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May 30, 2023
- Authorities Plan to Overhaul Rules on CFD Trades while Restricting New Transactions for Three Months
- The Financial Services Commission held a meeting with the Financial Supervisory Service, the Korea Exchange and the Korea Financial Investment Association on May 26 and held discussions to finalize a set of measures intended to strengthen regulations on trading of contracts for difference (CFDs). The measures include (a) enhancing transparency in the provision of information on the actual type of CFD investors and investment balances by item, (b) closing loopholes to prevent regulatory arbitrage by including the amount of CFDs provided in the securities firms maximum credit extension limit, (c) requiring individual investors applying for the qualified professional investor status to go through an in-person (including video call) verification process, and (d) establishing a new investment requirement for over-the-counter (OTC) derivatives transactions such as trading of CFDs. Enhancing transparency in provision of relevant investment information To help investors make more rational decisions about their CFD investments, authorities will improve the system to ensure the provision of more appropriate investment information. Even though those making investments in CFDs are mostly individual retail investors (making up about 96.5 percent), currently, when securities firms submit stock transaction orders following retail investors CFD trading, the investor type is currently marked as institutional investor when orders are submitted by a domestic securities firm or as foreign investor when orders are submitted by a foreign securities firm. This has created the problem of misrepresenting the flow of investment funds into particular investment items by institutional and foreign investors. In order to prevent this sort of misunderstanding by market participants, for stock transactions resulting from CFD trading, actual investor type (e.g., individual investor) will be recorded. In addition, as in the case of credit loans, the total and item-by-item CFD balances will be disclo
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May 25, 2023
- FSC Decides to Activate CCyB Requirement for Banks and Bank Holding Groups from May 2024
- The FSC decided to increase the countercyclical capital buffer (CCyB) requirement for banks and bank holding groups to one percent beginning on May 2024 at the 10th regular meeting held on May 24. The decision is a follow-up measure for the plan to improve the prudential regulations in the banking sector discussed at the third working group meeting of the taskforce on improving the management and operating practices of banks and banking system held on March 15. CCyB is an additional capital buffer requirement (within zero to 2.5 percent of risk-weighted assets) which takes into account the effects of procyclicality following credit supply on the financial system and the real economy. Since its introduction for domestic banks in 2016, CCyB has remained at around zero percent. The FSCs decision to increase the CCyB requirement to one percent takes into account comprehensive factors. First, even though the growth of household credit slowed down amid interest rate hikes, credit growth has remained high in the corporate sector. When looking at both the major total credit-to-GDP gap indicator and the complementary total credit gap indicator, there are strong signs for activating CCyB. Moreover, at the end of 2022, domestic banks Tier 1 common equity ratio was 13.50 percent (12.57 percent when including bank holding groups), which was higher than the regulatory ratio of 7.0 to 8.0 percent but fell slightly compared to 13.99 percent at the end of 2021 due to interest rate hikes and sharp rises in currency exchange rates. Also, as domestic banks net income in 2022 rose to KRW18.5 trillion (up KRW1.6 trillion y-o-y), it is deemed that banks are capable of setting aside additional capital. The FSC decided that it is necessary to preemptively require banks to build up capital to improve their loss absorbing capacity against the backdrop of macroeconomic uncertainties at home and abroad, potential growth of financial risks and the possibility of actually accruing expected losses
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May 25, 2023
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May 23, 2023
- Authorities Hold Joint Conference and Pledge to Stamp Out Unfair Trading Activities in Capital Markets
- The FSC held a joint conference on May 23 with the Financial Supervisory Service, the Korea Exchange and Seoul Southern District Prosecutors Office on the topic of stamping out unfair trading activities in capital markets. The conference was attended by experts from academia and research institutions. The heads of the FSC, FSS, KRX and the prosecutors office all agreed to boost inter-agency cooperation and expressed strong willingness to root out unfair trading activities in capital markets. The conference featured presentations on (a) ways to diversify sanctions on unfair trading activities, (b) measures to strengthen early detection mechanisms, (c) the KRXs handling of recent stock price manipulation cases and ways to improve in the future and (d) an overview on the current status of unfair trading activities in capital markets and how to handle from a judicial perspective. The following is a summary of FSC Chairman Kim Joo-hyuns opening