Financial stability is a prerequisite to innovation and inclusive finance policies. FSC maintains close market monitoring for any signs of market volatility and works to ensure stability in the financial markets. There are risk factors originating from abroad and from within. FSC focuses on making our economy more resilient from external shocks, such as a disruption in the global supply chain, and supporting Korea’s material, component and equipment industries to help boost their global competitiveness. Internally, FSC is closely monitoring the trends in household debt and seeking reforms to corporate restructuring in order to prevent domestic risk factors from turning into systemic risks. Policies aimed at increasing financial stability also include enhancing fairness in the financial markets by introducing a comprehensive legal framework for the supervision of financial conglomerates, improving market discipline and promoting transparency in corporate disclosure and accounting practices.
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Sep 07, 2022
- FSC Prepares Additional Measures to Improve Convertible Bond Market
- The FSC announced additional measures for improving rules on the convertible bond market on September 7. As in the case with the convertible bonds (CBs) and bonds with warrants (BWs) issued by listed firms, the regulation on refixing and call option will also apply to (redeemable) convertible preference shares issued by listed companies. Background In October 2021, the FSC introduced a revisionto the regulation on the issuance of securities and disclosure to help prevent CBs from being used in unfair transactions in such cases where CBs are used expediently to increase the shareholding of largest shareholders. Moreover, the FSC introduced a supervisory guideline on the accounting practices of CB call options to help improve the transparency in CB market from an accounting perspective. However, in the process of pursuing regulatory improvements, a concern has been raised about the possibility of stronger regulation (on refixing, etc.) posing excessive restriction on companies fundraising activities.Therefore, the authorities have prepared additional measures for regulatory improvement after examining the trend of CB issuance since the revised regulation went into effect from December 1, 2021. Convertible Bond Market Trend (Issuance Amount) The monthly average CB issuance amount in the first quarter of this year was KRW579.0 billion, a drop of 36 percent compared to the same period last year (KRW904.6 billion)This is on a par with the declining trend of corporate bonds over the same period (down 29.2 percent y-o-y). However, when including the amount of CB issuance prior to the implementation of the revised regulation (KRW2.2 trillion, November 2021), the monthly average CB issuance amount appears to be on course for recovery after a temporary fluctuation. (Issuance Rate) With the expansion in liquidity amid COVID-19 response measures, the CB issuance rate went down slightly in 2020 but edged back up narrowly due to the effects of base rate hike, etc. (Refixing Propor
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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 19, 2022
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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 11, 2022
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Jul 28, 2022
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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
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Jul 22, 2022
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Jul 14, 2022
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Jul 13, 2022
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Jul 04, 2022
- FSC and FSS Decide to Implement Measures to Mitigate Stock Market Volatility
- In response to a recent increase in stock market volatility, the financial authorities held a market monitoring meeting on July 1 and decided to take measures to mitigate market volatility. (a) Requirement for securities firms to maintain a certain level of collateral ratio on their credit loans will be exempted for three months starting from July 4, which may be extended if needed. (b) Caps on the amount of daily buy orders for acquisition of treasury stocks by listed companies will be eased for three months starting from July 7, which may be extended if needed. (c) The FSS and KRX will jointly conduct a special inspection on short-selling practices. Financial authorities will continue to monitor financial market conditions, holding a joint market monitoring meeting on a weekly basis, and consider or implement market volatility mitigation measures, if needed, in accordance with contingency plans. Background With the KOSPI falling below 2,300 points during intraday trading on July 1, Koreas stock market has shown continued and increasing volatilityon concerns over rising interest rates, expanding inflation, possibility of a global economic recession, etc. Although increased stock market volatility will be inevitable for a while, given macroeconomic conditions at home and abroad, it is necessary to stay alert about the spread of excessive market anxieties. Measures To Mitigate Stock Market Volatility The FSC and FSS held a joint market monitoring meeting with relevant securities institutionschaired by FSC Vice Chairman Kim So-young to examine financial market conditions after the market closing on July 1, and decided to implement the following measures to mitigate market volatility. (a) For three months from July 4 to September 30, which may be extended if needed, securities firms will be exempted from a requirementto maintain a certain level of collateral ratios on their credit loans in order to ease concerns about a surge in forced liquidation with declining stock
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Jun 23, 2022
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Jun 16, 2022
- Post Office-Bank Partnership Expanded to Improve Offline Access to Banking Services
- FSC Vice Chairman Kim So-young presided over a memorandum of understanding (MOU) signing event between Korea Post, four major banks and the Korea Financial Telecommunications Clearings Institute (KFTC) on June 16 for expanding consignment partnership between the banks and the post office. Vice Chairman Kim also announced the governments plan for improving offline access to banking services in order to guarantee consumers choice in accessing financial services both online and offline and improve convenience for vulnerable groups such as the elderly. MOU Signing Korea Post, four major banks (Kookmin, Shinhan, Woori and KEB Hana) and the KFTC signed an MOU and agreed to proceed with the consignment of banking services (deposit, withdrawal functions, etc.) to post offices with a goal to make services available within this year. Summary of Vice Chairmans Opening Remarks Rapid digital transformation taking place recently throughout the financial industry including the banking sector has led to an increase in mobile-based and contactless financial transactions and a continuing decline in the number of bank branches. However, offline financial services will continue to play an important role for maintaining the quality of banking services, ensuring inclusive finance for vulnerable groups such as the elderly and meeting diverse demands of consumers. Moreover, it is necessary that the government and the industry make joint effort to help improve offline access to financial services. To this end, the authorities have prepared a plan for improving offline access to banking services to ensure the availability of offline channels that can serve as an alternative to bank branches. Improving Offline Access to Banking Services (Expanding Consignment Partnership) The authorities are seeking a diversification in the availability of offline channels offering simple banking services such as deposit and withdrawal functions through consignment of banking services to the post office and c
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Jun 09, 2022
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May 24, 2022
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May 18, 2022
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May 02, 2022
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Apr 01, 2022
- FSC Approves Rules Change to Gradually Introduce Mark-to-Market Valuation on Corporate MMFs
- The FSC approved a revision to the regulation on financial investment business at the 6th regular meeting held on March 30 for gradually introducing the mark-to-market valuation method on corporate money market funds (MMFs) and to check relevant preparation and implementation to facilitate a soft-landing of the mark-to-market method in the market. Background The mark-to-market valuation method on corporate MMFs is scheduled to take effect from April 1, 2022, which was introduced through amendments to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) and the regulation on financial investment business in March 2020. Although the mark-to-market valuation method is considered as the rule of the game in principle, prior to the amendments, the book value method was permitted on MMFs as long as the disparate rate in the market-to-book value is within 0.5 percent. However, when disparity in the market-to-book value widens, there is a possibility of causing an abrupt and large-scale redemption as the earlier the investor redeems his/her money, the higher valuation s/he will get on return. As such, the amendments have been introduced to bring about improvements by introducing and implementing the mark-to-market valuation method on corporate MMFs from April 2022. Some of the key changes include (a) making an exemption to allow the book value method on corporate MMFs with more than 30 percent of stable assets as prescribed by the regulation on financial investment business and (b) expanding the duration of corporate MMFs using the mark-to-market valuation method from 75 days previously to 120 days to promote a wider use. However, with a growing potential of rising volatility in short-term money markets recently, there have been calls for a need to introduce the mark-to-market valuation method in a step-by-step manner in order to prevent corporate MMFs from turning into potential risk factors. With the MMFs current preference for the bo
