Meanwhile, the financial environment changed considerably with the opening of markets to foreign investments and the ongoing march of globalization.

This led to an increasing number of complex financial transactions – such as derivatives – that blurred the boundaries of banking, securities, and insurance.

Based on a recommendation by the International Monetary Fund to establish an integrated financial supervisory body, the National Assembly passed the bill on December 29, 1997.

To combat increased corporate insolvency resulting from the Asian financial crisis, the FSS successfully headed a corporate restructuring drive that implemented a series of measures like the improvement of conglomerates’ financial structure, liquidation of failing companies, and workout program.

The integrated supervisory agency also facilitated a systematic application and supervision of programs introduced in the aftermath of the crisis, such as forward-looking criteria (FLC), a system of financial holding companies, and the retirement pension plan.

In enforcing prudent regulations such as prompt corrective action, business management evaluation, and capital adequacy ratio, it was also able to coordinate and maintain equity across financial sectors.

Its current governor Kwon Hyouk-Se was named to his position in March 2011 after a career of nearly three decades in finance-related positions in the government, including with the Ministry of Finance and Economy(Mofe, predecessor to the Ministry of Strategy and Finance, and the Financial Services Commission.

The FSS is also present in New York, London, Tokyo, and Beijing, and has residing staff in Washington D.C., Frankfurt and Hong Kong.

During the recent period of credit expansion, the FSS took a series of strengthened measures of prudency such as Loan-to-Value (LTV) and Debt-to-Income DTI regulations in March 2006 and the 30% rule restricting savings banks’ project finance (PF) loans in August 2006.

From August 2007, when the sub-prime mortgage crisis emerged in the United States, the FSS established and operated a comprehensive monitoring system to track new market developments.

It operated a round-the-clock monitoring system that was linked with its offices overseas, government agencies, and financial institutions, while closely coordinating policies with the relevant organizations to promptly deal with potential instability factors.

In October 2008, the FSS set up the Foreign Debt Service Guarantee Task Force, thereby working to quickly recover the finance sector's intermediary role by improving banks’ liquidity ratio and helping to ease the domestic and foreign liquidity crunch faced by local companies.

The financial crisis was also an opportunity to crack down on unsound business practices that contributed to increased volatility in the foreign currency and stock markets.

In July 2009, the first round of evaluations screened 861 companies that were subject to external audits and had in excess of 5 billion won in debt; of them, 113 were selected for restructuring.

In the second round of evaluations that ended in September 2009, 1,461 companies subject to external audits and carrying 3 billion won or more in debts were screened, of which 174 were ordered to restructure.

In the third round of evaluations that ended in December 2009, companies subject to external audits with debts of 1 billion won or more and those not subject to external audits but with debts of 3 billion won or more were screened; of the 1,842 companies screened, 225 were selected to undergo restructuring.

The portal also contributed to promoting the Hope Loan program, offered in cooperation with financial institutions.

The FSS also took a series of measures to strengthen the lines of support to small- and medium-sized enterprises (SMEs) in times of liquidity shortage during the global financial crisis.

Working jointly with the Korea Federation of Banks and other organizations, the FSS introduced the SME Fast Track program in October 2008, injecting a combined liquidity of 2.82 trillion won to 1,672 SMEs by the end of 2008.

The FSS is geared to emphasize on-site supervision and examinations in its commitment to establishing itself as financial regulator that markets and consumers trust.

The FSS will provide more financial support for low-income people and SMEs, particularly vulnerable to economic recession, and concentrate on strengthening consumer protection.

1.Stabilizing Financial System In its efforts to better brace for worsening global and domestic conditions including euro-zone debt crisis, the FSS will strengthen foreign currency liquidity management and encourage financial companies to have more ability to absorb losses by setting aside more loan loss provisions.