set up and operate a daily monitoring system from mid-October to ensure close management and supervision.
Based on what has been discussed at today’s meeting and future taskforce meetings, the authorities plan to draw up and announce a government-wide plan to overhaul and update regulations on mutual financial businesses this year.
* Please refer to the attached file for details.