Regulation on Intra-group Transactions of Financial Affiliates in Non-financial Groups: The Current Status and Issues

Abstract

This study reviews the current status of the regulation of intra-group transactions of financial affiliates in non-financial groups and analyzes the limitations and loopholes in the regulatory environment surrounding these transactions. Intra-group transactions of group-affiliated financial firms are regulated under (1) the Monopoly Regulation and Fair Trade Act, (2) the Commercial Act, (3) tax laws, and (4) financial statutes and regulations. Despite the existence of various regulations, in practice, regulatory blind spots and loopholes for intra-group transactions undertaken by financial affiliates in non-financial groups remain because of the weakness of the supervisory framework and the nature of financial service transactions. This study contributes to the extant discussion on the regulation of intra-group transactions by focusing on the regulation of intra-group transactions undertaken by financial affiliates that have not received much attention. In addition, this study provides timely policy implications when the new Act on comprehensive group-wide supervision of financial affiliates becomes effective.