Press Releases - Financial Services Commission

Press Releases

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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

Financial Assistance to be Provided for Hanjin Shipping's Local Contractors

The Financial Services Commission (FSC) and Financial Supervisory Service (FSS) came up with measures to support Hanjin Shipping’s local contractors in a bid to minimize spill-over effects of Hanjin’s filing into small local contractors. Current Situation of Hanjin Shippings’s contractorsTotal 457 subcontractors have receivables from Hanjin Shipping, which account to approximately KRW 64 billion as of end-June 2016. (as of end-June, 2016)Supportive Measures1. Government will provide financial assistance for subcontractorsThe government will swiftly provide emergency financial assistance for subcontractors and small-to-mid sized shippers. The Korea Development Bank (KDB), Industrial Bank of Korea (IBK), Korea Credit Guarantee Fund (KODIT), and Korea Technology Finance Corporation (KOTEC) will extend maturity for principal repayment of outstanding loans and guarantees by one year. The FSS will encourage commercial banks to grant grace period and extend maturity as well.The KODIT and KOTEC will provide special guarantees for subcontractors and small-to-mid sized shippers suffering from cargo delay. Up to 90% guarantee will be provided for debts of such companies and guarantee fee will be reduced by 0.2%. The guarantee will be provided by using the KRW 800 billion restructuring fund allocated in the supplementary budget. The KDB and IBK will offer emergency financial assistance to the subcontractors with temporary liquidity shortage. The KDB will grant loans worth KRW 5 billion to small-sized firms and KRW 7 billion to medium-sized ones. The IBK will provide KRW 300 million to SMEs at a rate discounted by 0.5%p. The KODIT and KOTEC will provide special guarantee with higher guarantee ratio (90%) and lower fee (↓0.2%) for SMEs whose corporate restructuring plan has been approved by the government under the Special Act on the Corporate Revitalization. The KDB will provide special loans worth total KRW 2 trillion to SMEs willing to restructure their business thr
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Aug 02, 2016

Plan for Nurturing Mega-Investment Banks in Korea

The FSC announced its plan to nurture mega-investment banks(IBs) in Korea with equity capital of more than KRW10 trillion by allowing a broader range of new businesses for securities firms with a larger amount of equity capital. BACKGROUNDThe FSC introduced a scheme for ‘Comprehensive Financial Investment Business’ in 2013, in which a securities firm with equity capital of more than KRW3 trillion is permitted to engage in corporate lending. Since then, the securities industry has been still focused mainly on brokerage services and fell short of their IB activities to channel risk capital to innovative companies. Against this backdrop, the FSC outlined a plan to strengthen securities firms’ IB functions to enable them to provide more comprehensive financial services for businesses and boost their global competitiveness. KEY POINTS New financing channels will be allowed for securities firms to raise sufficient capital for corporate financing — e.g. issuance of promissory notes, introduction of an ‘Investment Management Account’ (IMA) to utilize a pool of customers’ deposit for investments. Regulatory amendments will be made to facilitate risk-underwriting activities by securities firms — e.g. separate NCR standards (NCR-II) to be applied to long-term corporate lending; securities firms to be allowed to lend companies up to 100% of their equity capital. Securities firms will be permitted an expanded business scope for corporate financing — e.g. internalization of order executions for unlisted company stock, foreign exchange operations, property-backed trust business, etc.  Cooperation between securities firms and policy banks will be strengthened to support their global activities in overseas investments and MAs.DIFFERENTIATED BUSINESS SCOPE DEPENDING ON EQUITY CAPITAL SIZEThe FSC differentiated the scope of new business allowed for securities firms according to their equity capital size, in an attempt to incentivize them to further boost
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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

