Annual Work Plan
The FSC announced its financial policy direction for the year of 2015 with three key policy goals and nine tasks.
Initial achievements in creative finance spread widely across all financial sectors
- Facilitate the convergence of IT and financial sectors to promote the ‘Fintech’ industry
- Strengthen the intermediary role of finance to support the real economy by encouraging investments by venture capital
- Continue financial regulator y reform to strengthen competitiveness of Korea’s financial sector
Consumer trust in the financial sector for further growth of the financial services sector
- Improve the financially-marginalized’ access to financial services and expand supportive programs
- Strengthen financial consumer protection by improving inconvenient practice in financial services
- Restore consumer trust in the financial sector with establishment of ethics guidelines of the sector
Secure financial stability to support a strong recovery of Korea’s economy
- Preemptively respond to potential risks of household debt
- Conduct corporate restructuring in a preemptive manner on a year-round basis
- Ensure financial stability against risk factors home and abroad
KEY POLICY ACHIEVEMEN TS IN 2013 AND 2014
For the last two years since the launch of the Park Geun-hye administration, the FSC has been committed to laying the groundwork for creative finance to promote innovation and competition in the financial sector.
The FSC established infrastructure for tech finance such as technology data base(TDB) or technology credit bureau(TCB )1 to support financing of innovative tech fims. For six months since the ‘tech finance’ initiative took off, provision of technology-secured loans amounted to a total of KRW 8.9trillion in 14,413 cases. Interest payment burden reduce d 0.4%p with tech loans.
Financial regulatory reform
As part of the government’s regulatory reform initiative, the FSC reviewed all statutory and ‘hidden’ financial regulations. Out of 1,700 regulations shortlisted for reform, about 700 were repealed or improved to reduce regulatory burden for financial institutions and consumers.
Financial consumer protection
The FSC reduced debt burden of low-income borrowers with the Happiness Fund (launched in March 2013) and support their debt restructuring. After the data leaks by card companies in January 2014, the FSC set out comprehensive measures to prevent a recurrence of data breach and protect financial consumers from financial frauds.
Financial market stability
The FSC responded to potential risks with preemptive actions. Measures were taken to improve quality of household loans, while managing quantitative growth of household debt.2 Corporate default risks were also preemptively managed with corporate restructuring and management of watch list for financially-distressed companies.
Financial institutions adopted prudential measures such as Basel III capital requirements or consolidated RBC rules in order to ensure financial soundness in accordance with global standards.
DETAILED POLICY TASKS
1. Facilitate convergence of IT and financial sectors to foster the ‘Fintech’ industry3
Minimization of ‘ex-ante’ regulations
Security review and evaluation for means of authentication will be abolished to allow financial firms to deliver consumers innovative convenient financial services and introduce more efficient authentication means on their own responsibility. (Revision to regulations related with electronic financial transaction within the second quarter of 20 15)
Instead, financial companies will be required to bolster their internal inspections and assessment, while the FSS will strengthen security oversight with regular and spot inspections. The FSC will establish a legal ground to issue business improvement recommendation and order based on internal inspection results by revising the Electronic Financial Transaction Act.
The FSC will draft a business model for online-only banks after reviews an d discussion of relevant factors – e.g. overseas cases, ownership structure,4 possible means to replace the current principle of face-to-face identification, capital requirement, business scope, etc.
Details will be set out in June 2015 with an aim to submit a relevant bill to the National Assembly within the third quarter of this year.
Fintech support system
The FSC will co-establish ‘Fintech Support Center (tentatively named)’ with related organizations5 to effectively provide support to foster Fintech industry. The center will offer comprehensive consultation services related to legal, regulatory, and financial matters. The center will be operated in close cooperation with ‘Center for Creative Economy’ which is under establishment by the M OSF to maximize synergies.
Financial support will be provided in various forms through policy banks. The KDB and IBK will give out loans and make investments worth KRW200 billion (KRW100 billion each) within 2015. KODIT and KIBO will provide guarantees.
2. Strengthen intermediary role of finance to support the real economy ‘Tech finance 3.0’
The FSC will further expand technology finance on a sustainable basis with policy focus shifting form loans to investment. In 2015, a total of KRW 20 trillion will be provided in 32,000 technology secured loans.
To invigorate investment in future values of technology, a fund worth KRW 300billion will be created through the ‘Growth L adder Fund.’ To stimulate intellectual property (IP) investments, policy banks will create an ‘IP fund’ and play a role of non practicing entities (NPE) to stimulate trading of intellectual property.
