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Sep 28, 2022
- 2022 Korea Fintech Week Opens
- The 4th annual global fintech expo, 2022 Korea Fintech Week will be held for three days from September 28 to 30 for both on-site (Lotte Hotel Seoul) and online viewing. Fintech businesses and experts from at home and abroad participate. Welcoming Remarks by FSC Chairman FSC Chairman Kim Joo-hyun delivered welcoming remarks at the opening ceremony. He spoke about the economic, financial and regulatory environment surrounding the fintech ecosystem and the governments policy direction to promote fintech. The following is a summary of Chairman Kims remarks. Koreas fintech industry expanded its size significantly in terms of the number of businesses in operation. However, recent global fintech rankings show Koreas ranking dropped from 18th in 2019 to 26th in 2020. And currently, fintech firms are facing challenges from expanding platform-based big tech companies and financial institutions which accelerate digitalization. Fintech firms also experience difficulties in attracting investments amid tightening monetary policies around the world. Besides, there are continuing concerns about inflexible regulations in the financial sector. In response to rapidly changing conditions surrounding the fintech industry, the government will act in a more agile manner to support fintech businesses in four aspects. First, the government will improve the financial regulatory sandbox program to promote commercialization of fintech services in order to make fintech startups to utilize this program more actively. Second, the government will examine and strengthen the financial support infrastructure to facilitate investment and funding on fintech firms. Third, the government will work to expand regulatory flexibility for artificial intelligence (AI)-based services and the rules on cloud computing use and network separation. Fourth, through a fundamental reexamination of current regulations, the government will actively pursue digital regulatory reforms throughout the whole financial industry
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Sep 28, 2022
- Measures to Strengthen Capacity to Respond to Unfair Trade Practices in Capital Markets
- The FSC proposed new measures to improve the effectiveness of penalties on unfair trade practices in capital markets. The measures include (a) a ban on new transaction and account opening for investment products and (b) disbarment from serving as a board member of listed companies up to 10 years. These measures will help prevent flagrant and repeated unfair trade practices and establish a sound capital market order. Authorities will propose a revision bill of the Financial Investment Services and Capital Markets Act (FSCMA) and propel its passage at the National Assembly. In addition, the FSC will make efforts to pass another FSCMA revision bill to provide calculating method for unfair profits acquired by unlawful trades and to introduce penalty surcharges. Background In capital markets, unfair trade practices increasingly take diverse and complex forms. However, the measures to punish, block and prevent them remain somewhat ineffective. In particular, unfair trades on material nonpublic information by board members of listed companies (who in fact should have a high degree of integrity) happen frequently and recidivism by those who previously committed unfair trades proliferates. The majority of ordinary investors suffer financial losses and trust in our capital markets is damaged. In May 2022, the new administration announced improving the effectiveness of penalties on unfair trade practices as one of 120 national policy tasks to restore fairness and trust in capital markets. Then, the government has prepared detailed plans through policy seminars and expert meetings. Current Situation and Problems (Overview of Unfair Trade Practice Cases) In recent five years (2017-2021), the number of unfair trade practice cases handled by the Securities and Futures Commission (SFC) was 274 in total, which translates into 54.8 cases annually. In terms of violation type, use of material nonpublic information was most prevalent (43.4%), followed by unfair trading (29.6%), market p
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Sep 26, 2022
- KoFIU Unveils H1 2022 Survey Result on Virtual Asset Service Providers
- The Korea Financial Intelligence Unit (KoFIU) conducted a survey on 35 registered virtual asset service providers (VASPs) in order to see the current state of the domestic virtual asset market. Survey Overview (Respondents) 35 VASPs (26 exchange service providers and 9 other businesses) (Survey Method) Collect data from VASPs by paper surveys (Period Covered) January 1, 2022 to June 30, 2022 Key Survey Findings for H1 2022 The domestic market for virtual assets in H1 2022 has been downsized significantly compared to that of H2 2021 in terms of market capitalization, trading volume, etc.This seems to be caused by a slowdown in economic activities following the crisis in Ukraine, interest rate hikes and decreasing liquidity as well as falling level of confidence in virtual assets in the wake of the Terra-Luna crash. Total sales profits gained by VASPs stood at KRW630.1 billion, a drop of 62 percent compared to KRW1.6 trillion in H2 2021. According to the survey, the number of virtual assets traded in domestic market was 1,371. When excluding duplicates on multiple exchanges, the number of virtual assets stood at 638, and among them, the number of stand-alone virtual assets listed and traded on a single exchange was 391 (or 61 percent). The proportion (% of market capitalization) of the global top ten virtual assets handled by the KRW-based exchange service providers increased from 41 percent to 47 percent, while the proportion (% of market capitalization) of stand-alone virtual assets increased from 84 percent to 86 percent for the coin-only exchange service providers. About 36 percent of stand-alone virtual assets (or 139 of them) were small-scale in their size with market capitalization of KRW100 million or less. For these small-scale virtual assets, users need to practice caution as they may be prone to abrupt price volatilityand liquidity shortage. As of the end of June 2022, the number of users eligible to trade in virtual assets stood at 6.9 million. The amount
