Press Releases - Financial Services Commission

Press Releases

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Dec 07, 2022

Authorities Hold Meeting to Monitor Flow of Funds and Risk Factors in Financial Markets

On December 7, the FSC met with the pertinent authoritiesto review the flow of funds and risk factors in the financial sectors and to go over future response plans. Participants in the meeting agreed that recent volatility in the domestic money market appears to be stabilizing, which is supported by expectations for a slower pace of tightening monetary policy both domestically and internationally as well as the implementation of a number of market stabilization measures. Participants concurred that caution must be exercised in light of the special funds situation involving year-end account settlements and the December meeting of the U.S. Federal Open Market Committee. Participants shared the opinion that consistent government policy support and efforts by the financial industry are necessary to firmly ensure market stability. The Bank of Korea (BOK) and financial authorities will work to smoothly implement the market stabilization programs set up to stabilize the money market. a) The bond market stabilization fund is currently undergoing another capital call, which will be finished by January 2023. Additionally, the BOK intends to provide liquidity to the financial institutions it has invested in, up to KRW 2.5 trillion. b) The Korea Development Bank (KDB), Industrial Bank of Korea (IBK), and Korea Credit Guarantee Fund (KODIT) are currently operating a corporate bond and CP (commercial paper) purchasing program worth a total of KRW11 trillion. In particular, the P-CBO (primary collateralized bond obligation) program, worth KRW5 trillion, will start running the following year to help large businesses, middle market enterprises, and SMEs issue corporate bonds. c) The PF-ABCP (project finance asset backed commercial papers) purchasing program for those backed by securities companies is currently providing prompt assistance in response to market demands from the PF-ABCPs approaching maturity (total KRW1.8 trillion).The PF-ABCP purchasing program for those backed by con
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Dec 06, 2022

FSC Plans to Temporarily Expand Government-sponsored Mortgage Loan Program

The authorities plan to temporarily operate a special Bogeumjari Loanby integrating Relief Conversion Loanand Conforming Loanand existing Bogeumjari Loan. Recent interest rate hikes resulting from global monetary tightening have significantly increased households debt servicing burden. In this regard, aiming to reduce the debt payment burden of more borrowers, the government will temporarily run a special Bogeumjari Loan that integrates together the regular type of Relief Conversion Loan, Conforming Loan, and the existing Bogeumjari loan for a year from the beginning of 2023. For the newly introduced special Bogeumjari Loan, debtors whose house price is KRW900 million or less will be able to apply regardless of their income.Maximum loan amount will be increased from KRW360 million to KRW500 million. Borrowers can use this loan for purposes of purchasing a new house, replacing existing loans or returning security deposits. The special Bogeumjari Loan will be granted at a single interest rate in the same way as the current Bogeumjari Loan program. Meanwhile, a concessionary interest rate will be applied, which is decreased to a certain extent from an appropriate interest ratethat is calculated with the current method. The specification of the loan including detailed implementation schedule and concessionary rate will be announced later, after considering computational adaptation, preparation periods for financial institutions, and etc. * Please refer to the attached PDF for more details.
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Dec 01, 2022

Authorities Plan to Disclose Identity of Entities Committing Unfair Trading Practices