Vitalize venture capital market
The FSC will boost venture capital investments in innovative start-ups. Funds worth KRW 600billion will be invested to support innovative start-ups. V-credit default swaps (V-CDS) will be developed to separately trade risks involved in venture investments. Barriers to investments by private equity funds will be reduced through revisions to relevant regulations. The FSC will also make easier for venture capitalists to recoup their investment by stimulating trading of SME shares and M &As.
Support for re-start businesses
Failed start-ups will be provided with funding support to restart their business. Current terms of joint liability waiver will be eased so that more startup business owners will be able to gain such a waiver. Non-startup business owners can be also waivered if they hold good credit standing by KODIT and KIBO.
Policy funds to support creative finance
Policy banks will provide a total of KRW 180trillion in 2015 to boost investment in future growth drivers and large-scale project to build infrastructure.
3. Strengthen financial industry’s competitiveness 2nd round of financial regulatory reform
Barriers among financial services sectors will be significantly reduced to make the financial industry more productive and more efficient. Regulations that hinder the convergence of IT and finance will be eased to foster Fintech businesses that will develop new growth drivers and create new jobs in the financial sector. Over the entire flow of financing, regulations will be improved to stimulate investment by venture capital. The FSC will continue to review remaining regulations for improvement depending on changes in regulator y environment.
Financial sector’s response to changing financial environment
The FSC will encourage financial institutions to pioneer into new business areas such as real estate finance, insurance against disaster, and climate finance.
Bolster financial institutions’ global competitiveness
The FSC will support financial institutions to expand their business into overseas markets. Efforts will be also made to promote Korea as a Chinese yuan trading hub and to strengthen global networks with overseas financial players.
4. Expand access of the financially-marginalized to financial services
The system for supporting microfinance will be overhauled to serve better the needs of the financially-marginalized. A draft bill was submitted to the National Assembly at the end of 2014 to establish a single agency (tentatively named as a ‘Microfinance Agency’) that will integrate various microfinance institutions such as Smile Microcredit Foundation, Happiness Fund, etc. and provide debt restructuring and counseling programs.
5. Strengthen financial consumer protection
The establishment of a financial consumer protection agency will be pushed forward to provide more comprehensive and systemic policy measures for strong consumer protection. The FSC will tighten personal data protection and IT security by financial institutions. Fundamental measures will be made to stamp out electronic financial fraud s.
6. Establish consumer trust in financial sector
As part of efforts to establish sound governance structure in financial institutions, best practice guideline on governance in financial institutions is being implemented since December 2014. The FSC will proceed with the establishment of ‘stewardship code’ to strengthen institutional investors’ rights as shareholders. Public disclosure and accounting rules will be improved to ensure transparency and fairness in financial market.
7. Preemptively respond to potential risks of household debt
The FSC will push forward a program to improve structural soundness of household loans. Under the program, a total of KRW 20 trillion will be provided in 2015 to convert floating rate or interest-only mortgages to fixed-rate amortized loans. Borrowers can take out new loans with fixed rate and amortization plan to repay their outstanding mortgages. The Korea Housing Finance Corporation will purchase and securitize the new loans from banks up to KRW 20trillion in 2015.
The FSC will strengthen assessment of debt repayment ability and provide tailored financial assistance to financially vulnerable people such as low income earners, small business owners to relieve their financial burdens
The FSC will restrict excessive business expansion of the mutual banking sector while strengthening control of mortgage loans
8. Conduct corporate restructuring in a preemptive manner on a year-round basis
The FSC will make the Corporate Restructuring Promotion Act permanent to establish a solid legal foundation for corporate restructuring. (Corporate Restructuring Promotion Act is due to expire at the end of 2015)
Tonnage bank system will be established with KAMCO and private investors to raise funds and purchase used ship in order to facilitate restructuring of the shipping industry.
The FSC will support temporarily financially distressed companies by extending fast track program for SMEs and utilizing KAMCO’s sale& lease back program.
9. Ensure financial stability against risk factors home and abroad
The FSC will strengthen monitoring of external risk factors and make sure a contingency plan work properly in the event of a crisis. Foreign exchange liquidity and soundness will be secured against possible increase in volatility of capital flows. The FSC will also strengthen supervision on prudential soundness of domestic financial institutions in or der to prevent external risks to spread into domestic financial system.
*Please refer to the attached PDF for details.