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Dec 21, 2006
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Dec 18, 2006
- New Measures Proposed to Advance the Bond Market
- The Financial Supervisory Commission announced a set of proposals aimed at advancing the bond market on December 14. The new proposals are the work of a joint public-private task force created in February this year to recommend improvement in four key areas—corporate bond underwriting, market liquidity, trading of repurchase agreements, and disclosure—and help raise the transparency and efficiency of the bond market.1 The legal and regulatory amendments needed for the changes proposed by the task force are expected to be completed by June, 2007.Bond Market TrendSince the financial crisis, the bond market has shown a steady growth with the total issue amount and the trading volume increasing more than two-fold and five-fold, respectively, since 1998. Recently, however, corporate debt-financing has been declining amid falling capital demand for corporate investment and investors showing preference for cash accumulation.Corporate Bond Underwriting by Securities CompaniesAs a result of weak capital demand and the growth of privately placed issues, the market for corporate bond underwriting has been shrinking, putting a downward pressure on profits securities firms generate from underwriting.Securities firms authorized to underwrite bond issues numbered 45, 31 of which took part in an actual bond underwriting. Fees generated from underwriting averaged KRW3 billion for each securities firm in 2005.Because local securities firms compete more on underwriting fees than on funding ability, risk analysis, raising interest among investors, and other critical underwriting capabilities, they have thus far failed to build the kinds of reputation that investors generally expect. Local securities firms are also continually exposed to legal risks for inadequate attention to investor protection, e.g., poorly administered due diligence and faulty prospectus.Task Force ProposalAs a way to discourage unhealthy competition and improve the overall caliber of corporate bond underwriting
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Nov 24, 2006
- Assessment of Private Equity Industry, November 2006
- The Financial Supervisory Service issued an assessment of Korea’s private equity industry on November 22, 2006, to mark the second year of regulatory changes that allowed the formation of private equity funds (PEFs) as a recognized investment entity for the first time in December, 2004.Registered PEFsThere were 20 registered PEFs as of end-October with a total investor subscribed (committed) amount of KRW4.66 trillion, of which KRW1.99 trillion were actually called. Since the beginning of 2006, six PEFs were newly registered and one was terminated for a net increase of five. The subscribed amount increased KRW1.76 trillion and the called amount KRW760.6 billion in 2006. At the end of 2005, there were 15 registered PEFs with KRW2.9 trillion in total subscribed amount and KRW338.8 billion in total called amount.Fund RaisingThere were seven large funds (more than KRW300 billion), six medium-sized funds (between KRW100 billion and KRW300 billion), and seven small funds (less than KRW100 billion) as of end-October. Three of the large funds exceeded KRW500 billion in total subscribed amount. Most of the small funds were so-called “deal-by-deal” PEFs that specialize in a specifically targeted company.Management fees typically ranged between 1.5% and 2% of the subscribed investment amount when PEFs were first introduced. But with a majority of institutional investors preferring financial, rather than strategic, investment whose returns do not depend too much on the fund management skills of the general partners (managers) of PEFs, management fees fell to a lower range between 0.1% and 2% of the investment executed.InvestmentsEleven PEFs had executed investments totaling KRW999.0 billion in 27 companies, including a KRW343.9 billion takeover of a privately held company in June, 2006, the largest PEF investment to date. Since the beginning of the year, the number of companies in which PEFs invested jumped from 9 to 27 with the total executed amount sharply up from KRW26
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Nov 15, 2006
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Nov 15, 2006
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Nov 10, 2006
- Asset Management Companies' Preliminary Net Income:First Half of FY2006
- Regulatory filings by 49 asset management companies–36 domestic and 13 foreign–show preliminary net income for the first six months of FY2006 ended September 30 totaled KRW150.9 billion, up KRW93.6 billion from KRW57.3 billion a year earlier. Pretax income came to KRW200.0 billion, compared with KRW78.5 billion a year earlier.A large increase in management fees boosted by a surge in investment into stock funds pushed asset management companies’ net income for the period. Management fees, which averaged 63 basis points at end-September, compared with 58 basis points a year earlier, jumped KRW124.8 billion or 67.1% to KRW310.7 billion. Investment in stock funds, which typically generate higher management fees than other funds, more than doubled from KRW21.9 trillion at end-September, FY2005, to KRW46.4 trillion.Domestic asset management companies’ pretax income for the period totaled KRW155.8 billion, an increase of KRW91.2 billion or 141.2% from a year earlier. For foreign asset management companies, the total come to KRW44.2 billion, compared with KRW13.9 billion a year earlier.As of end-September, assets under management totaled KRW230.7 trillion (net asset basis), an increase of KRW25.2 trillion or 12.2% from KRW205.5 trillion a year earlier. Both stock funds and hybrid funds grew by KRW24.5 trillion and KRW9.5 trillion, respectively, from a year earlier, but money market funds fell by KRW15.5 trillion during the period. Assets under the management of domestic asset management companies came to KRW191.4 trillion. For foreign asset management companies, the total was KRW39.3 trillion.* Please refer to the attached PDF for details.
