Press Releases - Financial Services Commission

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Dec 21, 2006

Bank BIS Capital Ratios, September 2006

Bank BIS capital ratios averaged 13.10% at the end of September, compared with 13.06% at end-June and 13.00% at end-2005. Bank capital rose KRW14.6 trillion (14.2%) on net income totaling KRW11.5 trillion for the first nine months of the year, while risk-weighted assets increased KRW105.5 trillion (13.3%) during the same period. Tier-1 capital rose 16.5% (KRW12.2 trillion) compared with an 8.3% increase (KRW2.4 trillion) for tier-2 capital.The capital ratio rose for seven banks but fell for the 11 others compared to end-2005. For some of the banks with a lower capital ratio than at end-2005, increases in capital did not keep pace with increases in risk-weighted assets. But all the 18 banks reported capital ratios in excess of 10% and expect to maintain strong capital positions going forward with solid net income.* Please refer to the attached PDF for details.
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Nov 24, 2006

Assessment of Private Equity Industry, November 2006

The Financial Supervisory Service issued an assessment of Korea’s private equity industry on November 22, 2006, to mark the second year of regulatory changes that allowed the formation of private equity funds (PEFs) as a recognized investment entity for the first time in December, 2004.Registered PEFsThere were 20 registered PEFs as of end-October with a total investor subscribed (committed) amount of KRW4.66 trillion, of which KRW1.99 trillion were actually called. Since the beginning of 2006, six PEFs were newly registered and one was terminated for a net increase of five. The subscribed amount increased KRW1.76 trillion and the called amount KRW760.6 billion in 2006. At the end of 2005, there were 15 registered PEFs with KRW2.9 trillion in total subscribed amount and KRW338.8 billion in total called amount.Fund RaisingThere were seven large funds (more than KRW300 billion), six medium-sized funds (between KRW100 billion and KRW300 billion), and seven small funds (less than KRW100 billion) as of end-October. Three of the large funds exceeded KRW500 billion in total subscribed amount. Most of the small funds were so-called “deal-by-deal” PEFs that specialize in a specifically targeted company.Management fees typically ranged between 1.5% and 2% of the subscribed investment amount when PEFs were first introduced. But with a majority of institutional investors preferring financial, rather than strategic, investment whose returns do not depend too much on the fund management skills of the general partners (managers) of PEFs, management fees fell to a lower range between 0.1% and 2% of the investment executed.InvestmentsEleven PEFs had executed investments totaling KRW999.0 billion in 27 companies, including a KRW343.9 billion takeover of a privately held company in June, 2006, the largest PEF investment to date. Since the beginning of the year, the number of companies in which PEFs invested jumped from 9 to 27 with the total executed amount sharply up from KRW26
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Nov 15, 2006

Bank Loans Classified as Substandard or Below: September 2006

Bank loans classified as substandard or below (SBLs)–substandard, doubtful, or presumed loss–totaled KRW8.8 trillion at the end of September, unchanged from end-June. But the ratio of SBLs to total outstanding loans fell to 0.98%, the lowest ratio since the forward-looking criteria were first adopted in 1999. The SBL ratio averaged 1.02% at end-June and 1.22% at end-2005. A surge in new loans, which pushed the total outstanding loans to KRW895.2 from KRW861.3 trillion, was mostly responsible for the drop in SBL ratio.Overall, the SLB ratios fell modestly for the key borrower groups from end-June, averaging 1.06% for corporate loans and 0.81% for household loans. The ratio for credit card receivables increased slightly from 1.80% at end-June to 1.84%. But compared to end-2005, the SBL ratios fell for all the loan types.* Please refer to the attached PDF for details.
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Nov 15, 2006

