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Chaebol's financial units to face closer scrutiny next year: regulator

All News 14:41 June 11, 2019

SEOUL, June 11 (Yonhap) -- The financial regulator said Tuesday it will put financial affiliates of family-run business conglomerates, or chaebol, under closer scrutiny next year, in a bid to better assess their risk management and emergency backstops.

Choi Jong-ku, chairman of the Financial Services Commission (FSC), made the remarks at a meeting with chief executives of financial affiliates of five chaebol -- Samsung, Hyundai Motor, Hanwha, Lotte and DB -- as well as Kyobo Life Insurance Co. and Mirae Asset Daewoo Co., earlier in the day.

During the meeting, Choi cited excessive intra-affiliate transactions among non-financial affiliates and opaque capital injections as risks facing financial affiliates of chaebol.

Chaebol's financial units to face closer scrutiny next year: regulator - 1

Choi urged financial affiliates of chaebol to "set up pre-emptive and practical risk management processes that are needed for sustainable management and growth."

Since last July, the FSC has applied tighter regulations on the chaebol's financial affiliates, requiring them to sell some of their shares in non-financial affiliates if such business practices are found to cause risks in the financial system.

The financial regulator also raised the monitoring of the capital adequacy of the financial affiliates.

In South Korea, a typical conglomerate controls dozens of subsidiaries through a complex web of cross-shareholdings. This shareholding system sometimes leaves many chaebol units vulnerable to problems affecting other affiliates.

Samsung Life Insurance Co., which holds an 8.27 percent stake in Samsung Electronics Co., has been under pressure to sell a part of the stake as lawmakers have proposed a bill that bans insurers from holding stakes of more than 3 percent in non-financial affiliates.


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