Press Releases - Financial Services Commission

Press Releases

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Nov 21, 2024

FSC Issues Prior Notice of Legislative Changes on Short Sale Regulations

The Financial Services Commission issued a prior notice of legislative changes regarding short sale regulations as a follow-up to the previously revised Financial Investment Services and Capital Markets Act (FSCMA) promulgated on October 22. The rule changes being proposed today address specific details that need to be stipulated under the revised FSCMA, which are expected to take effect from March 31, 2025 as follows(a) limiting the stock borrowing period for institutional investors, (b) introducing measures to prevent naked short sale through establishment of electronic net short position balance management system, internal control standards, and the securities companies verification duties, and (c) restricting short sellers from acquiring CBs (convertible bonds) and BWs (bonds with warrants) issued by the same company. Imposing a Limit on Institutional Investors Stock Repayment Period The stock repayment period for institutional investors should be determined by an agreement of both the lender and the borrower but should be limited to up to 12 months with 90-day repayment periods for renewal each time. However, exemptions are recognized in the case of delisting of stocks or trading suspension on the day of repayment, or when an account-to-account transfer (for bookkeeping entry at central securities depository) is being restricted. A violation of the repayment period may be subject to an administrative fine of KRW100 million for corporate investors and KRW50 million for retail investors. Introducing Measures Intended to Prevent Naked Short Sale Activities Corporate entities with an intention to engage in short sale of listed stocks need to take appropriate steps to prevent naked short sale in accordance with the revised FSCMA. All corporate entities should prepare internal control standards designed to prevent naked short sale. Their internal control standards should specify the role and responsibility of employees, item-by-item management of net short position b
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Nov 13, 2024

FSC Holds Meeting to Review Market Conditions and Extends Operation of Market Stabilization Programs

Vice Chairman Kim Soyoung of the Financial Services Commission held a meeting on November 13 with related organizations and market experts to go over economic and financial market conditions at home and abroad in the wake of U.S. presidential elections and Feds monetary policy pivot and discuss policy responses to ensure market stability. Market Stabilization Programs At the meeting, Vice Chairman Kim said that it is necessary to maintain backstops in order to be prepared for the potential of rising uncertainty and volatility in the market. Therefore, Vice Chairman Kim said that the market stabilization programs currently in place will continue to be operated at the same level in 2025. In order to ensure stability in financial markets, Vice Chairman Kim said that it is necessary to take into account comprehensive factors, such as the political and economic uncertainties in major economies including the U.S., ongoing geopolitical risks in the Middle East, deepening global competition for Koreas strategic industries and the potential of downward adjustment in GDP growth, and the restructuring and resolution of problematic real estate development projects. As it is possible that financial markets may experience a temporary rise in volatility affected by various external factors, Vice Chairman Kim said that the government and related organizations will continue to stay alert and make consistent efforts to ensure market stability. To this end, the government and policy financial institutions (Korea Development Bank, Industrial Bank of Korea, and Korea Credit Guarantee Fund) plan to continue to make available liquidity support programs worth up to KRW37.6 trillion to ensure stability in the corporate bond and money markets in 2025, which include the following(a) bond market stabilization fund of up to KRW20 trillion, (b) corporate bond and commercial paper (CP) purchase program of up to KRW10 trillion, (c) primary collateralized bond obligation (P-CBO) support program of
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Sep 26, 2024

Revisions to FSCMA Expected to Bring About Major Improvements to Short Sale Regulations

The Financial Services Commission announced that a revision bill of the Financial Investment Services and Capital Markets Act (FSCMA) intended to upgrade rules on short sale was passed by the National Assembly at the plenary session held on September 26. The passage of the revised FSCMA by the National Assembly officially brings within legal purview the short sale reform measures that have been sought by the government since the decision to ban short sale was introduced in November last year amid concerns about frequent occurrences of naked short sale activities and their disruptive effects on markets fair pricing function. Under the revised FSCMA, institutional investors will be required to set up their own electronic short sale processing system, while both institutional and corporate investors will need to prepare relevant internal control standards. For institutional investors, there will be a new restriction on the stock repayment period for borrowed stocks. Monetary penalties that can be imposed on unfair trading and illegal short sale activities will be strengthened, and new sanctions mechanisms will be introducedsuch as a ban on trading financial investment products and restriction from being appointed or serving as an executive at listed companiesto enhance the effectiveness of punishment and sanctions. Background Since the announcement of the short sale reform proposal on June 13 this year, the FSC and related organizations have been swiftly working on follow-up measures. Prior to making revisions to the legislation, authorities have been proactively working to prepare for establishing an electronic short sale processing and monitoring system and limiting the stock repayment period for institutional investors. Since August, the Korea Exchange (KRX) has been working to set up Naked Short-selling Detecting System (NSDS), which is designed to detect and identify naked short sale activities based on the records of short sale orders transmitted by institutional
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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

