Introduction and institutional structure

of financial supervision in Korea

Introduction

UK centralized and consolidated regulatory power by

establishing the Financial Services Authority (FSA) in 1997.
London separated prudential regulation from the regulation
of business conduct into two separate institutions: the
Financial Conduct Authority (FCA) and the Prudential
Regulation Authority (PRA) in 2012.
Korea adopted a financial regulatory system of the
integrated approach or consolidated model,
benchmarking the U.K.s former FSA.
Eleven savings banks in Korea were shut down, inflicting
substantial losses on many depositors and investors in 2011.
The Twin Peaks model is especially enticing since countries
with advanced financial markets, like the U.K., Korea have
recently implemented this model like US did.

The Twin Peaks model could enhance consumer protection;

(ii) major foreign markets and studies had either
implemented or recommended the Twin Peaks model; and
(iii) the existing integrated model of the Financial
Supervisory Service (FSS) and the Financial Supervisory
Commission (FSC) monopolized regulatory functions that
proved problematic in previous crises, and also showed the
need for checks and balances as well as coordination
among plural and separate regulatory bodies.

Institutional structure of financial

supervision in Korea

The consolidated model adopted after the 1997-1998 Asian Currency

Crisis
untill 1998, the structure of the Korean financial regulatory system
divided by traditional lines of banking, seurities, and insurance. Korean
Banks regulated by the Office of Bank Supervision (OBS) under the Bank
of Korea, and later under control by the Ministry of Finance and Economy.
Securities regulation in Korea up to the Securities Supervisory Boad
(SSB), and insurance was performed by the Insurance Supervisory Board
(ISB), both of them under control by ministry. After Asian crisis thereby
integrating financial supervision into the Financial Supervisory
Commision (FSC), in January 1999 the Financial Supervisory Service
(FSS) established. In addition to the FSC-FSS, the Bank of Korea was
made to monetary and credit policy, and Korean Deposit Insurance
Corporation (KDIC) was established in 1997 to be the national deposit
insurer. So from 1998, the FSC-FSS, BOK, KDIC, and the MOFE would form
the 4 pillar of organizational structure for financial regulation in Korea.

Specific Functions of Financial

regulators
1. FSC-FSS
FSC duty
2.
arrange on financial politicies and financial system.
3.
supervision and examination and give sanctions against financial institution.
4.
authorization and permission for establishment for financial institution.
5.
management, supervision, and monitoring capital market.
6.
enactment, amendment, and repeal of Acts.
7.
guidance, and supervision of the FSS.
8.
Arrange guidance and supervision of the FSS such amendment of articles about
incorporation and approval of budget and financial statements.
The Securities and Futures Commission (SFC) a part of FSC that independent have task
to:
9. Investigation unfair trade in capital market.
10. Arrange to established accounting standards and supervision.
11. Preliminary deliberation on related matters to management, supervision, and
monitoring capital markets.
12. Arrange delegated by the FSC related to management, supervision, and monitoring of
capital markets.

Specific Functions of Financial

regulators contd
FSS task/duty
Examination and supervision of the business
affairs and financial status of financial
institutions.
Impose sanctions in connection with the result
of inspections
Additional oversight and enforcement functions
Established the Financial Disputes Resolution
Committee to deliberate and give solution
related finance problem.

Specific Functions of Financial

regulators contd
2. The Bank of Korea
Main duty responsibility and take
charge of Korea monetary policies and
credit policy functions, have special
power to request FSS to examine a
financial institution and conduct or
lead a joint examination.

Specific Functions of Financial

regulators contd
3. Korean Deposit Insurance Corporation
Main goal to contribute to the protection of
depositors and maintain the stability of the
financial system with operating a deposit
insurance system efficiently to control situation
that financial institution is unable to pay deposits
due to bankruptcy or any else, main duty as
protector of bank depositors, and have special
power like Bank of Korea to request FSS to
examine a financial institution and conduct or lead
a joint examination for that investigation view

Specific Functions of Financial

regulators contd
4. Ministry of strategy and finance
Have first stripped as supervisor power
over financial institution in 1998 after
Asian crisis, kpt the right to decide
financial regulatory policy both
domestic and international, but now
have tasked just for domestic financial
policy.