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Dec 29, 2005
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Oct 13, 2005
- Amended Regulation on Indirect Investment Asset Management Business to Take Effect on October 7, 2005
- The FSC/FSS amended Regulation on Indirect Investment Asset Management Business and the accompanying enforcement rules on September 30. The amended regulations, which take effect October 7, are intended to strengthen prudential oversight of asset management companies (AMCs) and ease restrictions on asset management activities. The following is a summary of the amended regulations.Prudential Oversight of AMCsAmended Investment Risk Weights on Net-Asset Basis(To take effect after six months from October 7, 2005)The risk weight for mark-to-market funds for the purpose of regulatory capital is to be differentiated according to the funds’ asset holdings in order to lower capital burden on AMCs with large funds. Prior to the amendment, 0.1% was uniformly applied as risk weight to all mark-to-market funds. Below is a table of amended new risk weights to be applied to mark-to-market funds on net-asset basis.The risk weight for book -value funds is to remain unchanged at the current uniform level of 0.2%. The same risk weight is to be applied to private equity funds managed by AMCs. For AMCs with outside directors and an audit committee in place, 10% of the risk amount determined is to be additionally deducted. In determining risk amount, borrowed funds for investment purposes are to be included in the net asset amount.Amended Management Status Evaluation(To take effect after six months from October 7, 2005)For assessment of capital adequacy of AMCs, the ratio of capital impaired is to be newly added to the quantitative capital assessment criteria so that undercapitalized AMCs do not receive a quantitative rating higher than the third (fair) grade. The effective capital adequacy ratio, which had varies little among AMCs, was eliminated from the quantitative capital assessment criteria.Prompt Corrective Action for AMCsWhere an AMC subject to prompt corrective action (PCA) satisfies the mandatory soundness standards with capital restoration or other necessary measures, the b
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Sep 06, 2005
- Equity Disclosure Filings: First Half of 2005
- An analysis of equity ownership disclosure filings during the first half of this year showed that a total of 2,413 investors held together with related parties 5% or more of the outstanding shares of 1,548 publicly-held companies—671 Stock Market (formerly KSE)-listed and 877 KOSDAQ-listed companies—as of the end of June. Five tender offers and 108 proxy solicitations were made during the period, compared with nine and 124, respectively, during the same period a year earlier.Disclosures Related to the 5% RuleThe number of disclosures filed under the 5% rule rose 2,038 or 55% to 5,718 from 3,680 a year earlier. Most of the increase resulted from investors re-filing disclosures as mandated under the amended 5% rule that took effect March 29 this year.A breakdown of the filings by investment purpose showed that, of the 2,413 investors who filed disclosures under the 5% rule, a total of 1,494 investors—1,417 domestic investors and 77 foreign investors—declared Exercising Influence on the Management as the intended investment purpose; the rest declared Investment Only as the intended investment purpose.Disclosures on Tender OffersA total of five tender offer-related disclosures were filed during the first half of the year. Of the five, four were intended for going private and the other as a defensive move against potential hostile takeover bids. All five were filed by local investors and companies. A year earlier, there were a total of nine tender offer filings, of which three were by foreign entities.Disclosures on Proxy SolicitationA total of 108 disclosures were made for proxy solicitations during the first half of the year. Of the total, 93 were for meeting the quorum requirements in the general shareholders’ meetings; the rest was for proxy contests. One of the proxy solicitation disclosures was filed by Crest Securities on behalf of Sovereign for SK Corporation’s general shareholders’ meeting.* Please refer to the attached PDF for details.
