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Mar 05, 2007
- Asset-Liability Analysis of Domestic Banks: 2006
- An asset-liability analysis of domestic banks by the FSS shows bank assets totaled KRW1,191 trillion (average account balance basis) for 2006, up 11.0% or KRW118 trillion from KRW1,073 trillion for 2005. Loans and securities made up the bulk of the assets with the proportion of loans increasing from 67.6% to 68.3% and that of securities falling slightly from 21.6% to 20.9%. A 17.9% jump in loans to small-and medium-sized companies along with a 14.4% increase in housing loans during the year mostly accounted for the changes. On the liabilities side including equity, the proportion of deposits dropped from 53.4% a year earlier to 49.6%. The rest were mostly made up by debt issues (15.4%), borrowings (13.8%), and certificates of deposits (5.6%).An increase in loans and a drop in securitiesBank loans totaled KRW879.9 trillion, up 16.9% (KRW127.1 trillion) compared with 8.4% for 2005. In particular, loans to small- and medium-sized companies rose 17.9% (KRW45.9 trillion), a marked increase from 5.1% for 2005 and 2.6% for 2004. Household loans, led by housing loans, increased 13.5% (KRW40.8 trillion).Securities, on the other hand, rose 5.1% (KRW14.9 trillion) to KRW308.6 trillion, compared to 17.4% (KRW43.6 trillion) increase for 2005.Declining share of deposits as source of bank fundsThe source of funds for increased loans in 2006 came more from debt issues and CDs, which jumped by KRW38.0 trillion and KRW13.7 trillion, respectively, than from deposits. The proportion of deposits as a source of funds fell in 2006, as did in 2004 and 2005.In particular, as a result of the growth of CMA and other short-term, higher-yield products from non-banking financial institutions as alternatives to bank deposits, the proportion of demand deposits, savings deposits, and other low-interest deposits as a source of funds continued to drop in 2006.Continuing rise of loan-to-deposit ratioWith robust loans and sluggish deposits, the loan-to-deposit ratio of domestic banks showed a continued
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Feb 01, 2007
- FSS to Launch Electronic Foreign Investor Registration and English DART Website
- The Financial Supervisory Service will launch an electronic registration system for foreign investors and open an English DART website (http://enlgishdart.fss.or.kr) as part of an ongoing effort to simplify foreign investors’ investment procedures and improve their access to corporate information. DART, which stands for Data Analysis, Retrieval, and Transfer, is the FSS electronic disclosure system companies use to transmit regulatory filings and ongoing disclosures via the Internet.Electronic Registration of Foreign InvestorsUnder the current procedure, a foreign investor (or an agent) who wishes to acquire shares of listed companies and other exchange-traded securities submits an investment registration application along with the supporting documents to the FSS in person and returns three to four days later for the registration certificate.The new registration system, which is set to begin in May this year, will enable foreign investors to file investment registration applications and receive registration certificates electronically through financial institutions acting as their agents.Because the system utilizes information and telecommunication networks and electronic document exchange systems already used by financial institutions, no additional cost is expected from foreign investors or financial institutions. With electronic registration, the issuance of registration certificate, which numbers about 2,000 a year, is expected to be shortened from up to four days to no more than four hours.Opening of English DART WebsiteThe FSS will also open an English DART website (http://englishdart.fss.or.kr) on February 1 to improve foreign investors’ access to disclosures filed by Korea’s publicly traded companies. Foreign investors can use the English DART website to search all English disclosure documents voluntarily transmitted to DART and to Korea Exchange as well as corporate information available in English at Korea Listed Companies Association.The English DAR
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Mar 13, 2006
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Jul 29, 2005
- Amended Regulation on Outsourcing by Financial Services Companies Takes Effect July 27, 2005
