-
Sep 26, 2019
- FSC Proposes Measures To Promote Venture Capital
- FSC Chairman Eun Sung-soo unveiled measures to boost venture capital investment in innovative business at a meeting with executives from securities, asset management and venture capital companies. The measures include the introduction of a Business Development Company (BDC) and diversification of fundraising channels with exclusive private offerings for professional investors and small-scale public offerings. The FSC will announce finalized measures in October and submit a proposal to amend the Financial Services Investment and Capital Markets Act (FSCMA) to the National Assembly in the fourth quarter of 2019.Proposed Measures► INTRODUCTION OF BUSINESS DEVELOPMENT COMPANY (BDC):▪ Business Development Company (BDC) is a collective investment vehicle which raises funds from investors to be listed on the KRX and then invest in unlisted companies.▪ The BCD is required to invest more than 60% of its total assets in unlisted, KONEX-listed, KOSDAQ-listed companies (whose market capitalization of less than KRW200 billion) or SME venture investment funds.▪ Securities, asset management and venture capital companies that meet certain requirements1 will be granted a license to operate a BDC.▪ A minimum capital of KRW20 billion is required to establish a BDC. The operator of a BDC is required to hold 5% or more of its total equity investment.▪ The BDC is allowed to leverage up to 100% of its net assets, increase capital and provide management advisory services.► DIVERSIFICATION OF FUNDRAISING CHANNELS:▪ Private offering channels will be expanded with a new track exclusive for professional investors, which allows to attract subscribers through public recommendation and general advertisement.▪ The maximum amount of fundraising via a small public offering, currently KRW1 billion, will be increased to KRW3 billion in Tier 1 and KRW10 billion in Tier 2. For Tier 2, additional investor protection measures will be required (e.g. investment cap for general investors, r
-
Sep 16, 2019
- Electronic Securities System Launched
- Korea’s electronic securities system was launched on September 16, 2019.1 Under the new system, securities of listed stocks and bonds are required to be issued and circulated electronically.“It will open a new era for digitization of securities, making a historic transition to a paperless system in 45 years since the securities depository system was adopted in 1974,” FSC Chairman Eun Sung-soo said at an event celebrating the official launch of the electronic securities system.Korea’s stock and bond markets have been growing with the development of the Korean economy. The daily transaction of listed stocks amounts to KRW11 trillion, or1.4 billion shares, while the amount of bond trading is KRW8 trillion per day.2 The current securities depository system facilitated the circulation of securities, contributing to the growth of securities transaction and the development of Korea’s capital markets. However, the current system fell short of eliminating inefficiencies in the issuance of securities and the exercise of rights as it still requires the presence of physical securities.The Electronic Securities Act was established in 2016 to eliminate such inefficiencies and promote transparency in securities transaction. The electronic securities system will shorten procedures for the issuance of securities, making it easier for companies to raise funds in capital markets. It will also help investors exercise their rights, better informed of distribution of divided or capital increase. The electronic system will make it possible to build up big data on the issuance and circulation of securities, enabling fintech innovation using such data. Transparency in capital markets will be enhanced. Under the electronic securities system, information about the ownership and transfer of securities rights will be recorded electronically, which will eliminate risks of counterfeit or theft of securities or prevent tax evasion.Chairman Eun asked the Korea Securities Depository (KSD)
-
Sep 05, 2019
-
Sep 04, 2019
-
Aug 13, 2019
- Pool of Professional Investors to be Expanded
- Amendments to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) were approved at a cabinet meeting on August 13, 2019.As part of the government’s capital market reform efforts, the amendments are to expand a pool of professional investors and open a new trading venue, called ‘K- OTC Pro,’ exclusive to professional investors to trade unlisted equity securities. The amendments are aimed at encouraging professional investors, well aware of investment-related risks and able to afford such risks, to play an active role in funding innovative start-ups and SMEs.MAJOR CHANGESI. POOL OF PROFESSIONAL INVESTORS TO BE EXPANDEDThe FSC eased requirements for individual investors to be registered as ‘professional investors’ and streamlined the registration procedures.Previously, ‘professional investors’ were required to satisfy two criteria at the same time: loss-absorbing ability and investment experience. The amendments divide tracks to be registered as ‘professional investors’ in two categories for (i) individual investors without financial expertise and (ii) individual investors with financial expertise.1(Track1) Individual investors without financial expertiseGeneral investors without financial expertise are still required to meet both criteria of loss-absorbing ability and investment experience. Instead, thresholds for each criterion are eased as follows:►(INVESTMENT EXPERIENCE)2 Investors are required to maintain a financial investment account with a minimum balance of KRW50 million for at least one year within the most recent five years.►(LOSS-ABSORBING ABILITY)3 Investors are required to meet a minimum annual1 With eased requirements for ‘professional investors,’ the number of ‘professional investors,’ currently about 1,950 as of end-2018, is expected to increase to approximately 370,000 to 390,000.2 Previously, a minimum balance of KRW500 million was required.3 Previously, a minimum annual income of
