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TRANSCRIPT
Korea-EU FTA - Financial Services
Presentation for Korea-EU FTA Seminar
Dr. Jong-Goo YI
| June 20, 2011
2 l
Contents 1. The Korea-EU FTA: Overview
2. Market Access
3. Cross-Border Supply of Services
4. Offshore Business Delegation/Outsourcing
5. Offshore Data Processing
6. Transfer of Personal Data: Problems
7. Going Forward
3 l
FTA reconfirms Korea’s commitment to market-friendly policy
The Korea-EU FTA Overview
Closer to global standards
Significant progress already made, especially since Asian financial crisis
Ease of remaining operational burden for foreign-owned FIs
Offshore delegation/outsourcing of certain back-office functions
Offshore data processing
4 l
Market Access
Establishment of Local Subsidiaries/Branches
Cross-Border Supply of Services
Positive List
Negative List
Exceptions
Separate licenses required to establish additional bank branches
Interbank brokerage of KRW spot transactions limited to existing firms
New financial services (only in compliance with existing Korean laws)
5 l
Cross-Border Supply of Services
Permissible Cross-Border Services
Within 2 years(2) Financial data processing and related software
O(1) Provision and transfer of financial information
Banking and other Financial Services
O(5) Services auxiliary to Insurance*
Limited to insurances related with (1)~(3)(4) Insurance brokerage/agency
O(3) Reinsurance
O(2) Import/Export Cargo Insurance
O(1) Marine, Aviation, and Space Insurance
Insurance
Cross-Border SupplyService Areas
* Insurance consultation, actuarial services, risk assessment, claim adjustment, etc.
6 l
Scope of Business Delegation/Outsourcing
“The Parties recognize the benefits of allowing a financial service supplier in a Party’s territory to perform certain functions at its head office or affiliates located inside or outside the Party’s territory”
“To the extent practicable, each Party should allow such an office or affiliate to perform these functions……”
Scope of permissible business delegation/outsourcing is unclear
“certain”“to the extent practicable”“should allow”FSC/FSS discretion
Text of the FTA (Annex 7-D)
※Except that host country regulator has discretion to impose certain restrictions
7 l
Scope of Business Delegation/Outsourcing (continued)
Current Regulations
‘Regulations concerning Business Delegation of FIs’ (promulgated by the FSC)
Relevant statutes: ‘FSCMA’, ‘FHCA’, etc.
Non-core businesses such as HR / Accounting / IT
No bright line distinction for functions permitted and non-permitted Regulatory discretion
Prior or post reports to the FSS required
Specific Scope and Procedures for Delegation/Outsourcing
Whether and to what extent, FSC/FSS will change their position on offshore business delegation/outsourcing?
8 l
Offshore Data Processing
Current Practices and Policies
FSS Guidelines (FIs’ Delegation/Outsourcing Handbook, Dec. 2007)
IT facility considered a core function
IT outsourcing not allowed without compelling reason
However, a local subsidiary allowed to temporarily use a part of its offshore IT facility
Regulatory Practices
Offshore IT outsourcing not easily allowed
Onshore IT facility requirement strictly enforced as an important part of the entry requirement
9 l
Offshore Data Processing (continued)
FSC/FSS Concerns
Physical access to offshore data processing facilities
Handling emergency situation
Securing personal information
Obtaining customers’ consent re transfer of personal data
Fairness issue
10 l
Transfer of Personal Data: Problems
Scope of permissible data transfer is unclear
“where such processing is required in the ordinary course of business”“adequate safeguards to the protection of privacy”
No later than two years after the entry into force of this Agreement…,
“Each Party shall permit a financial service supplier of the other Party established in its territory to transfer information in electronic or other form, into and out of its territory, for data processing where such processing is required in the ordinary course of business of such financial service supplier”
“Each Party… … shall adopt adequate safeguards to the protection of privacy, in particular with regard to the transfer of personal data”
Text of the FTA (Article 7.43)
11 l
Transfer of Personal Data: Problems (continued)
Current Legislation: Inconsistencies among different laws
Consent required for providing offshore head offices with financial transaction information
Act on Real Name Financial Transaction and Guarantee of Secrecy
Consent required for outsourcing of ‘processing’
Act on Promotion of Communication Network Utilization and Information Protection Act
Consent not required for outsourcing of ‘data processing’
Personal Information Protection Act (Effective from Sep. 30)
Consent not required for outsourcing ‘information processing’ for ‘contract performance’
Use and Protection of Credit Information Act
12 l
Transfer of Personal Data: Problems (continued)
Future Policy Direction
Will the current consent requirement continue to apply?
The FSC/FSS has 2 years to review and adopt measures on :
protection of sensitive information of consumers
prohibitions on unauthorized reuse of the sensitive information
the ability of financial regulators to have access to records of financial service suppliers relating to the handling of such information
requirements for the location of technology facilities
13 l
Going Forward
Clarification
of Desired
Outcome
Development
of Solutions
Clarify and define “what we want?” (e.g., specific scope of offshore business delegation/outsourcing)
Benchmark EU practices, policies, and regulations
Clarification of Desired Outcome
Development
of Solutions
Develop and provide solutions to deal with
Technical issues
Operational difficulties
Regulatory concerns
14 l