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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.
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Jun 15, 2016
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Mar 09, 2016
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Jan 07, 2016
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Dec 16, 2015
- FSC-FSS Meeting for Monitoring Financial Market Conditions
- The FSC and the FSS held a meeting to make sure that Korea’s financial markets are prepared for the impact of the Fed’s possible rate hike. RECENT TRENDS IN CAPITAL FLOWSThe expectation of a U.S. rate increase weighs on global stock markets. External risk factors prompt volatility in Korea’s financial market with foreigners’ net selling of stocks and investors’ appetite for safer assets. Kospi fell 3.0% in recent days(Dec.1~Dec.15), while the yield on 3-year government bonds dropped 5.2bp in the same period. However, the general market view is that capital outflows would not be expanded sharply, looking into characteristics and causes of recent outflows. In 2015, foreign investors sold an average of KRW 1.7 trillion per month in the stock market, which is less than the net selling of KRW 2.5 trillion per month for the past 10 months and less than the net selling of KRW 2.4 trillion per month in the following months of the so-called ‘taper tantrum’ (March~June 2013). Since September this year, oil producers like Saudi Arabia have been leading foreign net selling as their fiscal conditions deteriorate with falling oil prices. The net selling mode is hardly related to changes in foreign investors’ appetite to Korean stocks. US funds, which represent a largest share of Korea’s stock market(40%), continue to remain net buyers in November and December amid rising possibility of a U.S. interest rate increase. European funds sold a net KRW 10.2 trillion of Korean shares from June to September this year, but the pace of selling has slowed since then. STOCK MARKET The Korean stock market is expected to face turmoil in the short term after the Fed’s decision. However, many investment banks forecast that the Kospi will gradually bounce back to a level of 2,100 or beyond in 2016. Given strong fundamentals of the Korean economy, undervaluation of Korean stocks could appeal to investors once the Fed’s rate hike finally removes uncertainty. The FSC will closel
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Oct 16, 2015
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Sep 07, 2015
- China's Economic Slowdown and Its Impact on Korea's Economy
- CHINA’S ‘NEW NORMAL’The IMF recently downgraded China’s economic growth forecast in 2015 and 2016 to 6.8% and 6.3% respectively, slower than the stable growth of 7% in three years since 2012. The growth rate of around 6% is still high, given the size of China’s GDP; however, the actual impact of such slowdown from 7% to 6% could be felt far more profound. China’s slowdown is attributed to excessive and inefficient investments by its massive economic stimulus plan. Inventory adjustments and deleveraging will weigh on China’s economy for a considerable period of time. It will be difficult to resolve oversupply in property market in a short period. To manage a soft landing of Chinese economy, the Chinese government set out a new economic model, so-called ‘Xin Chang Tai(新常態, new normal)’ since President Xi Jinping came to power in 2013. The new growth model is aimed to shift Chinese economy from export-driven rapid growth to consumption-led stable growth. It also includes structural reform, diversification of growth drivers and liberalization of financial markets. The effectiveness of the Chinese government’s stimulus plan to downward pressure is key to a soft landing of Chinese economy as it would take time for structural reform to achieve results. The Chinese government still has capability to prevent a hard landing of Chinese economy. However, emerging economies also need to be prepared in response to the spill-over effect of China’s new normal. IMPACT ON KOREA’S FINANCIAL MARKET There is a possibility that volatility might increase due to worries over China’s economic slowdown and potential spill-over effects of its structural reform. However, market participants view that it is unlikely for Chinese slowdown to cause a serious financial crisis. Since the 2008 global financial crisis, Korea’s economic fundamentals have been steadily improved. Its current surplus has grown to USD 89.2 billion in 2014 from USD 3.2 billion in 2008; its
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Aug 21, 2015
- FSC Holds Meeting over Recent Global Financial Market Condition & Its Impact on Korea's Stock Market
- The FSC held a meeting with the FSS, KRX, and KCIF at 8 a.m. on August 21 to discuss recent global financial market condition and its impact on Korea’s stock market.GLOBAL FINANCIAL MARKET CONDITIONGlobal stock markets recently went down with heightening global risk factors such as China’s stumbling stock market, its currency devaluation and speculation about the Fed’s rate hike. - Stock markets in major economies mostly went on a downward trend since June this year. Emerging markets slumped further compared to advanced ones. - Global stock funds are flowing into advanced market out of emerging markets amid growing uncertainty over global financial condition. IMPACT ON KOREA’S STOCK MARKETVolatility in Korean stock market has increased recently as foreign investors began to sell and stock prices stumbled with growing external uncertainty. - Foreign investors have turned net sellers of KRW 4.3 trillion KOSPI shares since June this year as external uncertainties heightened.