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Sep 13, 2022
- Ex-ante Disclosure Rule to be Introduced for Insider Transactions
- The FSC announced a plan to introduce an ex-ante disclosure for stock transactions by company insiders (board members or principal shareholders) which have been subject to only the ex-post disclosure rule thus far. Insiders of listed companies who plan to sell or purchase shares issued by his/her own company within a given year will need to disclose the purpose, price and volume of trading as well as expected trading period at least 30 days before the expected trading date. For nondisclosure, disclosure of false information or failure to comply with the trading plan, authorities will prepare effective compliance measures depending on the severity of violation such as a criminal penalty, fine, administrative action, etc. Introducing ex-ante disclosure is expected to enhance information transparency and market predictability regarding insider stock trading, thereby helping to ease market volatility. Since this measure is a closely anticipated policy task of the new administration, the financial authorities will make efforts to promptly prepare and submit a revision proposal of the Capital Markets Act to the National Assembly. Background Large-scale stock offloading by insiders such as board members of listed firms, etc. causing abrupt fall in stock prices has continued to present a source of discontent for investors and a concern for the society.Some ordinary investors suspect that company insiderswho have the ease of access to undisclosed company informationhave been using that information to pocket personal profits while ordinary investors are burdened with losses. Faced with this problem, the FSC has strengthened safeguards for ordinary investors by improving the rule in March this year to restrict stock sales for six months (a lock-up period) from the time of company being listed even for shares that have been acquired by exercising stock option. However, this measure alone cannot regulate sales of stocks by insiders after the lock-up period (six months) and that
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Sep 08, 2022
- Household Loans, August 2022
- In August 2022, the outstanding balance of household loansacross all financial sectors rose KRW0.7 trillion, edging back up slightly from a decline in the previous month but maintaining a stable level overall.The financial authorities will continue to monitor the household debt growth to ensure that it is maintained at a stable level in order to help prevent it from posing risk to the economy. (Overall) Household loans across all financial sectors rose KRW0.7 trillion in August 2022. The growth rate (up 1.2%, y-o-y) has continued to slow down since the second half of 2021. (By Type) Mortgage loans grew at a slightly faster pace than the previous month and other types of loans fell at a slower rate, leading to an overall increase in the balance of household loans. - (Mortgage Loans) Mortgage-backed loans rose KRW2.8 trillion in August, edging up slightly faster than the previous month (up KRW2.5 trillion), as group lending for new apartment subscription increased. - (Other Types of Loans) Other types of loans dropped KRW2.1 trillion in August, edging down at a slower rate compared with the previous month (down KRW3.4 trillion), as credit loans and non-housing collateral loans declined. (By Sector) Household loans increased from the previous month in most sectors but showed a continuous trend of slowdown in the mutual finance sector (down KRW0.5 trillion) with a drop in nonmortgage loans. - (Banking Sector) Banks saw a rise of KRW0.3 trillion in household loans. Mortgage loans from banks grew KRW1.6 trillion,rising at a slower rate than the previous month (up KRW2.0 trillion), with group lending for new apartment subscription and jeonse loans going up KRW1.2 trillion and KRW0.9 trillion, respectively. Other types of loans fell KRW1.3 trillion, declining at a slower rate from a month ago (down KRW2.3 trillion), with credit loans edging down KRW0.9 trillion. - (Non-Banking Sector) In August, nonbanks saw an increase of KRW0.4 trillion in household loans, led by savings
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Sep 07, 2022
- FSC Prepares Additional Measures to Improve Convertible Bond Market