As a way to bolster prevention of unfair trading practices in capital markets, the FSC plans to disclose the identity (corporate name, etc.) of those who violate capital market regulations such as restriction of short sales and prohibition of market disturbances and receive a disposition of a penalty surcharge or an administrative fine for that violation. This measure shall apply to the violators receiving sanctions at the 22nd regular meeting of the Securities and Futures Commission (SFC) scheduled to be held in December 2022. Their identities will be announced through the FSC website in February 2023. Background The FSC has gradually extended the scope and detailsstock items, dates and penaltiesof disclosure of the SFC resolutions on sanctions that are made available for unfair trading practices in capital markets. However, the identity of violators is not being disclosed currently due to the potential misuse of their corporate or individual financial transaction information by a third party. Nonetheless, there is a growing need to secure effectiveness of sanctions measures imposed on unfair trading activities in capital markets such as illegal short sales. Therefore, after a careful consideration, the FSC decided to expand the scope and details of disclosure of sanctions by unveiling the identity of violators. Disclosure of Identity of Entities Violating Capital Market Regulations If an investigation led by financial authorities ends up with sanctionsof imposing a penalty surcharge or an administrative fine, the identity (corporate name, etc.) of the violator will be unveiled. Although the violators that become subject to sanctions are mostly corporate entities, in some cases, individuals also become subject to sanctions when they commit unfair trading practices such as activities of disturbing market order. If unfair trading activities in capital markets under the investigation led by financial authorities are subject to criminal punishment,in consideration of t
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Nov 29, 2022

Taskforce on Improving Internal Control of Financial Companies Announces Interim Results

The taskforce on improving rules regarding financial companies internal control announced its interim discussion results on November 29. The key discussion details focus on strengthening the role and responsibility of chief executives, boards of directors and executive officers over their companies internal control affairs to boost the effectiveness of internal control mechanisms. Background Pursuant to the requirement for internal control standards and procedures (Article 24-1) prescribed under the Act on Corporate Governance of Financial Companies, all financial companies are currently operating their own internal control mechanism to prevent illegal activities committed by their executive officers or employees and the like. It is aimed at avoiding the risk of potential loss in the future and erosion of a companys reputation related to the soundness of company management and consumer protection. Since its introduction, there is an increased level of awareness throughout financial sectors about the significance of internal control. However, in reality, as setup and operation of an internal control system requires considerable efforts and costs, different companies have different levels of internal control standards and procedures, which vary significantly depending on the business strategy and willingness of the management. The more a company focuses on short-term performances, the more its internal control will remain perfunctory, which will probably prove inadequate in its function and effectiveness for the operation in the field. In particular, the successive occurrence of a number of financial accidents such as incomplete sales of financial products and large-scale embezzlement recently has raised the awareness and concerns about internal control of financial companies. Apart from inflicting losses to consumers and shareholders, financial accidents can have a significant impact on the overall health of the economy and society with a degradation of trust in fina
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Nov 28, 2022

Authorities Hold Policy Seminar on Making Improvements to Capital Market Regulations

The FSC, the Korea Exchange (KRX) and the Korea Capital Market Institute (KCMI) jointly held a policy seminar for alleviation of the Korea discount on November 28. The theme was improving the consistency of Korea and global capital markets rules and regulations. In his opening remarks, FSC Vice Chairman Kim So-young outlined the governments policy direction for regulatory improvements in Korean capital markets. The policy draft has been prepared by the FSC through a taskforce with private sector experts. Summary of Vice Chairmans Remarks In our capital markets, there are outdated regulations and unreasonable practices that have been first introduced decades ago and kept for too long without being scrutinized for their validity, some of which are nonexistent in the economies with advanced financial markets. These regulations and practices made sense and were considered necessary at the time of their introduction. However, in order to establish a system suitable for the current status of Korean capital markets and to satisfy the needs of a new era, our capital markets should bravely break the familiar but outdated framework and undertake reforms. (Registration for Foreign Investors) Foreign investor registration has long been regarded as one of major outdated regulations that deviate from global norms. This regulation requires foreign investors registration before trading listed securities in the Korean capital markets. Under the registration scheme, foreign investors are issued investment registration certificates, and all of their transaction data are recorded. This rule has been in force for more than 30 years since Korean capital markets were opened to foreign investors in 1992. Suppose that we acquire or dispose of listed stocks in a foreign country. If we had to register with the countrys financial authority in advance and if each individuals transaction records are piled up in real-time, it will induce not only procedural but also psychological burden. In advan
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Nov 24, 2022