remarks. Summary of FSC Chairmans Remarks In the wake of the recently uncovered unfair trading activities in our capital market and their damaging effects, relevant authorities have come together today to collectively seek measures to strengthen our response to fraudulent activities in capital markets. First, regarding the recent stock price manipulation cases, a joint investigation team made up of officials from the prosecutors office, the FSC and the FSS has already been set up, and it has been expanding its scope of investigation to all areas of suspicion. By thoroughly investigating and identifying illegal activities, authorities will make sure that those suspected of breaking laws are brought to justice. Second, authorities will promptly seek regulatory improvements in the current CFD (contract for difference) trading system on a separate track from the ongoing investigation. The improvement measures will include (a) providing more accurate investment information to investors, (b) resolving regulatory arbitrages vis--vis cred
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May 22, 2023
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May 18, 2023
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May 18, 2023
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May 17, 2023
- FSC Chairman Speaks about Opportunities and Challenges in Embracing AI in Financial Sector
- FSC Chairman Kim Joo-hyun attended a seminar on boosting the competitiveness of artificial intelligence (AI) in financial sectors hosted by Korea Credit Information Services on May 17 and delivered congratulatory remarks. At todays seminar, experts from both public and private sectors shared key trends of AI usage in financial sectors and discussed policy strategies to boost the competitiveness of the financial industry. The following is a summary of FSC Chairman Kims remarks. Summary of FSC Chairmans Remarks The development of hyper-scale, generative AI has recently put a new spotlight on the potential of AI. Investment in AI and its usage have been growing in diverse areas where AI can be put to use to help increase convenience for consumers and make financial companies core functions more efficient. At the same time, it is also crucial to consider ways to effectively respond to situations of AI failures or digital herding. Financial institutions are strongly encouraged to invest in AI and make use of the technology to enhance the global competitiveness of domestic financial businesses. The FSC has been working to embrace the use of AI in financial services and will continue to provide active support in this regard. So far, authorities have introduced a number of guidelines on AI, for example, on using and developing AI in financial sectors, verifying AI-based credit scoring models and ensuring security in AI-based financial services. Going forward, first, the FSC plans to establish a data library for AI in financial sectors and designate more data specializing institutions to facilitate big data analytics. Second, the FSC will work to improve the regulatory environment on financial data to promote an expansion of new AI-based services. Lastly, the FSC will set up a testbed for AI in financial sectors and prepare a guideline on explainable AI (XAI) with a goal to help increase confidence in AI-based financial services. The FSC will work to ensure that the specific
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May 16, 2023
- FSC Vice Chairman to Visit Central Asia to Support Overseas Expansion of Domestic Financial Companies
- FSC Vice Chairman Kim So-young will visit Uzbekistan and Kyrgyzstan from May 16 to 19 in order to help strengthen cooperation with the Central Asian countries and provide support for domestic financial institutions to expand their businesses overseas. In March this year, the FSC set up a new organization (Financial Industry Globalization Taskforce) charged with providing support for expansion of domestic financial institutions overseas business activities. The taskforce has held a series of seminars and talks with financial sectors to listen to their comments and suggestions. In this regard, Vice Chairman Kims visit to the Central Asian countries is a significant step forward to strengthen support for domestic financial companies overseas business activities. This year marks the 31st anniversary of diplomatic relations between Korea and the Central Asian countries. Last year, the 15th Korea-Central Asia Cooperation Forum was held and close relationship has been maintained between Korea and the region in a variety of areas ranging from health care, digitalization, tourism, environment and economic security. Recently, the trade volume between Korea and the region also grew more than twofold in the past four years. However, the degree of exchange and cooperation in financial sector has remained limited thus far. In this regard, FSC Vice Chairman Kims visit this time will serve as a turning point in boosting exchange and cooperation in financial sector. Central Asia has abundant mineral and energy resources with high potential for growth. As the five Central Asian countries are seeking to advance and digitalize their financial industries, the FSC expects that Korean financial companies will be able to make significant contributions as they are equipped with ample experience in developing digital infrastructures. In this regard, the visit to Central Asia this time will set a stepping stone for expanding opportunities in the future.