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Jul 22, 2005
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Jul 14, 2005
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Jul 07, 2005
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Jul 01, 2005
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Jun 23, 2005
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Jun 22, 2005
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May 27, 2005
- FSC Action on Leading Investment & Securities’ Applications for Share Acquisition and Merger with Bridge Securities
- The Financial Supervisory Commission announced on May 27 that it had decided not to give regulatory approval to the applications by Leading Investment Securities Co., Ltd. to acquire shares of Bridge Securities Co., Ltd. and merge with the company.Leading Investment Securities Co., Ltd. stated in the business plan it submitted to the FSC that it envisioned a sharp turnaround after the proposed merger with Bridge Securities (cumulative three-year net income totaling KRW33.9 billion following the merger). Leading Investment Securities also anticipated securities underwriting and investment banking as its key revenue sources.The FSC noted that the two companies incurred large net cumulative losses totaling KRW58.4 billion between April 2002 and December 2004 from mostly engaging in securities brokerage and dealings. The FSC further noted that the amount of financing put forth by Leading Investment Securities to complete the merger (KRW149.4 billion), including share purchases, restructuring expenses, and share buybacks, can be covered only by disposing of nearly all of the liquid assets of the merged company (KRW156.1 billion). Because the merged company would then be left only with illiquid assets such as unlisted shares and physical assets, it is unrealistic to expect the company to engage in normal securities dealings and underwriting activities, both of which typically require substantial financial resources.Furthermore, the recent increase in share buyback price Leading Investment Securities proposed for the shareholders of Bridge Securities as well as other merger expenses raise serious doubts about post-merger liquidity positions of the company. It was also determined that revenue outlook for the company was uncertain given the planned downsizing of branch operations and underwriting business and a lack of experience in and specific business strategies for investment banking.After taking into consideration the asset structure, the underlying business strength an
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Apr 25, 2005
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Apr 01, 2005
- Correction to March 31 Financial Times Article "Seoul's new rules anger overseas investors" by Anna Fifield
- The FSC/FSS and the Ministry of Finance and Economy hereby issue a correction to March 31 Financial Times article entitled “Seoul’s new rules anger overseas investors.” The article misinterprets the recently amended “5% rule,” labeling it a “draconian” requirement and a move designed to tighten controls on foreign investors. In particular, the article stretches the 5% rule to suggest that it was connected to the equity investment in SK Corp. by Sovereign Asset Management and the gains recently achieved by Newbridge Capital after selling its stakes in Korea First Bank.The 5% rule was first established with an amendment to the Securities and Exchange Act in 1991. The newly amended 5% rule was passed by the National Assembly on December 31, 2004, promulgated on January 17, 2005, and took effect on March 29, 2005.It is important to note that the 5% rule is widely adopted and enforced in many countries—particularly stringently in the U.S.—and Korea’s 5% rule is modest with respect to the kinds of disclosure compliance it requires from investors. Thus, the assertion made in the FT article that Korea’s 5% rule is “draconian” is a hyperbole and a mischaracterization that can only be expected from uninformed or misinformed observers.Moreover, as the FSC/FSS has pointed out on numerous occasions, the changes adopted to the 5% rule were intended only to replace broadly worded provisions with more specific and unequivocal rules. It was never intended to control the “pernicious” effects of foreign capital as the article falsely asserted.The FSC/FSS and the Ministry of Finance and Economy further note that the amended 5% rule is part of the ongoing effort to raise Korea’s corporate governance to the highest global standards. It is not related in any way to particular foreign investors and is applied equally and fairly to all investors, domestic and foreign. It is certainly not intended to tighten controls on foreign investors.The FSC/FSS and the Mi
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Jan 18, 2005
- FSS Announces Major Organization & Workforce Changes
