Financial Crime World

Korea’s Banking Industry Regulations and Compliance: A Complex yet Effective Framework

Introduction

In the Democratic People’s Republic of Korea, the banking industry is heavily regulated to ensure stability and prevent financial crises. The regulatory framework is composed of laws enacted by the National Assembly, enforcement decrees approved by the President’s State Council (Cabinet), enforcement rules approved by the Office for Government Policy Coordination under the Prime Minister, and regulations written by the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS).

Regulatory Hierarchy

At the top of the hierarchy are laws enacted by the National Assembly, which supersede all other regulations. Enforcement decrees, also known as Presidential Enforcement Decrees, are subordinate to laws and are approved by the President’s State Council to implement specific statutes. Enforcement rules complement enforcement decrees with additional detailed rules.

Role of FSC and FSS

The FSC writes regulations to support enforcement decrees and ensure full enforcement of statutes. Detailed regulations are written by the FSS in support of FSC regulations to ensure effective performance of supervisory duties and functions.

Banking Act and Subordinate Regulations

The Banking Act provides the broad legal basis for regulating banking business, while subordinate enforcement decrees and regulations set forth specific provisions needed to enforce the Act. Article 34 requires banking institutions to comply with supervision standards, which are set by the FSC. Enforcement rules and detailed regulations provide additional specificity on bank capital requirements, asset classification rules, and minimum capital standards.

Rulemaking Process

The rulemaking process is similar for most regulations, involving a 40-day public comment period and an independent review. The General Rulemaking Process involves:

  • Draft amendment
  • Inter-agency consultation and coordination
  • Announcement of public comment period
  • Review by the Regulatory Reform Committee
  • Review by the Ministry of Government statutes
  • Deliberation at Vice-Ministerial Meeting and President’s State Council
  • Approval by the National Assembly
  • Public promulgation

Conclusion

The banking industry regulations and compliance in Korea provide a complex yet effective framework for stability and growth. The regulatory hierarchy, which includes laws, enforcement decrees, enforcement rules, and regulations, ensures that banking institutions comply with supervision standards and minimum capital requirements. The rulemaking process provides transparency and accountability, while ensuring that the regulatory framework remains up-to-date and effective in preventing financial crises.

Key Takeaways

  • The regulatory framework in Korea is composed of laws, enforcement decrees, enforcement rules, and regulations.
  • Laws enacted by the National Assembly supersede all other regulations.
  • Enforcement decrees are subordinate to laws and are approved by the President’s State Council to implement specific statutes.
  • The FSC writes regulations to support enforcement decrees and ensure full enforcement of statutes.
  • Detailed regulations are written by the FSS in support of FSC regulations.
  • The rulemaking process involves a 40-day public comment period and an independent review.