Financial Supervisory Service As the integrated supervisory authority, the FSS oversees financial services firms across
the entire financial sectors.


FSS-Supervised Financial Institutions

As the integrated supervisory authority, the FSS oversees financial services firms across the entire financial sectors. For supervision purposes, the FSS classifies financial services firms it supervises into four general types: banks, nonbank financial companies, financial investment services providers, and insurance companies.


Banking institutions that the FSS supervises are generally grouped into domestic banks and foreign bank branches. Domestic banks are divided into commercial banks and specialized banks, and commercial banks into national banks and regional banks, both of which are incorporated pursuant to the Banking Act. National banks operate nationwide, but regional banks are subject to certain geographic restrictions in their business operations. Specialized banks refer to government-affiliated policy banks that have been established under individual legislation enacted by the National Assembly. The Banking Act in principle recognizes foreign bank branches as equivalent to domestic banks in respect of banking activities permitted and supervision.

Domestic Banks

Domestic banks comprise commercial banks and specialized banks. Commercial banks are further divided into national banks and regional banks.

National Banks

National banks operate throughout the country without any regional restriction. The number of national banks grew from five at the end of 1979 to 16 by the end of 1997 on the back of financial market liberalization. Following the 1997 Asian financial crisis, which caused systemic stresses of unprecedented scale to the banking industry, the number of national banks fell to seven as a result of mergers and dissolutions. From January 1998 to September 2001, a total of five commercial banks (three national banks and two regional banks) were closed through purchase and acquisition, and a total of 11 banks (six national banks, two regional banks, and three specialized banks) were merged to form five banks (four national banks and one specialized bank). As of June 1, 2017, seven national banksㅡShinhan, Woori, Standard Chartered Bank Korea, Hana (merged with Korea Exchange Bank in September 2015), Citibank Korea, Kookmin Bank, and K Bank ㅡwere operating. (K bank started banking business in April 2017 as Korea's first Internet bank.)

Regional Banks

Regional banks were first established in 1967 in an effort to better balance regional economic development and provide greater access to financial services to the regional and rural areas. There were ten regional banks that were operating at the end of 1997, but the number fell to six as a result of closures and mergers in the wake of the 1997 financial crisis. Like national banks, regional banks maintain branch banking within their respective localities. The regional banks primarily serve small- and medium-sized enterprises (SMEs), households, and individual borrowers in their respective regions. As of June 1, 2017, six regional banksㅡDaegu, Busan, Gwangju, Jeju, Jeonbuk, and Gyongnamㅡwere operating.

Specialized Banks

Specialized banks were established during the 1960s primarily to supplement the commercial banks in areas where they could not supply sufficient funds due to limited capital and also to support specific industrial sectors that were given priority by the government in its economic development plans. As the banking landscape shifted, however, specialized banks began to expand their businesses into commercial banking. Their share of capital allocation to the specific sectors they were originally intended to serve is still relatively high. In raising funds, specialized banks primarily rely on public funds and bonds, although they compete with commercial banks for deposits. Under the law, five banking organizations are recognized
  • Korea Development Bank
  • Export-Import Bank of Korea
  • Industrial Bank of Korea
  • NongHyup Bank of the National Agricultural Cooperative Federation
  • Suhyup Bank of the National Federation of Fisheries Cooperatives

Foreign Bank Branches

Foreign bank branches were first allowed into Korea in 1967 to encourage the flow of foreign capital and improve access to international capital markets. In 1984, the government began to remove restrictions on foreign branches in an effort to level the playing field for foreign banks, and in 1991 significantly eased regulations on foreign banks to promote greater competition among banking organizations operating in Korea. For instance, the government allowed foreign banks to open multiple branches under the same standards and procedures as those applied to domestic banks and to compete on equal footing with domestic banks. Traditionally, foreign bank branches in Korea specialized in wholesale banking. As a result of growing market liberalization and deregulation, however, foreign banks have recently been competing with domestic banks on wider-ranging banking businesses.

Nonbank Financial Companies

Nonbank financial companies refer to financial services firms that are not classified as a bank, a financial investment services provider, or an insurance company. For supervision purposes, nonbank financial companies are generally divided into three groups: mutual savings banks, specialized credit finance companies, and mutual credit cooperatives.