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May 11, 2023
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May 08, 2023
- FSC Introduces Measures to Facilitate Corporate Merger and Acquisition Activities
- The FSC announced a set of measures aimed at facilitating corporate merger and acquisition activities on May 8. In the second half of this year, the FSC also plans to announce additional policy agenda items for facilitating corporate MA activities through coordination with the Ministry of Justice. Corporate MAs are an important mechanism to boost management efficiency and reorganize the structure of an enterprise. They also help to increase the overall productivity of an economy as well as its recovery from a downturn. However, the corporate MA market saw a significant decline recently due mainly to the worsening of macroeconomic conditions. Against this backdrop, the FSC prepared plans to (a) seek regulatory improvements on corporate MAs, (b) strengthen support for corporate restructuring through MAs, (c) support strategic MA activities in line with industrial restructuring demand, and (d) make domestic rules on corporate MAs more congruent with global standards. Key Details Seek regulatory improvements on corporate MAs to propel growth momentum Authorities plan to make improvements to some of the regulations that have been identified as unreasonable including those on public tender offer, corporate mergers and credit offering by investment banks. First, when making a public takeover bid, the burden of securing funds beforehand will be eased. A loan commitment from a trustworthy acquiring financial institution or an investment agreement from a limited partner will be recognized as an admissible document showing financial capability of a tender offeror. Second, in a spin-off or a post-spin-off merger, the process of converting CBs (convertible bonds) and BWs (bonds with warrants) will be streamlined as the electronic securities depository (Korea Securities Depository) will be allowed to get investor information directly from securities firms and process conversion of CBs and BWs electronically. Third, investment banks will be able to more actively offer credit to bu
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Apr 26, 2023
- Revised Rule to Require IPO Bookrunners to Check Payment Capability of Institutional Investors
- The FSC approved a revision bill of the regulation on financial investment businesses at its 8th regular meeting held on April 26. This revision bill is a follow-up to the measures to improve the soundness of the initial public offering (IPO) market announced in December last year and contains a measure to facilitate carbon emissions trading by securities companies along with other regulatory overhaul items. Requirement for IPO bookrunners First, when managing IPOs, the IPO bookrunner will be responsible for verifying institutional investors ability to pay for stocks before the allotment of shares takes place. In an IPO, the bookrunner performs a book building to check demands from institutional investors in order to determine an appropriate IPO price. The public offering price decided is then used to get subscription from retail investors. However, for certain high-demand items, the issue of fictitious subscription by institutional investors in excess of their payment capabilities and that of over-competition have been problematic. It has been pointed out that this practice of fictitious subscription has been hindering the price discovery function of the book building process, causing distortions in the IPO market. Thus, this revision is aimed at preventing the practice of fictitious subscription and strengthening the responsibility of IPO bookrunners throughout the book building process by introducing sanctions such as imposition of an administrative fine for unfair transaction activity when bookrunners fail to check institutional investors stock payment capabilities prior to allotting shares. This requirement will take effect from the securities registration reports for IPOs filed after July, after relevant rules change is completed by the industry association. With this revision bill, apart from the measures for allowing bookrunners to preliminarily review institutional investors demands and introducing the cornerstone investing system, all other follow-up items
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Apr 24, 2023
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Apr 24, 2023
- FSC and KAI Participate in First Meeting of Sustainability Standards Advisory Forum
