Press Releases - Financial Services Commission

Press Releases

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Sep 05, 2022

Measures to Improve Protections for General Shareholders in IPO of Split off Subsidiary

The FSC introduced a plan to improve the rights and interests of general shareholders in IPOs of split off subsidiaries in order to help restore fairness and trust in the capital markets and strengthen investor protections. Background With some companies recently deciding to split off rapidly growing portions of their business and went ahead with IPO of split off subsidiaries within a short period of time, the issue of general shareholders incurring losses has become problematic as their shareholder rights are stripped away and stock prices for the parent company tend to decline. Unlike in a spin off, shareholders of the parent company in a split off are not allocated with stocks of a split off subsidiary and therefore they have no shareholder rights over the split off company. There is also a study suggesting that the valuation of the high growth split off business section is not necessarily reflected in the valuation of parent company stocks. Especially, the fact that the rights of general investors who have been opposed to the split off decision are not adequately protected has presented an ongoing problem which has also been closely related to the so-called Korea discount phenomenon. As an equity interest, a stocks worth largely consists of a right to participate in the decision making process and a right to make a claim on present and future profits. However, in a capital market where these two principles are not properly observed, it will be difficult for investors to have high levels of confidence. Therefore, as one of the key policy tasks of the new administration for restoring fairness and trust in capital markets, the financial authorities have prepared the following measures to improve the rights and interests of general shareholders in IPO of split off subsidiaries after months of engaging in discussions with experts and relevant stakeholders. Key Details I. Strengthen Disclosure Companies planning to carry out a split off of their business should disclo
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Sep 01, 2022

FSC Holds 4th Financial Risk Taskforce Meeting

FSC Vice Chairman Kim So-young held the 4th financial risk taskforce meetingon August 31 jointly with other relevant institutions.The 4th taskforce meeting discussed the following two agenda(a) measures for improving the loss absorbing capacity of financial sectors in response to financial market uncertainties and (b) detailed implementation plans of various market stabilization measures which had been deployed in past financial crises. Summary of Vice Chairmans Remarks In his opening remarks, Vice Chairman Kim assessed that volatility in financial markets has increased due to concerns about the prospect of the Feds aggressive monetary tightening, Europes economic recession, and potential economic slowdown in China, etc. Given the increased uncertainty in financial markets such as rising debt servicing burden of borrowers and a potential collapse in major asset prices, Vice Chairman Kim emphasized that it is necessary to strengthen monitoring of risk factors in the financial sector and prepare response measures preemptively. In order to proactively respond to the accumulated risks such as an increase in lending to vulnerable borrowers and real estate project finance (PF) loans, Vice Chairman Kim stated that the financial authorities will examine the level of loan loss provisions of banks and nonbanks to make sure that they have sufficient capacity to absorb potential losses. He said that the authorities are planning to (a) raise the loan loss provision coverage ratio for the nonbank sector such as savings banks, mutual finance companies and specialized credit finance businesses and (b) introduce a regulatory ground to allow the finical authorities to require banks to set aside additional special loan loss reserves. In particular, for the nonbank sector whose assets have been rapidly increased, Vice Chairman Kim said that the authorities will ensure that they hold a sufficient level of capital while bolstering risk management. In addition, considering the close-knit
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Aug 29, 2022

New Start Fund for Small Merchants and Self-employed Business Owners Hit by Covid-19 To Be Launched

A debt adjustment program, called New Start Fund, for small merchants and self-employed business owners hit by the Covid-19 crisis will be launched in October.The New Start Fund is intended to ease their debt payment burden as they are struggling to repay their debt since they suffered unavoidable losses while cooperating with the governments quarantine measures such as social distancing policy and restrictions to business operations. Background Over the past two and a half years, self-employed business owners and small merchants have suffered inescapable damages in the process of cooperating with the governments preventive measures, such as restrictions on business operation, in response to the COVID-19 crisis. As their businesses slowed down and financial conditions deteriorated, small businesses turned to debt and the size of their loans have grown significantly with increased burdens for principal and interest payments. Major institutions including the Bank of Korea evaluate the size of potential insolvency of self-employed business owners to be about 5 to 8 percent of their total loans. With the availability of COVID-19 support measures such as the loss compensation support, funding support through fiscal spending and the loan maturity extension and payment deferment program, the vulnerability of their debt situation had not surfaced yet. However, there are possibilities that their insolvency potential may build up and expand if there is another wave of COVID-19 or a worsening of the economic or financial conditions due to high levels of interest rates, prices and USD-to-KRW exchange rates. Against this backdrop, the FSC has prepared a debt adjustment program (called New Start Fund) to help prevent an expansion in the insolvency potential of the pandemic-hit small businesses and to provide a chance of credit recovery and restart for debtors who have already turned insolvent. The debt adjustment program will help lower excessive payment burdens (high interest ra
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Aug 26, 2022