Mutual Savings Banks

Mutual savings banks are regulated institutions that provide retail and small business banking in limited scale. Although they are deposit-taking institutions and carry on commercial banking, they are not classified as banks for supervision purposes because they are incorporated and regulated under the Mutual Savings and Finance Company Act, not under the Banking Act as is the case for the commercial banks. Mutual savings banks primarily offer time deposit, installment deposit, and demand deposit services and provide small credit to individual borrowers and small businesses at interest rates that are typically higher than the rates charged by the banks and other established lending institutions.

Specialized Credit Finance Companies

Specialized credit finance companies comprise credit card companies, leasing companies, installment finance companies, and new technology venture capital companies. All specialized credit finance companies are subject to FSS supervision.

Credit Card Companies

The primary services of credit card companies are installment payment, cash advances, and card loan services, debit card services, and payment settlement services.

Leasing Companies

Leasing companies engage in the business of providing facility leasing and deferred payment sales to business enterprises. As lessors, leasing companies generate rental income by granting the lessee a right to use for a period of time specific property that they own or have paid for. Deferred sale is a method used by leasing companies to deliver specific property to the lessee, which then uses the property with payments in periodic installments.

Installment Finance Companies

Installment finance companies provide financing for the purchase of consumer goods and services. They collect principal and interest payment from the borrower by entering into an installment purchase agreement simultaneously with the buyer and the seller.

New Technology Venture Capital Companies

New technology venture capital companies help raise capital to technology companies by underwriting debt and equity issues and offering financing to companies with the “venture” designation. They also provide consulting services to technology start-ups

Mutual Credit Cooperatives

Mutual credit cooperatives are not-for-profit financial cooperatives that are owned and controlled by members who share a common place of residence, workplace, organization, community or are tied by other associations. Most provide deposit and loan services and other member-specific financial services. Under the law, the following mutual credit cooperatives are recognized:

  • Credit unions and their national federation (the National Credit Union Federation of Korea);
  • Agricultural cooperatives and their national federation (the National Agricultural Cooperative Federation);
  • Fishery cooperatives and their national federation (the National Federation of Fisheries Cooperatives);
  • Forestry cooperatives and their national federation (the National Forestry Cooperative Federation); and
  • Community credit cooperatives and their national federation (the Korean Federation of Community Credit Cooperatives).

Of the recognized mutual credit cooperatives, only community credit cooperatives and their national federation fall under the oversight of the Ministry of the Interior. By assets, credit unions are the largest.

Financial Investment Services Providers

The Financial Investment Services and Capital Markets Act (FSCMA) that the National Assembly approved in July 2007 and took effect on February 4, 2009, following a grace period of a year and half provides for function-based supervision of securities and investment servicesㅡcollectively referred to as “financial investment services”ㅡby reclassifying previous service boundaries into six new categories of financial investment services:

  • Dealing;
  • Brokerage;
  • Collective investment schemes;
  • Investment advisory services;
  • Discretionary investment services; and
  • Trust services.

Financial services firms may engage in one or more of the six financial investment services businesses with the appropriate regulatory authorization/approval from the FSC/FSS. A financial services firm that engages in any of the six financial investment services is referred to as a financial investment services provider.


Investment dealing refers to proprietary buying and selling of an investment product (financial investment product) through the company’s proprietary account; dealing extends to underwriting securities on the behalf of an issuer and subscribing to the securities or making offers and accepting bids for the securities.


Brokerage providers engage in the business of non-proprietary buying and selling of financial investment products through customer accounts; brokerage services cover subscribing to an investment product for a customer or making offers and accepting bids for an investment product.

Collective Investment Scheme

Collective investment scheme (CIS) refers to the business of pooling investment from two or more investors and managing the investment in behalf of the investors; asset management companies are most common CIS operators.

Investment Advisory Services

Companies offering investment advisory services engage in the business of providing advice on investment products and investment decisions in respect of such matters as investment to be bought and sold and the methods and the timing of the buying and selling; in addition to investment advisory service companies, securities companies and asset management companies may offer investment advisory services. Companies seeking to offer investment advisory services must register with the FSC/FSS.

Discretionary Investment Services

Companies providing discretionary investment services make partially or wholly discretionary investment decisions and manage the investments on behalf of customers. In addition to discretionary investment service companies, securities companies, and asset management companies may provide in discretionary investment services. Registration with the FSC/FSS is required for discretionary investment services.

Trust Services

Trust services refer to the business of managing assets of a trust settlor for the benefit of the designated beneficiary; in addition to trust service companies, banks, securities companies, insurance companies, and asset management companies may engage in providing trust services.