- The FSS announced the results of the organization and workforce innovation initiative that was launched in October of 2004 to renew and reinvigorate the FSS as an efficient and effective supervisory organization backed by a highly specialized workforce capable of meeting the ever-growing demands and challenges of the marketplace.The organization and workforce innovation initiative, prompted and driven by the growing market demand for highly efficient and specialized supervisory services, brings about a number of major changes to the current examination structure, seeks greater synergy from the integrated supervision, creates a macro-supervision department to help formulate forward-looking supervisory policies, and institutes workforce changes that stress performance-based personnel management and pay. To provide independent perspectives and expertise in implementing the organization and workforce initiative, A.T. Kearney participated in the initiative as an outside consultant.SUMMARY OF ORGANIZATIONAL INNOVATION1. Reorganization of the examination structureThe examination staff and departments are restructured with the goal of enhancing the ability of the examiners to conduct onsite examinations “whenever necessary, to the extent necessary, and with the examiners necessary” on the basis of the continuous surveillance of financial institutions and to minimize the burden financial institutions face in complying with FSS examinations. The examination teams, which are divided into offsite surveillance and onsite examination teams, are merged together to enable the examiners to carry out both offsite surveillance and onsite examination simultaneously. With the transition to the “relationship manager” system, each examination team is to be assigned specific financial institutions to monitor and examine. An examination support department, staffed by examiners with technical expertise in risk management, IT and other specialized areas, is also newly created to suppo
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Dec 23, 2004
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Aug 14, 2002
- Investigation Findings and Disciplinary Action against UBS Warburg and Merrill Lynch Seoul Branch Offices
- The FSS conducted partial on-site examinations of the local branches of Merrill Lynch from April 19 to May 10 and UBS Warburg from May 21 to June 17 to investigate allegations of improper disclosures by analysts at these two branches. After a thorough review of the findings, on August 13, 2002, the FSS decided to take following disciplinary action against the subject firms and analysts for a number of violations that have been found through the investigation. These measures will be officially enforced after the FSC approval on Friday, the 16th.- The Seoul Branch of UBS Warburg will receive a “severe disciplinary warning,” which means, in case of a repeated violation, the company can be subject to a business suspension.- The Seoul Branch of Merrill Lynch will receive a “disciplinary warning,” one step below the “severe disciplinary warning.” - UBS Warburg: 15 employees in total, will be penalized, one of whom will receive a severe disciplinary warning, one a suspension of business activity for a limited period of time, four a salary reduction, and the remaining nine a censure.- Merrill Lynch: 6 employees will be penalized; one will receive a suspension of business activity, one a salary reduction, and the remaining four a censure.* This is the first time since its foundation that the FSS has imposed sanctions against branch offices of foreign securities firms and their individual staff of measures above a salary reduction.The FSS will continue to carry out investigations on both domestic and foreign securities firms for any possible unlawful business conduct in order to reinforce market discipline.* Please refer to the attached PDF for details.
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Apr 13, 2001
- The Major Policy Objectives of FSC for 2001
- 1. Main Policy Direction The financial industry is increasingly shaping the back-bone of knowledge-based economy of the 21st century of global and digital age. Fully recognizing such trend, financial regulatory authorities have taken policy directions which are to ensure strengthening the financial industry for the stable and sound financial markets and future economic growth. Accordingly, the government has shifted its focus from government-led restructuring policies to market-oriented approaches for continuous restructuring financial markets. Further, financial institutions will be encouraged to be more actively engaged in “software” reform to strengthen profitability and competitiveness. 2. Continuous Financial and Corporate Restructuring Reform in the Financial Sector• Preventive Supervisory and Prompt Corrective Action Measures: The terms and conditions of Management Improvement Arrangement, which is to be signed between ailing financial institutions and authorities, will be intensified to prevent managerial risk before PCA is enforced. • Continuing Reduction of Bad Loans: By monitoring commercial banks’ progress, on quarterly basis, with their efforts to reduce the ratio of substandard and below to total loans to the targeted 5% or below by the end of this year• Bank Mergers Among Sound Banks: To be more globally competitive by achieving greater economies of scale and by creating universal banking system The merger trend has been set off by the financial holding company and the merger between Kookmin Bank and Housing Commercial Bank (HCB), and other banks are encouraged to follow suit. Reform in the Corporate Sector• Effective Credit Risk Evaluation: To activate the corporate credit risk assessment system in full scale, by which creditor banks can assess credit risk of each of their debtor companies for the prevention of further increase of ailing assets, and, when necessary, for the timely exit of non-viable companies from the market The monthly
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Sep 17, 1999
- Terms of Investment Signed for the Sale of Korea First Bank