Financial Regulatory Reform Committee Discusses Ways to Promote Platform-based Financial Services

The financial regulatory reform committee held its 2nd meetingon August 23 and decided on plans to (a) promote platform-based financial services from financial institutions and pilot online platform-based financial intermediary services to help enhance consumer convenience and facilitate digital innovation and to (b) make improvements to the operation of the financial regulatory sandbox program. The key measures include the following. a) Support balanced growth of platform-based financial services in financial industry - (Financial Institutions) Pursue regulatory reforms to enable consumers to use a variety of financial and non-financial services such as banking, insurance, card, securities, etc. through platforms (integrated apps) designed by financial institutions - (Fintechs) Pilot operation of services (through financial regulatory sandbox program) that can offer comparisons and recommendations on various financial products including loans, savings, insurance, peer-to-peer (P2P) lending, etc. through a single platform - (Minimizing Negative Impact) Prepare safeguards against the negative effects of platform-based services by ensuring fairness in algorithms, preventing mis-selling, requiring sufficient provisions to be set aside for damage compensation, preventing anti-competitive behaviors of big tech platform companies. Out of 36 specific financial regulatory reform initiatives, #8: Promoting health care related services offered by insurance companies, #9: Improving rules to introduce digital universal banks, #10: Reviewing introduction of online platform-based financial intermediary services, and #11: Promoting card companies platform business b) Upgrade the financial regulatory sandbox program so that it can continue to play the role of facilitating financial innovation - Make early notification available to those that have been designated as innovative financial service providers about whether a regulatory change will be introduced or not prior to the termin
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Aug 19, 2022

Measures to Improve Implementation of Reporting Requirements under the 5 Percent Reporting Rule

The FSC plans to make revisions to the corporate disclosure form and the practical guidance to ensure that those subject to the reporting requirement under the 5% reporting rule report detailed plans about their investment purpose. For companies and their management, the measures are intended to provide proper information needed to defend their management control, thereby strengthening the fairness and transparency in competition for control over management. For investors, the measures aim to provide better protection by giving them sufficient information about any possibility of change in management control. Overview of the 5% Reporting Rule The 5% reporting rule is a disclosure obligation which requires any person holding 5% or more of a publicly traded companys total outstanding shares to report his/her status of share ownership, changes in shareholdings and the purpose of holding. The 5% reporting rule was first introduced in 1992 under the former Securities Exchange Act, and the rule was amended with the revision to the Act in 2005 to provide companies and management with reasonable protection against threats of hostile merger and acquisition attempts, making changes in the purpose of holding subject to the reporting requirements. The 5% reporting rule contributes to enhancing fairness and transparency in capital markets by subjecting large shareholders to timely disclosure of information about concentrated shareholding status of listed companies. Current Practice and Need for Improvement The current disclosure form requires those subject to reporting requirements under the 5% reporting rule to disclose specific details about their shareholding purpose. However, the result of examining disclosures filed suggests that in practice there are many cases in which such information is provided as a perfunctory reiteration (in an all-inclusive and one-off manner) of the list of examples stated under the Management Participation Purpose in the Article 154(1) of the Enfo
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Aug 18, 2022

KoFIU Cautions Virtual Asset Users against Unregistered Virtual Asset Service Providers