-
Aug 08, 2019
- Implementation Plan for Margin Requirements for Non-centrally Cleared OTC Derivatives
- The FSC announced its adjusted schedule to implement initial margin requirements for non-centrally cleared derivative transactions in accordance with internationally- agreed standards:► Initial margin requirements for financial institutions with derivatives of KRW70 trillion or more will be implemented from September 1, 2020 as scheduled, while the implementation for those with derivatives of less than KRW70 trillion will be delayed until September 1, 2021.► The FSC will also propose a bill on margin requirements for non-centrally cleared OTC derivative transactions as the relevant guidelines by the Financial Supervisory Service (FSS) are due to expire in August 2020.Background Global discussionIn the aftermath of the global financial crisis of 2018, the G20 countries agreed to a series of reform proposals to enhance stability and transparency in OTC derivative markets.As part of such reform efforts, the Basel Committee on Banking Supervision (BCBS) and International Organization of Securities Commissions (IOSCO) published a final report on margin requirements for non-centrally cleared OTC derivatives in September 2013, aimed at reducing a systemic risk and promoting central clearing of OTC derivatives.In the detailed framework announced in March 2015, the BCBS and IOSCO set differential implementation schedules according to the amount of non-centrally cleared OTC derivatives in order to give enough time to prepare for the new regime of margin requirements.On July 23 this year, the BCBS and IOSCO announced a postponement of implementation of initial margin requirements for financial institutions with non- centrally cleared derivatives of less than €50 billion, originally scheduled to come into force in September 2020, until September 2021. The one-year postponement is intended to ease the impact of the new rules on smaller financial institutions and give financial supervisory authorities enough time to prepare for domestic implementation. Domestic progressKore
-
Aug 06, 2019
- FSC Vice Chairman's Remarks on Domestic Financial Market Conditions
- FSC Vice Chairman Sohn Byungdoo held a meeting with financial investment experts on August 6th to review the current conditions of Korea’s stock markets and discuss measures to mitigate short-term shocks.Vice Chairman’s remarksCurrent condition of domestic and global financial marketsKorea’s financial markets experienced volatility yesterday due to multiple domestic and external factors. Such trend is not confined to Korea, however, as global financial markets fluctuated as well due to multiple reasons such as: expectations that the U.S.- China trade dispute would be prolonged; concerns on sluggish global growth; and uncertainties regarding the U.S. rate cut. Domestically, Japan’s trade measures, major exporters’ worsened profit, and MSCI rebalancing posed additional impact.Moreover, China’s yuan weakened pass the psychological threshold of 7 RMB against the dollar, resulting to an increased volatility in won-dollar exchange rate. Announcement that the U.S. labeled China as a currency manipulator deepened concerns that the bilateral trade dispute would spillover to currency issues, resulting to a sharp drop in major stock markets such as Japan (↓2.7%) and Australia(↓3.0%).Measures to stabilize domestic financial marketsWorsened investor sentiment due to increased uncertainties is analyzed to have resulted in such stock market volatility.However, Korea’s financial markets are maintaining solid fundamentals1 after overcoming the 2008 global financial crisis and financial market turmoil in 2016 resulting from Brexit uncertainties.Moreover, there has been no overshoot in Korea’s stock markets even in times of global liquidity expansion. Korea’s stock markets are tend to be undervalued despite that price book-value ratio(PBR)2 is relatively low compared to global stock markets.1 Foreign exchange reserve($billion): (’97)20.4, (’08)239.7, (July,’19) 403.1Short-term external debt(%): (’97)286.1, (’08)84.0, (Mar,’19) 31.6CDS(5 yrs, bp): (end
-
Aug 03, 2019
-
Jul 25, 2019
-
Jul 24, 2019
-
Jul 18, 2019
-
Jul 18, 2019
-
Jul 17, 2019
- FSC to Resume Procedures to Approve Additional Digital Banks in Korea
- The FSC announced its plan to resume a new round of procedures for granting preliminary approval for additional digital banks in Korea.Earlier this year, the FSC intended to approve one or two additional digital banks under the Special Act on Online-only Banks, which allows non-financial companies to own a 34% stake in an online-only bank. However, the FSC granted no preliminary approval to either of the two applicants – Kiwoom and Toss – in last May as both fell short of the evaluation committee’s standards.Against the backdrop, the FSC decided to resume a new round of procedures to live up to the purpose of the special legislation on online-only banks and continue a momentum of policy initiatives for Korea’s innovation-led growth.As initially announced, the number of new digital banks will be one or two, given the level of competition in the banking sector and the examples of other major economies.PROCEDURAL IMPROVEMENTSHowever, in order to ensure more effective evaluation, some operational changes will be made in procedures from application to operation of the evaluation committee.► The FSS will provide applicants with consultation over the whole process of application to help them better informed.► If necessary, the chairman of the evaluation committee will be attending FSC meetings to explain evaluation criteria so that FSC commissioners could have in- depth discussions and reviews on the committee’s evaluation results.► Applicants will be given enough opportunities to express their opinions during the evaluation committee’s evaluation process.SCHEDULE► Application period: 10th October ~15th October, 2019► Announcement of preliminary approval: within 60 days upon the date of application► Announcement of official approval: within one month upon the date of application for official approval