- The FSC announced additional measures for improving rules on the convertible bond market on September 7. As in the case with the convertible bonds (CBs) and bonds with warrants (BWs) issued by listed firms, the regulation on refixing and call option will also apply to (redeemable) convertible preference shares issued by listed companies. Background In October 2021, the FSC introduced a revisionto the regulation on the issuance of securities and disclosure to help prevent CBs from being used in unfair transactions in such cases where CBs are used expediently to increase the shareholding of largest shareholders. Moreover, the FSC introduced a supervisory guideline on the accounting practices of CB call options to help improve the transparency in CB market from an accounting perspective. However, in the process of pursuing regulatory improvements, a concern has been raised about the possibility of stronger regulation (on refixing, etc.) posing excessive restriction on companies fundraising activities.Therefore, the authorities have prepared additional measures for regulatory improvement after examining the trend of CB issuance since the revised regulation went into effect from December 1, 2021. Convertible Bond Market Trend (Issuance Amount) The monthly average CB issuance amount in the first quarter of this year was KRW579.0 billion, a drop of 36 percent compared to the same period last year (KRW904.6 billion)This is on a par with the declining trend of corporate bonds over the same period (down 29.2 percent y-o-y). However, when including the amount of CB issuance prior to the implementation of the revised regulation (KRW2.2 trillion, November 2021), the monthly average CB issuance amount appears to be on course for recovery after a temporary fluctuation. (Issuance Rate) With the expansion in liquidity amid COVID-19 response measures, the CB issuance rate went down slightly in 2020 but edged back up narrowly due to the effects of base rate hike, etc. (Refixing Propor
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Sep 05, 2022
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Sep 01, 2022
- FSC Holds 4th Financial Risk Taskforce Meeting
- FSC Vice Chairman Kim So-young held the 4th financial risk taskforce meetingon August 31 jointly with other relevant institutions.The 4th taskforce meeting discussed the following two agenda(a) measures for improving the loss absorbing capacity of financial sectors in response to financial market uncertainties and (b) detailed implementation plans of various market stabilization measures which had been deployed in past financial crises. Summary of Vice Chairmans Remarks In his opening remarks, Vice Chairman Kim assessed that volatility in financial markets has increased due to concerns about the prospect of the Feds aggressive monetary tightening, Europes economic recession, and potential economic slowdown in China, etc. Given the increased uncertainty in financial markets such as rising debt servicing burden of borrowers and a potential collapse in major asset prices, Vice Chairman Kim emphasized that it is necessary to strengthen monitoring of risk factors in the financial sector and prepare response measures preemptively. In order to proactively respond to the accumulated risks such as an increase in lending to vulnerable borrowers and real estate project finance (PF) loans, Vice Chairman Kim stated that the financial authorities will examine the level of loan loss provisions of banks and nonbanks to make sure that they have sufficient capacity to absorb potential losses. He said that the authorities are planning to (a) raise the loan loss provision coverage ratio for the nonbank sector such as savings banks, mutual finance companies and specialized credit finance businesses and (b) introduce a regulatory ground to allow the finical authorities to require banks to set aside additional special loan loss reserves. In particular, for the nonbank sector whose assets have been rapidly increased, Vice Chairman Kim said that the authorities will ensure that they hold a sufficient level of capital while bolstering risk management. In addition, considering the close-knit
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Aug 29, 2022
- New Start Fund for Small Merchants and Self-employed Business Owners Hit by Covid-19 To Be Launched
- A debt adjustment program, called New Start Fund, for small merchants and self-employed business owners hit by the Covid-19 crisis will be launched in October.The New Start Fund is intended to ease their debt payment burden as they are struggling to repay their debt since they suffered unavoidable losses while cooperating with the governments quarantine measures such as social distancing policy and restrictions to business operations. Background Over the past two and a half years, self-employed business owners and small merchants have suffered inescapable damages in the process of cooperating with the governments preventive measures, such as restrictions on business operation, in response to the COVID-19 crisis. As their businesses slowed down and financial conditions deteriorated, small businesses turned to debt and the size of their loans have grown significantly with increased burdens for principal and interest payments. Major institutions including the Bank of Korea evaluate the size of potential insolvency of self-employed business owners to be about 5 to 8 percent of their total loans. With the availability of COVID-19 support measures such as the loss compensation support, funding support through fiscal spending and the loan maturity extension and payment deferment program, the vulnerability of their debt situation had not surfaced yet. However, there are possibilities that their insolvency potential may build up and expand if there is another wave of COVID-19 or a worsening of the economic or financial conditions due to high levels of interest rates, prices and USD-to-KRW exchange rates. Against this backdrop, the FSC has prepared a debt adjustment program (called New Start Fund) to help prevent an expansion in the insolvency potential of the pandemic-hit small businesses and to provide a chance of credit recovery and restart for debtors who have already turned insolvent. The debt adjustment program will help lower excessive payment burdens (high interest ra