The Korea Financial Intelligence Unit (KoFIU) announced on August 18 that it has notified illegal business activities of 16 unregistered Virtual Asset Service Providers (VASPs) to the investigative authority. The KOFIU urged virtual asset users to practice extra caution in order to avoid incurring damages that may result from their transactions with unregistered VASPs. I. Unregistered Operation of Foreign-based VASPs in Domestic Market The KoFIU has notified the investigative authority about the violation of unregistered business activities of 16 foreign-based VASPs* carrying out business activities intended for domestic consumers pursuant to the Act on Reporting and Using Specified Financial Transaction Information (the Act hereinafter). * KuCoin, MEXC, Phemex, XT.com, Bitrue, ZB.com, Bitglobal, CoinW, CoinEX, AAX, ZoomEX, Poloniex, BTCEX, BTCC, DigiFinex, Pionex The 16 foreign-based VASPs were found to have been engaged in business activities targeting domestic consumers by offering Korean-language websites, having promotional events targeting Korean consumers and providing a payment option that supportsthe purchase of virtual assets using credit cards. On July 22, 2021, the KoFIU notified foreign-based VASPs that have business operations targeting Koreans about their obligation to registertheir business with the authority pursuant to the Act. However, the 16 aforementioned entities were found to have business operations targeting Koreans without obtaining a registration and thus the authorities plan to take necessary measures. II. Actions Taken on Unregistered VASPs a) The KoFIU has notified the investigative authority about the violation of registration duties (under the Act) of 16 unregistered VASPs, and plans to inform FIUs in their respective countries about their violation. For illegal business activities of unregistered entities, maximum 5 years of imprisonment or up to KRW50 million of fine can be imposed with a restrictionfor registering as a VASP in dome
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Aug 17, 2022

Private-Public Joint Taskforce on Digital Asset Holds Kickoff Meeting

The FSC announced that a private-public joint taskforceon digital asset consisting of private sector experts, relevant government authorities and institutions was launched on August 17 and held its kickoff meeting chaired by FSC Vice Chairman Kim So-young. The government has actively responded to digital asset related issues through vice ministerial meetings organized by the Office for Government Policy Coordination thus far. In particular, by seeking an enactment of a framework law on digital asset, the new administration has been working on ways to promote a proper balance between innovation based on new technology such as blockchain and consumer protection and financial stability. A private-public joint taskforce on digital asset was launched in this regard to promote discussion and sharing of information between private sector experts, relevant government authorities and related institutions in seeking government-wide collaboration for legislative efforts. Through operation of a taskforce, authorities plan to comprehensively review the following issues(a) the legal characteristics and the rights relationship regarding digital assets and ways to respond to digital asset related crimes, (b) digital assets and financial stability, central bank digital currency (CBDC) and taxation issues, (c) regulatory framework for digital asset issuance and distribution markets and (d) ways to promote the blockchain industry. Summary of Vice Chairmans Opening Remarks In his opening remarks, Vice Chairman Kim So-young stated that the new administration has been engaging in discussions from multifaceted perspectives to support innovation based on blockchain technology while creating an environment to foster responsible growth of the digital asset market. A research commissioned to examine relevant issues and response strategies based on a comparative analysis of various digital asset related bills pending at the National Assembly and overseas legislative trends was completed in ear
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Aug 11, 2022

FSC Plans to Introduce Small Business Loan Refinancing Program

The FSC announced its plan to introduce a small business loan refinancing program worth KRW8.5 trillion to help lower interest payment burdens of self-employed business owners and small merchants. Background In the process of dealing with the COVID-19 pandemic, the size of loans for the self-employed and small merchants increased as well as their debt service burdens, and the qualitative structure of their loans deteriorated with an expansion in high interest rate loans from nonbank sectors. Recent interest rate hikes resulting from an accelerated pace of monetary tightening in major economies has resulted in added debt servicing burdens for the self-employed and small merchants. As such, small businesses hit by a protracted pandemic are experiencing difficulties in normalizing their business operation while making payments on high interest rate loans at the same time. At the 2nd emergency meeting for stabilizing peoples livelihoods held on July 14, the government introduced comprehensive support packages for self-employed business owners and small merchants in the amount of KRW80 trillion as shown below. a) (For Borrowers with Repayment Capability) KRW41.2 trillion in financing support for liquidity provision and to help boost their business competitiveness (already announced on July 25) b) (For Borrowers Having Difficulties with High Interest Rates) KRW8.5 trillion in refinancing support with low interest rate loan (included in todays announcement) c) (For Borrowers without Repayment Capability on Their Own) KRW30 trillion worth New Start Fund to be set up for debt adjustment support through principal payment reduction, etc. (to be announced in mid-August) Today, the FSC is announcing specific plans for introducing a low interest rate refinancing program in the amount of KRW8.5 trillion to help alleviate the self-employed and small merchants payment burdens with high interest rate loans. Key Details of Low Interest Rate Refinancing Program I. Eligibility The low i
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Aug 10, 2022

