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Sep 26, 2024
- Korea-Vietnam Financial Cooperation Forum Highlights Sustainable Finance and Capital Market Development
- Standing Commissioner Lee Hyung Ju of the Financial Services Commission traveled to Hanoi, Vietnam from September 25 to 26 to attend the Korea-Vietnam Financial Cooperation Forum, meet with senior officials from the State Bank of Vietnam and the State Securities Commission, and have a meeting with officials from local branches of Korean financial companies operating in Vietnam. Vietnam is Koreas third largest trade partner and it hosts the second largest number of Korean financial companies following the U.S. FSC Standing Commissioners visit this time was aimed at promoting domestic financial companies and policy financial institutions business expansion in Vietnam. Korea-Vietnam Financial Cooperation Forum On September 25, FSC Standing Commissioner Lee Hyung Ju attended the Korea-Vietnam Financial Cooperation Forum held in Hanoi under the theme of sustainable finance and capital market development. The forum was jointly sponsored by the FSC and Vietnams State Bank of Vietnam and State Securities Commission. The forum was organized into two parts(a) Towards a Sustainable Future: Enhancing Korea-Vietnam Financial Synergies and (b) Capital Market Development and Transition Finance. In the opening of the first part, Standing Commissioner Lee delivered congratulatory remarks where he introduced various climate finance strategies being pursued by the Korean government, such as the guidelines on K-taxonomy, green bonds and green finance, and ESG disclosure standards. Speaking on the mutually beneficial relationship that has been maintained between Korea and Vietnam since the establishment of diplomatic ties in 1992, Standing Commissioner Lee said that he expects this forum to help build a more future-oriented financial partnership between the two countries. In the second part, Standing Commissioner Lee delivered opening remarks where he introduced Koreas recent capital market reform initiatives and key elements of Corporate Value-up Program. To make sure that growth momen
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Sep 03, 2024
- Revised Rules on Electronic Financial Transactions to Take Effect from September 15
- The Financial Services Commission announced that the government approved a revision bill for the Enforcement Decree of the Electronic Financial Transactions Act at the cabinet meeting held on September 3. Together with the previously amended Act on Electronic Financial Transactions (approved on September 14, 2023), the revised rules will help to close the regulatory loophole on electronic prepayment means and strengthen protection for advance payments made for electronic prepayment means. The revised rules on electronic financial transactions are scheduled to take effect from September 15. First, under the revised rules, prepayment service providers are required to separately manage the total amount (100 percent or more) of advance payments made by their customers, thereby strengthening protection for users. In addition, to prevent prepayment service providers from issuing advance payments at discounted rates in excessive levels, the revised rules will only allow them to issue advance payments at discounted rates or offer rewards points only when their debt ratio is 200 percent or below. In this case, the total amount of advance payments required to be separately managed by prepayment service providers includes the amount of monetary benefits offered to customers (discounts and rewards). Advance payments managed separately in the form of a trust or a payment guarantee insurance need to be managed only through investment in safe assets, such as Korea Treasury bonds and local government bonds, or through deposits at banks and Korea Post. The revised rules also make sure that customers are able to get refunds even when their prepayment service providers go bankrupt. In this case, the prepayment service provider will provide relevant information about refunds to the entity in charge of managing advance payments to facilitate the reimbursement of funds to customers. Second, under the revised rules, the scope of prepayment service providers that are subject to the user pr
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Jun 25, 2024
- New Enforcement Decree on the Protection of Virtual Asset Users Approved by the Government
- The Financial Services Commission announced that the government approved a new legislative bill on the Enforcement Decree of the Act on the Protection of Virtual Asset Users at a cabinet meeting held on June 25. The Enforcement Decree will go into effect on the same day as the Act on the Protection of Virtual Asset Users (the Act hereinafter) on July 19. The Act was enacted on July 18, 2023 with aims to protect virtual asset users and establish a sound order in the virtual asset market. The Act provides definitions on virtual assets and those that are excluded from the scope of virtual assets. The Act mandates virtual asset service providers (VASPs) to safely keep and manage users deposits and virtual assets. The Act also establishes legal grounds to impose penalties and sanctions on unfair trading activities, such as the use of material nonpublic information and price manipulation. In this regard, the Enforcement Decree to the Act approved by the