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Moody's: South Korea's new rules for financial conglomerates are credit positive

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Moody's: South Korea's new rules for financial conglomerates are credit positive

South Korean regulators' plan to roll out new regulations to introduce integrated supervision of financial conglomerates is credit positive, Moody's said.

The rating agency said Feb. 5 that the plan is credit positive because major financial conglomerates will become subject to assessment and monitoring of group-level risk. The rules will cover financial conglomerates with at least two financial affiliates that have more than 5 trillion won of combined assets, according to South Korea's Financial Supervisory Service.

The Financial Services Commission and the FSS defined "conglomerate" as any group of companies with financial affiliates in at least two of the banking, insurance and securities sectors. The rules will require such groups to implement risk management controls and set aside additional capital buffer to absorb potential risk contagion, the regulators said.

The rating agency said the move brings South Korea's regulation more in line with global best practices. Relevant laws and rules will be established in 2018, and Moody's said it expects the pilot program to start in the second half of the year.

As of Feb. 5, US$1 was equivalent to 1,087.04 South Korean won.