FSC Chairman Meets with Venture Startups and Holds Talks on Boosting Investment

FSC Chairman Kim Joo-hyun visited Mapo Front1, the largest startup support center in Korea, on November 24, where he held talks with venture businesses, venture capitalists and financial institutions. Chairman Kim listened to difficulties and complaints from startups and venture businesses and also asked financial institutions to increase investment and support for startups and venture businesses. Summary of FSC Chairmans Remarks Startups and venture businesses are essential for increasing our economys growth potential and creating jobs. Thus, it is important to establish an ecosystem where they can thrive. Meanwhile, to improve our economys competitiveness, more startups and small businesses with technological prowess and innovativeness need to be fostered even in times of investment drought. Therefore, the FSC and policy financial institutions will strengthen their support for innovative and promising venture businesses by providing more funding opportunities and acting as a priming pump to attract more private sector investments. For this, the innovative growth fund worth KRW15 trillionwill be created over the next five years to support SMEs and startups in new industries such as semiconductor and artificial intelligence (AI) and to supply venture businesses the funds in need to grow up into unicorn companies. Second, policy financial institutionsKorea Development Bank (KDB), Industrial Bank of Korea (IBK) and Korea Credit Guarantee Fund (KODIT)will introduce a lending program worth KRW6.3 trillion, which will provide funds to startups and venture businesses based on loan examinations focused on their growth potential rather than their financial statements and the value of collaterals. In particular, the IBK will introduce a new lending program for venture businesses, modeled after those observed in Silicon Valley, which will offer loans with zero-interest rate bonds with warrants (BWs) attached. This program will enable early-stage venture businesses to continue
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Nov 21, 2022

FSC Plans Regulatory Reforms in Insurance Sector to Promote Digital Transformation

The FSC announced a plan to reform regulations on insurance businesses to help the insurance sector more effectively respond to emerging demands for new services and to facilitate the entry of specific business models expected by the market. The plan has been screened by the financial regulatory innovation committee at its 4th meeting held on November 14. Authorities will prepare revision bills to amend relevant laws with a goal of submitting and passing them at the current 21st term of National Assembly. Background The FSC has listened to opinions on the areas that require regulatory reforms through discussions within a taskforceon insurance sector (from February) and the survey of demands (June-July) conducted across all financial industry groups. Among 234 regulatory reform items raised by eight financial industry groups, the demand for regulatory reform in the insurance sector was particularly high (77 items). According to the taskforce and the survey, the insurance industry faces hindrance in effectively adapting to disruptive changes of business environment due to outdated and stringent regulations. First, even with a spread of digital economy based on network- and platform-based services, the level of digital transformation in the insurance market is still at a nascent stage, requiring an urgent industrial restructuring. Second, compared to insurance markets in other countries and other domestic financial markets, insurance businesses face excessive regulations for product development and asset management, which restrict insurance companies from supplying diverse types of financial products and weaken their global competitiveness.Third, there are cases where the rigor of penalizing practices and supervisory administration led to excessive restriction on the sales activities of insurance companies. For the consumer service of the supervisory authorities to deal with civil complaints, which cannot be served promptly due to the limited number of staff members an
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Nov 18, 2022

FSC Proposes Revision of Supervisory Regulation to Facilitate Credit Supply to Low-credit Individuals

The FSC plans to revise the supervisory regulation on credit service providers to help expand credit supply to lower income individuals under the current program which incentivizes outstanding credit service providers maintaining above certain levels of credit extension to low-credit borrowers. Background The current incentive program for outstanding credit service providers was first introduced to promote expansion of credit supply to the low-credit individuals following the reduction of the maximum legal interest rate from 24 percent to 20 percent in 2021. A credit service provider can be selected as an outstanding credit service provider if the amount of credit loans made to those with low credit is (a) at least KRW10 billion or (b) at least 70 percent of its total gross loan. When selected as outstanding credit service providers, they are given incentives that allow them to borrow from banks, which assist them to lower borrowing costs, and to sell their loan products via online platforms. The outstanding credit service providers are gradually taking root in the market and playing a crucial role in credit supply to low-credit individuals. With the continuation of high interest rates, if the supply of personal credit loans from credit service providers significantly shrinks due to the elevated borrowing costs, lower income individuals may face difficulties in getting loans, and illegal private lending activities may spread gradually. Therefore, authorities plan to revise the supervisory regulation on credit businesses to improve the current incentive program for outstanding credit service providers, which will contribute to its original goal of promoting expansion of credit supply to low-credit individuals. Key Revision Details Authorities will modify the requirements for maintenance of outstanding credit service providers status. Currently, outstanding credit service providers need to maintain both the total balance (at least KRW10 billion) and the ratio (at leas
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Nov 16, 2022