Government today prescribes specific procedures and methods delegated by the Act as follows. Key Details Definition and Formation of an Advisory Committee (Articles 2 to 7) Virtual assets are defined as electronic tokens with economic value, which can be traded or transferred electronically. Electronic tokens that are regulated by another legislation or are deemed to pose no harm to users, such as game money, electronic money, electronic stocks, and central bank digital currency (CBDC) are excluded from the scope of virtual assets. Electronic bonds, mobile gift certificates, deposit tokens linked to the CBDC network, and non-fungible tokens (NFTs) are also added to the listed of excluded tokens. The FSC will organize an advisory committee on virtual assets to seek consultation on related policies and regulations. The committee will be made up of representatives of relevant government ministries and experts from the private sector, and will be chaired by Vice Chair of the FSC. Management of User Deposits (Articles 8 to 10)
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Jun 13, 2024
- Short Sale Reform Measures Introduced to Prevent Illegal Trading Activities and Protect Investors
- The Financial Services Commission announced the finalized version of short sale reform measures on June 13, which include plans to establish a completely electronic short sale processing system until March 2025, limit the length of stock repayment period for both institutional investors and retail investors to maximum 12 months, and strengthen the severity of penalties on illegal short sale activities when the amount of unfairly gained profits is KRW5 billion or more. In November 2023, the FSC decided to ban short selling in domestic stock markets (until the end of June 2024), because authorities became concerned about naked short selling activities taking place routinely, which could potentially disrupt domestic stock markets fair pricing function. Since then, public debates and discussions have taken place to make improvements to the short selling system, and the ruling party and the government held a consultative meeting to announce the finalized set of reform measures on June 13. Background On November 16, 2023, the FSC introduced its plan to seek short sale reform measures at the meeting held with representatives from the private sector, the ruling party of the National Assembly, and related authorities. The issue of developing an electronic short sale processing system, which was discussed multiple times previously, has been thoroughly dealt with in taskforce meetings jointly led by the Financial Supervisory Service (FSS) and the Korea Exchange (KRX). After having active communication with market participants, including foreign investors, the authorities have come up with a set of practical measures for developing an electronic short sale processing system. In addition, the authorities have had a series of meetings and discussions with experts, industry representatives, and the public to collect wide-ranging opinions on the overall stock short sale system before arriving at this finalized set of reform measures. Meanwhile, the authorities have continued to mak
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May 27, 2024
- Rule Changes Proposed to Bring About Improvements to the Convertible Bond Market
- The Financial Services Commission issued a preliminary notice of proposed rule changes regarding the issuance and disclosure of securities, which will be open for public comment from May 28 until June 11, 2024. The proposed rule changes deal with strengthening disclosure requirements on the issuance and circulation of convertible bonds (CBs), including bonds with warrants and (redeemable) convertible preference shares, and upgrading the rules and procedure on refixing convertible prices of CBs to make them more reasonable. First, the revised regulation will strengthen disclosure requirements on the issuance and circulation of CBs. Under the current regulation, when issuing CBs, companies are required to disclose information about the entity who shall exercise the call option. However, in most cases, companies provide only a vague statement of company or company-designated entity in their disclosure filing, which makes it difficult for investors to clearly understand about the entity exercising the call option. To improve upon this situation and to help increase predictability for investors, the proposed rule change will require companies to file material information disclosures when designating an entity for exercising the call option or if the right to exercise the call option has been transferred to a third-party. In addition, the practice of converting CBs into stocks after acquiring CBs close to their maturities and reselling them to the largest shareholder has been identified as a concern for unfair trading activities in capital markets. Although the practice of reselling CBs prior to their maturities is in essence similar to issuing new CBs, there has been lack of sufficient information being provided in the market thus far. Therefore, to address this problem, the proposed rule change will require companies to file material information disclosures when acquiring CBs close to their maturities with detailed information, such as reason for acquisition, plans for
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May 27, 2024
