The Financial Services Commission plans to push a proposal to designate large insurers and securities firms as "domestically systemically important financial institutions (D-SIFI)." Once designated as important financial institutions, they must mandatorily set aside additional capital and prepare their own recovery plans in advance to brace for a crisis. Until now, only financial holding companies and banks have been selected as important financial institutions, but the authorities are reviewing this plan as insurers and securities firms have recently grown in industry influence.
According to the financial authorities on the 3rd, the Financial Services Commission (FSC) is treating the plan to designate large insurers and securities firms as important financial institutions as a mid- to long-term task. The Financial Services Commission plans to form a task force (TF) later with the Korea Deposit Insurance Corporation (KDIC), the Financial Supervisory Service, and the financial industry to discuss the proposal.
Important financial institutions are part of a system recommended by the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (BCBS) to minimize the shock that the failure of a large financial company would have on the economy. The Financial Services Commission (FSC) has selected systemically important financial institutions each year since 2022 by revising the Act on the Structural Improvement of the Financial Industry (the Financial Industry Restructuring Act). Being designated as an important financial institution means the entity is large enough that, if it becomes distressed, the damage to the market would be significant.
When a serious crisis arises due to deteriorating soundness, important financial institutions must submit to the financial authorities and the KDIC both a plan to restore normal operations and, if they become insolvent, a resolution plan. They also must mandatorily accumulate an additional 1 percentage point each for the common equity tier 1 ratio, tier 1 capital ratio, and total capital ratio. As of this year, Shinhan Financial Group(055550)·KB Financial Group(105560) Holdings·Hana Financial Group(086790)·Woori Financial Group(316140)·NongHyup Financial Group, and Shinhan, KB, Hana, Woori, and NongHyup Bank are included among important financial institutions.
To designate insurers and securities firms as systemically important financial institutions, the Financial Services Commission (FSC) plans to focus discussions on additional capital buffer standards. Financial holding companies and banks are subject to the Bank for International Settlements (BIS) capital adequacy ratio, but insurers and securities firms need separate calculation methods tailored to their sector characteristics. The Financial Services Commission also plans to push to amend the Financial Industry Restructuring Act once related consultations are completed.
An official at the Financial Services Commission (FSC) said, "As insurers and securities firms have grown in market influence, we see a need to designate them as systemically important financial institutions."