- The FSC and the Korea Accounting Institute (KAI) participated in the first meeting of the Sustainability Standards Advisory Forum (SSAF), an official advisory body of the International Sustainability Standards Board (ISSB), on April 17 in Frankfurt, Germany. At the first meeting, members discussed the progress in the development of the IFRS S1 (general sustainability-related disclosure requirements) and S2 (climate-related disclosure requirements), future standards setting priorities and the connectivity and compatibility between the ISSBs sustainability disclosure standards and the International Accounting Standards Board (IASB)s accounting standards. In March last year, the ISSB published its draft IFRS S1 and S2 and collected feedback from around the world. For crucial issues raised in the comment process, the ISSB will go through a re-deliberation before announcing financial standards at the end of June this year. The International Organization of Securities Commission (IOSCO) is also expected to decide whether to endorse them when the final standards are made public. The SSAFs first meeting also dealt with the areas of future standard setting priorities. The ISSB has already identified four potential projectsbiodiversity, ecosystems and ecosystem services; human capital; human rights; and integration in reportingas future standard setting priorities. In May this year, the ISSB plans to announce its agenda priorities for the next two years and seek feedback. The SSAF meeting provides an important venue for Korea to directly engage with the ISSB and other countries and strengthen international cooperation on sustainability disclosure standards. The SSAF meeting is held four times annually and the next meeting is expected to be held in July. The FSC and the KAI plan to continue to actively participate in global discussions on sustainability disclosure standards. In the meantime, authorities will also work on developing ESG disclosure standards in Korea as the ESG
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Apr 20, 2023
- FSC Chairman Speaks about Measures to Boost Support for Startups and Venture Businesses
- The FSC and the Ministry of SMEs and Startups held a press briefing on their joint effort to boost support for startups and venture businesses on April 20. The following is a summary of FSC Chairman Kim Joo-hyuns opening remarks. FSC Chairmans Remarks The measures to support startups and venture businesses being announced today are focused on helping the industry escape the problem of death valley in terms of their financing needs, and the measures take into account opinions of key industry participants such as venture investors and startups. According to venture investors, the industry currently faces difficulties in attracting new investment due to liquidity shortage amid interest rate hikes and anxieties in financial markets. Also, the slowdown in IPO market activities has made it difficult for investors to collect their investments, which restricts opportunities for new investment. Against this backdrop, while reflecting the opinions and needs of the industry, the government has drawn up support measures that will help strengthen the role of policy financial institutions while having the private sector play the key role in this private-public joint effort. Support for venture investors First, to support venture capital to liquidate funds at maturity according to schedule to allow opportunities for new investment, authorities will set up a secondary fund worth KRW1 trillion through policy financial institutions this year. Second, to facilitate banks to provide more venture capital, the banks investment cap on venture funds will be raised from the current level of 0.5 percent of equity capital to 1% of equity capital. Third, additional funds will be injected to the KONEX scale-up fund to promote innovative startups to be listed on KONEX and enable them to make collection on investment. Support for startups First, to help ensure a continuous growth of early-stage startups that are not making any profits and deep tech startups for which it may take a long time befor
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Apr 17, 2023
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Apr 13, 2023
- FSC Introduces Measures to Improve the Process of Bank Branch Closure
- The FSC introduced a set of measures aimed at improving the process of banks branch closures at the 5th working group meeting of the taskforce on improving the management and operating practices of banks held on April 12. The key measures include strengthening the preliminary impact assessment process and expanding the scope of information provided to consumers. From now on, before a branch closure, banks should collect opinions from the branch customers and make decision prudently. When a branch closure is unavoidable, banks should arrange to have an alternative service provision channel beforehand through a joint office, small-scale office, makeshift office or teller partnership to make sure that the same level of service is provided to consumers as before. Key Details I. Strengthen the Preliminary Impact Assessment Process Under the common procedures established for banks branch closures, banks need to conduct a preliminary impact assessment prior to closing down a branch and establish an alternative service provision channel when a branch closure has been decided. However, with the number of bank branch closures going up steadily, there have been calls to strengthen the effectiveness of these