- FSC Announces Measures to Support Covered Bond Market to Facilitate Supply of Long-term, Fixed Rate Mortgages
- The Financial Services Commission announced that an agreement signing event was held between Korea Housing Finance Corporation (HF) and five major commercial banks to facilitate payment guarantees on covered bonds on May 27. In accordance with this agreement, HF will begin to provide payment guarantee service on covered bonds issued by banks starting from May 27. This is part of the broader set of government plans intended to support the covered bond market with aims to increase the supply of long-term, fixed interest rate mortgage products by commercial banks. Through HFs payment guarantee service, commercial banks are able to issue covered bonds at lower interest rates and investors are able to invest in safe, long-term assets, which require relatively little capital costs. For instance, with HFs payment guarantee service, covered bonds issued by banks with an AAA rating will have 5 to 21 basis points lower interest rates for issuance, when compared to typical bank bonds with same maturities. Therefore, if banks are incentivized in this way to reduce funding costs, this will encourage them to provide more long-term, fixed interest rate mortgage products at lower interest rates. HF also plans to seek re-securitization of covered bonds. Under this program, HF will purchase 10-yr covered bonds issued by banks, for instance, and through a settlor-trustee trust, issue asset-backed securities and sell them. This program will facilitate the issuance and purchase of long-term covered bonds in the market, and the supply of long-term funds raised this way can be put to use in providing long-term, fixed interest rate mortgages for houses valued more than KRW600 million, which is currently unavailable under the policy mortgage loan program. In line with the introduction of HFs payment guarantee service, there will be other types of incentives for banks and financial institutions. First, when issuing covered bonds with 10-yr or longer maturities, banks will be allowed to use (
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May 21, 2024
- Authorities Meet to Discuss Progress and Plan for Temporarily Eased Financial Regulatory Measures
- The Financial Services Commission held a meeting with related authorities and industry associations to check progress and discuss further plans for the temporarily eased financial regulatory measures on May 21. At todays meeting, authorities reviewed the prudential management and liquidity situation in each sectorbanks, financial investment companies, specialized credit finance businesses, and savings banksand discussed further plans for extending the availability of eased regulatory measures that are scheduled to expire at the end of June this year. At the meeting, participants assessed that considering current market conditions showing signs of stability and financial sectors response capacity, financial companies are expected to be able to maintain regulatory ratios even with the termination of the eased regulatory measures. However, given the potential of growing uncertainties in the future, participants agreed that some of the eased regulatory measures need to be made available on an extended basis. In this regard, first, the authorities discussed the need to gradually roll back the easing of liquidity coverage ratio (LCR) in the banking sector, which was first introduced in April 2020 in the wake of the COVID-19 pandemic, by raising banks LCR requirement from the current level of 95 percent to 97.5 percent for the second half of 2024. Most banks are currently operating with their LCRs exceeding 100 percent. Although the level of bank bonds issuance has been rising somewhat, considering bond market conditions and expectations for future demand for funds, the recent rise in bank bonds issuance is not expected to have a significant impact on the flow of funds. The banks LCR requirement, in this regard, is scheduled to be raised by 2.5 percentage points every six months, while the authorities will need to review market conditions in the fourth quarter of 2024 to decide further plans from January 2025 and thereafter. Second, the authorities discussed and decided to
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May 13, 2024
- FSC and FSS Announce Measures to Seek an Orderly Soft-landing in the Real Estate Project Finance Market
- The Financial Services Commission and the Financial Supervisory Service announced measures to seek an orderly soft-landing in the real estate project finance market on May 13, expanding upon the series of previously introduced measures aimed at stabilizing the market. Background Since the second half of 2022, the government has been working to facilitate an orderly soft-landing in the real estate project finance market through various market stabilization programs designed to stabilize financial markets, such as the PF-ABCP (project finance asset-backed commercial paper) market and bond market, and by providing funding support to the development projects that are considered to be financially viable, while encouraging restructuring or liquidation of projects that are deemed to be unviable. Corporate bond spreads, which stood at 109 bps at the end of September 2022, rose quickly to 177.2 bps on December 1, 2022 due to market anxieties about PF-ABCPs. However, as the government and the private sector actively took