South Korea's Financial Services Commission (FSC) has approved the self-recovery and resolution plans for 10 major financial institutions, completing this year's review of the country's crisis management framework. The FSC announced on March 15 that the plans largely meet international standards and domestic legal requirements, with no critical vulnerabilities found.
Key Institutions and Plan Details
The 10 institutions include the five largest financial holding companies—Shinhan, KB, Hana, Woori, and NongHyup—along with their respective commercial banks. The self-recovery plans outline measures such as capital raising or asset sales that these firms would use to restore their health during a crisis. The resolution plans, prepared by the Korea Deposit Insurance Corporation (KDIC), detail how authorities would wind down a failing institution while minimizing market disruption.
Areas for Improvement
While approving the plans, regulators identified several areas requiring enhancement. Given the growing risk of cyberattacks in the financial sector, the FSC stressed the need to strengthen IT disaster and hacking response protocols within crisis plans. The newly introduced "digital bank run" indicator also needs refinement. This metric tracks rapid deposit withdrawals via mobile apps or online banking, which can trigger liquidity crunches much faster than traditional bank runs.
Systemic Risk Considerations
The review assumed simultaneous stress across the financial system, recognizing that multiple firms deploying similar recovery tools—like asset sales or funding plans—at the same time could reduce their effectiveness and distort market prices. The FSC instructed institutions to apply more conservative estimates for the impact of such measures and to reflect these scenarios in upcoming simulation exercises. The KDIC also received positive feedback for diversifying its resolution funding sources and enhancing its due diligence capabilities for systemically important institutions.
Next Steps
The review committee recommended strengthening joint simulation drills among relevant agencies and further developing digital bank run response strategies for next year's plans. The FSC expects the approved frameworks to enable major banking groups and authorities to act more swiftly and proactively during crises. A joint simulation exercise involving multiple agencies is scheduled for the second half of this year. As financial instability increasingly stems from non-traditional sources—such as cyber incidents and the speed of digital fund transfers—these reforms point toward more practical, real-world crisis management systems in the future.