Preliminary Bank Net Income: January-September 2006

Preliminary figures show domestic banks’ net income for the first nine months of 2006 will come to KRW11.1 trillion, compared with KRW10.5 trillion for the same period a year earlier. A drop in provisioning for loan losses and disposition of stocks from past debt-equity swaps mostly contributed to the increase. Income for the third quarter totaled KRW3.1 trillion, down from KRW4.0 trillion a year earlier.For the January-September period, ROA averaged 1.26%. The gross income/asset ratio, a key measure of profitability, has fallen each of the three quarters in 2006, averaging 2.86% for the nine-month period, which compares unfavorably to 5.44% for the U.S. banks.Narrower net interest margin (NIM) resulting from competition most likely contributed to the declining bank profitability. NIM averaged 2.66% for the January-September period, compared with 2.81% for the same period a year earlier.* Please refer to the attached PDF for details.
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Nov 10, 2006

Asset Management Companies' Preliminary Net Income:First Half of FY2006

Regulatory filings by 49 asset management companies–36 domestic and 13 foreign–show preliminary net income for the first six months of FY2006 ended September 30 totaled KRW150.9 billion, up KRW93.6 billion from KRW57.3 billion a year earlier. Pretax income came to KRW200.0 billion, compared with KRW78.5 billion a year earlier.A large increase in management fees boosted by a surge in investment into stock funds pushed asset management companies’ net income for the period. Management fees, which averaged 63 basis points at end-September, compared with 58 basis points a year earlier, jumped KRW124.8 billion or 67.1% to KRW310.7 billion. Investment in stock funds, which typically generate higher management fees than other funds, more than doubled from KRW21.9 trillion at end-September, FY2005, to KRW46.4 trillion.Domestic asset management companies’ pretax income for the period totaled KRW155.8 billion, an increase of KRW91.2 billion or 141.2% from a year earlier. For foreign asset management companies, the total come to KRW44.2 billion, compared with KRW13.9 billion a year earlier.As of end-September, assets under management totaled KRW230.7 trillion (net asset basis), an increase of KRW25.2 trillion or 12.2% from KRW205.5 trillion a year earlier. Both stock funds and hybrid funds grew by KRW24.5 trillion and KRW9.5 trillion, respectively, from a year earlier, but money market funds fell by KRW15.5 trillion during the period. Assets under the management of domestic asset management companies came to KRW191.4 trillion. For foreign asset management companies, the total was KRW39.3 trillion.* Please refer to the attached PDF for details.
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Nov 01, 2006

IMF-FSC/FSS to Host Macroprudential Supervision Conference in Seoul

The International Monetary Fund and Financial Supervisory Commission / Financial Supervisory Service will jointly host an international conference on macroprudential supervision in Seoul from November 7 to 8, 2006, at the Grand Hyatt Seoul Hotel.The conference, entitled “Macroprudential Supervision: Challenges for Financial Supervisors,” underscores the growing interest in macroprudential supervision among financial supervisors. With an emphasis on system-level approach to regulatory and supervisory frameworks, macroprudential supervision is taking shape as an added safeguard against financial instability.There have been a number of discussions among international organizations and several national supervisory authorities in recent years on various aspects of macroprudential supervision. But the Seoul conference is expected to be the first major international conference that will focus exclusively on macroprudential supervision. Thus, it will give the participants a unique opportunity to share with others experiences and expertise on macroprudential supervision.Approximately 350 participants at home and from abroad, including representatives from the International Monetary Fund and Bank for International Settlements, and the heads of the U.K. Financial Services Authority and the Australian Prudential Regulation Authority, are expected to attend the conference. Four separate sessions—Financial Stability, Approaches to Macroprudential Supervision, Stress Testing, and Case Studies of Macroprudential Supervision—with presentations and discussions on 15 topics are scheduled during the two-day conference.* Please refer to the attached PDF for details.
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Sep 22, 2006