steps to respond in a timely manner, by introducing the corporate bond market stabilization fund and the PF-ABCP purchase program, bond market conditions began to stabilize since after January 2023, and corporate bond spreads as of the end of April 2024 stood at 46.6 bps. Spreads on commercial paper (CP) also spiked to 240 bps on November 23, 2022, but have come down to the recent level of 68 bps, showing signs that financial market conditions have returned to stability. To facilitate funding of the development projects that are operating on solid financial grounds, the government introduced a project finance guarantee program worth KRW30 trillion in October 2022, from which about KRW18 trillion has been implemented thus far in support for projects making a transition from bridge loans to project finance loans. Along this line, in September 2023, various lending support programs were also introduced to assist construction companies via policy financial instit
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Feb 15, 2024
- Government Unveils KRW76 Trillion Worth Corporate Financing Support Plans in Private-Public Joint Initiative
- Chairman Kim Joo-hyun of the Financial Services Commission presided over a meeting with the heads of five major commercial banks and policy financial institutions on February 15 and announced the governments plans to provide tailored funding support for enterprises. The FSC has held a series of meetings with businesses to listen to their challenges and difficulties in financing business operations. To make sure that the prepared measures can actually serve the needs of businesses, the FSC has actively collaborated with the Ministry of Economy and Finance, the Ministry of Trade, Industry and Energy and the Ministry of SMEs and Startups. The support measures being introduced today are also an outcome of active participation and contribution from policy financial institutions as well as from major commercial banks. In his opening remarks, FSC Chairman Kim Joo-hyun said that the future of Korean economy depends on the competitiveness of our enterprises, and that to boost our industrial competitiveness through new initiatives to ensure a continuous growth amid uncertain business environment, it is essential to have finance play an active role. In this regard, Chairman Kim stressed that it is necessary to have (a) a large-scale investment support for high-tech industries, (b) a targeted investment support for middle market enterprises, and (c) assistance programs made available for businesses undergoing challenging situations due high interest rates and so on. The corporate financing support plans being unveiled today consist of the following three key measures. First, authorities have prepared strategic financing support plans worth KRW26 trillion-plus for high-tech enterprises. A supply chain stabilization fund will be created to help businesses seeking to diversify imports, develop alternative technologies, and secure raw materials from overseas. The Korea Development Bank (KDB) will provide KRW15 trillion in financing support to the five major strategic sectorssuch as
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Jan 25, 2024
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Jan 23, 2024
- FSC Announces a Plan to Improve the Soundness of the Convertible Bond Market
- Vice Chairman Kim Soyoung of the Financial Services Commission held a meeting with officials from relevant organizations and industry groups and announced a plan to bolster the soundness of the convertible bond (CB) market on January 23. The measures included in the plan are intended to strengthen rules on disclosure of information on the issuance and distribution of convertible bonds, making improvements to the current refixing rules and procedure, and strengthening investigation over unfair trading activities involving CBs. The FSC expects that these measures will help to address the following three oft-cited problems regarding the CB marketthe lack of transparency in the issuance and circulation of CBs, the arbitrariness in the refixing of convertible prices, and the potential misuse in unfair trading activities. In this regard, the FSC has prepared the following three measures to address these problems, taking into account opinions and suggestions raised during the public seminar held on the topic in last July. First, the disclosure of information about the issuance and circulation of CBs will be strengthened to boost transparency in the market. Authorities will seek to ensure that the types of information that can be critical to the corporate governance structure and share valuation, such as information about the entity designated by the company to exercise the call option and the plan for CB selloff close to maturity, are opened up to the public in a more transparent way. Second, the rules and procedure for refixing convertible prices of CBs will be made more reasonable. Current rules set the minimum level of refixing at 70 percent of the initial convertible price and allow companies to refix convertible prices below the minimum level only in exceptional casese.g. corporate restructuringvia securing a special resolution at a general shareholders meeting or through their articles of incorporation. However, some companies have exploited such exceptions to the ru
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Jan 18, 2024