FSC Statement on Results of MSCI 2016 Market Classification Review

FSC Vice Chairman Jeong Eun-bo held a meeting on June 15 with officials from relevant agencies to discuss the government’s responses, following MSCI’s announcement of 2016 Market Classification Review. In its annual market review, MSCI announced that “Korea will not be included on the list for a potential reclassification to Developed status as part of the 2017 Review”, citing the following reasons: “the recent changes announced by the Financial Services Commission in South Korea will not take effect until 2017 and the investment frictions related to the lack of convertibility of the Korean Won and restrictions imposed by the local stock exchange on the use of exchange data for the creation of financial products remain unaddressed.” The Korean government’s stance on the MSCI requirementsThere exist some gaps between the extent of improvements that the government could make under our economic and market circumstances and the level of MSCI’s requirements, making it difficult for Korea to be included in the MSCI’s developed market index in the near future. Convertibility of the Korean Won MSCI has been asking the Korean government to allow offshore trading of the Korean won to address the lack of convertibility of the Korean won. However, we consider that currency market stability is an issue of critical importance to Korea, a small and open economy which highly relies on international trade. The Korean government seeks the internationalization of the Korean won but will move gradually, taking possible impact of currency market volatility on the Korean economy into consideration. In particular, allowing offshore trading of the Korean won is an issue that we cannot address in the short term since it would involve fundamental changes to our current forex management system. Use of KRX price data MSCI demanded that KRX should abolish immediately the “anti-competitive” clauses that require a separate contract for the use of KRX data for the purpose of
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Mar 09, 2016

Corporate Restructuring Progress in 2015 and Plan for 2016

PROGRESS IN 2015(RESTRUCTURING OF INDIVIDUAL COMPANIES) A total of 299 companies – 54 large companies and 175 SMEs – received the ratings of C and D in credit risk evaluations last year to be subject to restructuring. They are now under a debt workout program or a rehabilitation procedure. (MAIN DEBTOR GROUPS) The main creditor banks conducted from April to May 2015 the evaluation of financial health of the 41 main debtor groups for 2015 selected by the FSS. Based on the results of evaluation, those who fell short of certain thresholds signed an agreement with the creditor banks to improve their financial structure or to be under tighter monitoring. From November to December last year, the main creditor banks inspected financial conditions of affiliated companies of the main creditor groups and signed MOUs with financially-vulnerable companies to improve their financial health in a bid to prevent potential risks from spilling over into other affiliated companies. Domestic banks’ non-performing loan (NPL) ratio of corporate loans stood at 2.42%, a mere 0.33%p increase from the previous year. PLAN FOR 2016The FSC will push ahead preemptive and continuous corporate restructuring based on the results of credit risk evaluation for the main debtor groups and individual companies. We will also continue to support sector-specific restructuring for structurally vulnerable industries – e.g. shipping, shipbuilding, construction, steel and petrochemical industries, as part of the government’s effort to boost industry-wide competitiveness. (MAIN DEBTOR GROUPS)The main creditor banks will complete the evaluation of financial conditions of the main debtor groups by the end of April. Based on the results, the creditor banks will select those in need of improving their financial structure and signed the financial structure improvement agreement with them by the end of May. The creditor banks will also pick affiliated companies of the main creditor groups to be evaluated by
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Jan 07, 2016

FSC Holds Meeting over Risk Factors in Financial Markets in 2016

The FSC held a meeting on January 7, Thursday morning with the FSS, KRX and KCIF to examine internal and external risks in financial markets in 2016 and ensure prompt policy responses to stabilize markets if needed.GLOBAL FINANCIAL MARKETSGlobal financial markets started 2016 with increased volatility amid market anxiety over China’s stock market plunge and geopolitical tensions such as the severance of diplomatic relations between Saudi Arabia and Iran and North Korea’s nuclear test. The Federal Reserve’s monetary tightening began in December last year without causing considerable shocks to financial markets; however, the pace of rate hikes and subsequent movements in the dollar still remain uncertain. Uncertainties in the Chinese economy – China’s stock market turmoil and currency depreciation – could also threaten global financial market stability. A series of events in recent few days this year alerted us to a rough year for global economic and financial conditions. The government will remain vigilant on future developments in financial markets to take swift actions if necessary. DOMESTIC FINANCIAL MARKETSKorea’s financial markets are relatively calm in the face of external destabilizing factors. Affected by China’s stock market plunge on January 4, Kospi fell 2.2% on that day but shortly recovered 0.6% on the following day. North Korea’s nuclear test on January 6 did not have large impact on the stock market. However, the government keeps closely monitoring financial market conditions in response to further developments in China’s stock market turmoil and North Korean nuclear issue. POLICY RESPONSEThe FSC will closely monitor foreign capital flows in Korea’s stock market, especially changes in capital flows by advanced countries with the U.S. interest rate hikes and possible capital outflow by fiscally distressed oil-producing countries. We will also push ahead our policy efforts for the inclusion of Korean stock markets in MSCI advanced m
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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