- The FSC/FSS announced on July 26 that the newly amended Regulation on Business Delegation of Financial Institutions took effect July 27, 2005. The newly amended regulation is a major deregulatory step that significantly broadens the range of activities that can be outsourced by financial services companies and help them utilize outsourcing more efficiently. One of the key changes to be implemented under the amended regulation is a shift from a positive regulatory regime that provides for activities financial services companies may outsource to a negative regulatory regime that provides for activities financial services companies may not outsource. Thus, as a general rule, financial services companies will be allowed to outsource activities unless the regulation specifically provides otherwise. The following is a summary of the newly amended regulation on outsourcing.Expanded outsourcing by financial services companies• Adoption of negative regulatory regime for outsourcingAs a rule, outsourcing is to be allowed for financial services companies unless the activity to be outsourced (i) constitutes a part of the core business activities of the financial service company; (ii) is mandated under the law to the financial service company, or (iii) poses risk to the soundness of the financial services company, undermines orderly conduct of their business, or causes consumer harm. In addition, the core business activities of financial services companies are specifically provided for so that non-core activities may be outsourced without undue discretionary intrusion from the regulators.• Back-office support activitiesThe amended regulation newly defines outsourcing as utilizing the services or the facility of a third party in order to perform financial services activities approved by the FSC/FSS and provides that outsourcing encompasses the back-office and other support activities of financial services companies. As a general rule, outsourcing is to be allowed for back-off
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Sep 23, 2004
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Apr 15, 2002
- Removal of 5 Banks from Prompt Corrective Action (PCA)
- During the second phase of financial restructuring in the latter half of 2000, the government and FSC/FSS provided and pursued management normalization plans for eight banks under PCA (Korea Exchange, Chohung, Hanvit, Peace Bank of Korea, Cheju, Kyongnam, Kwangju and Seoul) based on the evaluation results of the ad hoc management evaluation committee. Following a recent evaluation of these banks’ performance since the plans were implemented – excluding Peace Bank, whose banking business was merged into Hanvit Bank in late 2001 – the FSC/FSS concluded 5 of these banks would be removed from PCA. As part of their normalization plans, 6 of the 8 banks excluding Korea Exchange Bank and Chohung Bank underwent a complete capital reduction. Afterward, they were injected with a second round of public funds in the form of equity participation in December 2000 and capital contributions in September 2001, totaling 7.1 trillion won. As a result of the second phase of restructuring in the banking sector, management performance of these banks such as financial soundness significantly improved through injection of public funds and self-restructuring efforts. A foundation of “clean banks” has been established through clearance of large amounts of ailing assets, and stabilization of financial markets and restoration of the intermediary function of financial companies have contributed to the recovery of the real economy. The evaluation of the 8 banks’ overall performance as of the end of 2001 by the FSC/FSS included a comprehensive review of these banks’ satisfaction of the basic requirements for removal from PCA such as a minimum BIS capital adequacy ratio of 8% and a grade 3 or higher on the CAMELS evaluation, as well as their management improvements such as advancements in corporate governance and introduction of a risk management system. The FSC/FSS concluded from the evaluation results that 5 banks (Korea Exchange, Chohung, Hanvit, Kyungnam and Kwangju) would be rem
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Mar 20, 2001
- Response to News Media Reports Concerning Financial Aid to Hyundai Group
- In response to several news media reports that the decision by Hyundai creditor banks to provide additional liquidity support to Hyundai Electronics Industries Co. (HEI), Hyundai Engineering and Construction Co. (HEC), and other Hyundai subsidiaries amounted to the granting of special favors to the Hyundai Group, the FSS verified the following issues with the creditor banks:1. Financial Support to HEI and Progress of Self-Rescue PlanUnder a mutual agreement, the financial support to be provided by the creditor banks to HEI can be divided into loans under credit lines, ordinary loans and credit access, and syndicated loans.During a series of meeting held between late-November 2000 and mid-March 2001, the creditor banks agreed to restore HEI’s credit lines up to previous limits. For ordinary loans and credit access, the creditor banks sought to resolve the liquidity shortages experienced by HEI through extension of debt maturity.However, due to protracted disagreements among several creditor banks over their share of liquidity support, the creditor banks convened an emergency meeting on March 10th in order to resolve their differences and strike a new agreement concerning the portion of liquidity support to be provided by each creditor bank.With regard to the syndicated loan that was lead-managed by Citibank and announced on November 28, 2000, it should be noted that only KRW 800 billion of the original target of KRW 1 trillion was successfully raised due to the non-participation of several creditor banks. The decision to proceed with raising the remaining KRW 200 billion is entirely up to Citibank as the lead manager of the syndicated loan. The FSSneither participated in the March 10th creditor bank meeting nor engaged in any discussions in regard to the meeting.Meanwhile, the decision by creditor banks to provide liquidity support to HEI was made on the strict condition that it would fully execute the self-rehabilitation plan announced by the Hyundai Group in Janu