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Jan 17, 2024
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Dec 11, 2023
- FSC Proposes Rules on the Protection of Virtual Asset Users
- The Financial Services Commission (FSC) proposed detailed rules under the Act on the Protection of Virtual Asset Users (the Act hereinafter), which is scheduled to take effect on July 19, 2024. Aimed at protecting virtual asset users and establishing a sound order in virtual asset transactions, the Act defines the scope of virtual assets subject to the law and requires virtual asset service providers (VASPs) to safely manage and store their customers deposits and virtual assets. It also provides statutory grounds for sanctions including criminal penalty and fines to punish unfair trading activities using virtual assets. The proposal is intended to specify details that the Act delegates to its subordinate enforcement decree and supervisory regulation. First, the proposal specifies more types of tokens not covered by the Act. Under the Act, virtual assets are defined as electronic tokens with economic value which can be traded or transferred electronically. The Act excludes game money, electronic money, electronic stocks, electronic bills, electronic B/L and central bank digital currency (CBDC) from the coverage of the law. The proposal adds electronic bonds, mobile gift certificates, deposit tokens linked to CBDC, and non-fungible tokens (NFTs)to the list of excluded tokens. Second, the proposal prescribes what kind of financial institutions should be a custodian for VASP customers money and how customers funds should be managed. The Act requires VASPs to keep customers money separate from their own funds and deposit or trust them to a credible financial institution. Taking account of credibility, stability and current systems of operating deposit, the Enforcement Decree chose banks as a custodian institution for VASP customers money. Custodian banks are allowed to invest VASP customers deposit or trusted funds, kept separately from VASPs own funds, only in safe assets such as government bonds. VASPs are required to pay fees to their customers for using their deposit
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Nov 23, 2023
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Nov 08, 2023
- Government and Related Authorities Hold Meeting on Household Debt Situation
- The Financial Services Commission held a meeting with officials from the relevant government ministries and organizations on November 8 and discussed the current household debt situation and various measures to ensure effective management. Regarding the October household loans data announced earlier today, the participants had a positive assessment about the slowing trend of mortgage loans, despite an overall increase in the size of household loans from the previous month. To continue to ensure a stable management of household loans, the authorities agreed on the need to strengthen relevant measures as follows. First, the authorities will bolster rules on debt service ratio (DSR) by closely reviewing the areas that are currently being exempted from DSR regulation and look into ways to gradually expand the application of DSR rule. The stressed DSR limit that is currently being reviewed for application on variable interest rate loans is expected to be announced in December this year with specific details. Second, the authorities will come up with stronger incentive structures that can reward banks to more actively and voluntarily introduce long-term, fixed interest rate mortgage loans by overhauling a relevant administrative guidance. The authorities will also seek to provide more incentives for covered bonds, which serve as a mechanism for banks to fund long-term, fixed rate loans. Third, the authorities will continue to keep close tabs on the trends of household loan growth across all financial sectors. Fourth, the authorities will work with financial sectors to come up with various ways to help reduce the burden of repayment and high interest rate for borrowers, for instance, by offering a temporary exemption from early repayment charges. At the meeting, FSC Secretary General Lee Se-hoon said that as it is difficult to achieve short-term results when it comes to containing household debt, the government will make efforts with a long-term perspective to build an inc
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Oct 18, 2023
- FSC Holds Meeting to Check Financial Market Situation
- The Financial Services Commission held a meeting with the Financial Supervisory Service and industry representatives on October 18 to review financial market situations, potential risk factors and ways to handle them, chaired by FSC Vice Chairman Kim So-young. At the meeting, the authorities shared the same view that there are ongoing risk factors in financial markets due to the possibility of continuing high interest rates caused by a prolonged policy tightening in the U.S. and uncertainties surrounding the Israel-Hamas conflict. Therefore, the FSC, the FSS and financial industry groups agreed to maintain strong communication and cooperation. Despite these downside external risks, Vice Chairman Kim said that the domestic financial market conditions appear to be stable and that it is very unlikely that market situation will abruptly turn unstable as in the previous year since there are less uncertainties about the interest rate