Measures to Boost Competitiveness of Financial Investment Business

1. STRENGTHEN CORPORATE FINANCING FUNCTIONS ‘Comprehensive Financial Investment Business Entities,’ will be allowed to lend up to 100% of their equity capital in corporate credit offering. For credit loans with a maturity of less than one year, prudential regulatory requirements will be eased to levels applied to commercial banks. Brokerage firms specialized in SME financing will be designated to facilitate fundraising activities of SMEs and venture companies such as listings on KONEX or KOSDAQ, bond issuance and public placement of securities. Regulations on private placement of securities for qualified institutional investors (QII) will be eased to allow all companies whose total asset value of less than KRW 2 trillion to issue securities in the private placement. Current regulations permit private placement only to companies with total asset value of less than KRW 500 billion, while prohibiting listed companies, financial institutions and public corporations from issuing securities in the private placement. 2. EXPAND BUSINESS SCOPE OF SECURITIES COMPANIES Comprehensive Financial Investment Business Entities will be allowed to open stock markets for non-listed shares and non-competitive trading markets using prices at KRX for listed stocks. With the implementation of the revised FSCMA, securities firms will be allowed to register as hedge fund managers on condition that they have measures to prevent conflict of interest in place. The FSC will facilitate utilization of securities provided as collateral by securities firms in repo transactions and securities lending to offer more opportunities for profits. 3. ALLEVIATE REGULATORY CONSTRAINTS TO ENCOURAGE DIVERSE SERVICES Requirements for individuals and institutions to qualify for professional investors will be eased to enable more investors with sufficient knowledge to make investments within their own responsibilities. More exemptions will be permitted to the separation of investment banking and brokerage busi
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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

Financial Policy Direction for 2015

The FSC announced its financial policy direction for the year of 2015 with three key policy goals and nine tasks.Creative FinanceInitial achievements in creative finance spread widely across all financial sectors- Facilitate the convergence of IT and financial sectors to promote the ‘Fintech’ industry- Strengthen the intermediary role of finance to support the real economy by encouraging investments by venture capital- Continue financial regulator y reform to strengthen competitiveness of Korea’s financial sectorConsumer TrustConsumer trust in the financial sector for further growth of the financial services sector- Improve the financially-marginalized’ access to financial services and expand supportive programs- Strengthen financial consumer protection by improving inconvenient practice in financial services- Restore consumer trust in the financial sector with establishment of ethics guidelines of the sectorFinancial StabilitySecure financial stability to support a strong recovery of Korea’s economy- Preemptively respond to potential risks of household debt- Conduct corporate restructuring in a preemptive manner on a year-round basis- Ensure financial stability against risk factors home and abroadKEY POLICY ACHIEVEMEN TS IN 2013 AND 2014For the last two years since the launch of the Park Geun-hye administration, the FSC has been committed to laying the groundwork for creative finance to promote innovation and competition in the financial sector.Technology financeThe FSC established infrastructure for tech finance such as technology data base(TDB) or technology credit bureau(TCB )1 to support financing of innovative tech fims. For six months since the ‘tech finance’ initiative took off, provision of technology-secured loans amounted to a total of KRW 8.9trillion in 14,413 cases. Interest payment burden reduce d 0.4%p with tech loans. Financial regulatory reformAs part of the government’s regulatory reform initiative, the FSC reviewed all statutory an
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Nov 26, 2014

