Recent Changes and Prospects of Banking Services Regulations and Supervision in Korea

Fintech innovations as well as the Covid-19 pandemic and UN SDGs have made a huge impact on banking businesses and supervision in Korea. Fintechs are replacing the substantial part of traditional commercial banking services, thereby raising questions about the future of commercial banking. With a high level of financial accessibility and well-developed digital payment systems, Korea experiences advanced financial inclusion and efficiency of payment services. In Korea, BigTech companies are now competing with traditional financial companies as BigTechs are making full use of big data under the revised Korean Personal Information Act system to facilitate the processing of personal information. However, there are still ongoing debates on issues of how to deal with the banking industry under the changing digital environment, such as pseudo-banking issue, regulation of BigTechs as financial conglomerates under the Act on the Supervision of Financial Conglomerates (SFCA), virtual asset (mostly crypto-assets) regulation, issue of separation of banking and commerce, and Central Bank Digital Currency (CBDC). During the Covid-19 pandemic, pandemic emergency financing made a huge increase of debt ratio for the individuals and SMEs in Korea. If the Covid-19 pandemic continues and it takes some time to recovery after the pandemic, non-performing loans will be a significant burden for the financial institutions. Even credit crunch may be expected in such a situation. In order to prevent such situation in advance, it is urgent to prepare legal measures before such problem becomes reality. The Korean government gives guidance and plans on Environmental, Social, and Governance (ESG) reporting, disclosure, and business operation. Currently ESG is regulated by self-regulation by the ESG Disclosure Guidance in 2021. However, Korean Financial Supervisory Commission announced its comprehensive plan to change on the Korean corporate disclosure system, which includes the staged mandatory disclosure on ESG report in the coming years.