-
Jun 26, 2019
-
Jun 26, 2019
-
Jun 26, 2019
-
Jun 25, 2019
-
Jun 25, 2019
- Government to Complete Privatization of Woori Financial Group by 2022
- The FSC announced its plan to sell the remaining 18.3% stake in Woori Financial Group (WFG), owned by the Korea Deposit Insurance Corporation (KDIC), from 2020 to 2022.BACKGROUNDIn the aftermath of the Asian financial crisis in 1998, the government injected KRW12.8 trillion to bail out five financial institutions, which later turned into WFG. Since then, the government has redeemed KRW11.1 trillion, or 87.3% of the injected public funds.The government still remains as the largest shareholder of WFG with the remaining 18.3% stake owned by KDIC, prompting market uncertainty and concerns that the complete privatization of WFG might be delayed.Against the backdrop, the FSC intends to ease market uncertainty and concerns by presenting its roadmap for the sale of the remaining stake in WFG, which includes specific timelines and methods.ROADMAP FOR SALE OF REMAINING STAKE IN WFG1. TimelinesKDIC will sell its remaining stake in WFG through two or three rounds of sale over the next three years from 2020 to 2022.In principle, sale will be proceeding in one-year intervals over the next three years. The amount of shares put up for sale in each round will not exceed 10%, given market demand.The government aims to complete the sale of its remaining stake by 2022.2. MethodsFor each round of sale, maximum 10% of shares will be sold through competitive bidding first. If shares fail to be sold at auctions, then they will be sold through a bloc sale with a maximum 5% for each round of sale.
-
Jun 18, 2019
- Electronic Securities System to be Introduced
- Securities certificates of listed stocks and bonds will be issued electronically only, not in physical form, starting from September 16, 2019.Korea will introduce an electronic securities system as the 「 Act on Electronic Registration of Stocks, Bonds, etc.」(hereinafter referred to as ‘Electronic Securities Act’) and its subordinate decree will take effect on September 16.Under the new system, securities certificates of listed stocks and bonds are required to be recorded on an electronic register, allowing investors to acquire, transfer and exercise subsequent rights electronically. Most of securities, except those that have effect only in written form (e.g. commercial papers), will be subject to mandatory electronic registration. Once registered electronically, securities issued in physical form shall not have effect. Unlisted stocks, not subject to mandatory electronic registration, may be registered electronically upon the issuer’s application.The Korea Securities Depository (KSD) will act as an electronic registry under the Electronic Securities Act, ensuring a smooth transition to the paperless system. It will be in charge of electronic registration of securities, management of rights to electronically registered securities, operation of relevant IT infrastructure, and disclosure of issuance of electronic securities, etc.The introduction of electronic securities system is expected to save cost of issuing securities, reduce risks in securities circulation, and enhance transparency in corporate governance and securities transaction.
-
Jun 17, 2019
- FSC to Reform Benchmark Interest Rates
- The FSC and the Bank of Korea (BOK) jointly launched a taskforce to develop a new benchmark interest rate, which aims to replace the current benchmark interest rate of certificate of deposits (CDs) by 2021. Co-chaired by FSC Vice Chairman and BOK Vice Governor, the taskforce is composed of officials from the Ministry of Economy and Finance, the Financial Supervisory Service, market participants and research institutions.The rate-rigging scandal of the London Interbank Offered Rate (LIBOR) in 2012 prompted global reform efforts to improve the representativeness and credibility of benchmark interest rates. In preparation for the expiration of LIBOR in 2022, the US, the UK, the EU, Japan and Switzerland are replacing it with new benchmarks such as “risk-free” overnight rates. Other countries including Australia, Canada, Hong Kong and Singapore, whose currencies are not used to calculate LIBOR, are also developing alternatives to enhance the representativeness and transparency of benchmark interest rates and their consistency with international standards.In line with the global move, Korea will also develop a new benchmark interest rate as an alternative to the CD rates, currently being widely used as a benchmark interest rate in Korea’s financial markets.However, the CD rates have fundamental limitations in serving as a benchmark interest rate: (i) the issuance of CDs is not sufficient; and (ii) CD rates are based on quotes, not real transactions.Against this backdrop, the FSC and the BOK jointly launched a taskforce to develop an alternative to the CD rates, which aims to publish a new benchmark interest rate in March 2021. Meanwhile, the taskforce will also come up with measures in the second half of 2019 to boost the issuance of CDs and improve the current method of calculating CD rates.At a kick-off meeting on June 14, FSC Vice Chairman Sohn Byungdoo called for an active role by market participants including banks, financial investment companies and the KRX i