KoFIU Holds Talks with CEOs of VASPs and Discusses Market Situation

The KoFIU held a meeting with CEOs of five major virtual asset service providers (VASPs)in Korea on November 16 and discussed their current anti-money laundering (AML) procedures and controls on overseas withdrawal and remittance of virtual assets, and their custody and management of customer assets. With regard to the AML procedures and controls of domestic VASPs, the heads of VASPs said that the level of transparency in virtual asset transfer increased after the travel rule took effect from March 25 this year, and that they run the whitelistingand blacklistingsystems, which block transactions with high-risk traders. In particular, they said that VASPs are regularly monitoring and blocking wallet addresses that are used in crypto mixers, which split and blend virtual assets of many users together to obfuscate the origins and traces of the funds. In this regard, KoFIU authorities said that it is important to prevent money laundering taking place when users virtual assets are transferred to high-risk countries or traders via personal wallets and the likes. For this, authorities asked VASPs to establish a standard for detecting suspicious transactions and enhance screening and checking the origin of the users funds and the purpose of his or her transactions. Regarding the condition of domestic VASPs custody services for customer assets, authorities emphasized the importance of user protection efforts made by VASPs. Authorities indicated the need to set up a real-time information system on customers assets in custody and asked VASPs to closely monitor the safety of their transaction support for the self-issued virtual assets. In the wake of the recent FTX crash, authorities said that they will support the ongoing legislative efforts at the National Assembly to ensure that relevant user protection measures are discussed. The heads of VASPs said that the root of the FTX collapse was the inappropriate use of customer assets by the company management and the misuse of self
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Nov 16, 2022

Authorities Discuss Regulatory Reforms to Promote Convergence of Financial and Non-financial Sectors

The financial regulatory innovation committee held its 4th meeting on November 14 and discussed ways to improve the regulations on the separation of industrial and financial capital. The committee also discussed plans to improve the regulation on entrustment of services of financial institutions. Key Agenda Details a) Regulatory reform on separation of industrial and financial capital Regarding separation of industrial and financial capital, authorities will expand and improve the scope of permissible ancillary services and that of their permissible investment in other companies in order to promote convergence between financial and non-financial sectors as well as help improve synergetic effects between them. The principle on separation of industrial and financial capital forms an integral part of our financial system in maintaining financial stability, preventing conflicts of interests and restricting concentration of economic power. However, rapid digitalization and the Big Blurphenomenon recently require changes in the regulations on separation of industrial and financial capital. While keeping the basic framework of these regulations intact to ensure financial stability, it is essential to more reasonably regulate financial institutions ancillary services and investment in other companies in order to assist financial institutions in efficiently adapting to a changing environment, such as digital transformation and the Big Blur, and making advances. Therefore, authorities will consider various ways to decide how to recraft the regulatory scope of non-financial services that financial institutions can do, from making improvements to the current positive list approach to making a transition to a negative list approach and regulating the total amount of risks. b) Regulatory reform on entrustment of financial institutions services Authorities will encourage subcontracting and outsourcing of financial institutions by enhancing the regulatory framework for entrusting f
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Nov 14, 2022

Single-stop Online Loan Transfer System to be Set Up to Reduce Interest Burden on Consumers