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Aug 26, 2022
- Financial Regulatory Reform Committee Discusses Ways to Promote Platform-based Financial Services
- The financial regulatory reform committee held its 2nd meetingon August 23 and decided on plans to (a) promote platform-based financial services from financial institutions and pilot online platform-based financial intermediary services to help enhance consumer convenience and facilitate digital innovation and to (b) make improvements to the operation of the financial regulatory sandbox program. The key measures include the following. a) Support balanced growth of platform-based financial services in financial industry - (Financial Institutions) Pursue regulatory reforms to enable consumers to use a variety of financial and non-financial services such as banking, insurance, card, securities, etc. through platforms (integrated apps) designed by financial institutions - (Fintechs) Pilot operation of services (through financial regulatory sandbox program) that can offer comparisons and recommendations on various financial products including loans, savings, insurance, peer-to-peer (P2P) lending, etc. through a single platform - (Minimizing Negative Impact) Prepare safeguards against the negative effects of platform-based services by ensuring fairness in algorithms, preventing mis-selling, requiring sufficient provisions to be set aside for damage compensation, preventing anti-competitive behaviors of big tech platform companies. Out of 36 specific financial regulatory reform initiatives, #8: Promoting health care related services offered by insurance companies, #9: Improving rules to introduce digital universal banks, #10: Reviewing introduction of online platform-based financial intermediary services, and #11: Promoting card companies platform business b) Upgrade the financial regulatory sandbox program so that it can continue to play the role of facilitating financial innovation - Make early notification available to those that have been designated as innovative financial service providers about whether a regulatory change will be introduced or not prior to the termin
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Aug 19, 2022
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Aug 18, 2022
- KoFIU Cautions Virtual Asset Users against Unregistered Virtual Asset Service Providers
- The Korea Financial Intelligence Unit (KoFIU) announced on August 18 that it has notified illegal business activities of 16 unregistered Virtual Asset Service Providers (VASPs) to the investigative authority. The KOFIU urged virtual asset users to practice extra caution in order to avoid incurring damages that may result from their transactions with unregistered VASPs. I. Unregistered Operation of Foreign-based VASPs in Domestic Market The KoFIU has notified the investigative authority about the violation of unregistered business activities of 16 foreign-based VASPs* carrying out business activities intended for domestic consumers pursuant to the Act on Reporting and Using Specified Financial Transaction Information (the Act hereinafter). * KuCoin, MEXC, Phemex, XT.com, Bitrue, ZB.com, Bitglobal, CoinW, CoinEX, AAX, ZoomEX, Poloniex, BTCEX, BTCC, DigiFinex, Pionex The 16 foreign-based VASPs were found to have been engaged in business activities targeting domestic consumers by offering Korean-language websites, having promotional events targeting Korean consumers and providing a payment option that supportsthe purchase of virtual assets using credit cards. On July 22, 2021, the KoFIU notified foreign-based VASPs that have business operations targeting Koreans about their obligation to registertheir business with the authority pursuant to the Act. However, the 16 aforementioned entities were found to have business operations targeting Koreans without obtaining a registration and thus the authorities plan to take necessary measures. II. Actions Taken on Unregistered VASPs a) The KoFIU has notified the investigative authority about the violation of registration duties (under the Act) of 16 unregistered VASPs, and plans to inform FIUs in their respective countries about their violation. For illegal business activities of unregistered entities, maximum 5 years of imprisonment or up to KRW50 million of fine can be imposed with a restrictionfor registering as a VASP in dome
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Aug 17, 2022
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Aug 11, 2022
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Aug 10, 2022
- Household Loans, July 2022
- In July 2022, the outstanding balance of household loansacross all financial sectors fell KRW1.0 trillion, showing a stable trend as the growth seen in Q2 turned back lower.The financial authorities will make efforts for a stable management of the household debt growth while working on effective implementation of the normalization of household loan regulations to help alleviate financing difficulties of non-speculative homebuyers. (Overall) Household loans across all financial sectors dropped KRW1.0 trillion in July 2022. The growth rate (up 1.7%, y-o-y) has continued to stay on a downward path since the second half of 2021. (By Type) Mortgage loans expanded at a slower pace than the previous month and other types of loans dropped at a greater level, contributing to the overall decline in household loans. - (Mortgage Loans) Mortgage-backed loans rose