Introduction of Third Insurance with Cash Value and Bancassurance Supervision

Bancassurance was first introduced in August, 2003, to help consumers purchase insurance at a lower cost and improve market efficiency. In light of the potential impact of bancassurance on the insurance market, a phase-in approach was adopted. Under this approach, sale of savings-type insurance began in August, 2003. This was followed by the sale of exclusively protection-type “third insurance” providing coverage against illnesses and injuries as well as post -illness and post -injury risks in April, 2005. In October, the sale of third insurance with cash value at maturity (TICV) is set to begin.Sales of Bancassurance ProductsDuring the second phase of bancassurance (April, 2005, to June, 2006), sales totaled KRW7.3 trillion–KRW6.2 trillion for life and KRW1.1 trillion non-life insurance products–on earned premium basis. With earned premium rising more than 30% in FY2005, the growth outlook on the bancassurance market looks positive. Nearly all of the bancassurance sales (98.9%) were made through banks. Kookmin Bank and Shinhan Bank held 28.8% and 19.4%, respectively, of the sales.Market for TICVThe market for TICV, which is set to begin in October, is estimated at KRW12.7 trillion–KRW7.9 trillion for life and KRW4.8 trillion for non-life insurance products–a year, approximately 14% of the insurance market.When the third-phase bancassurance commences, insurance products that can be sold through banks and other financial institutions are expected to account for 51.5% of life insurance products and 36.1% of non-life insurance products.Tax Benefits of TICVConsumers are expected to benefit from, among others, tax deductions and longer-term policies with TICV, a protection-type insurance that allows up to KRW1 million in deductions from the policyholder’s taxable income. The policy term for savings-type insurance is limited to 15 years (non-life), but no such term restriction is applicable to TICV as it is a protection-type insurance.Upsides of TICVConsumer
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Sep 12, 2006

Equity Disclosure Filings First Half 2006

An analysis of disclosure filings for investment in listed companies for the first six months of 2006 showed a total of 2,397 investors held five percent or more equity interests in 1,624 listed companies (700 Stock Market-listed and 924 KOSDAQ-listed). During the period, 2 tender offers and 122 proxy solicitations were made, compared with 5 and 108, respectively, during the same period a year earlier.Disclosures Filed under the “Five-Percent Rule”Disclosures filed under the five-percent reporting rule for the first six months of the year totaled 4,157, compared with 4,499 for H2, 2005, and 5,717 for H1, 2005. The total for H1, 2005, includes 1,791 re-filings made under the amended reporting rule that took effect March 29, 2005. Excluding the re-filings, the total for H1, 2005, was 3,926. Filings by foreign investors have steadily increased since 2003.By investment purpose, filings for exercising influence on the management totaled 1,609 (1,580 companies: 666 Stock Market-listed, 914 KOSDAQ-listed) as of the end of June. Those for investment only totaled 872 (1,139 companies: 516 Stock Market-listed, 623 KOSDAQ-listed).Filings by Foreign InvestorsA total of 307 foreign investors–288 legal entities and 19 individuals–held five percent or more equity interests in 505 listed companies, of which 242 were Stock Market-listed and 263 KOSDAQ-listed.Tender Offer FilingsTwo tender offer filings involving Choong Nam Spinning Co., Ltd. were made during the first six months of the year. There were no tender offers intended for enhancing management control or going private during the period.Proxy SolicitationsA total of 122 disclosures were filed for proxy solicitation during the first six months of the year. Of the total, 110 or 90.2% were for the purpose of meeting the quorum requirements in the general shareholders’ meetings. There were 12 filings for proxy contests during the period.* Please refer to the attached PDF for details.
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Sep 01, 2006

Chairman/Governor Yoon Jeung-Hyun to Visit Hong Kong, Thailand and Singapore for Talks on Supervisory Cooperation

Chairman/Governor Yoon Jeung-Hyun of the Financial Supervisory Commission and Financial Supervisory Service will visit Hong Kong, Singapore and Thailand and meet with senior supervisors and business leaders from August 31 to September 7. Throughout the trip, discussions are planned on wide-ranging supervisory issues, including cross-border supervisory cooperation, investor/consumer protection under free trade regime, MOU on exchange of information and joint examination, and implementation of Basel II capital framework. Chairman/Governor Yoon also plans to take the opportunity to share Korea’s success with financial-sector reform and promote its financial hub initiative to business leaders in the three countries.* Please refer to the attached PDF for details.
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Aug 30, 2006