- The Korean Government and Newbridge Capital Ltd., a U.S. investment firm, reached an agreement on the detailed terms of the transaction of Korea First Bank on September 17, 1999. This Terms of Investment is the binding agreement on major terms and conditions which will be the basis for the definite contract. They had exchanged memoranda of understanding on December 31, 1998. Both parties have expressed their interest in concluding the final contract as soon as possible.The major terms agreed are that Newbridge Capital will invest KRW 500 billion to acquire 51 percent of the shares in Korea First Bank, which are held by the Government, on the condition that the bank shareholders’ equity will be maintained at least at a level equivalent to both 3 percent of total assets and the capital required to meet BIS capital ratio of 10 percent. Newbridge Capital would also invest up to an additional KRW 200 billion in the next 2 years, subject to progress in the management rehabilitation of the bank.As premium for management rights, the Government will have a warrant exercisable on 5 percent of the total shares of the bank after 3 years, which would enable its participation in the future upside potential of the bank to any extent possible. In the meantime, the bank will be protected against losses arising from a deterioration of the existing loans in two ways. First, the Government would purchase the loans should they default during the next 2 years, or 3 years in the case of workout loans, from the closing. Second, the Government would provide the bank with additional reserves for loan losses, which may be incurred from any asset quality deterioration.Throughout the negotiation process, the Government placed an emphasis on the need to preserve the bank’s post-sale operational base and facilitate financial support for the existing corporate customers. Especially in this regard, all loans will be retained by the bank except for non-performing loans as classified according to
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Dec 31, 1998
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Dec 17, 1998
- Features about the new Cho Hung Bank
- 101 years young, Cho Hung Bank announced this morning a definitive agreement to merge with two Korean financial institutions, Kangwon Bank and Hyundai International Merchant Bank to form a new business entity.- Reborn as a Clean and Best BankGiven the government's expected capital injection to the Bank upon the amalgamation of the three institutions, and the enhanced management efficiencies through recent man-power reductions, drastic network consolidation and H.O. organization slim-down, the Bank will be reborn as a sound financial services group in Korea.The Bank, which has already lowered its NPL ratio to 5.2% from 10.8% by the bulk sale of non-performing loans to KAMC (Korea Asset Management Corporation), has a firm belief in the restoration of its former strong position among other financial institutions through the maximized synergy effects flowing from the merger within a short time frame.- Leading peers in sizeWith assets of over Won 62 trillion and Won 2.5 trillion in equity, the combined entity will be one of the largest banking establishments in Korea and, through the merger with a merchant banking institution, will be able to expand its deposit base and expertise in such business domains as private banking and investment banking.- Strengthened capital base through foreign capital injectionThe government's promised capital injection to the combined Bank, which is considered to be sufficient to boost the Bank's BIS Capital Adequacy Ratio to over the 10% level, will reactivate the capital inducement negotiations with those foreign financial institutions which have already expressed their keen interest in investing in the Bank. The Bank will have a more advantageous position with those foreign investors as their pre-condition of a government capital injection will have been satisfied.- Other facts about the mergerThe merger ratio will be decided by the respective institutions' net asset values as evaluated by accounting firms and stock prices. Other details
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Dec 15, 1998
- Strengthening Prudential Supervision & Regulations
- Ⅰ. Introduction1. Since the 1980s, while financial activities have become more complex and diverse at home and abroad under financial liberalization and globalization, uncertainty in financial markets has rapidly increased. Financial institutions became widely exposed to risks such as credit risk on which they had already begun to focus concern, including interest rate risk, foreign exchange risk, market risk and country risk. At the same time, as the volume of financial derivative transactions has sharply increased mainly due to the development of information technology, they have assumed even further risk.2. As we have seen through the example of the Barings case, the stability of the financial industry as a whole has deteriorated due to derivative transactions and their contagion effect. To cope with this instability, financial institutions have taken care to develop various advanced financial commodities, to establish the consolidated risk management system on the basis of market risk, and to employ elaborate risk management techniques, including Value at Risk (VAR).3. As advanced financial supervisory authorities such as the Office of the Comptroller of the Currency in the United States and the Financial Services Authority in the United Kingdom have changed their supervisory policies into "risk-focused supervision", many authorities in other countries are following suit. International organizations such as the Bank for International Settlements (BIS), the International Organization of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS) are trying to establish and employ international standards related to risk management to secure the soundness of financial institutions. Perhaps the best example is the Core Principles for Effective Banking Supervision of the BIS.4. The need for stronger financial supervision is clear. Although Korean financial institutions have been able to continue to pursue high growth volume-orie