The FSC announced its plan to set up a single-stop online loan transfer system on November 14 to help alleviate the burden of high interest rates on financial consumers. With recent interest rate increases, it is necessary to find ways to lessen financial consumers interest costs.The FSC plans to facilitate loan transfer,as one of these ways, allowing financial consumers to more easily swap their present loans to reduced interest rate loans. Current Market Situation Currently, there is not a lot of products for loan transfers in the personal loan market because of inconvenience for the loan applicants and lack of a relevant infrastructure.In the first place, the absence of a fully integrated online system in financial institutions has required the payment of existing loans in the offline mode,which results in time and costs for both financial consumers and financial institutions. Second, since there are very few platforms offering comparison services for loans and because there is a limited amount of information, namely, accurate information on the current loan, the cost (various fees when transferring loan) and the benefits (savings generated from lower interest rate), which can help consumers make informed decisions, borrowers still have a difficult time making a decision about the loan transfer. The FSC announced its plan to set up a single-stop online loan transfer system on November 14 to help alleviate the burden of high interest rates on financial consumers. With recent interest rate increases, it is necessary to find ways to lessen financial consumers interest costs.The FSC plans to facilitate loan transfer,as one of these ways, allowing financial consumers to more easily swap their present loans to reduced interest rate loans. Key Details of Plan a) Build an online loan transfer system between financial institutions The payment of the loan, from the request of payment to the provision of the necessary information and to the final confirmation of the payment
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Nov 11, 2022

FSC Announces Additional Measures to Stabilize Project Finance ABCP and CP Markets

FSC Vice Chairman Kim So-young presided over a meeting on November 11 with officials from the FSS, the Bank of Korea, financial industry groups and policy financial institutions to review current market situation. At the meeting, authorities discussed recent trends in financial markets, progress of the governments market stabilization measures announced earlier on October 23 and additional measures to help stabilize the CP (commercial paper) market. At the meeting, participants assessed that since the governments market stabilization programs were first announced on October 23, concerns about a severe credit crunch in bond and money markets have eased somewhat. However, relative to the corporate bond market, there are continuing challenges in short-term money market. Financial investment businesses said that thanks to clear regulatory interpretation offered by financial authorities last week to allow securities firms to purchase ABCPs (asset-backed commercial papers) guaranteed by their own companies, there is less burden of having an oversupply of ABCPs guaranteed by securities firms in the market. However, they indicated that refinancing of ABCPs (especially A2 grade) guaranteed by small- and medium-sized securities firms continues to be difficult, which has led to liquidity problems of securities firms and high levels of their CP spreads. Moreover, authorities reviewed the progress of both the public and private sector efforts to stabilize the bond markets supply and demand situation. The government has reduced the volume of government bond issuance this year. The Ministry of the Interior and Safety and local governments plan to pay back debt on municipal bonds and public corporation bonds scheduled to mature before early 2023 and preemptively prepare for portions of guaranteed debt expected to turn into determinate liabilities (total KRW3.4 trillion) through budgeting. In addition, the government is closely working with public institutions to spread out issue da
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Nov 10, 2022

FSC Introduces Revision to Supervisory Regulations to Ease Financing Burden of Homebuyers

The FSC will give advance notices of revision to several supervisory regulations between November 10 and 16 as a follow-up action to implement the housing market-related measures introduced at the 11th emergency economic meeting held on October 27 and the 3rd ministerial meeting on housing market held earlier today. The revised supervisory regulations stated below are expected to take effect from December 1, 2022. a) The loan-to-value (LTV) ratio is currently applied differentially for no-home or one-home owners in regulated areasby different locations and different price of houses. This will be raised to uniform application of 50 percent. b) Allow no-home or one-home owners who plan to purchase an apartment valued over KRW1.5 billion in designated speculation areas and high-speculation areas to finance their house with a mortgage loan. c) Raise the top LTV ratio for lower income and non-speculative homebuyerswho plan to purchase a house in regulated areas to up to 70 percent with the maximum loan amount of KRW600 million. * Please refer to the attached PDF for details.
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Nov 09, 2022