Preliminary Bank BIS Capital Ratios: June 2006

Preliminary figures show bank BIS capital ratios averaged 13.08% at the end of June, compared with end-2005 average of 13.00%. Bank capital rose KRW9.1 trillion or 8.8% on robust net income totaling KRW8.1 trillion for the first half of 2006, compared with KRW64.6 trillion or 8.2% jump in risk -weighted assets. Tier-1 capital rose 11.0% (KRW8.1 trillion) versus a 3.3% increase (KRW1.0 trillion) for tier-2 capital.The capital ratio rose for nine banks but fell for the others. Banks with higher capital ratios were helped by strong earnings. Kookmin Bank and the National Agricultural Cooperative Federation increased their tier-2 capital by KRW1.9 trillion and KRW800 billion, respectively, with subordinated debt issues. For most of the banks with lower capital ratios than at end-2005, capital increases did not keep pace with increases in risk-weighted assets. Capital ratio for Shinhan Bank fell modestly following its merger with Chohung Bank on April 1, 2006. All the banks reported BIS capital ratio higher than 10% at end-June.* Please refer to the attached PDF for details.
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Aug 30, 2006

Bank Loans Classified as Substandard or Below: First Half, 2006

Bank loans classified as substandard or below (SBLs)–substandard, doubtful, or presumed loss–totaled KRW8.8 trillion at the end of June, down from KRW9.7 trillion at the end of 2005. The ratio of SBLs to total outstanding loans fell from 1.22% to 1.02%, the lowest ratio since the forward-looking criteria were first adopted in 1999. Disposition of borrower collateral, aggressive write-off of SBLs, and a smaller increase in new SBLs–KRW6.0 trillion compared with KRW8.8 trillion for H1, 2005, and KRW7.1 trillion for H2, 2005–mainly contributed to the drop in SBL ratio for the first half of 2006.The SLB ratios fell for all the key borrower groups during the first half from end-2005, averaging 1.09% for corporate loans, 0.86% for household loans, and 1.80% for credit card receivables. The ratio fell for 14 banks but modestly rose for 4 others.* Please refer to the attached PDF for details.
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Aug 17, 2006

Asset Management Companies Operating Results Q1 FY2006

Preliminary operating results from a total of 48 asset management companies show pretax income for the first quarter of FY2006 ended June 30 will come to KRW92.54 billion, up sharply from KRW21.59 billion a year earlier. A KRW67.44 billion increase in investment management fees driven by a surge in assets under management mostly contributed to the jump in pretax income for the period. Net income for the period is expected to total KRW72.54 billion.Pretax income for domestic asset management companies (36) came to KRW72.03 billion, compared with KRW14.42 billion a year earlier. For foreign asset management companies (12), the total came to KRW20.51 billion, compared with KRW7.17 billion a year earlier.As of the end of June, assets under management totaled KRW221.6 trillion, up slightly from the previous quarter’s total of KRW221.3 trillion. Both stock funds and hybrid funds grew by KRW5.1 trillion and KRW3.7 trillion, respectively, but money market funds fell by KRW13.1 trillion during the period. Assets under management by domestic asset management companies came to KRW183.5 trillion. For foreign asset management companies, the total was KRW38.1 trillion.* Please refer to the attached PDF for details.
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Jul 31, 2006

Bank First Half 2006 Net Income

Preliminary figures show domestic banks’ net income for the first half of 2006 will come to KRW8.09 trillion, up 23.4% or KRW1.54 trillion from KRW6.55 trillion a year earlier. An 8.5% or KRW1.1 trillion increase in interest income driven by continued loan growth as well as a 50.3% or KRW1.2 trillion drop in loan loss provisions mainly contributed to the robust earnings for the period.Net interest income for H1 totaled KRW14.5 trillion, up 8.5% from a year earlier, and made up 86.6% of the gross income for the period. Non-interest income jumped 6.3% to KRW2.3 trillion from KRW2.1 trillion a year earlier.As a result of the sharply higher H1 net income, the average ROA jumped from1.26% in H1, 2005, to 1.40%. The gross income/asset ratio fell slightly from 2.98% to 2.92%, while the net income/gross income ratio averaged 48.1%, compared with 42.2% a year earlier. Narrower interest margins (from 3.11% to 2.95%) most likely contributed to the modest drop of the gross income/asset ratio for the period despite a continued growth of loan assets.* Please refer to the attached PDF for details.
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Jul 31, 2006

