The South Korean Financial Services Commission plans to impose prudential regulations in accordance with global standards, while streamlining prudential standards services sectors.

In a recent paper, the regulator says that regulatory regimes for Domestic Basel Pillar 2 will start to apply 2016 and strengthen gradually over time. It will present the banking sector with detailed plans for Recovery and Resolution and Net Stable Funding Ratios with an implementation date in 2018.

For insurers, consolidated Risk-Based Capital and Own Risk & Solvency Assessments are scheduled for 2016 and 2017 respectively. Recapitalization plans for insurers in preparation for IFRS4 phase 2 (the new global solvency standard) and measures to strengthen credit risk management for off-balance-sheet exposures.

The FSC plans to establish a 'best practice guideline' for financial groups in 2016 to assess and manage risks by group unit, as the present system is focused too heavily on sector-wide supervision. At the moment, only financial holding companies are subject to consolidated supervision under the Financial Holding Companies Act. The guideline is for consolidated companies such as affiliated companies of financial services groups, financial affiliates of conglomerates, etc.

It will also ease regulations that it thinks are 'excessive.' Bank loan-to-deposit regulations will be maintained for now, while load-to-deposit ratios on foreign banks’ branches will be partially eased. Foreign branches will be allowed to include their long-term borrowings with a maturity longer than one year from headquarter offices in the calculation of deposits. The “legal reserve” requirement will be abolished as its effectiveness has diminished with the introduction of Basel III. Insurance companies will be allowed to issue subordinate bonds, subject to regulatory approval. Issuance of hybrid bonds will be permitted whenever necessary to secure solvency margin. For the non-banking sector, loan-to-deposit ratios for mutual finance businesses will be 100%, the equivalent level applied to banks.