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Nov 01, 2006
- IMF-FSC/FSS to Host Macroprudential Supervision Conference in Seoul
- The International Monetary Fund and Financial Supervisory Commission / Financial Supervisory Service will jointly host an international conference on macroprudential supervision in Seoul from November 7 to 8, 2006, at the Grand Hyatt Seoul Hotel.The conference, entitled “Macroprudential Supervision: Challenges for Financial Supervisors,” underscores the growing interest in macroprudential supervision among financial supervisors. With an emphasis on system-level approach to regulatory and supervisory frameworks, macroprudential supervision is taking shape as an added safeguard against financial instability.There have been a number of discussions among international organizations and several national supervisory authorities in recent years on various aspects of macroprudential supervision. But the Seoul conference is expected to be the first major international conference that will focus exclusively on macroprudential supervision. Thus, it will give the participants a unique opportunity to share with others experiences and expertise on macroprudential supervision.Approximately 350 participants at home and from abroad, including representatives from the International Monetary Fund and Bank for International Settlements, and the heads of the U.K. Financial Services Authority and the Australian Prudential Regulation Authority, are expected to attend the conference. Four separate sessions—Financial Stability, Approaches to Macroprudential Supervision, Stress Testing, and Case Studies of Macroprudential Supervision—with presentations and discussions on 15 topics are scheduled during the two-day conference.* Please refer to the attached PDF for details.
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Sep 22, 2006
- Introduction of Third Insurance with Cash Value and Bancassurance Supervision
- Bancassurance was first introduced in August, 2003, to help consumers purchase insurance at a lower cost and improve market efficiency. In light of the potential impact of bancassurance on the insurance market, a phase-in approach was adopted. Under this approach, sale of savings-type insurance began in August, 2003. This was followed by the sale of exclusively protection-type “third insurance” providing coverage against illnesses and injuries as well as post -illness and post -injury risks in April, 2005. In October, the sale of third insurance with cash value at maturity (TICV) is set to begin.Sales of Bancassurance ProductsDuring the second phase of bancassurance (April, 2005, to June, 2006), sales totaled KRW7.3 trillion–KRW6.2 trillion for life and KRW1.1 trillion non-life insurance products–on earned premium basis. With earned premium rising more than 30% in FY2005, the growth outlook on the bancassurance market looks positive. Nearly all of the bancassurance sales (98.9%) were made through banks. Kookmin Bank and Shinhan Bank held 28.8% and 19.4%, respectively, of the sales.Market for TICVThe market for TICV, which is set to begin in October, is estimated at KRW12.7 trillion–KRW7.9 trillion for life and KRW4.8 trillion for non-life insurance products–a year, approximately 14% of the insurance market.When the third-phase bancassurance commences, insurance products that can be sold through banks and other financial institutions are expected to account for 51.5% of life insurance products and 36.1% of non-life insurance products.Tax Benefits of TICVConsumers are expected to benefit from, among others, tax deductions and longer-term policies with TICV, a protection-type insurance that allows up to KRW1 million in deductions from the policyholder’s taxable income. The policy term for savings-type insurance is limited to 15 years (non-life), but no such term restriction is applicable to TICV as it is a protection-type insurance.Upsides of TICVConsumer
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Sep 12, 2006
- Equity Disclosure Filings First Half 2006
- An analysis of disclosure filings for investment in listed companies for the first six months of 2006 showed a total of 2,397 investors held five percent or more equity interests in 1,624 listed companies (700 Stock Market-listed and 924 KOSDAQ-listed). During the period, 2 tender offers and 122 proxy solicitations were made, compared with 5 and 108, respectively, during the same period a year earlier.Disclosures Filed under the “Five-Percent Rule”Disclosures filed under the five-percent reporting rule for the first six months of the year totaled 4,157, compared with 4,499 for H2, 2005, and 5,717 for H1, 2005. The total for H1, 2005, includes 1,791 re-filings made under the amended reporting rule that took effect March 29, 2005. Excluding the re-filings, the total for H1, 2005, was 3,926. Filings by foreign investors have steadily increased since 2003.By investment purpose, filings for exercising influence on the management totaled 1,609 (1,580 companies: 666 Stock Market-listed, 914 KOSDAQ-listed) as of the end of June. Those for investment only totaled 872 (1,139 companies: 516 Stock Market-listed, 623 KOSDAQ-listed).Filings by Foreign InvestorsA total of 307 foreign investors–288 legal entities and 19 individuals–held five percent or more equity interests in 505 listed companies, of which 242 were Stock Market-listed and 263 KOSDAQ-listed.Tender Offer FilingsTwo tender offer filings involving Choong Nam Spinning Co., Ltd. were made during the first six months of the year. There were no tender offers intended for enhancing management control or going private during the period.Proxy SolicitationsA total of 122 disclosures were filed for proxy solicitation during the first six months of the year. Of the total, 110 or 90.2% were for the purpose of meeting the quorum requirements in the general shareholders’ meetings. There were 12 filings for proxy contests during the period.* Please refer to the attached PDF for details.