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Mar 13, 2001
- Response to Media Coverage on Hyundai Group Companies
- On Saturday, March 10, creditor banks to the Hyundai Group convened an emergency meeting with executives from Hyundai Electronics Industries, Hyundai Engineering Construction, Hyundai Petrochemical, and Hyundai’s financial advisor, Salomon Smith Barney, in order to discuss liquidity problems facing the Hyundai units and to determine feasible methods to resolve them. During the meeting, the participants reaffirmed the viability of the concerned companies and reviewed the progress of self-rescue plans that are being implemented at each firm. In addition, the creditor banks reaffirmed and finalized each bank’s share of liquidity support to Hyundai subsidiaries, which had been agreed upon a few months ago.At the request of the creditor banks, FSS representatives attended the meeting only to ensure the implementation of follow-up measures by the creditor banks and the Hyundai units, and not to influence the creditor banks or their decision to extend additional credits to the Hyundai companies.1. The purpose of the meeting The purpose of the meeting was to adjust and finalize the already agreed specific share of liquidity support to be assumed by each creditor bank, and to devise a timely implementation plan that could mitigate market uncertainties surrounding the companies; it was not to extend additional loans. Between January and March 2001, the creditor banks had already agreed to raise the purchase limit on export bills (on D/A basis) by US$ 600 million for Hyundai Electronics Co. and to provide US$ 400 million in credit guarantees to Hyundai Engineering and Construction Co. However, both companies have been suffering from liquidity shortages due to disagreements among the creditor banks concerning the relative share of liquidity support that each creditor bank had to assume. 2. The criticism of government interferenceWith respect to the Hyundai Group, the creditor banks voluntarily held numerous meetings in the past and agreed to provide financial support to Hyu
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Oct 05, 2000
- Potentially Non-viable Corporation Subject to Credit-risk Assessments
- In line with the second phase of financial sector restructuring, the Financial Supervisory Service (FSS) announced that creditor financial institutions will assess the credit risks of potentially non-viable companies, and manage them accordingly. The action is expected to place the long-deferred resolution of ailing companies back on the right track and help restore stability in Korean financial markets by promptly resolving non-viable companies experiencing critical problems such as a liquidity shortage.Companies with outstanding extended credit of 50 billion won or more as of July 31, 2000, will be initially examined. Among these companies, those that fall into one of the following categories will be subject to credit risk assessment: 1) Companies to which loans previously extended are now classified as “precautionary” or lower under FLC evaluation; 2) Companies that have recorded interest coverage ratio of less than 1 for three consecutive years. For those firms that are deemed potentially non-viable under each banks’ specific regulations and guidelines, the creditor banks will determine, regardless of the amount of outstanding extended credit, whether or not to conduct credit risk assessment.A Credit Risk Assessment Committee (CRAC) will be established at each creditor bank in October and will conduct risk assessment under its own guidelines. These guidelines, however, should comprehensively reflect qualitative factors such as industry risk, business risk, management risk, financial risk, and future cash flows. The Committee will be comprised of around 10 members, and should include outside experts while excluding any members who may present a conflict of interest or hold undue influence over the credit decision.From November, creditor banks will group the companies subject to risk assessment into three categories: Companies with normal operation, companies with temporary liquidity problems, and companies with severe liquidity problems. For the first two g
