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About Laws and Regulations

Financial statutes and regulations consist of laws enacted by the National Assembly, enforcement decrees approved by the president’s state council (cabinet), enforcement rules approved by the Office for Government Policy Coordination under the prime minister, and regulations written by the Financial Services Commission and the Financial Supervisory Service. Although enforcement decrees, enforcement rules, and supervisory regulations differ in hierarchy, they are all intended to implement and support specific statutes enacted by the National Assembly.

Laws

A law, enacted by the National Assembly, supersedes enforcement decrees, enforcement rules, and regulations that are written and enforced by the administrative agencies of the executive branch.

Enforcement Decrees and Enforcement Rules

An enforcement decree, also called presidential enforcement decree, is a regulation immediately subordinate to laws. It is approved by the president’s state council (cabinet) to implement statutes enacted by the National Assembly. An enforcement rule is a regulation subordinate to enforcement decree and approved by the Office for Government Policy Coordination under the prime minister. Enforcement rules complement enforcement decrees with additional detailed rules in support of statutes enacted by the National Assembly. Laws passed by the National Assembly are not always accompanied by an enforcement decree and an enforcement rule.

Regulations and Detailed Regulations

In respect of financial regulation and supervision, regulations are written by the Financial Services Commission (FSC), a regulatory agency of the executive branch, to complement enforcement decrees and enforcement rules and ensure full enforcement of statutes. Regulations are subordinate to both enforcement decrees and enforcement rules. The Regulation on Supervision of Banking Business is thus subordinate to the Enforcement Decree of the Banking Act. Because the FSC and the FSS share financial regulation and supervision, the FSC assigns or delegates most of the enforcement functions such as investigation of unlawful securities trading to the FSS. Detailed regulations are written by the FSS in support of FSC regulations to ensure effective performance of supervisory duties and functions.

Legal and Regulatory Structure for Banking Business

The legal and regulatory structure for banking business is typical of the legal and regulatory structures for nonbanking, securities, and insurance businesses. The statutes and regulations applicable to banking in descending hierarchy are: (1) the Banking Act, legislated and amended by the National Assembly; (2) the Enforcement Decree of the Banking Act, written and approved by the president’s cabinet; (3) the Regulation on Supervision of Banking Business, written and amended by the FSC; and (4) Detailed Regulation on Supervision of Banking Business, written and amended by the FSS.

The underlying rationale for the hierarchial structures is that the Banking Act provides the broad legal basis for regulating banking business, and the subordinate enforcement decrees and regulations set forth specific provisions needed to enforce the Banking Act. As an example, the provisions of the Banking Act and the subordinate enforcement decrees and regulations pertaining to bank capital requirements vary in specificity as follows:

  • Article 34 of the Banking Act requires banking institutions to comply with supervision standards and grants the FSC the authority to set the supervision standards.
  • Article 20 of the Enforcement Decree of the Banking Act sets forth specific provisions to be included in the determination of supervision standards; the specific provisions pertain to bank capital standards and asset classification rules.
  • Article 26 of the Regulation on Supervision of Banking Business provides that banking institutions must comply with the minimum standards for common equity tier 1 capital, tier 1 capital, and total regulatory capital and that the authority to set the specific minimum capital standards may be delegated by the FSC to the FSS.
  • Article 17 of the Detailed Regulation on Supervision of Banking Business specifies the numerical ratios to be complied with in respect of common equity tier 1, tier 1 capital, and the total regulatory capital.

Rulemaking Process

The rulemaking process is similar for most regulations. In general, when a rule is newly written or amended, it is subject to a 40-day public comment period and an independent review. After the rulemaking agency decides on the final rule, the new rule is officially promulgated before it takes effect.

General Rulemaking Process

Banking Act Enforcement Decree of the Banking Act Regulation on Supervision of Banking Business Detailed Regulation on Supervision of Banking Business
Draft Amendment Draft Amendment Draft Amendment Draft Amendment
Regulatory Impact Analysis Regulatory Impact Analysis
Inter-agency Consultation and Coordination Inter-agency Consultation and Coordination Announcement of Public Comment Period

No less than 40 days

Announcement of Public Comment Period

No less than 40 days

Announcement of Public Comment Period

No less than 40 days

Announcement of Public Comment Period

No less than 40 days

Review of Regulatory Reform Committee Review of Regulatory Reform Committee
Review of Regulatory Reform Committee Review of Regulatory Reform Committee Approval by Financial Services Commission Approval by Financial Supervisory Service
Review of Ministry of Government statutes Review of Ministry of Government statutes Promulgation by Financial Services Commission Review of Financial Services Commission
Deliberation at Vice-Ministerial Meeting and President’s State Council Deliberation at Vice-Ministerial Meeting and President’s State Council Notice of Rule Change
Deliberation and Approval by National Assembly Approval of President
Public Promulgation Public Promulgation