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FSS orders Kakao Bank to improve contingency plan

A Kakao Bank subscriber uses the online bank’s mobile application. (Yonhap)
A Kakao Bank subscriber uses the online bank’s mobile application. (Yonhap)
Financial regulator Financial Supervisory Service said Thursday that it has ordered online-only bank Kakao Bank to beef up its plans to deal with emergent situations, such as shortage of capital.

The watchdog regularly assesses financial companies’ capital adequacy and risk management schemes, and it orders them to fix inefficient emergency measures if there is any.

It was the first time for the online bank to be reviewed by the financial authority over its contingency plan. The nation’s second online bank launched in July 2017 has been exempt from the assessment process for the sake of the growth of the fledgling internet banking sector here.

As the online banking sector has been fast growing recently, the financial authority is thought to have started tightening restrictions on newcomers in the banking industry.

With the caution from the FSS, Kakao Bank now needs to come up with detailed plans to secure capital in emergent situations and clarify the descriptions of how it will handle capital adequacy. The watchdog has also required the bank to set up compensation standards for risk management officials, and detailed methods of management risks.

Meanwhile, the online banking affiliate of mobile messenger KakaoTalk, has decided to stop offering credit line services temporarily from Thursday through the end of this year. The move is in line with the government’s efforts to reduce risks stemming from growing household debt. Concerned over the so-called ‘panic buying,’ trend in which people buy homes by borrowing as much money as possible, the government has recently ordered local banks to limit the amount of loans offered to individuals with high credit ratings.

By Kim Young-won (
Korea Herald Youtube