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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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Mar 05, 1999
- Restructuring the Life Insurance Sector
- In a document released on March 5, 1999, the Financial Supervisory Commission laid out the underlying scheme for restructuring the domestic life insurance sector (total assets of 92.3 trillion won as of Dec. 1998). The following summarizes some of the important features.Progress to dateInitial round of restructuring of the life insurance sector carried out in August, 1998 entailed the following measures ;- Business suspension and exit (4 cos.) ; Kukje, BYC, Taeyang, Coryo- Mandatory submission of management improvement implementation plans (7 cos.) ; Josun, Dongah, Kookmin, Hankuk, Handuk, Pacific, Doowon- Mandatory submission of LOI (7 cos.) ; Hanil, Shinhan, Hansung, Daishin, Tongyang, SK, KumhoBased on 1998 year-end results, among the 14 life insurance companies that were subject to management submission of management improvement implementation plans and LOIs, 10 companies were found to not have implemented plans as originally scheduled and were asked to promptly come up with ways to complete implementation (Jan 18 - Feb 18, 1999). It was conluded that a large number of these companies were suffering from huge losses and with deterioration in management performance of recent registered significant shortfall in solvency margin.In February, 1999 due diligence was conducted on 14 companies that were subject to further management improvement and based on these results specific companies to be placed under restructuring schemes were identified.Future TasksWithout the resolution of ailing life insurance companies, problems in the sector will only worsen and require increasingly more public funds. Although voluntary MAs within the domestic market along side takeovers by international buyers are seen as the ideal way to approach the problem, as most of the companies are under severe distress the likelihood of any voluntary consolidation is dismal and thus sell-offs to international buyers will be the main vehicle to be used.The underlying principle for the follow-up stag
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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
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Dec 07, 1998
- Agreement for the Restructuring of the Top 5 Chaebol
- Premise1. Ever since the outbreak of the economic crisis of a year ago, our economy concentrated its heart and soul toward quickly pulling itself out of the turmoil. Special attention was devoted to fixing the fundamental causes that brought about the economic crisis, which called for the overhaul of financial, corporate, labor and public sectors as well as implementation of relevant deregulation and foreign investment liberalization measures.Owing to the facilitated and bold implementation of financial sector restructuring, the financial market has been stabilized. On top of this, we now have a more harmonized labor-management relationship backed by a more flexible labor market, a more reliable social safety net, and with the privatization of the public sector as well as management improvement, public sector reform has also come a long way.2. Building on the 5 major principles for corporate restructuring agreed upon between president-elect Kim Dae-Jung and representatives of the 5 leading chaebol on January 13, 1998, corporate restructuring has also been pursued continuously. Legislative measures toward enhancing transparency of corporate management, unwinding of cross guarantees, strengthening of accountability of controlling shareholders and management have been completed.Furthermore, by lifting tax impediments, introducing the foreign investment inducement law, and fully opening the MA market to foreigners, the necessary institutional framework to facilitate restructuring is in place. 3. Riding on such institutional support, a large number of corporates were sold-off, exited, or reborn as new corporates. However, unfortunate to us all, in many instances existing management had to be replaced and unemployment rose significantly, causing economic players to suffer tremendous pain along the way. The top 5 chaebol are commended for their efforts toward pushing corporate restructuring. Especially they have derived voluntary business restructuring plan for 7 indus
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Dec 04, 1998
- Progress and Prospects of Economic Reform in Korea