Household Loans, July 2022

In July 2022, the outstanding balance of household loansacross all financial sectors fell KRW1.0 trillion, showing a stable trend as the growth seen in Q2 turned back lower.The financial authorities will make efforts for a stable management of the household debt growth while working on effective implementation of the normalization of household loan regulations to help alleviate financing difficulties of non-speculative homebuyers. (Overall) Household loans across all financial sectors dropped KRW1.0 trillion in July 2022. The growth rate (up 1.7%, y-o-y) has continued to stay on a downward path since the second half of 2021. (By Type) Mortgage loans expanded at a slower pace than the previous month and other types of loans dropped at a greater level, contributing to the overall decline in household loans. - (Mortgage Loans) Mortgage-backed loans rose KRW2.5 trillion in July, slowing down from KRW2.8 trillion in the previous month. - (Other Types of Loans) Other types of loans dropped KRW3.6 trillion in July, falling at a faster rate compared with the previous month (down KRW2.1 trillion). (By Sector) Household loans in both the banking and non-banking sectors turned lower, but the growth trend continued in the savings bank (up KRW0.4 trillion) and insurance (up KRW0.2 trillion) sectors. - (Banking Sector) Banks saw a drop of KRW0.3 trillion in household loans. Mortgage loans from banks grew KRW2.0 trillion,rising from KRW1.4 trillion a month ago, as group lending for new apartment subscription and jeonse loans rose KRW1.3 trillion and KRW1.1 trillion, respectively. Other types of loans fell KRW2.2 trillion, declining at a faster rate from a month ago (down KRW1.2 trillion) as credit loans fell KRW1.9 trillion. -(Non-Banking Sector) In July, nonbanks saw a drop of KRW0.8 trillion in household loans, led by declines in the mutual finance (down KRW1.2 trillion) and specialized credit finance (down KRW0.2 trillion) sectors. (Assessment) Household loans across all financ
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Aug 08, 2022

FSC Unveils Financial Policy Agenda of the New Administration

FSC Chairman Kim Joo-hyun presented the new administrations financial policy agenda to President Yoon Suk Yeol on August 8 which focuses on preemptive handling and management of crisis and providing steady reinforcement for the revitalization of the financial industry and economy beyond crisis. Financial Policy Agenda I. Financial Measures to Stabilize Peoples Livelihoods in Vulnerable Sectors a) Background - Pursue prompt implementation of the KRW125 trillion-plus financial measures to help stabilize peoples livelihoods - Seek additional measures in preparation for SMEs facing difficulties b) Key tasks [Task #1] Effective implementation of the financial sector measures to help stabilize peoples livelihoods Authorities will strengthen efforts for promotion and consultation activities and establish a close-knit coordination network with relevant government ministries and institutions. - Strengthen promotion and consultation efforts customized for each beneficiary group to help ensure that there is no one left out from receiving assistance due to the lack of awareness about the availability of the support programs - Improve synergetic effects (consultation funding support offered) through collaboration with the small merchant support program provided by the Ministry of SMEs and Startups - Maintain close communication with the financial sectors and media. [Task #2] Response to potential management and financing difficulties of Small and Medium-sized Enterprises Authorities will prepare financial support measures to help resolve the difficulties of SMEs such as increases in inflation, interest rates and prices of raw materials. 1) Make newly available (KRW6 trillion) government-backed fixed rate loans with low interest rates 2) Provide preferential interest rate support for loans and guarantees to businesses that are highly dependent on raw material imports or those experiencing difficulties due to disruption in global supply chain 3) Make adjustment to the accounting r
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Aug 04, 2022

