FSS vows to make level playing field

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FSS vows to make level playing field

The head of Korea’s regulatory watchdog vowed yesterday that the financial system will be improved to create a level playing field for both domestic and foreign firms this year.

At the largest annual gathering of foreign financial firms hosted by the Financial Supervisory Service, officials of foreign financial companies expressed confidence in the Korean economy while discussing their concerns about the worldwide trend of burdensome regulatory changes.

More than 200 such representatives gathered to hear the regulator’s supervisory direction for the year at the fourth annual “FSS Speaks” conference held at Lotte Hotel in central Seoul yesterday.

This year, FSS Governor Kwon Hyouk-se said in a welcoming address that “[The FSS is taking steps] to move toward a more even regulatory environment, without making any distinctions between domestic and foreign [firms], especially in light of Korea’s free trade agreements with the EU and the U.S.”

Large investment banks will be subject to “more intensive and more frequent” examinations, Kwon said, adding in reply to reporters’ questions that domestic and foreign banks will still receive “equal treatment” in terms of the intensity of the probes.

Echoing foreign analysts’ assessment of Korea’s policy direction, officials of foreign financial firms acknowledged that financial regulators have done a fair job of defending the local economy against repeated financial crises that started overseas.

“Supervisory authorities [have taken] appropriate prudential measures for the past year to help contain the impact of the euro zone debt [crisis] on the Korean economy and its financial markets,” said Stephen Lackey, chairman of BNY Mellon Asia Pacific.

“Public policies have been very effective in allowing continued buildup of foreign currency reserves.”

Such a positive outlook was echoed by other high-ranking officials such as Wang Lili, the senior executive vice president of the world’s largest bank, the Industrial and Commercial Bank of China. She said that ICBC is planning a capital infusion into the Korean unit of ICBC, although the size of the capital still “depends” on regulatory approval.

“We have a local unit here in Korea [which] needs more capital, and the ICBC head office will help by injecting money here,” said Wang. “We think that Korea is an economy which enjoys very good growth potential, although [it is currently experiencing] a little bit of a slowdown.”

However, there were also voices of concern about whether the slew of tougher financial regulations currently being introduced worldwide may end up harming the timely allocation of funds that effectively props up the economy.

“The single biggest risk is that in a legitimate attempt to respond to real concerns, the global regulatory environment starts to fragment,” said Richard Hill, CEO of Standard Chartered Bank Korea, in his guest presentation.

“This effectively creates unintended protectionism and undermines international connectivity, reduces trade flows and ultimately costs jobs in the real economy.”

Meanwhile, the FSS and foreign financial companies stressed the importance of corporate social responsibility in the wake of the Occupy movement that began last year.

“There has been a growing demand on financial firms for more active, more socially responsible corporate citizenship,” said FSS Governor Kwon in his address. “This is a challenge that I think financial firms can step up to meet.”

In meeting with reporters, Kwon explained that he wasn’t calling for financial companies to add to their loan loss reserves instead of paying out dividends when he emphasized social responsibility. Rather, he said he was suggesting that financial services for low-income households be expanded, along with more customer protection.

Kwon added that the FSS will carry out an investigation this month into how well its previous measures aimed at providing financial products for low-income households and curbing household debt are being carried out “on the ground.”

By Lee Jung-yoon [joyce@joongang.co.kr]

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