Financial institutions serve mainly as intermediaries for savings and investment between savers and borrowers, and are commonly divided into six categories: banks, non-bank depository institutions, financial investment business entities, insurance companies, other financial institutions, and financial auxiliary institutions.
To elaborate on the financial institutions making up each category under this classification, banks are divided into commercial banks and specialized banks. Commercial banks consist of nationwide and local banks and branches of foreign banks. Special banks are financial institutions established under a special act rather than the Banking Act, and their main enterprises are banking businesses. Specialized banks include the Korea Development Bank, the Export-Import Bank of Korea, the Industrial Bank of Korea, Nonghyup Bank, Suhyup Bank, and others.
Non-bank Depository Institutions
Non-bank depository institutions mainly concern themselves with taking deposits and lending, similar to banks, but are established for more limited purposes and fall under distinct regulations concerning their raising and management of funds. That is, the scope of their business activities is narrower than that of banks, payment and settlement services are either non-existent or provided in a limited manner, and the focuses of their businesses are restricted in advance in accordance with each financial institution's unique features. Non-bankdepository institutions comprise mutual savings banks, credit cooperatives including credit unions, community credit cooperatives and mutual banking entities, merchant banks and the postal savings.
Financial Investment Business Entities
Financial investment business entities include all financial institutions that primarily conduct the business of trading marketable securities in the direct financing markets. These consist of investment traders and brokers (securities and futures companies), collective investment business entities, investment advisory and discretionary investment business entities, and trust business entities.
Insurance companies are those institutions that underwrite and operate insurance against death, disease, old age, or a variety of accidents including fires. In consideration of the features of the institutions and their businesses, they are categorized into entities providing life insurance, non-life insurance, postal insurance, mutual aid, and others. Non-life insurance companies consist of property and casualty insurance companies, reinsurance companies, and guarantee insurance companies.
Other Financial Institutions
Other financial institutions include institutions mainly operating financial businesses that are difficult to classify among the financial institutions in the four aforementioned categories. They consist of financial holding companies, creditspecialized financial companies (leasing, credit card, installment financing, and new technology venture capital companies), venture capital companies (small and medium-sized enterprise establishment investment companies), securities finance companies, public financial institutions, and others.
Financial Auxiliary Institutions
Financial auxiliary institutions are those institutions that, rather than directly taking part in financial transactions, mainly provide the conditions necessary for smooth operation of the financial system. They span institutions carrying out businesses related to financial infrastructure such as the Financial Supervisory Service, the Korea Deposit Insurance Corporation, the Korea Financial Telecommunications and Clearings Institute, the Korea Securities Depository, the Korea Exchange, credit guarantee institutions including the Korea Credit Guarantee Fund and the Korea Technology Finance Corporation, credit information companies, financial brokerage companies, and others.
Financial Institutions in Korea(as of end-June 2016)
|Financial holding companies||Bank holding companies||7|
|Non-bank holding companies||2|
|Banks||Commercial Banks||Nationwide Banks||6|
|Branches of Foreign Banks||42||49 branches|
|Non-bank Depository Institutions||Merchant Banking Corporations||1|
|Mutual Savings Banks||79|
|Credit Cooperatives||Credit Unions||906|
|MG community credit cooperatives||1,329|
|Financial Investment Business Entities||Securities Companies||54||Including 10 foreign branches|
|Collective Investment Business Entities||138|
|Investment Advisory and Discretionary Investment Business Entities||153|
|Trust Business Entities||Bank / Securities / Insurance / Real Estate Trust||56||19/20/6/11|
|Insurance Companies||Life Insurance Companies||25||Including9 foreign companies|
|Non-life Insurance Companies||Property and Casualty Insurance Companies||19||Including 4 foreign companies and 4 branches|
|Reinsurance Companies||9||Including 8 foreign branches|
|Guarantee Insurance Companies||4||Including 2 foreign branches|
|Mutual Aid Associations||Mutual Aid Services of NFFC / Korean FCCC / NCUF Korea||3|
|Other Financial Institutions||Credit-specialized Financial Companies||Leasing||81||
|New Technology Venture Capital Companies|
|Venture Capital Companies||SME Establishment Investment Companies||117|
|New Technology Venture Capital Companies||27|
|Securities Finance Companies||1|
|Financial Auxiliary Institutions||Financial Supervisory Service||1|
|Korea Deposit Insurance Corporation||1|
|Korea Financial Telecommunications and Clearing Institute||1|
|Credit Guarantee Institutions||Korea credit guarantee fund||2|
|Korea technology finance corporation|
|Credit Information Companies||33||Including 4 combining businesses company|
|Korea Asset Management Corporation||1|
|Korea Housing Finance Corporation||1|
|Financial Brokerage Companies||13||Including 10 foreign exchange brokage firms|
When examining the share of each financial cluster in the total assets of major financial institutions as of end-2010, the banking sector (including trust accounts) accounted for the largest portion with 54.8 percent, followed by insurance institutions (14.8 percent), credit cooperatives (10.5 percent), collective investment business entities (asset management companies) (9.5 percent), investment traders and brokers (securities companies) (5.5 percent), mutual savings banks (2.7percent) and postal savings (1.6 percent).
For banks (bank accounts), their share of total assets increased temporarily owing to their recovery of soundness through restructuring and a preference by economic players for riskless assets in the wake of the 1997 Asian currency crisis. Over the long term their share has been showing a trend of decline, however, attributable for example to their low earnings ratios. Among non-bank depository institutions, the share of credit cooperatives has been experiencing steady growth, while the volume and share of assets at mutual savings banks decreased for a period following the 1997 currency crisis but rebounded due to a governmental small-loan support policy1). Insurance companies' portion has shown a steady increase thanks to growing interest in preparation for the uncertain future and provisions for old age. As the capital markets recovered from the 1997 Asian currency crisis, the share of securities companies grew as well.
- Note : 1) Some savings banks, however, focused on external expansion and risky real estate project financing, and the depression of the real estate market in the aftermath of the global financial crisis of 2008 hurt savings bank performance. Coupled with the moral hazard of majority shareholders and management, eight savings banks including Busan Mutual Savings Bank and its affiliates were ordered to suspend operations in 2011.
Total Assets of Major Financial Institutions (as of period-ends)
Units: Billion won, %
|Mutual savings banks||32,612(3.4)||24,196(1.6)||24,196(1.6)||91,271(2.7)|
|Community credit cooperatives||20,729(2.2)||37,061(2.4)||53,913(2.6)||53,913(2.6)|
|Life insurance companies||69,677(7.4)||120,730(7.8)||239,362(11.4)||408,495(11.9)|
|Non-life insurance companies||12,711(1.3)||28,049(1.8)||28,049(1.8)||98,987(2.9)|
|Investment traders and brokers
|Collective investment business entities3)
(Asset management companies)
- Note : 1) Includes consolidated financial accounts of banks and securities companies. Figures in ( ) indicate the percentages in the total amounts.
- 2) As of end-2009.
- 3) Based on investment trust accounts.
Sources: Bank of Korea Monthly Statistical Survey Bulletin, Financial Supervisory Service Monthly Financial Statistics Bulletin, Korea Insurance Development Institute Insurance Statistics Yearbook