Household Loans, October 2022

In October 2022, the outstanding balance of household loansacross all financial sectors fell KRW0.2 trillion (m-o-m), declining for the second consecutive month from a month ago (down KRW1.2 trillion).Financial authorities will swiftly roll back relevant loan regulations to help alleviate difficulties of non-speculative homebuyers. At the same time, authorities will stably manage the grow rate of household debt. (Overall) Household loans across all financial sectors dropped KRW0.2 trillion in October. The growth rate (y-o-y) was 0.2 percent which continues to show a downward trend since the second half of 2021. (By Type) Mortgage loans increased at a faster rate than the previous month and other types of loans fell at a slower rate, leading to a slowdown in the pace of an overall decline in household loans. - (Mortgage Loans) Mortgage loans rose KRW2.0 trillion in October, growing at a slightly faster rate compared to the previous month (up KRW1.9 trillion), led by group lending for new apartment subscription. - (Other Types of Loans) Other types of loans fell at a slower rate (down KRW2.2 trillion) compared to a month ago (down KRW3.1 trillion), led by a drop in credit loans. (By Sector) Overall household loans edged down as nonbanks saw a growth and banks maintained a declining trend. - (Banking Sector) Banks saw a drop of KRW0.6 trillion in household loans. Mortgage loans from banks grew KRW1.3 trillion,rising at a faster rate than the previous month (up KRW0.9 trillion), as government-sponsored mortgage lending and group lending for new apartment subscription went up KRW1.0 trillion and KRW0.7 trillion, respectively. Other types of loans from banks fell KRW1.9 trillion, declining at a slower rate than the previous month (down KRW2.1 trillion), led by a drop in credit loans (down KRW1.6 trillion). (Nonbanking Sector) In October, nonbanks saw an increase of KRW0.4 trillion inhousehold loans with declines in mutual finance (down KRW0.4 trillion) and specialized cre
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Nov 09, 2022

FSC Chairman Meets with Heads of Banks and Discusses Market Stabilization Measures

FSC Chairman Kim Joo-hyun met with the heads of Korea Federation of Banks and twenty major banks on November 9 and held talks on financial market stabilization efforts. At the meeting, participants shared their outlook and views on financial market conditions and discussed (a) the banking sectors constructive role and action plan for market stabilization and (b) current difficulties in banks financing and operation of funds as well as ways to resolve them. Summary of Remarks by FSC Chairman Rapid increases in interest rates are continuing to put stress on our economic situation. However, unlike in the previous crisis situations such as thefinancial crisis in 2008 and the COVID-19 pandemic in 2020, it is now difficult to handle this situation by lowering interest rates or expanding fiscal spending. Now is the time for the financial industry and the government to come together and respond to difficulties by effectively making use of all available capacities in our economy. Under these circumstances, the banking sector has thus far provided a steady reinforcement to support vulnerable groups and supply liquidity in response to the recent turmoil in money market and bond market. The five major financial holding companies are making efforts to stabilize markets through their support plan announced on November 1. To sustain stability in financial markets, it is necessary to look closely at both the trees and the forest as stated earlier by former Fed chair Ben Bernanke. In this regard, the banking sector, as the core of our financial system, should provide a leading role to stabilize market for the whole financial system over the banking sector. First, aside from abrupt rate hikes, there are concerns about credit crunch that may result from the collapse of market confidence. In this regard, the combined effects of the governments market stabilization measures and the banking sectors efforts to stimulate the flow of funds will significantly help businesses and micro-enterp
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Nov 04, 2022

Financial Authorities Hold Meeting to Monitor Market Situation in Wake of U.S. Fed Rate Hike