FSC Plans to Promote the Use of Artificial Intelligence in Financial Services

Vice Chairman Kim So-young presided over a meeting with relevant industry officials and experts on August 4 and held discussions on ways to promote the use of artificial intelligence (AI) in financial sectors and ensure public trust in financial services based on AI. Some of the key measures of the plan include the following. a) Building an AI data library that allows pseudonymized data to be reused b) Issuing detailed guidelines for AI development and usage in five specific areas c) Granting an exemption of the network separation rule on the development and test servers using pseudonymized data d) Building an AI testbed to support data and computing resources for testing e) Establishing an AI-based credit evaluation model and a process for verifying the security of AI-based services. Summary of Vice Chairmans Remarks In his opening remarks, Vice Chairman Kim emphasized the importance of making advancement in AI technology to make effective use of the exponentially increasing availability in big data amid hyperconnected networks and the hyperconvergence and big blur phenomena. To help realize success in digital financial innovation, Vice Chairman Kim said that financial regulatory reforms need to take place to ensure that financial sectors can make use of big data and AI technology effectively. In this regard, digital financial innovation based on the promotion of the use of big data and AI will help to (a) boost consumer convenience by allowing more customized financial services to be introduced, (b) strengthen the function of financial intermediation services, (c) improve financial institutions risk management functions through enhancement of analysis and assessment and (d) increase the access to financial services and enhance financial inclusion for vulnerable groups such as individuals with thin credit history. To this end, the FSC will make active efforts to remove barriers that stand in the way of making use of AI in financial services. First, by building a fi
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Aug 03, 2022

FSC Announces Measures to Strengthen Financial Support for Business Transformation

The FSC unveiled a plan to provide financial support in the amount of about KRW1 trillion to companies pursuing business transformation to cope with changing digital and environmental conditions in order to help domestic companies regain their competitiveness edge and expand their business areas. Background In the process of responding to the COVID-19 pandemic, the rapidly changing business conditions such as digital transformation and carbon net zero movement have necessitated businesses to make changes at a greater level. Considering a slowdown in the level of business productivity, it has become necessary for companies to proactively seek structural transformation of their business in order to enhance the level of competitiveness. Measures to Support Business Transformation Currently, the Ministry of Trade, Industry and Energy (MOTIE)s standards for approving business transformation activities and the evaluation standards used by financial institutions remain different, so that it has been difficult to provide financing support to those that have been approved by MOTIE. Therefore, authorities will strengthen the pre-selection process to ensure that businesses that are eligible to receive financial assistance are selected as the entities pursuing business transformation by introducing a two-staged evaluation process (evaluation of disqualification criteria and evaluation of technological prowess). a) The business transformation support center will examinethe financial conditions of applicants and determine whether there are any reasons for disqualification. b) A technology credit bureau (TCB) will examine and determine the technological prowess and the viability of business model for those that have passed the evaluation of disqualification criteria. Through TCBs technology appraisal,the feasibility of new business model will be evaluated such as the potential for expanding sales, operating profit, etc., and the capability for capital expansion will be evaluated b
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Jul 28, 2022

Improving Short Selling System and Strengthening Oversight and Punishment for Illegal Activities

FSC Chairman Kim Joo-hyun presided over a joint meeting with relevant institutionson July 28 and announced the measures to improve the stock short selling system and strengthen oversight and punishment on illegal short selling activities. At the meeting, participants shared the same view that investors growing concerns about the use of short selling in illegal transactions and the ineffective oversight and punishment on illegal short sale activities need to be resolved in order to restore investors trust in domestic stock markets.In this regard, through joint efforts, authorities agreed to strengthen oversight, detection and punishment of illegal short selling activities and promptly pursue improvements to the short selling system to stamp out illegal short selling activities. Overview of the Meeting A joint meeting to stamp out illegal short selling activities was held on July 28 chaired by FSC Chairman Kim Joo-hyun. As investors mistrust toward the short selling system continues to grow with recent declines in global stock markets, the meeting was held as the authorities deemed it necessary to (a) promptly address the need to bolster oversight and punishment over market disturbing activities in capital markets through illegal short selling activities and short selling-based price rigging and (b) discuss and announce the measures for bringing about prompt improvements to the short selling system to help address the issues raised by investors. Background Short selling involves a sale of borrowed stocks. As an investment strategy aimed at gaining profits or avoiding losses when stock prices fall, it is an investment method generally allowed in markets across all advanced economies.Short selling helps to increase market liquidity and prevent formation of bubble in stock prices. However, in the wake of the COVID-19 crisis in March 2020, a short selling ban was introduced to help ease market anxieties. Since the introduction of short selling ban, various improvements ha
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Jul 26, 2022

