With the June 3 local elections over, the financial sector's attention is shifting to financial authorities and parliament. Key financial policies that were pushed back during the election period are likely to return to the agenda in the second half of the year.

As of June 5, the financial sector expects issues that had struggled to gain momentum to be discussed again after the local elections. These include improving governance at financial holding companies, loan rules for non-resident single-home owners, a no-fault compensation scheme for voice phishing, the Digital Assets Basic Act and amendments to the Microfinance Act.

These issues directly affect how the financial sector is run, its cost burden and new business strategies. They have been discussed for a long time but were sidelined without conclusions due to the election schedule, political uncertainties and coordination among stakeholders.

Attention is first focusing on plans to improve governance at financial holding companies. The measures were initially likely to be made public in March, before regular annual general meetings, but the announcement was repeatedly delayed. While the stated goal is to strengthen transparency in the process of selecting group chairmen and chief executives, the real issue is how far to limit long-serving chairmen through institutional rules.

Authorities are reviewing a plan to write into law a limit on a financial holding company chairman serving three consecutive terms, as well as changes to how the executive candidate recommendation committee is formed. They are also considering having the committee made up entirely of outside directors and requiring signatures from all members when recommending candidates. Other items under discussion include clawbacks to recoup executive bonuses in the event of financial incidents, say-on-pay to strengthen shareholder control over executive pay plans, and staggered terms that set different term structures for outside directors.

The financial sector is sensitive about the issue because the timing of the policy announcement overlaps with chairman selection schedules in the second half. KB Financial Group is set to begin its chairman selection process in November, and iM Financial Group is also due to choose its next chairman in March next year. Depending on when and how the measures are finalised, boards at financial holding companies and how they manage candidate pools could change.

Loan, compensation and legislative issues line up, raising concerns over a larger burden

Household loan rules are also likely to come back into focus. Financial authorities have stressed a "productive finance" stance aimed at redirecting money flows concentrated in real estate toward industry and innovation. With loan curbs already continuing, and regulators reviewing possible restrictions on jeonse loans for non-resident single-home owners, banks' lending business environment could narrow further.

Financial authorities are assessing the size of jeonse loans for apartment owners with one home in the Seoul metropolitan area and regulated districts and are reviewing policy design. For it to lead to actual regulation, a key issue will be how to distinguish speculative purposes from genuine demand. If rules also cover non-speculative cases such as working in a different region, children's education or temporary relocation, the impact on the jeonse market and end-users could be large.

A no-fault compensation scheme for voice phishing is also cited as a burden factor for the financial sector. A proposed revision to the law on refunds for telecom fraud damage includes provisions requiring financial firms to compensate voice phishing victims for part or all of losses regardless of whether the firms were at fault. The aim is to broaden victim relief, but the financial sector is concerned the scope of liability could become excessively wide.

With voice phishing damage continuing to increase mainly among older people and vulnerable groups, a key issue is how far to impose compensation responsibility on financial firms. Depending on the compensation cap, the burden on the financial sector could rise to several hundred billion won a year.

Major banks are strengthening their own prevention systems separately from legislative discussions. Measures include artificial intelligence-based detection of unusual transactions, sharing information on fraudulent accounts and creating dedicated teams for financial fraud.

Proposed amendments to the Microfinance Act could also resurface in the second half along with discussions on inclusive finance. A bill is pending in parliament that would set up a funding framework to expand policy microfinance supply and establish a microfinance stabilisation fund within the Korea Inclusive Finance Agency.

The financial sector is concerned that additional contributions or cost burdens could increase. There is little disagreement over the policy direction of expanding inclusive finance, but discussions could be prolonged over who bears how much of the funding.

Will the Digital Assets Basic Act gain speed

The Digital Assets Basic Act is also a key point to watch in the second half. Digital finance-related businesses such as won-denominated stablecoins, Bitcoin spot ETFs, deposit tokens and tokenised securities are spreading quickly, but legislation has not gained momentum. After the election, the possibility is being discussed that debate could resume.

Legislation has been delayed as key issues have not been settled, including who can issue such assets, how reserves are accumulated, redemption obligations and limits on major shareholders' stakes in exchanges.

Stablecoins in particular could affect existing bank business models. If stablecoins establish themselves as payment and remittance methods, some deposits could move into reserve assets and payment functions could also shift to blockchain-based systems. That is why banks see the digital asset market not simply as a new business but as an area they must defend.

The financial sector sees a higher likelihood that policy discussions will restart after the election, but says the actual pace of progress remains to be seen. Depending on how the latter half of the parliament is formed, the direction of standing committee operations and political issues between the ruling and opposition parties, financial bills could again be pushed down the priority list.

A financial sector official said, "With the election over, stalled discussions may start moving again, but interests differ by issue and are complex, so it does not look easy to reach conclusions in a short period." The official added, "In the case of the governance improvement measures, it looked like they would come out soon, but they have been delayed. We are watching because various other issues could also simultaneously act as a burden on the financial sector."