The FSC held a meeting with the Financial Supervisory Service, financial industry groups and policy financial institutions on November 4 to review financial market condition following the recent increase in the U.S. federal funds rate (+75bps). On November 2, the Fed raised its policy interest rate by 75 basis points for the fourth consecutive time. The Fed Chair Jerome Powell mentioned about a possible slowdown in the pace of future increases but suggested that the Fed will go on to raise rates and that the ultimate interest rate will be higher than previously expected. At todays meeting, authorities reviewed financial market conditions with a focus on the impact of the FOMC decision on domestic money market including the corporate bond and CP (commercial paper) markets. Authorities also checked the progress and future plans for the KRW50 trillion-plus liquidity support measures. a) Bond market stabilization fund: Purchase of CPs began last week; purchase of bonds issued by specialized credit finance companies began this week; and first round of additional capital calls expected to be completed this week (Oct. 20). b) Korea Securities Finance Corporation: About KRW1 trillion in repos (repurchase agreements) and loans provided to small- and medium-sized securities firms so far; purchase of CPs issued by securities firms began on November 1 (Oct. 26). c) Five major financial holding companies: Announced that KRW95 trillion in liquidity supply will be implemented (Nov. 1). d) Banks: Industry-wide market stabilization efforts in place such as reducing bank bond issuance and expanding market liquidity support; temporary easing of LCR (liquidity coverage ratio) requirement (Oct. 21) and loan-to-deposit ratio (Oct. 27) announced; and a working-level taskforce to regularly monitor situation of banking sector launched on Nov. 3. e) Insurance sector: Measures to support liquidity conditions of non-life insurers (Oct. 28) and life insurers (Nov. 3) are being taken. f) Financi
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Nov 04, 2022

Authorities Hold Meeting to Review Financing Situation of Specialized Credit Finance Businesses

The FSC and the FSS held a meeting with the Credit Finance Association of Korea and specialized credit finance business companies (credit card firms and capital companies) on November 4 to review financial market situation. At the meeting, financial authorities checked the borrowing condition (bonds and CPs) of specialized credit finance business companies and listened to their opinions. Financial authorities have been keeping close tabs on the financing condition of specialized credit finance businesses and have already taken a necessary step to facilitate their bond financing by allowing the bond market stabilization fund to buy financial bonds issued by several specialized credit finance businesses from November 3. In the mean time, the ongoing regulatory plan to reduce the maximum ratio of financial bonds issued by specialized credit finance business companies, which are incorporated into the portfolio of derivatives-linked securities (ELS, DLS, etc.) issued by securities firms to hedge risk, will be applied flexibly. According to the previous plan, the maximum ratio would have been 12 percent until the end of 2022 and lowered to 8 percent from the beginning of 2023. However, that plan is postponed for three months, which will allow those ELS or DLS to incorporate up to 12 percent of financial bonds issued by specialized credit finance business companies for the purpose of risk hedging until the end of March 2023. At the meeting, financial authorities encouraged specialized credit finance business companies to make persistent efforts to support the stabilization of financial markets by effectively managing their own liquidity condition and the soundness of their assets. Authorities emphasized that financial authorities and the industry should make joint efforts and communicate regularly to stabilize markets. Financial authorities will continue to closely monitor changes in financial markets and promptly carry out necessary measures to stabilize markets. * Please
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Nov 03, 2022

Authorities Hold Meeting with Life Insurance Businesses to Monitor Market Situation