FSC Announces a Task Force on Capital Market Consolidatiln Legislation

The Financial Supervisory Commission announced on July 17 the formation of a task force on the capital market consolidation legislation (provisionally titled “Financial Investment Services and Capital Market Act”) in order to conduct a thorough review of the new legislation and come up with recommendations for the Ministry of Finance and Economy. The task force was formed as part of the ongoing effort by the FSC to reduce regulatory arbitrage, provide a consistent regulatory framework and facilitate a balance growth of the capital market.In light of the importance and urgency the government attaches to the capital market consolidation legislation, the Securities and Futures Commission will lead the task force with nine senior officers from the FSC and the FSS. The task force will be supported by five staff-level teams that will separately focus on securities, asset management, unfair market conduct, banking, and trust services.The key areas of focus for the task force are:- Whether additional reinforcement measures are needed in the conflict-of-interest provisions for financial service firms offering multiple investment advisory services (articles 43 and 44 of the proposed legislation);- Whether additional reinforcement measures are needed for investor protection and for effective supervisory oversight (investor protection provisions, articles 45-51; safeguard measures against unfair market conduct, articles 70, 82, 92, and103);- Whether regulatory provisions are open to multiple interpretations (appropriateness of the meaning of investment product and investment business, articles 3-7), and- Follow-up measures and further reinforcement steps in the supervisory regulations.The task force is expected to complete its work by September and work closely with the Ministry of Finance and Economy on its recommendations for the capital market consolidation legislation.* Please refer to the attached PDF for details.
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Jul 31, 2006

Bank BIS Capital Ratio March 2006

Bank BIS capital ratios averaged 13.18% as of the end of March, 2006, up from 13.00% at the end of 2005. The end-March capital ratio is the highest ever reported by domestic banks. Risk-weighted assets rose KRW17.4 trillion or 2.2% during the first quarter, but bank capital also rose KRW3.7 trillion or 3.6% on the back of KRW3.9 trillion in net income during the period. Tier-1 capital increased KRW3.9 trillion or 5.3%, while tier-2 capital showed a modest drop of KRW500 billion or 1.6%.Six banks reported capital ratios higher than at the end of 2005, but the rest reported slightly lower ratios for the quarter. All the banks reported capital ratios higher than 10%, which compares favorably with international capital standards. The capital soundness of domestic banks is expected to remain strong with further increases in tier-1 capital and additional room for tier-2 capital.* Please refer to the attached PDF for details.
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Jun 21, 2006

Credit Card Companies Q1 2006 Net Income

The six domestic credit card companies reported net income totaling KRW526.4 billion for the first quarter of 2006, up from the 2005 fourth quarter total of KRW344.2 billion. Operating income came to KRW474.1 billion. Earnings for the first quarter were helped by a 44.1% drop in bad debt expenses from the fourth quarter of 2005.All the six credit card companies reported positive earnings for the first quarter, and five posted increased earnings from the previous quarter.More stringent credit screening of card users and risk management contributed to lower payment delinquencies during the first quarter. Delinquency ratio—defined as payments overdue one month or more plus loans converted from overdue credit card receivables (“converted loans”) divided by total managed assets—averaged 8.77% at the end of the quarter, compared with 10.05% a quarter earlier and 15.73% a year earlier. Excluding converted loans, the delinquency ratio averaged 4.96% at the end of first quarter, compared with 5.88% a quarter earlier and 8.19% at the end of 2005.The capital adequacy of the credit card companies also improved during the first quarter with the adjusted capital adequacy ratios rising to 22.36% from 18.99% at the end of 2005. Hyundai Card’s adjusted capital adequacy rose to a record 29.89% from 14.68% at the year’s end as a result of KRW165.3 billion equity investment by GE Capital International Holdings.* Please refer to the attached PDF for details.
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Jun 21, 2006