- Mr. Chairman,Distinguished Guests,Ladies and Gentlemen:It is my honor and pleasure to have this opportunity to share my thoughts on what Korea has accomplished since the crisis and remaining tasks for reforming our economy.About a year has passed since the crisis broke out in Korea, but the situation in Korea is already quite different. Usable foreign reserves have significantly increased to over 45 billion dollars and the composition of foreign debts has improved as well.Recently, the international community including IMF and the World Bank, praised impressive progress that Korea has made and foreign investors are coming back.Although I fully understand that there remains a lot more work to be done, let me very cautiously mention three major points which led such a remarkable progress.First, the reform has been driven by new leadership which is free from previous misconduct. The newly elected president Kim Dae Jung pledged full commitment to the market principle and made series of crucial decisions on how to react, what to do and what to not do.The newly organized Financial Supervisory Commission, headed by reform minded persons who are well equipped with theories and practices of both financial and corporate sectors but nothing to do with previous misbehavior, took charge of the whole process.Second, the restructuring program has been based upon internationally well recognized criteria and procedures. The problem faced and still facing is not cyclical but structural.Hence, we strictly excluded case by case approach but pursue full-scale fundamental reform.Moreover, we targeted the core of the problem first. For example, resolution of ailing banks was our top priority.Another example of sticking to the principle is the confirmation of the government not to handover Seoul and Korea First Bank to domestic chaebols, although it may restrict the eligibility for potential bidders and make the sale process more difficult.Finally and most importantly, the national consens
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Aug 11, 1998
- Management Improvement Measures toward Insurance Companies
- - The Financial Supervisory Commission (FSC), at an FSC meeting on August 11, 1998 deliberated management improvement measures for 18 life and 2 non-life insurance companies, accommodating recommendations concerning evaluation results of rehabilitation plans submitted by the appraisal committee.- For the evaluation of insurance companies' rehabilitation plans, 6 accounting firms conducted assets/liabilities due diligence. Based on these results the appraisal committee consisting of experts from the private sector evaluated the feasibility of rehabilitation plans of the insurance companies and subsequently submitted its recommendation to FSC- Major features of management improvement measureso 4 companies that are deemed to have unreasonable rehabilitation plans and thus have minimal chance of implementing them, namely Kukje Life, BYC Life, Taeyang Life and Coryo Life have been identified as non-viable financial institutions and accordingly will be subject to business suspension as of August 11, 1998. Once large life insurance companies interested in acquiring these institutions come forth, business transfer procedures including opinion hearings and acquisition approvals etc. will be carried out in due course.o 7 life insurance companies (Josun Life, Kookmin Life, Pacific Life, Handuk Life, Hankuk Life, Doowon Life, Dongah Life) with moderately reasonable rehabilitation plans and which thus are deemed to possess the capability to implement their rehabilitation plans but are not surely to satisfy minimum solvency margin requirements by September, 2000 (0%) will be required to make appropriate adjustments to rehabilitation plans and to submit related implementation plans.o 9 companies (Hanil Life, Shinhan Life, Hansung Life, Daishin Life, Tongyang Life, SK Life, Kumho Life, Haedong Fire Marine, Dongbu Fire Marine) with reasonable rehabilitation plans and which are deemed to possess the capability to implement plans with high possibility will be required to submit letter
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Aug 11, 1998
- FSC Chairman Announcement on Measures toward Insurance Co.
- 1. Management improvement measures for insurance companies- The Financial Supervisory Commission (FSC), at an FSC meeting on August 11, 1998 deliberated management improvement measures for insurance companies and business suspension orders toward non-viable companies.o The Financial Supervisory Commission, with input from evaluation results of the appraisal committee submitted to the Commission on August 10, 1998, deliberated on matters concerning solvency margin ratios of insurance companies and the feasibility of rehabilitation plans of 18 life and 2 non-life insurance companies and announced measures pertaining to management improvement and business suspension.- Looking into details on management improvement measures of insurance companies,o 9 companies namely, Hanil Life, Shinhan Life, Hansung Life, Daishin Life, Tongyang Life, SK Life, Kumho Life, Haedong Fire Marine and Dongbu Fire Marine, with reasonable rehabilitation plans, are deemed to possess the capability to implement plans with considerable certainty and will be required to submit letters of intent, which are to include quarterly implementation plans, within 1 month,o 7 life insurance companies namely, Josun Life, Kookmin Life, Pacific Life, Handuk Life, Hankuk Life, Doowon Life, Dongah Life, with moderately reasonable rehabilitation plans, are deemed to possess the capability to implement their rehabilitation plans. However, these companies show somewhat high deficiencies in solvency margins, whereas rehabilitation plans are deemed as likely to be affected by future external conditions and thus these companies will be required to make appropriate adjustments to rehabilitation plans and to submit related implementation plans within 1 month.o As for 4 companies that are for practical purposes insolvent and are deemed to have unreasonable rehabilitation plans and thus have a minimal chance of implementing them, namely Kukje Life, BYC Life, Taeyang Life and Coryo Life, will be subject to business suspens
