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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
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Jun 26, 2019
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May 30, 2019
- FSC Introduces Deregulatory Measures to Boost Korea's Derivatives Market
- The FSC introduced deregulatory measures to make Korea’s derivatives markets more vibrant and competitive. The reforms are intended to strengthen the derivative market’s role for risk hedging and price discovery, as part of the government’s broader efforts to vitalize capital markets and support the real economy.BackgroundKorea’s derivatives trading volume fell sharply from its peak in 2011 but recovered to an extent after 2015 with increased trading of index products.1 Since the introduction of tighter regulations to curb speculative trading in 2011, the derivatives market’s soundness improved with an increase in the number of longer-term open contracts for risk hedging.2By investors, foreigners accounted for 50.4% of derivatives trading in 2018, up from 25.7% in 2011. Over the same period, the share of institutional investors decreased from 48.7% to 36.1%; and retail investors from 25.6% to 13.5%. Excessive entry barriers act as obstacles to retail investors, while strict margin requirements hinder institutional investors’ participation.The derivatives market is disproportionately concentrated in KOSPI200-related products, making it difficult to serve investors’ demand for a variety of derivatives products.Reform Measures► Lower entry barriers for retail investors (Q4 2019/FSC, KRX) Minimum deposit requirement will be abolished for professional investors and eased for non-professional investors: (i) KRW 10million or more for futures and options trading; and (ii) KRW 20million or more for all derivatives trading. One hour of education and three hours of mock trading► Ease margin requirements for institutional investors (Q3 2019/FSC, KRX) Currently, institutional investors are required to deposit an extra margin, 10 % of credit risk limit, in addition to 100% of the volume exceeding the credit limit. The1 Average daily turnover (unit: trillion won): 66.3(2011), 47.9(2013), 37.2(2014), 41.2(2015).45.0(2018)2 KOSPI 200 Futures Open Interest (unit: 10
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May 26, 2019
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Apr 24, 2019
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Apr 17, 2019
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Apr 01, 2019
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Oct 29, 2018
- FSC Holds Meeting on Financial Market Conditions
- FSC Vice Chairman Kim Yongbeom convened a meeting with representatives of financial institutions this morning to examine financial market conditions and make sure that Korea’s economic and financial conditions are well prepared to deal with the recent market turmoil.SUMMARY OF VICE CHAIRMAN’S REMARKS:► KOREA’S ECONOMIC AND FINANCIAL CONDITIONSKorea’s economic fundamentals remain strong, despite recent downward revision of growth outlook and concerns on global economic conditions.From the macroeconomic perspective, Korea’s economic growth is expected to stay well above 2%. Its current account has recorded a straight 78-month surplus. It maintains sound fiscal balance with 2.3 % of GDP in fiscal surplus. Korea’s currency exchange and CDS premium are stable compared to those of major emerging markets.From the microeconomic perspective as well, Korea’s economic and financial indices have improved since the financial crisis of 2008. Banks’ short-term external debt ratio decreased, while BIS capital adequacy ratio increased. Banks have sufficient buffer against external shocks since they had turned net creditors in 2016.The self-assessment above is in line with evaluations by credit rating firms. Moody’s, SP and Fitch maintain good credit ratings with Korea, highly evaluating its external and fiscal soundness.► POLICY RESPONSESOverall, Korea has strong fundamentals to weather the recent turmoil in domestic and global financial markets. Given its characteristics of a small open economy, however, Korea may not be immune to the effects from external and internal uncertainties. In particular, readjustment of asset prices with monetary normalization in major economies may increase volatility in financial markets.Against this backdrop, the FSC will take measures to stabilize the stock market:First, the FSC will create a KRW500 billion fund with securities-related institutions to support the stock market. Out of the fund, KRW300 billion will come from ‘Ko
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May 29, 2018
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May 04, 2018
- Regulatory Reform on Entry Barriers to Financial Services Industry
- The FSC outlined its plan on regulatory reform on entry barriers to financial services business in a bid to promote competition and innovation in the financial sector. The proposal comes at a time when Korea’s financial industry is facing a paradigm shift that demands further innovation in response to the Fourth Industrial Revolution, prompting competition between incumbents and new entrants. It is the first-ever reform plan on entry barriers in 20 years since the current regulatory framework on market entry was established after the Asian financial crisis. Based on the review of the current regulations across the financial sector, the plan aims to overhaul entry requirements tailoring to the needs of each sector, encouraging innovative players to enter the market.Key Changes1. Expanding participation of private-sector expertsThe FSC will expand participation of private-sector experts in the decision-making process related to approval for new entrants. To this end, the FSC will create a 9-person committee of outside experts to evaluate competitive conditions in the financial sector on a regular basis, making it possible to make more objective and fair policy decisions.2. Lowering regulatory barriers to entryThe FSC will lower regulatory barriers to entry and reform entry-related regulations to allow ‘innovative challengers’ to enter the market.► Banking industryThe two internet-only banks, launched in 2017, are being considered to have brought positive changes to the banking sector as they has grown in size1 and promoted competition with incumbent banks. To deepen and broaden such changes, the FSC will consider allowing additional internet-only banks, if demand exists, based on reviews and evaluations of competitive conditions in the banking sector.► Insurance industryThe insurance industry is highly concentrated towards large insurers dealing with all types of life and property insurance. Such large insurers accounted for 99.5% of life insurance and 92% o
