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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the insurance industry faces hindrance in effectively adapting to disruptive changes of business environment due to outdated and stringent regulations.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 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 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
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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
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Oct 27, 2022
- Regulation on Loan-to-Deposit Ratio to be Temporarily Eased to Facilitate Corporate Financing
- The FSC announced that financial authorities will temporarily ease the regulation on loan-to-deposit ratio, which will enable banks and savings banks to provide sufficient liquidity to businesses. The demand for business loans increased as a result of the recent contraction of the corporate bond market.However, the current regulation on loan-to-deposit ratiohas prevented banks from responding actively to these demands for borrowing. To facilitate active response, loan-to-deposit ratio is chosen as a first step of temporary regulatory easing because it is only domestically regulated and swiftly adjustable. Authorities will continue to monitor financial market situations and consider whether other deregulatory steps on such indexes like LCR (liquidity coverage ratio), NSFR (net stable funding ratio) should be taken. Details of Temporary Regulatory Easing To help banks and savings banks to more effectively respond to corporate loan requests, the loan-to-deposit ratio requirements will be eased from 100 percent for both to 105 percent for banks and 110 percent for savings banks. The eased loan-to-deposit ratio requirements will be applied for upcoming six months first, and authorities will take into account extending the period after reviewing market situation. With this easing of loan-to-deposit ratio requirements, banks and savings banks will have additional capacity to lend more to businesses. Furthermore, competition for deposit-taking is alleviated, and thus reduced borrowing costs will help in part to contain upward pressure on interest rates of corporate loans. Further Plan Financial authorities will issue a no-action letter in October to allow temporary easing of loan-to-deposit ratio rules immediately. Changing the calculation method will also take effect immediately with a no-action letter in October, but authorities will revise the supervisory regulation on banking business afterward to make the change officially. Authorities will maintain close communication
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Oct 26, 2022
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Oct 26, 2022
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Oct 24, 2022
- Financial Authorities Hold Meeting to Respond to Bond and Money Market Situation
- FSC Chairman Kim Joo-hyun presided over a meeting of senior FSC officials on October 23 right after the government-wide emergency meeting on macroeconomic and financial stability took place. At this meeting, Chairman Kim ordered authorities to promptly take follow-up actions to implement the support measures announced at the earlier emergency meeting. After the senior official meeting, FSC Standing Commissioner Kwon Dae-young held another meeting with the Financial Supervisory Service (FSS), financial industry groups, policy financial institutions and commercial financial institutions to check the recent situation of bond and money market and related risk factors in financial institutions. At the meeting, financial authorities explained that they will immediately activate the KRW50 trillion-plus liquidity of supportive measures announced at the government-wide emergency meeting. Authorities emphasized that the government, aiming to ensure market stability, will provide ample support by all means necessary. In addition, as restoration of market mechanisms is the key to overcome the current problematic situation, authorities said, market participants such as financial institutions and institutional investors also should step up their own efforts to facilitate recovery of the role of financial markets as intermediaries and accordingly to ensure a virtuous cycle. Moreover, authorities underscored the need for concerted efforts of both the government and the private sector. Application of all available means at their disposal and close communication between them should be in harmony to ensure market stability as the government alone has limited financial resources. Financial industry groups, in response to authorities request, also showed their commitment to strengthen efforts to stabilize financial markets and actively cooperate with the governments measures. * Please refer to the attached PDF for details.
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Oct 21, 2022
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Oct 20, 2022
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Oct 12, 2022
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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 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 11, 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
