South Korea’s Financial Services Commission proposes emergency resolution regime to resolve troubled firms in three to four days

South Korea’s Financial Services Commission (FSC) has announced plans for an emergency resolution regime that would allow troubled financial institutions to be resolved in three to four days, including weekends, compared with roughly 150 days under current procedures. South Korea already operates annual recovery and resolution planning for major institutions, but its resolution framework remains constrained by staged corrective measures and mandatory procedures. The proposed regime would cover institutions eligible for Deposit Insurance Fund support, including banks and savings banks, insurers, securities firms and financial holding companies. NongHyup Bank, Suhyup Bank and reinsurers would be excluded. Activation would require an institution to be distressed or at risk of distress, threaten a serious financial crisis or significant disruption to financial stability, and require urgent intervention because other statutory measures could not prevent the risk. Designation would need approval from at least two-thirds of all FSC members. Resolution tools would include contract transfers, acquisitions by third parties and capital reductions. Competitive tendering, advance notification and corporate approval procedures could be waived. Merger review would be replaced by prior consultation with the competition authority. The Korea Deposit Insurance Corporation would conduct a provisional valuation within one to two days, followed by a definitive assessment. Early termination and settlement of qualified financial transactions, including derivatives and repurchase agreements, could be suspended for up to two business days. To offset restrictions on procedural and property rights, shareholders and creditors would receive compensation from the Deposit Insurance Fund for losses exceeding those they would have incurred in liquidation or bankruptcy, based on an independent assessment. The FSC would report the resolution’s details and results to the relevant National Assembly committee within six months of its action. Consultation on amendments to the Act on the Structural Improvement of the Financial Industry and the Depositor Protection Act is scheduled to begin Nov. 2, 2026, before the bills are submitted to the National Assembly following government review.