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Sep 01, 2006
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Aug 30, 2006
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Aug 30, 2006
- Bank Loans Classified as Substandard or Below: First Half, 2006
- Bank loans classified as substandard or below (SBLs)–substandard, doubtful, or presumed loss–totaled KRW8.8 trillion at the end of June, down from KRW9.7 trillion at the end of 2005. The ratio of SBLs to total outstanding loans fell from 1.22% to 1.02%, the lowest ratio since the forward-looking criteria were first adopted in 1999. Disposition of borrower collateral, aggressive write-off of SBLs, and a smaller increase in new SBLs–KRW6.0 trillion compared with KRW8.8 trillion for H1, 2005, and KRW7.1 trillion for H2, 2005–mainly contributed to the drop in SBL ratio for the first half of 2006.The SLB ratios fell for all the key borrower groups during the first half from end-2005, averaging 1.09% for corporate loans, 0.86% for household loans, and 1.80% for credit card receivables. The ratio fell for 14 banks but modestly rose for 4 others.* Please refer to the attached PDF for details.
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Aug 17, 2006
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Jul 31, 2006
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Jul 31, 2006
- FSC Announces a Task Force on Capital Market Consolidatiln Legislation
- The Financial Supervisory Commission announced on July 17 the formation of a task force on the capital market consolidation legislation (provisionally titled “Financial Investment Services and Capital Market Act”) in order to conduct a thorough review of the new legislation and come up with recommendations for the Ministry of Finance and Economy. The task force was formed as part of the ongoing effort by the FSC to reduce regulatory arbitrage, provide a consistent regulatory framework and facilitate a balance growth of the capital market.In light of the importance and urgency the government attaches to the capital market consolidation legislation, the Securities and Futures Commission will lead the task force with nine senior officers from the FSC and the FSS. The task force will be supported by five staff-level teams that will separately focus on securities, asset management, unfair market conduct, banking, and trust services.The key areas of focus for the task force are:- Whether additional reinforcement measures are needed in the conflict-of-interest provisions for financial service firms offering multiple investment advisory services (articles 43 and 44 of the proposed legislation);- Whether additional reinforcement measures are needed for investor protection and for effective supervisory oversight (investor protection provisions, articles 45-51; safeguard measures against unfair market conduct, articles 70, 82, 92, and103);- Whether regulatory provisions are open to multiple interpretations (appropriateness of the meaning of investment product and investment business, articles 3-7), and- Follow-up measures and further reinforcement steps in the supervisory regulations.The task force is expected to complete its work by September and work closely with the Ministry of Finance and Economy on its recommendations for the capital market consolidation legislation.* Please refer to the attached PDF for details.
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Jul 31, 2006
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Jun 21, 2006
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Jun 21, 2006
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Jun 21, 2006
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May 22, 2006
- Chairman/Governor Yoon Jeung-Hyun Holds High-Level Talks in Washington, D.C., and Attends 8th Integrated Financial Supervisor
- Chairman/Governor Yoon Jeung-Hyun of the Financial Supervisory Commission and the Financial Supervisory Service met with senior U.S. regulators in Washington, D.C., and attended the 8th Integrated Financial Supervisors Conference in Budapest, Hungary.During his visit to the U.S., Chairman/Governor Yoon met with Fed Chairman Ben Bernanke, SEC Chairman Christopher Cox, OCC Comptroller John Dugan, and Deputy Secretary of the Treasury Robert Kimmitt in Washington, D.C., and discussed financial supervision, steps to strengthen supervisory ties between the two countries, the new capital accord, and other issues of mutual interest.In New York City, Chairman/Governor Yoon met with President Timothy Geithner of the Federal Reserve Bank of New York and discussed banking supervision and facilitating supervisory support to each other. Chairman/Governor Yoon also delivered a speech before Asia Society stressing the need for close regional and global cooperation to ensure financial stability and promote economic growth. He also held a roundtable discussion with the heads of major U.S. financial institutions on the success of Korea’s regulatory reform and the financial hub initiative.After the meetings in the U.S., Chairman/Governor attended the 8th Integrated Financial Supervisors Conference in Budapest, Hungary, on May 18-19. The IFSC is an annual gathering of the heads of integrated supervisory authorities that first began in 1999 to promote sharing of knowledge and experiences on integrated financial supervision and enhance cooperation on areas of common interest among the integrated supervisors.The agenda for this year’s conference were updates on major developments in the member countries, quality management of financial supervision, informal power and responsibility, and integrated supervision cross-border issues. During the conference, Chairman/Governor Yoon met separately with Chairman Callum McCarthy of the U.K. Financial Services Authority for the annual high-level