Bank Loans Classified as Substandard or Below-First Quarter 2006

Bank loans classified as substandard or below (SBLs)–substandard, doubtful, or presumed loss–totaled KRW9.75 trillion at the end of the first quarter of 2006, up slightly from KRW9.72 trillion at the end of 2005. During the same period, the ratio of SBLs to the total outstanding loans fell from 1.22% to 1.20%, the lowest level since the forward-looking criteria were first adopted in 1999. A drop in newly distressed loans during the quarter mainly contributed to the lower SBL ratio.Distressed loans disposed during the quarter totaled KRW2.9 trillion, down KRW2.2 trillion from the previous quarter. The drop was mainly due to seasonal factors, but the pace of distressed loan disposition is expected to pick up in the second quarter.SBL ratios fell for corporate loans and credit card receivables but rose slightly for household loans.* Please refer to the attached PDF for details.
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Jun 21, 2006

Bank BIS Capital Ratio March 2006

Bank BIS capital ratios averaged 13.18% as of the end of March, 2006, up from 13.00% at the end of 2005. The end-March capital ratio is the highest ever reported by domestic banks. Risk-weighted assets rose KRW17.4 trillion or 2.2% during the first quarter, but bank capital also rose KRW3.7 trillion or 3.6% on the back of KRW3.9 trillion in net income during the period. Tier-1 capital increased KRW3.9 trillion or 5.3%, while tier-2 capital showed a modest drop of KRW500 billion or 1.6%.Six banks reported capital ratios higher than at the end of 2005, but the rest reported slightly lower ratios for the quarter. All the banks reported capital ratios higher than 10%, which compares favorably with international capital standards. The capital soundness of domestic banks is expected to remain strong with further increases in tier-1 capital and additional room for tier-2 capital.* Please refer to the attached PDF for details.
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May 22, 2006

Chairman/Governor Yoon Jeung-Hyun Holds High-Level Talks in Washington, D.C., and Attends 8th Integrated Financial Supervisor

Chairman/Governor Yoon Jeung-Hyun of the Financial Supervisory Commission and the Financial Supervisory Service met with senior U.S. regulators in Washington, D.C., and attended the 8th Integrated Financial Supervisors Conference in Budapest, Hungary.During his visit to the U.S., Chairman/Governor Yoon met with Fed Chairman Ben Bernanke, SEC Chairman Christopher Cox, OCC Comptroller John Dugan, and Deputy Secretary of the Treasury Robert Kimmitt in Washington, D.C., and discussed financial supervision, steps to strengthen supervisory ties between the two countries, the new capital accord, and other issues of mutual interest.In New York City, Chairman/Governor Yoon met with President Timothy Geithner of the Federal Reserve Bank of New York and discussed banking supervision and facilitating supervisory support to each other. Chairman/Governor Yoon also delivered a speech before Asia Society stressing the need for close regional and global cooperation to ensure financial stability and promote economic growth. He also held a roundtable discussion with the heads of major U.S. financial institutions on the success of Korea’s regulatory reform and the financial hub initiative.After the meetings in the U.S., Chairman/Governor attended the 8th Integrated Financial Supervisors Conference in Budapest, Hungary, on May 18-19. The IFSC is an annual gathering of the heads of integrated supervisory authorities that first began in 1999 to promote sharing of knowledge and experiences on integrated financial supervision and enhance cooperation on areas of common interest among the integrated supervisors.The agenda for this year’s conference were updates on major developments in the member countries, quality management of financial supervision, informal power and responsibility, and integrated supervision cross-border issues. During the conference, Chairman/Governor Yoon met separately with Chairman Callum McCarthy of the U.K. Financial Services Authority for the annual high-level
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May 04, 2006

Opening Ceremony held for FSS International Supervision Support Office

The Financial Supervisory Service held an opening ceremony on May 3 for the International Supervision Support Office. The ceremony was attended by Governor Yoon Jeung-Hyun and other senior FSS officers as well as government officials and CEOs of foreign financial institutions in Korea.
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