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Apr 04, 2018
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Mar 15, 2018
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Oct 24, 2017
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Sep 28, 2017
- Revision to the Act on External Audit of Stock Companies
- I. BackgroundThe Act on External Audit of Stock Companies (hereinafter referred as “the Act”) has gone through major improvements since the bill was enacted in 1981. Among them, the latest revision, passed by the National Assembly on September 28, 2017, is the most far-reaching reform of Korea’s accounting and audit practices, compared to a Korean version of the Sarbanes-Oxley Act. To deter a repeat of major accounting scandals in recent years, the revised bill contains fundamental changes in a wide range of issues, including external auditor independence, corporate accountability, and penalties against wrongful acts. Those changes will set higher standards for all stakeholders in their role, including companies, auditors and financial regulators, to further advance Korea’s accounting reform efforts. The revised bill will take effect November 1, 2018, one year after the date of its promulgation.II. Key ProvisionsCompanies, greater accountability and stronger internal control1. The scope of companies subject to external audit, currently limited to ‘stock companies’ under the Act, will be expanded to include ‘limited liability companies (LLCs).’* Specifics about companies subject to external audit and the scope of disclosure of audit reports will be delegated to the subordinate Enforcement Decree of the Act.2. The right to appoint an external auditor, currently exercised by the company’s management, will be transferred to internal audit organizations such as the ‘statutory auditor’ or the ‘audit committee.’3. Companies will be held more accountable for preparation of their financial statements.► A company shall not require an external auditor to prepare financial statements on its behalf.► If a company fails to submit financial statements to the external auditor and the Securities and Futures Commission (SFC) within the statutory deadline, six weeks before the general meeting of shareholders, the company’s representative director shall
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Aug 24, 2017
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Nov 10, 2016
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Nov 07, 2016
- FSC Holds Emergency Meeting on Financial Markets
- FSC Chairman Yim Jong-Yong convened an emergency meeting with top officials from the FSS and other relevant financial organizations to respond to recent uncertainties in financial markets at home and abroad. Followings are key messages from his opening remark: The Korean economy is now facing internal and external challenges with slump in exports; slow recovery in domestic consumption; and household and corporate debt risks. However, our economy has sound fiscal health and strong fundamentals to weather these challenges. The government maintains fiscal soundness with its debt-to-GDP ratio of 35.5% at the end of 2015, which is the 4th lowest among 31 OECD countries. South Korea has the world’s 7th largest foreign currency reserve. Its short-term external debt accounts for only 29% of the foreign currency reserve, as of the 2nd quarter of 2016, which is much lower than 74% at the end of 2008. The financial system is resilient enough in terms with capital adequacy and asset soundness of financial institutions. The government will stay alert to internal and external uncertainties and take bold and preemptive measures, if necessary, to prevent any of risk factors from spilling over into a wider financial system to threaten our economy. Starting from today, the FSC and the FSS go into an emergency operation mode with a 24-hour monitoring on financial markets, in a close cooperation with the Ministry of Strategy and Finance, and the Bank of Korea. If necessary, we will take market stabilizing measures in accordance with contingency plans in a timely manner. We will continue to respond to household and corporate debt risks in a preemptive manner. For household debt, the government will continue our effort to improve soundness of household debt by holding the principle of ‘debt should be borrowed within repayment ability and paid back in installments.’ We will also closely monitor and respond to rapid growth of household debt in non-banking sectors. For ong
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Sep 06, 2016
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Aug 02, 2016
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Jun 24, 2016
- FSC Meeting on Financial Market Stability after UK's Decision to Leave the EU
- As it seems inevitable that the ‘Brexit’ decision would have short-term impact on financial market, financial authorities will respond in a swift and decisive manner to developments in financial markets. The government will monitor international and domestic financial market conditions around the clock while strengthening communication with global IBs and foreign media. The FSC/FSS will immediately form and operate a contingency response team led by the FSC Secretary General to strengthen monitoring and respond preemptively to possible volatility in financial markets. The government will also review its contingency plan to ensure that the detailed action plans are executed without any delay in case of abrupt financial market turmoil.In particular, the government will closely monitor domestic banks’ foreign currency liquidity conditions and make sure that they are well prepared to respond to market developments. The government views that the Korean economy is resilient enough to withstand possible impact of the Brexit decision on global financial market, given its strong economic fundamentals and financial soundness. * short-term external debt / total external debt: 43.1% (2009), 34.9% (2011), 26.4% (2013), 27.4%(2015) * short-term external debt / total foreign reserve: 52.0% (2009), 45.6% (2011), 32.3% (2013), 29.1% (2015) * current account surplus/ GDP: 3.7% (2009), 1.6% (2011), 6.2% (2013), 7.7% (2015) We ask investors not to overreact to temporary increase in financial market volatility and remain calm to future market developments from a mid-to long-term perspective with confidence in the Korean economy’s fundamentals. * Please read the attached file for details.