Insurance Companies

Insurance companies are financial services companies that offer life, nonlife, and hybrid insurance products and services. The Insurance Business Act classifies business activities permitted to insurance companies into three types: primary business, secondary business, and concurrent business.

Under the law, insurance business is divided into life insurance, nonlife insurance, and hybrid insurance. Whereas life insurance gives protection against death in the form of a payment to a beneficiary, nonlife insurance generally provides property and casualty coverage and includes reinsurance and guaranty insurance. Following a major overhaul of the Insurance Act in 2003, hybrid insurance was created as a separate business category in addition to life and nonlife insurance for products providing coverage for illness, injury, and long-term care.

In addition to the primary businesses, insurance companies may also engage in secondary businesses that are ancillary to insurance business and can be carried on by utilizing the company’s existing business assets and infrastructure. Insurance companies may also engage in concurrent businesses, which may not be related to insurance business but may be carried on concurrently with insurance businesses such as pension insurance and retirement, trust services, and investment advisory services.

Financial Holding Companies

In addition to the four primary types of financial services companiesㅡbanks, nonbank financial companies, financial investment services providers, and insurance companiesㅡfinancial holding companies (FHCs) that are duly incorporated pursuant to the Financial Holding Companies Act also fall under FSS supervision.

FHCs are regulated business entities that hold and exercise controlling interest in financial institutions and others with businesses closely related to those of financial institutions. A subsidiary is an entity controlled by an FHC, a second-tier subsidiary controlled by the subsidiary, and a third-tier subsidiary controlled by the second-tier subsidiary. A subsidiary of an FHC may hold a controlling interest in a second-tier subsidiary only if the second-tier subsidiary is either a financial institution whose business is closely related to that of the subsidiary or is a company that provides or facilitates financial services (such as an IT service provider).

FHCs were allowed for the first time in February 1999 with an amendment to the Monopoly Regulation and Fair Trade Act and were then placed under financial regulation and supervision with the passage of the Financial Holding Companies Act in October 23, 2000, and the approval of the subordinate supervisory regulations on December 29, 2000. Under the law, the scope of business activities for FHCs in is limited to (1) management of the subsidiary units, including establishing business objectives, evaluating business performance, determining corporate governance, inspection of the subsidiaries, and internal control; and (2) business activities facilitating the management of the subsidiary units, such as financing, joint development of financial products and services, and shared use of facilities. The supervisory framework for FHCs is essentially similar to that for banks. As a financial group, FHC is supervised on a consolidated basis.

Other Supervised Financial Services

Postal savings and insurance, community credit cooperatives, and other similar enterprises managed or supervised by government or public agencies are exempted from FSS supervision.

Moneylenders engage in the business of providing short-term cash and loan services at higher interest rates than rates charged by the commercial banks and other regulated lenders. They fall under FSS supervision if they are registered with 2 or more municipal administrative authorities or if the aggregate amount of assets from the most recent accounting period exceeds KRW7 billion.

In addition to the institution-based supervision of financial services companies that are incorporated and recognized under the law, the FSS carries on function-based supervision of financial services activities whose business boundaries or risk characteristics are not well established. Such activities include foreign currency-related activities, derivatives trading, electronic financial services, and the sale of corporate, individual, and retirement pension products and pension asset management.

Table of FSS-Supervised Financial Services Companies


Domestic banks Commercial banks
  • National banks
  • Regional banks
Specialized banks
  • Korea Development Bank
  • Export-Import Bank of Korea
  • Industrial Bank of Korea
  • NongHyup Bank
  • Suhyup Bank
Foreign bank branches

Nonbank financial companies

Nonbank financial companies
Mutual savings banks
Specialized credit finance
  • Credit card companies
  • Leasing companies
  • Installment finance companies
  • New technology venture capital companies
Mutual credit cooperatives Credit unions (the National Credit Union Federation of Korea)
  • Agricultural cooperatives (the National Agricultural Cooperative Federation)
  • Fishery cooperatives (the National Federation of Fisheries Cooperatives)
  • Forestry cooperatives (the National Forestry Cooperative Federation)

Financial investment services

  • Dealing
  • Brokerage
  • Collective investment scheme
  • Investment advisory services
  • Discretionary investment services
  • Trust services

Insurance companies

  • Life insurance companies
  • Nonlife insurance companies