Financial Crime World

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Equivalence of South Korea’s Financial Regulations with the European Union’s Capital Requirements Regulation (CRR)

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Confidential Information and International Cooperation

The assessment highlights the importance of confidentiality and international cooperation in financial regulations.

  • The Financial Supervisory Service (FSS) Korea is required to seek approval from foreign authorities before disclosing confidential information.
  • The FSS participates in international supervisory colleges and has agreements for information sharing with foreign supervisory authorities.

Topic II: Own Funds

South Korea’s framework for own funds shares many similarities with the EU’s, but includes some differences.

Similarities

  • South Korea’s framework for own funds is similar to the EU’s.
  • The own funds requirements and CET1 composition share many features with the CRR.

Differences

  • Dividend stoppers are included in South Korean regulations, which are not allowed under the CRR. This area is deemed partially equivalent.

Topic III: Credit Risk Requirements

The assessment suggests that Korean regulations on credit risk are largely equivalent to the EU framework.

Key Provisions

  • The regulation includes provisions on:
    • Credit Risk Standardized Approach (SA)
    • IRB Approach
    • Credit risk mitigation techniques
  • While there are some differences in treatment, particularly regarding owner-occupier rules for residential mortgages and exposures to SMEs, the overall framework is considered equivalent.

Section 7: General Requirements

The assessment suggests that South Korea’s financial regulations have similarities with the EU’s framework in areas such as own funds requirements and credit risk management.

  • Own funds requirements cover credit, market, and operational risk.
  • Provisions on prudential reporting are similar to those envisaged by the CRR. This section is deemed equivalent.

Conclusion

Overall, the assessment suggests that South Korea’s financial regulations have a high degree of equivalence with the EU’s framework, particularly in areas such as own funds requirements and credit risk management. However, there are some differences and more conservative approaches taken in certain areas, which may require further consideration.