- The KOSPI and KOSDAQ indexes have slumped recently. * KOSPI: 1,916(end-2014) → 2,173(April 23, 2015) → 1,915(August 20, 2015) KOSDAQ: 543(end-2014) → 783(July 20, 2015) → 657 (August 20, 2015) Recent adjustments in stock market prices are seen largely due to external factors such as diminishing global market confidence, rather than domestic market factors. - While foreign investors are selling shares in most of Asian stock markets, the amount of net sales by foreigners in Korean stock market is relatively small.- Korea’s stock market indexes did not fall sharply, compared to those of Asia’s major markets. Market fundamentals in Korea are sound, and global financial markets remain stable in comparison to previous market turmoil in 2011 and 2013. We see market participants do not have to react excessively to recent market developments. - Korean stock prices are relatively undervalued. Korea’s foreign exchange reserves stood at USD 374.7 billion, the world’s sixth largest as o
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Jul 22, 2015
- Household Debt Management Measures
- The government announced today a package of measures to manage household debt. A consultative body was formed among relevant government agencies in March this year to discuss and come up with comprehensive and preemptive measures to manage household debt in response to potential internal and external risks. The measures are focused on accelerating the improvement of household loan quality, strengthening the assessment of a borrower’s repayment ability, tightening household debt management in the non-banking sector, and strengthening banks’ ability to respond to internal or external shocks. CURRENT STATUS OF KOREA’S HOUSEHOLD DEBTThe household debt has grown fast recently after years of stabilized growth around 6%. Particularly, mortgage lending from banks has been rising fast since the second half of last year , which is attributed to multiple factors such as eased mortgage restrictions and growing demand for loans with interest rate cuts. Mortgage lending by banks which amounted to KRW 375 trillion at the end of March 2015 maintains its financial soundness with a delinquency rate of 0.39% at the end of March 2015. Banks have sufficient capability to absorb potential losses with a BIS capital adequacy ratio of 13.9% at the end of March 2015. Since the government-led KRW 32 trillion program was launched in March this year to help mortgage borrowers switch to fixed-rate and amortized loans, the shares of such mortgages continue to increase and hit 30%, initially targeted by the end of 2016, in the first half of this year. In addition, 70% of household debt is held by households in the highest income brackets – fourth and fifth quintiles. Household financial assets are more than twice household financial liabilities. Given the soundness of household debt, the possibility is limited that household debt risks would cause a systemic risk.As household debt continues to grow faster than income with a slow economic recovery, however, the government needs to take pree
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Jan 29, 2015
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Nov 26, 2014
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Jul 15, 2014
- Plan to Improve License System for Financial Investment Business
- The FSC announced its plan to ease regulations on license system for financial investment business, which includes integrating business units for license, currently overly subdivided, and simplifying license process.KEY DIRECTION1. Improve License System for Financial Investment BusinessIn principle, financial investment businesses will be required to apply for a business license for only when it first enters the sector. The number of business units for regulatory approval will be cut from the current 42 to 13(see the table below). Once a financial institution is granted a regulatory approval for business(①~⑬), the company will be allowed to add new business within the same sector simply through add-on registration, without any additional procedure for approval.How business units for regulatory approval will change* Please refer tothe chartin the attached PDF. Regulations regarding majority shareholders will be also revised. - (Current) Person not allowed to participate in business management due to spinoff is classified as a “specially related person” under the Financial Investment Business and Capital Markets Act(FSCMA ), which unreasonably restricts such person from becoming a major shareholder. - (Revision) If the Fair Trade Commission confirms the person not participating in management due to spinoff, the person will not be classified as a “specially related person”. - (Current) A financial firm issued with sanctions equal to or stronger than institutional warning within the ‘recent three years’ is banned from becoming a largest shareholder of a financial investment company. - (Revision) For institutional warning, the period will be shortened to from the current three years to the recent one year.Other procedural regulations on license or registration will be eased or improved. - (Current) Under the current practice, a financial investment company issued with sanctions equal to or stronger than institutional warning is suspended from applying fo
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Jul 10, 2014
- FSC Announced Its Plan for Financial Regulatory Reform