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Jul 01, 1998
- Strengthening of Prudential Supervision of Foreign Exchange
- 1. BackgroundRisks accompanying foreign exchange operations are mounting in Korea due to increased multi-national transactions, financial deregulation, tougher competition among financial institutions and the introduction of derivatives.However, foreign exchange management by the Foreign Exchange Management Act has been enforced mainly through focusing on aspects of the management of external assets and liabilities.○ The supervision of foreign exchange operations, executed mainly by the central bank, has given more weight to the stability of the foreign exchange market and monetary policy, rather than to assuring the soundness of commercial banks.〓 The supervisory function was not sufficient to manage the various risks, which may arise in foreign exchange operations, such as exchange risk, credit risk, liquidity risk, market risk, etc..○ It is necessary to strengthen prudential supervision over banks' foreign exchange operations, in order to prevent recurrence of the foreign exchange crisis through efficient management of the risks inherent in foreign exchange operations.2. Contents◎ In order to efficiently manage various risks in foreign exchange operations, the Banking Supervisory Authority is taking comprehensive measures.○ The foreign currency liquidity regulation system will be modified to enforce the Maturity Mismatches(GAP) Regulation, as well as the Foreign Currency Liquidity Ratio Regulation.○ The banks will set up and manage the limits on their foreign exchange operations under the Guidelines of the Banking Supervisory Authority.○ The Banking Supervisory Authority is also strengthening its off-site surveillance by improving banks' reporting systems, in order to facilitate risk evaluation and assure the soundness of foreign exchange operations in commercial banks.1) Strengthening of supervision on liquidity riskIntroduction of the Maturity Mismatches(GAP) Regulation○ After dividing assets and liabilities into 7 buckets1) according to their r
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Jun 29, 1998
- FSC Press Release upon Ailing Bank Resolution
- ■ Final assessment results of the Bank Appraisal Committee were reported to the Financial Supervisory Commission on June 28, 1998. A special meeting of the Financial Supervisory Commission was held at 7:00 am on June 29, 1998 and utilizing input from the committee decided the following;○Banks whose rehabilitation plans are deemed feasible, such as Cho Hung Bank, Commercial Bank of Korea, Hanil Bank, Korea Exchange Bank, Peace Bank of Korea, Kangwon Bank and Chungbuk Bank each received conditional approval of rehabilitation plan and are required to submit an implementation plan containing strong management improvement plans by the end of July'○Banks whose rehabilitation plans are deemed not feasible, such as Dong Hwa Bank, Dongnam Bank, Dae Dong Bank, Chung Chong Bank and Kyungki Bank each received disapproval of rehabilitation plan and will have to transfer their assets and liabilities to Shinhan Bank, Housing Commercial Bank, Kookmin Bank, Hana Bank, Koram Bank, respectively■The government will exert utmost effort in minimizing clients' inconveniences during the course of bank resolution by implementing following measuresNot only payment settlement and deposit repayment businesses but also businesses of overdraft and bill discount will be carried out as normalIn order to restore financial market stability as soon as possible, liquidity situation will be improved and credit extention toward corporate clients of resolved banks will be enhanced1. Progress to-date■Submission of rehabilitation plans (April 30, 1998)○12 banks with BIS ratio that fell short of 8% as of December 1997 were required to submit rehabilitation plans■Accounting firms' evaluation on rehabilitation plans (May 1 - June 8, 1998)○In accordance to evaluation criteria agreed upon with the IBRD, the feasibility of the following elements were evaluated - capital adequacy, recapitalization plan, asset quality classification, reduction plan for risky assets, cost reduction scheme, managemen
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May 21, 1998
