Financial Regulation

Financial regulation is not merely a tool for imposing sanctions. It serves as an institutional mechanism meant to encourage fair competition and ongoing innovation within the financial industry.

In particular, Article 1 of the Financial Regulation Operating Rules gives central weight to the following objectives whenever a financial regulation is newly established, strengthened, or enforced.

Guided by these basic principles, financial regulation pursues consumer protection and market stability in the short term, and, over the longer term, the broader goals of strengthening the competitiveness of the financial industry and promoting innovation.

Under Article 3 of the Financial Regulation Operating Rules, the rules govern the following measures taken by the Financial Services Commission and financial-related agencies.

An innovative financial service is one that carries a technological or methodological distinctiveness setting it apart from existing financial services.

Such services may include the following.

In every case, the financial regulatory sandbox is only a temporary regulatory exception, so once the designated period ends, the service must comply with all applicable financial regulations.

Even where an empirical exception has been granted, core rules on consumer protection and the security of personal information and data still apply, so careful risk management remains necessary throughout the trial run.

A sandbox designation is also valid only within the purpose and scope approved in advance, so extending the service beyond that scope or applying it in a different form may trigger additional review or restrictions.

These regulations are set out clearly in official statutes, including acts, presidential decrees, prime ministerial ordinances, and public notices.

For example, the category covers specific, legally enforceable measures that apply across the financial industry, such as the licensing of financial companies, capital requirements, and restrictions on business conduct.

These measures are not laid down directly in statute, yet the financial authorities recommend or require them of financial companies in order to achieve financial administrative objectives.

Non-explicit regulation can be divided further into the following two categories.

In the insurance industry, the core objectives are protecting policyholders and securing the solvency of insurance companies.

▶ Main Statutes and Regulations

Banks play a central role in protecting depositors and maintaining the stability of financial markets, and they are subject to strict capital and risk management requirements.

▶ Main Statutes and Regulations

The capital markets sector centers on protecting investors and securing market transparency.

▶ Main Statutes and Regulations

Policy finance covers regulation of the financial activities that the government and public institutions operate to achieve economic policy objectives.

▶ Main Statutes and Regulations

This area regulates financial support for small and medium-sized enterprises and small business owners, aiming to expand access to finance and protect the financially underserved.

▶ Main Statutes and Regulations

This area covers regulation in the field of financial innovation tied to new technologies and new businesses, such as fintech, digital finance, and virtual assets.

▶ Main Statutes and Regulations

A company should regularly review the latest financial regulatory trends and statutory amendments announced by related agencies, such as the Financial Services Commission and the Financial Supervisory Service.

Doing so allows the company to adjust quickly to a changing regulatory environment and to anticipate and respond to the effects of regulatory changes.

To comply with financial regulations, a company should establish and document clear internal control standards and procedures.

It also helps to maintain a system that designates a compliance officer or compliance staff to oversee and manage regulatory compliance on an ongoing basis.

Before launching a new financial product or service, a company should review regulatory compliance thoroughly.

Where appropriate, it can be safer to draw on legal professionals to examine regulatory risks in advance.

A company should prepare a manual and procedures that allow a prompt, systematic response to crisis situations, such as financial incidents or leaks of personal information.

It also helps to identify and remedy vulnerabilities in advance through periodic internal audits and risk management.

For complex and specialized financial regulatory matters, it can help to obtain the advice of a financial attorney.

In particular, matters concerning financial regulatory sandbox applications, anti-money laundering obligations, and innovative financial services can be safer to prepare together with a professional.