FSC Announces Plan to Introduce Insolvency Resolution Mechanism for Financial Institutions

The FSC announced a plan to introduce an insolvency resolution mechanism for financial institutions (tentatively called financial stability account) to help prevent insolvency of financial institutions. The plan was discussed at the financial risk response taskforce meeting held on July 26. With changes in financial market environment, there have been calls for introducing a mechanism that can help protect financial institutions against insolvency and prevent risks from spreading in advance. In the wake of the 2008 global financial crisis, major economies such as the U.S., EU and Japan established such preventive support systems. In this regard, the FSC is considering ways to introduce an insolvency resolution mechanism for financial institutions (tentatively called financial stability account)for insolvency prevention of financial institutions through liquidity provision and capital expansion. The FSC will prepare a detailed plan after coordinating with relevant ministries and institutions and gathering opinions from experts and seek revision to the Depositor Protection Act accordingly. Background With some of the changes taking place in the financial industry such as the growth of the nonbank sector, deepening interconnectedness between financial sectors and unpredictability in shock originating from the real economy sector, there is growing concern about risks in certain areas spreading across the entire financial system. Therefore, through provision of liquidity injection and capital expansion to the financial sector facing temporary distress amid a crisis situation, it is necessary to keep the cost of maintaining stability in the financial system to a minimum levelby preventing insolvency of financial institutions as well as spread of risks. Major economies such as the U.S., Japan and EU had already set up relevant systems to prevent systemic risks and minimize the cost of insolvency resolution in the wake of the 2008 global financial crisis. On the contrary, t
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Jul 25, 2022

FSC Introduces Financial Support Programs Tailored to the Needs of Small Businesses

The FSC announced its plan to provide KRW41.2 trillion worth of financial support programs tailored to the needs of self-employed business owners and small merchants over two years in order to provide liquidity support, help boost their competitiveness and assist with recovery efforts. Background During the COVID-19 pandemic, the debt service burden of self-employed business owners and small merchants has accumulated as those undergoing difficulties due to a slowdown in contact-based consumption and business restrictions have resorted to more borrowing. The qualitative structure of their loans also deteriorated due to an increase in borrowing from the nonbank sector and growth in the number of borrowers who have multiple debts. The government has thus far provided financial support on an emergency and temporary basis through funding supply with low interest rate loans, maturity extension and payment deferment, etc. However, in the process of returning to normal daily activities, authorities plan to work preemptively and comprehensively to ensure that there are no financing difficulties for self-employed business owners even when the emergency and temporary pandemic era support measures come to an end. In this regard, authorities have prepared comprehensive support packages in the amount of KRW80 trillion that are tailored to the financial needs and business situation of self-employed business owners and small merchants as shown below. a) (For Borrowers with Repayment Capability) KRW41.2 trillion in financing support for liquidity provision and to help boost their business competitiveness (included in todays announcement) b) (For Borrowers Having Difficulties with High Interest Rates) KRW8.5 trillion in refinancing support with low interest rate loan (to be announced in August) c) (For Borrowers without Repayment Capability on Their Own) KRW30 trillion worth New Start Fund to be set up for debt adjustment support through principal payment reduction, etc. (to be annou
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Jul 22, 2022

Government and Financial Sectors to Work for Soft Landing of Business Loan Forbearance