KRW2.5 trillion in July, slowing down from KRW2.8 trillion in the previous month. - (Other Types of Loans) Other types of loans dropped KRW3.6 trillion in July, falling at a faster rate compared with the previous month (down KRW2.1 trillion). (By Sector) Household loans in both the banking and non-banking sectors turned lower, but the growth trend continued in the savings bank (up KRW0.4 trillion) and insurance (up KRW0.2 trillion) sectors. - (Banking Sector) Banks saw a drop of KRW0.3 trillion in household loans. Mortgage loans from banks grew KRW2.0 trillion,rising from KRW1.4 trillion a month ago, as group lending for new apartment subscription and jeonse loans rose KRW1.3 trillion and KRW1.1 trillion, respectively. Other types of loans fell KRW2.2 trillion, declining at a faster rate from a month ago (down KRW1.2 trillion) as credit loans fell KRW1.9 trillion. -(Non-Banking Sector) In July, nonbanks saw a drop of KRW0.8 trillion in household loans, led by declines in the mutual finance (down KRW1.2 trillion) and specialized credit finance (down KRW0.2 trillion) sectors. (Assessment) Household loans across all financ
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Aug 08, 2022
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Aug 04, 2022
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Aug 03, 2022
- FSC Announces Measures to Strengthen Financial Support for Business Transformation
- The FSC unveiled a plan to provide financial support in the amount of about KRW1 trillion to companies pursuing business transformation to cope with changing digital and environmental conditions in order to help domestic companies regain their competitiveness edge and expand their business areas. Background In the process of responding to the COVID-19 pandemic, the rapidly changing business conditions such as digital transformation and carbon net zero movement have necessitated businesses to make changes at a greater level. Considering a slowdown in the level of business productivity, it has become necessary for companies to proactively seek structural transformation of their business in order to enhance the level of competitiveness. Measures to Support Business Transformation Currently, the Ministry of Trade, Industry and Energy (MOTIE)s standards for approving business transformation activities and the evaluation standards used by financial institutions remain different, so that it has been difficult to provide financing support to those that have been approved by MOTIE. Therefore, authorities will strengthen the pre-selection process to ensure that businesses that are eligible to receive financial assistance are selected as the entities pursuing business transformation by introducing a two-staged evaluation process (evaluation of disqualification criteria and evaluation of technological prowess). a) The business transformation support center will examinethe financial conditions of applicants and determine whether there are any reasons for disqualification. b) A technology credit bureau (TCB) will examine and determine the technological prowess and the viability of business model for those that have passed the evaluation of disqualification criteria. Through TCBs technology appraisal,the feasibility of new business model will be evaluated such as the potential for expanding sales, operating profit, etc., and the capability for capital expansion will be evaluated b
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Jul 28, 2022
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Jul 26, 2022
- FSC Announces Plan to Introduce Insolvency Resolution Mechanism for Financial Institutions
- The FSC announced a plan to introduce an insolvency resolution mechanism for financial institutions (tentatively called financial stability account) to help prevent insolvency of financial institutions. The plan was discussed at the financial risk response taskforce meeting held on July 26. With changes in financial market environment, there have been calls for introducing a mechanism that can help protect financial institutions against insolvency and prevent risks from spreading in advance. In the wake of the 2008 global financial crisis, major economies such as the U.S., EU and Japan established such preventive support systems. In this regard, the FSC is considering ways to introduce an insolvency resolution mechanism for financial institutions (tentatively called financial stability account)for insolvency prevention of financial institutions through liquidity provision and capital expansion. The FSC will prepare a detailed plan after coordinating with relevant ministries and institutions and gathering opinions from experts and seek revision to the Depositor Protection Act accordingly. Background With some of the changes taking place in the financial industry such as the growth of the nonbank sector, deepening interconnectedness between financial sectors and unpredictability in shock originating from the real economy sector, there is growing concern about risks in certain areas spreading across the entire financial system. Therefore, through provision of liquidity injection and capital expansion to the financial sector facing temporary distress amid a crisis situation, it is necessary to keep the cost of maintaining stability in the financial system to a minimum levelby preventing insolvency of financial institutions as well as spread of risks. Major economies such as the U.S., Japan and EU had already set up relevant systems to prevent systemic risks and minimize the cost of insolvency resolution in the wake of the 2008 global financial crisis. On the contrary, t