Supply of Policy Mortgage Loans to Concentrate on Non-speculative Homebuyers

The Financial Services Commission announced that the operation of an integrated policy mortgage loan program under the Special Bogeumjari Loan scheme will end on January 29 as scheduled, which will be switched back to the regular Bogeumjari Loan program from January 30. The volume of policy mortgage loans planned to be supplied under the Bogeumjari Loan program will be KRW10 trillion-plus on an annual basis. Depending on market demands and implementation of other types of policy funds, authorities will flexibly adjust the supply of policy mortgage loans. However, the sum of all types of policy mortgage loans made available will be maintained at around KRW40 trillion, a 10-year average. The supply of Bogeumjari Loan will be focused on lower-income households and non-speculative homebuyers, with added benefits available for vulnerable groups. Newly married couples, households with multiple children and victims of housing rental (jeonse) scams will be eligible for eased borrowing conditions. In general, Bogeumjari Loan will be available for households with a combined annual income of KRW70 million or less and for houses valued at KRW600 million or less. For newly married couples, the combined annual income of up to KRW85 million will be allowed. Households with multiple children will be eligible for higher income thresholds and more loan amounts. There is no income restriction for the victims of jeonse frauds who will be eligible to borrower from Bogeumjari Loan to purchase homes valued up to KRW900 million. Interest rates for Boguemjari Loan will be set between 4.2 percent and 4.5 percent. Support for interest rates will be available for vulnerable groups on varying degrees to ensure the supply of policy mortgage loans at about mid-three-percent interest rates to them. The FSC also plans to work on various measures to promote the supply of longer-term mortgage loans by commercial lenders. First, authorities will encourage banks to handle more of the less risky mortgag
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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

Rules Change Approved to Officially Introduce BCBS Large Exposure Limit on Banks from February 1

The Financial Services Commission held its first scheduled meeting of the year on January 18 and approved the previously proposed rules change to the supervisory regulations on banks and financial holding companies. The regulatory change officially establishes the large exposure limit recommended by the Basel Committee on Banking Supervision (BCBS) to bring domestic financial rules more aligned with global standards. In this regard, the changed rules are similar to the banks and financial holding companies credit extension limit being observed under the existing legal framework in that it requires banks and financial holding companies to keep large exposures to a counterparty (or a group of affiliated counterparties) within 25 percent of their core capital (20 percent for D-SIBs). However, the under the revised rules, the scope of counterparties has been broadened to include entities in both controlling relationship and economically dependent relationship. The revised rules also incorporate a wider scope of credit exposures since they include both credit extensions such as loans and financial products such as stocks and bonds as well as third-party guarantees. Thus, the revised rules will allow a more comprehensive and integrated way of managing counterparty credit risks. The revised rules will go into effect from February 1. Authorities expect that this will help to improve the management of large-scale concentration risks in the banking sector. The financial authorities will continue to closely monitor risks in the banking sector and seek changes in rules needed to boost regulatory consistency with global standards. * Please refer to the attached PDF for details.
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Jan 17, 2024

Government Holds Policy Forum on Enhancing the Role of Finance to Expand Co-prosperity and Ladder of Opportunity

The government held the fourth round of policy forum on the topic of strengthening the role of finance to foster co-prosperity and expand the ladder of opportunity, presided over by President Yoon Suk Yeol on January 17. At the forum, the Financial Services Commission presented the governments plans to enhance the role of finance to help expand the ladder of opportunity in the following three ways(a) strengthening the role of capital markets to facilitate asset accumulation of the public, (b) reducing the burden of high interest rates for vulnerable groups, and (c) assisting vulnerable groups to recover and regain footing from financial difficulties and debt problems. I. Strengthening the role of capital markets First, the government will strengthen tax incentives to support asset accumulation of the public. In this regard, the previously planned capital gains tax (for introduction in 2025) on financial investment income will be repealed. For individual savings accounts (ISAs), the maximum savings limit (ISA allowance) will be raised from KRW20 million a year for a total of KRW100 million previously to KRW40 million a year for a total of KRW200 million. The tax deductible limits for dividend and interest income will be raised from KRW2 million and KRW4 million (for agro-fishery types) previously to KRW5 million and KRW10 million (for agro-fishery types). A new type of ISA will be created for investments exclusively in domestic stocks and funds. Investors subject to aggregate taxation on financial income will also be eligible to sign up for this type of ISA for which a separate tax rate of 14 percent will be applied without any deductible. Second, the government will seek regulatory reforms intended to create a more investor-friendly environment in capital markets. To this end, authorities will seek to revise the Commercial Act to enhance protection for the rights and interests of small shareholders through strengthening the accountability of company executives and m
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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

Authorities Decide to Extend the Period of Operating Market Stabilization Programs and Eased Regulations

Vice Chairman Kim So-young of the Financial Services Commission presided over a meeting with officials from the Financial Supervisory Service, Korea Development Bank, Korea Credit Guarantee Fund and other market experts on November 23 to check condition of the current bond and short-term money markets and discuss plans for various market stabilization programs and eased regulatory measures. Market stabilization programs At the meeting, the authorities decided to extend the period of operating the bond market and short-term money market stabilization programs, which began to operate since last year. Although the demand for these support programs this year has been considerably lower than the previous year, the authorities decided to extend the period of operation for one year for the programs that are set to expire soon. As such, the operation of the bond market stabilization fund and the corporate bond and CP (commercial paper) purchase program will be extended until the end of December 2024, and the availability of the PF-ABCP purchase program for PF-ABCPs issued by securities firms will be extended until the end of February 2025. The primary collateral bond obligation (P-CBO) support program run by the Korea Credit Guarantee Fund and intended to support bond market stabilization will continue to operate as planned until the end of 2024. Eased regulatory measures The authorities also discussed extending the period of operating eased financial regulatory measures which are set to expire at the end of this year. Although the current liquidity and soundness indicators show that financial institutions are capable of maintaining regulatory ratios without the support form eased regulations, considering the possibility of abrupt changes in market situations, the authorities decided to extend the availability of eased regulations until the end of June 2024. The eased regulatory measures subject to the period extension include the following. a) Banks: Temporary easing of li
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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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