The FSC and FSS along with major banks, financial industry associations and other relevant institutionsdecided to set up a consultative body to work together for a soft landing of the loan maturity extension and payment deferment programfor small merchants and SMEs and held its first meeting on July 22.Through consultative body meetings, authorities will work to prepare a close knit system of support for a soft landing of the maturity extension and payment deferment program in close connection with the governments financial sector measures to help stabilize peoples livelihoods announced on July 14. Background The FSC and financial holding companies held discussions on the implementation of the financial sector measures to help stabilize peoples livelihoods as well as the maturity extension and payment deferment measure at the meeting between the FSC Chairman and CEOs of financial holding firms held on July 21. At the meeting, the financial holding firms stated that financial institutions have been drawing up measures voluntarily in preparation for the termination of the maturity extension and payment deferment program. They indicated that financial institutions are providing one-on-one consulting service and rescheduling of debt payments to help borrowers who are currently on the loan forbearance program to make installment payments (for deferred principal and interest payments) according to their individual debt service capabilities.They explained that each financial institution is preparing its own plan for dealing with borrowers on a case-by-case basis. Nonetheless, in order to prevent potential confusion arising between financial institutions due to divergent situations of borrowers (e.g. debtors with multiple debt accounts), the CEOs of financial holding firms suggested that drawing up a joint guideline that is agreeable by both banks and nonbanks is needed to effectively deal with the areas that individual financial institutions alone cannot adequately address
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Jul 19, 2022

FSC Holds Kick-off Meeting on Financial Regulatory Reforms

The FSC launched a financial regulatory reform committee, composed of 17 private sector participants with expertise in economics, finance, digital, law, and media sectors, to push forward financial regulatory reform initiatives through a private-public cooperation. At its kick-off meetingheld on July 19, the committee appointed Bahk Byung-won, former honorary chairman of the Korea Enterprises Federation (KEF), as committee chairman and discussed directions for financial regulatory reforms. Summary of FSC Chairmans Opening Remarks In his opening remarks, FSC Chairman Kim Joo-hyun emphasized the need for financial regulatory reforms in response to the reshaping of the financial sector and technological changes caused by digital transformation and a blurring of the barriers across sectors (called a Big blur phenomenon). In order for the financial sector to play a key role in economic growth as an independent industry, Chairman Kim called for bold reforms of financial regulations. The financial regulatory reforms, he said, are aimed at creating a new playing field to produce a success story, like a globally-renowned K-pop group BTS, in Koreas finance, in which new players originating from Koreas financial sector would be leading global markets. With financial regulatory reforms, the government will (a) support financial companies, regardless of whether they are online or offline businesses, to grow into global players; (b) create an environment to promote digital innovation for both financial companies and big tech; and (c) allow domestic financial companies to enter businesses, in which global financial companies are allowed to operate. All existing regulations will be reexamined on a clean slate. Chairman Kim stressed the importance of working together principle with various stakeholders from different sectors including industries, academics and media, and asked the financial regulatory reform committee to examine and discuss financial regulatory reform proposals from
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Jul 14, 2022

FSC Unveils New Administration's Financial Sector Measures to Ensure Stability in People's Livelihoods

FSC Chairman Kim Joo-hyun announced the new administrations financial sector measures for ensuring stability in peoples living conditions on July 14. The measures were discussed at the 2nd emergency meeting for stabilizing peoples living conditions held by President Yoon Suk Yeol earlier on the same day. Financial Measures for Ensuring Stability in Peoples Living Conditions (Basic Direction) Strengthen efforts for providing financial supports through refinancing options, debt adjustment and emergency funds to help alleviate burdens on vulnerable groups such as small merchants, households, young adults and lower income earners facing difficulties amid rate hikes. I. Easing Financial Burdens on the Self-employed and Small Merchants Support the self-employed and small merchants recovery efforts by adjusting their debt payment burdens in line with their payment capabilities. a) Make a transition from the current system of financial rescue centered on payment deferments (since April 2020) to a system centered on making fundamental improvements to the financial structure focused on alleviating payment burdens ► (New Start Fund) Provide debt adjustment by purchasing some KRW30 trillion in bad debt (or at-risk debt) - Loan term (maximum 1~3 years), long-term installment payment (maximum 10~20 years), interest rate reduction - Principal reduction (60~90%) provided at a considerable rate to delinquent borrowers with overdue payments of 90 days or more ► (Refinancing Loan) Convert high interest rate loans (with interest rates of 7% or higher) to low interest rate loans (KRW8.7 trillion) ► (Funding for Business Operation) Funding support for business remodeling, reorganization or improvement (KRW42.2 trillion) b) Prepare a close-knit system of support for small merchants to ensure that there are no loopholes after the termination of the loan maturity extension and payment deferment program currently in place until the end of September 2022 ► Maximum loan term of one yea
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Jul 13, 2022