common procedures. Therefore, taking examples from overseas cases,from now on, it will be necessary for banks to establish relevant procedures to collect opinions from the consumers using their branch and take consumer opinions into account to make an adjustment to their alternative service provision plan, perform an impact assessment again or reconsider the decision to close down the branch. When a considerable impact on consumers is expected, banks should continue to maintain their branch office in principle. However, if it is unavoidable to close down the branch, banks should ensure that consumers can continue to access financial services without much inconvenience after its closure by establishing an alternative service provision channel through a small-scale office, jo
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Apr 10, 2023
- Household Loans, March 2023
- In March 2023, the outstanding balance of household loansacross all financial sectors declined KRW5.0 trillion, showing a continuing trend of decline. Financial authorities will work to ensure a stable management of household debt and keep close tabs on potential risks that may be caused by high interest rates. (Overall) Household loans across all financial sectors fell KRW5.0 trillion in March 2023. The year-on-year change rate (down 1.4 percent) accelerated somewhat compared to a month ago (down 1.3 percent), showing a continuing trend of decline since the second half of last year. (By Type) Mortgage loans edged up from a decline in the previous month and other types of loans fell at a faster pace. - (Mortgage Loans) Mortgage loans rose KRW1.0 trillion with a grow in the banking sector (up KRW2.3 trillion) and a decline in the nonbanking sector (down KRW1.3 trillion). - (Other Types of Loans) Other types of loans fell KRW6.0 trillion, declining at a faster pace compared to the previous month (down KRW4.7 trillion), led by credit loans (down KRW3.2 trillion). (By Sector) Household loans edged down in both the banking and nonbanking sectors. -(Banking Sector) Household loans in the banking sector fell KRW0.7 trillion in March, declining at a slower pace compared to a month ago (down KRW2.7 trillion). Mortgage loans from banks grew KRW2.3 trillion as the volume of policy mortgage loans increased (up KRW7.4 trillion), but jeonse loans (down KRW2.3 trillion), group lending for new apartment subscription (down KRW0.9 trillion) and general individual mortgage loans (down KRW1.9 trillion) all declined. Other types of loans in the banking sector fell KRW2.9 trillion as credit loans went down KRW2.3 trillion. -(Nonbanking Sector) Nonbanks saw a drop of KRW4.4 trillion in household loans with a slight increase in insurance companies (up KRW0.4 trillion) and declines in mutual finance companies (down KRW4.0 trillion), specialized credit finance companies (down KRW0.4 trillion
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Apr 10, 2023
- FSC Proposes Rules Change in the Enforcement Decree of the Banking Act
- The FSC gave advance notice on April 10 regarding rules change in the Enforcement Decree of the Banking Act, which will be put up for public comment until May 22. The revision bill establishes a specific standard for when a bank should get authorization from the FSC if it closes down or transfers or acquires a major part of its business operation. It also contains a regulatory modification in agreement with upstream legislation and a penalty clause for a specific type of violation. When Citibank Korea decided to draw back its retail banking operation in 2021, the FSC was not able to proceed with an authorization process since the Banking Act stipulates a banks closure of the entire part of its business as an area where the FSC could deliver authorization. For the closure of a part of the banks business operation, the FSC then saw it unlikely that it could give authorization under the purview of the Banking Act. Nonetheless, given the necessity to protect the rights and interests of consumers, the FSC then gave the order to Citibank Korea to draw up a detailed plan to minimize inconvenience to consumers, protect consumer rights and maintain sound market order and implement its plan faithfully as it was authorized to take such action as prescribed by the Financial Consumer Protection Act. In March 2023, the Banking Act was amended, however, to subject banks to get authorization from the FSC when they close down not only the entire part of their business but a major part of their business operation as well. The amended Banking Act then delegates the authority of determining what constitutes a major part to its Enforcement Decree. Thus, this partial revision proposal for the Enforcement Decree of the Banking Act specifies the major part of the banks business operation to be closed down as a part of business constituting 10/100 or more of the banks assets and total profits. Also, considering that the transfer of a part of a business is in essence same as the closure of a
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Apr 06, 2023
