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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