Authorities Introduce Measures to Stabilize Corporate Bond and CP Markets

The FSC announced preemptive market stability measures on July 13 to help stabilize corporate money markets amid rising volatility in the corporate bond and CP markets and financing difficulties exhibited by some businesses due to the impact of recent market rate increases. The Korea Development Bank (KDB) and Korea Credit Guarantee Fund (KODIT)s operation of the corporate bond and CP purchase programswill be extended until March 2023 and the maximum purchase cap will be expanded to KRW6 trillion. Corporate Bond and CP Market Assessment The FSC along with the Financial Supervisory Service, other relevant institutionsand market participants has been closely monitoringthe corporate bond and CP markets amid concerns over increasing volatility in the corporate bond and CP markets due to recent rate hikes. Current Situation in Corporate Bond and CP Markets Due to deteriorating conditions for issuing corporate debt amid expansions in interest rates and spreads, there have been concerns about a slowdown in the issuance of corporate debt and risk for refinancing particularly for low-rated and vulnerable businesses. I. Corporate BondMarket Situation (Issuance) In H1 2022, the amount of corporate bonds (for both non-financial and financial businesses) issued was KRW89.3 trillion, a decline from the same period in the previous year,and the trend for low-rated (non-investment grade) businesses (A-rating or lower) has been continuously declining since March. (Interest Rate and Spread) With acceleration in monetary tightening by major economies and continuing rate hikes by the Bank of Korea, the issuing rateshave increased and spreadshave expanded too. Especially, corporate bond spreads in general have recently gone up higher than the highest point recorded during the COVID-19 pandemic era (June 2020). (Refinancing Risk) Corporate bonds (non-financial businesses) maturing in H2 2022 amount to KRW15.4 trillion, which is the largest since 2017, and the proportion of non-investment
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Jul 12, 2022

Household Loans, June 2022

The outstanding balance of household loansacross all financial sectors rose KRW0.7 trillion in June 2022 with the pace of growth falling from the previous month (up KRW1.7 trillion).The trends in household loan continue to be on a stable path as the statistics for all financial sectors in H1 2022 fell (down KRW0.8 trillion) for the first time since the half-year statistics first became available in 2015.The financial authorities will continue to make efforts for a soft-landing of the household debt issue as there are possibilities of growing burdens on borrowers and risks to financial companies due to interest rate hikes. (Overall) Household loans in June 2022 increased KRW0.7 trillion across all financial sectors. The growth rate (up 2.7%, y-o-y), which fell back lower from a slight increase seen in the previous month, continued to stay on a downward path since the second half of 2021. (By Type) Mortgage loans grew at a faster rate compared with the previous month, but other types of loans dropped considerably to bring down the overall household loan growth level. - (Mortgage Loans) Mortgage-backed loans rose KRW2.8 trillion in June, growing at a faster rate from the previous month (up KRW1.5 trillion) due to brisk lending by banks and the mutual finance sector. - (Other Types of Loans) Other types of loans dropped KRW2.1 trillion in June, edging back lower from a temporary hike in the previous month as credit loans and non-housing collateral lending declined. (By Sector) Household loans in both the banking and non-banking sectors saw a slowdown in the growth level, but the downward trend seen throughout this year in the mutual finance sector has turned upward. -(Banking Sector) Banks saw an increase of KRW0.2 trillion in household loans, declining slightly from the previous month (up KRW0.3 trillion). Mortgage loans from banks rose KRW1.4 trillion,growing at a faster rate compared with the previous month (up KRW0.8 trillion), as jeonse loans (up KRW0.9 trillion) a
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