The Financial Services Commission introduced measures to strengthen the management of financial risks associated with major industrial accidents on September 17, which are part of the government’s comprehensive plan for ensuring industrial safety announced earlier on September 15. The comprehensive plan to ensure industrial safety is aimed at providing structural solutions to the root cause of industrial accidents, and it includes financial sector measures including credit evaluation, assessment in capital markets, etc.
In this regard, the FSC has prepared specific measures intended for all financial sectors, such as loans and insurance, policy financing, and disclosure and assessment in capital markets, and plans to carry out follow-up measures accordingly. As investors are becoming more interested and concerned about the risk of major industrial accidents, with the enhanced administrative and judicial measures in place, companies with a record of major industrial accident may face significant challenges in terms of their business operation and investment activities (e.g. stock prices falling). In this regard, the financial sector needs to take proactive steps to manage risks and protect investors in order to maintain the soundness. To ensure a systematic management of financial risks associated with major industrial accidents, the financial sector plans to strengthen rules over soundness management and introduce incentives for the prevention of industrial accidents.
Summary of Key Measures
Bank loan
- Industrial accidents will be taken into account for credit evaluation purposes.
- All banks will be subject to the same rules regarding the reduction and/or suspension of loan commitment (in the event of a major industrial accident).
Project finance (PF) loan guarantee by Korea Housing Finance Corporation
- Screening criteria to be strengthened for defective construction, safety accidents, etc.
- Companies certified with outstanding safety management performance will be offered a discounted guarantee fee rate.
Insurance premium
- In the event of a major industrial accident, up to 15 percent of surcharge will be added to accident liability and construction related insurance premiums.
- Companies that have been certified for occupational health and safety standards (e.g. ISO 45001) will be offered a discount in insurance premiums.
Policy financing
- The Korea Development Bank (KDB) and the Industrial Bank of Korea (IBK) will offer new incentive programs in loans and guarantees intended for companies investing in new safety facilities and those with safety certification, respectively.
Capital market disclosure
- In the event of a major industrial accident or when a court decision has been reached under the Serious Accidents Punishment Act, companies will be required to disclose this information through KRX (Korea Exchange) disclosure filing.
- In the event of a major industrial accident, companies will be required to file more detailed and follow-up disclosure of information describing current situation and their own remedial measures through business report and semi-annual disclosure.
ESG evaluation and Korea Stewardship Code
- Major industrial accidents will be included in the ESG (environment, social, governance) evaluation guidance.
- Major industrial accidents will be incorporated into Korea Stewardship Code and related guidelines to be utilized by institutional investors, such as pension funds.
* Please refer to the attached PDF for details.