FSC strengthens its roleAs part of efforts to prevent another Tongyang-type crisis, the country’s financial regulator yesterday announced a package of comprehensive measures that include giving the regulator full monitoring control over lenders affiliated with large conglomerates.
Currently, private lenders register their businesses and receive inspections, if needed, by regional governments.
According to the Financial Services Commission, starting next year it will be in direct charge of receiving business registers of private lenders owned by conglomerates, and constantly monitor and impose restrictions, if necessary. The role so far has been taken by local governments.
“Honestly speaking, private lenders aren’t considered financial institutions, but simply private moneylenders,” said an official from the FSC. “So, for example, if an individual wanted to start a private lending business, he or she would have to submit registration documents to the government body of the region the business is based in, like the Daegu Metropolitan City Government.”
The change comes as more than 49,000 small investors were victimized after they bought more than 2 trillion won ($1.88 billion) in high-risk corporate bonds and commercial paper of Tongyang Securities. The conglomerate secured funding by having affiliate Tongyang Securities issue junk-rated bonds and selling them to retail investors, and also through its private lending affiliate Tongyang Financial.
“Tongyang Financial was an affiliate of the conglomerate that provided funds to its affiliates rather than doing business with consumers,” the official said. “The company was monitored by Seoul city, which triggered the crisis.”
The regulator also named 10 unfair financial practices, saying it will no longer “tolerate” them.
“We will punish those financial institutions if they cause damage to consumers,” said Chung Chan-woo, vice chairman of the FSC.
Among the 10 are financial institutions selling products to consumers in an unfair manner, unfairly collecting loan interests and commissions, supporting their major shareholders and affiliates, and promoting unfair stock trading.
BY LEE EUN-JOO [firstname.lastname@example.org]