Plan to Revitalize Korea's Stock Market

OVERVIEWThe FSC announced a set of measures to revitalize the Korean stock market, which has been in a slump in recent years. The benchmark index KOSPI has been hovering around the 2,000-point level since it hit 2,000 points for the first time in 2007. There is not enough supply of newly listed stocks to boost trading. The market infrastructure and trading system are not attractive to investors, compared to the advanced markets.The measures are aimed to address such structural problems of the stock market. First, the FSC will boost stock market trading by allowing the listing of more blue-chip stocks and new derivatives products and by encouraging more active role of institutional investors. Second, the FSC will enhance efficiency of the market infrastructure and trading system. Third, the FSC will strengthen investor protection and trust by improving disclosure rules.MEASURES TO REVITALIZE THE STOCK MARKET1. EXPAND INVESTMENT PRODUCTRevise listing regulation(Revision to the Capital Markets Act in the first half of 2015)In order to encourage the listing of more blue-chip stocks, the FSC will revise listing regulations to incentivize companies to go public such as allowing the issuance of bond with separable warrants and simplifying procedures for dividend payout.Introduce new derivatives products(Revision to the KRX regulation in 2015~2016)The FSC will allow the listing of new derivatives products such as Mini futures and RMB futures in one to two years. The listing of V-index options or ETF futures will be also considered depending on commodity market situation.2. ENLARGE PARTICIPATION OF INSTITUTIONAL INVESTORSCreate a common investment pool for small pension funds (in the first half of 2015)A common investment pool will be set up for smaller private pension funds. Korea Securities Finance Corp and asset management companies will jointly attract and manage investments from universities’ funds and private pension funds of corporations.Enlarge stock investments by
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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

Comprehensive Measures to Protect Personal Data in the Financial Sector

OVERVIEWThe FSC and relevant ministries jointly announced a package of measures to prevent a recurrence of personal data leaks in the financial sector, as part of the government’s follow-up measures to ensure market discipline under its three-year plan for Korea’s economic innovation.The measures announced today were drawn up based on the following basic principles, further developing a series of measures previously announced since the data leakage from the three credit card companies were revealed last January. 1. Financial firms will be asked a greater responsibility in handling their customers’ personal data at each stage that they collect, retain, use and discard customers’ information. 2. Financial consumers’ right to their personal information will be ensured so that they can decide for what, when and how their own personal data are being used by financial firms. 3. Financial firms will be held more accountable for personal data protection and strictly sanctioned in the event of personal data security breach. 4. Cyber security measures will be strengthened across the financial sector in response to cyber crimes such as hacking. 5. The government will make sure financial consumers’ personal data previously provided or illegally-circulated not to be misused by financial scammers.1. STRENGTHEN PERSONAL DATA PROTECTION AT EACH STAGE THAT FINANCIAL FIRMS COLLECT, RETAIN USE A ND DISCARD CUSTOMERS’DATAFinancial firms will be asked a greater responsibility in handling their customers’ personal data at each stage that they collect, retain, use and discard such information .‘COLLECT’ STAGEFinancial firms will be allowed to collect necessary information at a minim um level from their customers. Currently, financial firms are collecting 30 to 50 items of information from their customers. The list of collected information will be shorted up to 6 items necessarily required for financial transactions.3Additional information should be collected only with
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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
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Nov 13, 2013

Plan to Improve Regualtions on Short Selling

BACKGROUNDShort selling is one of investment techniques that investors sell either securities they do not own or ones they borrowed. Short selling can contribute to enhancing market efficiency as it provides liquidity and serves as a hedging tool for investors when stock prices fall. However, it has side effects as well. Naked short selling involves a risk of unfulfilled settlement.Speculative short selling prevents fair price forming the market.The Korean government has been strictly regulating short selling, compared to other countries.1 Naked short selling is prohibited. Since October 1, 2008, covered short sales of all stocks were banned. Short sales of financial stocks have been banned since then, while ban on short selling of non-financial stocks was lifted in June 1, 2009 except for the period from August 10 to November 9, 2011 when the ban was temporarily reinstated due to concerns about the European debt crisis.As the stock market have stabilized since the second half of 2013, however, there is a need to shift the government’s regulatory approach to short selling from direct regulations, which has been in place since the financial crisis in 2008, to indirect ones.After reviewing short-selling regulations in other advanced countries and problems raised about the current regulations, the FSC announced today its plan to improve regulations on short selling so that we can minimize side effects of short selling, while boost trading activities.KEY CONTENTS1. Lift ban on short sale of financial stocksBan on short sales of financial stocks, which has been in place since October 2008, will be lifted from November 14, 2013.2. Introduce disclosure requirements of investors’ short-selling positionsInvestors whose short-selling position in a stock exceeds 0.5% of total shares will be required to disclose their position on the KRX website.3. Improve effectiveness of the current regulations on disclosure of short-selling positionsThe FSC will establish a legal ground
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