The FSC and the FSS held a meeting with life insurers on November 3 to share current issues in the insurance sector and monitor current market situation. At the meeting, participants discussed the recent situation where insurance companies are having to resort to bond sales due to an abrupt increase in demand for liquid assets following a rise in the number of surrendered savings insurance policies driven by increasing interest rates on savings products amid growing market uncertainties. In this regard, the insurance sector expressed the need for measures that will help them accumulate more liquid assets or alleviate their burden of having to maintain certain levels of liquid assets. In response, financial authorities stated that the insurance companies rising demand for liquid assets is understandable. However, to ensure stability in money market, authorities asked insurers to refrain from selling bonds and more actively contribute to market stabilization efforts as institutional investors. Nonetheless, authorities decided to seek measures to help insurers to better respond to the recently expanded volatility and uncertainty of funding market. To this end, authorities will temporarily ease the liquidity risk evaluation standardfor insurers to facilitate their active contribution to market stabilization efforts such as capital calls for the bond market stabilization fund. In addition, at a meeting with non-life insurers on October 28, authorities already decided to expand the types of liquid assets for insurers when applying the liquidity ratio regulationto ease their burden of maintaining liquid assets. Also, for other measures to increase liquiditysuggested by insurers, authorities will promptly review their viability while maintaining close communication throughout. The measure to temporarily relax the liquidity risk evaluation standard for insurers will take effect promptly with a revision to the detailed regulations on supervision of insurance businesses in Nov
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Nov 01, 2022

FSC Chairman Meets with Financial Holding Company CEOs and Discusses Market Stabilization Measures

FSC Chairman Kim Joo-hyun met with CEOs of five major financial holding companieson November 1 and held talks on current financial market situation. At the meeting, Chairman Kim and participants discussed the important role of financial holding companies in stabilizing markets, ensuring liquidity provision to the real economy and providing support for vulnerable debtors. Summary of Remarks by FSC Chairman Amid global monetary policy tightening, Koreas money market reacted sensitively to certain market shocks, which has resulted in the spread of anxieties even to the corporate bond market. However, the governments swift announcement and implementation of market stabilization programs worth KRW50 trillion-plus, in conjunction with the Bank of Korea and the banking sectors speedy efforts, helped to stop market situations from getting worse and that market conditions are gradually returning to stability. To ensure effectiveness in the governments market stabilization measures, it is necessary to have market participants play their parts and cooperate with each other to facilitate seamless circulation of funds. In particular, the role and responsibility of financial holding companies and their affiliated financial institutions like banks are important as they make up a big part of financial markets and have good financial and liquidity conditions. Financial holding companies and their affiliated banks recent earnings temporarily increased mostly as the amount of loans increased amid expansive fiscal and monetary policies put in place to deal with the COVID-19 pandemic and as global monetary policy tightening followed. Thus, it is expected that financial holding companies and their affiliated banks will play a role in enabling smooth flow of funds through financial markets by acting as intermediaries to stabilize markets, ensure provision of liquidity to the real economy and assist vulnerable debtors. In this regard, financial holding company CEOs are encouraged to make e
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Oct 28, 2022

Authorities to Temporarily Ease Regulation on Bond Issuance Procedure for Banks

The FSC and the FSS will temporarily ease a rule on the bond issuance procedure from October 28 to help banks more flexibly correct their already filed total amount of bonds to be issued. Pursuant to the Financial Investment Services and Capital Markets Act (FSCMA), banks are issuing their bonds after filing advance registration statements with the FSC that include total amount of bonds to be issued for certain periods in the future (from two months to two years each, under the universal shelf registration statement system).Under the FSCMA, when a bank wants to correct the total amount of bonds to be issued written on an already filed registration statement, the amount can only be reduced up to 2+0 percent from the predetermined amount. This rule restricts banks from making reduction to the predetermined issue amount of bonds on their registration statement by more than 20 percent when they need to take steps in reaction to market uncertainty or take measures to help stabilize the bond market. Responding to this, authorities will not impose penalties on banks that fail to issue bonds according to their previously submitted registration statements. The penalty exemption will apply to bank bonds already determined to be issued until December 31, 2022 on the statements. Authorities will consider the need for extending the period of penalty exemption in the future after taking into account market situations. This exemption will relieve banks from a duty to issue bonds just to comply with their previously submitted registration statements and thereby alleviate potential worries in the bond market that bank bond issuance may drive out the demand for corporate bonds. With the issuance of a no-action letter, this penalty exemption will take effect immediately on October 28. * Please refer to the attached PDF for details.
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