expectation in major economies and the financial institutions liquidity and risk management conditions have been improved compared to a year ago. However, as it is always possible that an external shocksuch as the one caused by the Israel-Hamas warcan deepen market anxiety when combined with vulnerabilities in domestic markets, Vice Chairman Kim said that it is necessary to continue to proactively deal with the vulnerable areas in domestic financial markets. With regard to the uncertainties surrounding the Israel-Hamas conflict, Vice Chairman Kim urged financial institutions to stay vigilant and secure a sufficient level of foreign currency liquidity to be adequately prepared. At the meeting, the authorities also discussed ways to avert excessive money moves in the financial sectors in the final three months of the year as competition to win over more deposits toward the end of the year led to market instability last year. In this regard, from September this year, the FSC and the FSS held a series of meetings with the financial sectors to che
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Sep 05, 2023
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Aug 17, 2023
- FSC Vice Chairman Holds Media Briefing on the Progress and Achievements of Capital Market Reform Agendas
- Vice Chairman Kim So-young of the Financial Services Commission held a media briefing on the progress and achievements of the governments capital market reform agendas on August 17. The following is a summary of Vice Chairman Kims remarks. I. Key Achievements This administration has been actively pursuing capital market reforms as a key part of the governments policy priority. In particular, the government has taken bold steps to resolve the problem of the so-called Korea discount by enhancing investor protections, removing outdated regulations and overhauling rules to foster innovation in the market. Despite the presence of difficult economic and financial conditions, there have been some favorable outcomes achieved thank to active cooperation between relevant institutions and industries. Restoring Investor Trust First, the government has prioritized in implementing a set of measures aimed at restoring investors trust in the capital market. In this regard, the governments policy focused on (a) strengthening the rights and interests of general shareholders, (b) bolstering response against fraudulent and unfair trading activities, and (c) ensuring order and fairness in the market. With regard to strengthening protections for general shareholders, we have put in place three layers of protection mechanisms at the end of last year to ensure that the rights and interests of general shareholders are thoroughly guaranteed in an IPO of a split-off subsidiary. Since the introduction of the measures, we have seen changes in corporate practices as more companies are drawing up shareholder protection plans on their own and communicating with shareholders to seek their consent. To protect general shareholders from unforeseen damages caused by insider transactions involving large shareholders or executive officers, we introduced a rule requiring corporate insiders to disclose their share trading plans before the expected trading date. To ensure that general shareholders can also
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Jun 20, 2023
- Authorities Review Market Situation and Discuss Rollback of Eased Regulatory Measures
- The Financial Services Commission held a meeting with the Financial Supervisory Service, the Bank of Korea and financial industry associations on June 20 to check current market situation and discuss the progress of market stabilization measures and the operation of eased financial regulations. With financial market conditions stabilizing, demand for market stabilization programs remains not so high currently. However, to be prepared for uncertainties at home and abroad, authorities already made an agreement on continuing to make the PF-ABCP (project finance asset backed commercial paper) purchase program available until the end of February 2024 for PF-ABCPs guaranteed by securities firms.Market stabilization programs including the bond market stabilization fund and the corporate bond and CP purchase program currently have KRW35 trillion in their remaining capacity, which provides an ample room to respond in the future in the case of market instability. In addition, authorities are closely monitoring the real estate PF market and taking necessary steps to help normalize the projects considered to be facing the risk of default. In this regard, the real estate PF lending institutions consortium agreement was activated to ensure an orderly normalization of at-risk projects. Regarding the temporary easing of regulations applied on banks, insurers, savings banks, specialized credit finance businesses and financial investment businesses since after October of last year and extended partially in March 2023, participants evaluated that financial institutions are currently capable of responding to risks without the support made available by additional extension. However, to be prepared for potential expansion of uncertainties in the future, participants agreed on extending the availability of eased regulations for certain areas. As such, the eased regulations on banks loan-to-deposit ratio, credit offering limit between subsidiaries of a financial holding company and insuran