- BACKGROUNDThe FSC announced its plan for financial regulatory reform to create new opportunities and growth drivers for Korea’s financial industry and economy.The global financial industry stands at a crossroads between decline in growth and another takeoff in the aftermath of the global financial crisis. Korea’s financial industry also has difficulties in seeking for clear vision, developing new profit models, and restoring public trust in the financial sector. The financial sector is now called for reinventing itself to support the real economy, to generate high-added value, and to bring more satisfactory services to financial consumers.The FSC identified both statutory and implicit regulations which constrained the growth of the financial industry. Since March 2014, we held dozens of meetings with stakeholders – e.g. financial institutions, consumers, etc. – and conducted a survey of stakeholders to get their views on existing regulations and recommendations for improvement. We also conducted a series of reviews on a total of 3,100 financial regulations, 1,700 regulations of which were shortlisted for further reviews. Out of them, 700 regulations were finally chosen to be reformed.KEY DIRECTION FOR FINANCIAL REGULATORY REFORM1. Build a financial regulatory system for ‘better regulation’A two-track approach will be taken for financial regulatory system: 1) a rule-based approach for regulations needed to maintain systemic stability, protect financial consumers, and ensure personal data security; and 2) a principle-based approach for regulations on approving financial institution s’ entrance into business, sales channel and business operation.2. Strengthen support for the real economy and reduce financial consumers’ inconvenienceRegulations on corporate lending, guarantee, and listing will be improved to facilitate the technology credit bureau(TCB) system. For financial consumers, excessive document requirement will be eased to enhance access to fina
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Mar 11, 2014
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Feb 27, 2014
- Measures to Improve Structural Soundness of Household Debt
- BACKGROUNDAs of the end of 2013, Korea’s household debt amounted to KRW 1,021 trillion. The government has been taking a series of measures so far to improve the quality of household loan and to rein in the pace of household debt growth. As a result, the government significantly lowered a possibility that household debt issue might be worsened into a systemic risk.Morgan Stanley(Oct. 2013) evaluated that Korea’s household debt risk is manageable, citing grounds such as financially stable structure of household assets and mortgage rules on loan-to-value(LTV) and debt-to-income(DTI) ratios. The IMF stress test result (Jan. 2014) also shows Korea’s household debt has a low possibility to pose a systemic risk in the event of economic shock.Despite such achievement, the household debt issue still exposes vulnerability in some parts. The share of floating-rate and interest-only mortgages remains high. Low-income households’ ability to repay debt deteriorated.The FSC and relevant ministries jointly announced today a package of measures to improve the structural soundness of household debt, as part of the government’s follow-up measures to push forward the three-year plan for the next phase of Korea’s economic growth.KEY CONTENTS1. The government will set the ratio of households’ debt to income as a key target indicator in managing household debt and lower the ratio by 5%p until the end of 2017.2. The government will set new targets for banks to increase the proportion of fixed-rate and amortizing loans out of total mortgages, up to 40% by the end of 2017.3. The government will prompt banks to offer a variety of loans tailored to consumers’ debt repayment ability such as loans with a cap on floating rates or loans amortized over a mid-term maturity, for example, 5 to 10 years.4. Borrowers with fixed-rate and amortizing loans will be granted a bigger tax exemption up to KRW 18 million, up from the current ceiling of KRW 15 million. For loans with a long-term
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Nov 27, 2013
- Plan to Strengthen Competitiveness of Korea's Financial Industry
- The FSC announced its ‘Plan to Strengthen Competitiveness of Korea’s Financial Industry’ or the so-called ‘10-10 Value-Up Plan’ aimed at raising the added value that the financial industry generates up to 10% of the GDP over the next 10 years.BACKGROUNDThe financial industry greatly contributed to Korea’s rapid economic growth. Since the global financial crisis in 2008, however, Korea’s financial industry has lost its growth momentum and vitality. Moreover, repeated security incidents and fraud scandals in the financial sector significantly undermined financial consumers’ confidence in the industry.At the same time, the financial industry faces new challenges as Korea’s economy is shifting to slower growth, searching for a new growth model based on innovative technology and creative ideas. The population is also rapidly aging. Faced with such paradigm-shifting changes, it is time for both the government and the financial industry to seek new growth drivers.The FSC proposed the ‘10-10 value-up’ as a vision for Korea’s financial industry for the first time when Chairman Shin Je-Yoon met CEOs of financial holding companies in May this year. For the last six months since then, the FSC held 68 meetings with those in the financial industry to gather their opinions.Based on such a bottom-up approach, the FSC drew up the ’10-10 value-up’ plan focused on its feasibility. As a rolling plan, the ‘10-10 value-up plan’ will continue to be reviewed and updated on a regular basis in order to respond to market developments in a timely and flexible manner. OVERVIEWThe ‘10-10 value-up’ plan is to provide a blueprint for the financial industry’s development. The financial industry will be developed into a high value-added service sector as a new growth driver and generate decent jobs. To this end, the plan set three missions and nine objectives.KEY CONTENTS1. Promote competition and innovation in the financial sectorRegulatory barriers will be sig
