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Sep 03, 2020
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Sep 02, 2020
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Sep 01, 2020
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Aug 27, 2020
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Aug 27, 2020
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Aug 27, 2020
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Aug 26, 2020
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Aug 26, 2020
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Aug 25, 2020
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Aug 24, 2020
- Vice Chairman Discusses Preemptive Responses to Potential Risks amid Growing Uncertainty
- Vice Chairman Sohn Byungdoo presided over the 18th financial risk assessment meeting on August 24 to review market conditions and monitor the progress in implementing the COVID-19 financial support.The following is a summary of Vice Chairman Sohn’s remarks.(CURRENT MARKET SITUATION) The government’s effective response to Covid-19 and aggressive financial support have helped to maintain stability in financial markets. The KOSPI has recovered to pre-crisis levels, gaining 58.1 percent from its lowest in mid-March. Corporate bond and short-term money markets also have shown signs of overall recovery, although some low-rated companies still face difficulties in securing funds. However, the government should remain vigilant as the recent resurgence of Covid-19 cases heightens uncertainty in financial markets and the real economy. In response to the possibility of a protracted pandemic crisis, the government will closely monitor risk factors and take preemptive measures when necessary.(FINANCIAL MARKET MONITORING) With low interest rates, funds searching for higher returns have been increasingly flowing into stock and property markets, prompting a surge in asset prices. As the concentration of funds to certain assets along with growing debt could pose potential risks to financial markets, the government has been closely monitoring market activities.For the stock market to grow into a sustainable and attractive investment destination, the government needs to ensure the sound operation of the market and encourage more listings of promising companies. To this end, the government will come up with comprehensive measures for prevention, investigation and punishment to root out unfair transactions such as market manipulation, while improving regulations to help channel more funds into innovative businesses with long-term perspectives.(IMPLEMENTATION OF HOUSING MARKET MEASURES) The government has taken a series of measures to curb speculative demand in housing markets, while
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Aug 20, 2020
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Aug 19, 2020
- Vice Chairman Speaks about Importance of Maintaining Lending Support by Financial Institutions
- Vice Chairman Sohn Byungdoo presided over the 17th financial risk assessment meeting on August 19 to review market conditions and monitor the progress in implementing the COVID-19 financial support programs.The following is a summary of Vice Chairman Sohn’s remarks.(CURRENT PANDEMIC SITUATION) In response to the recent spike in the number of COVID-19 infections, the government has reinstated the level-2 social distancing measures today. Preventing further waves of infection remains the most urgent task. A successful economic turnaround achieved from earlier this year was made possible through effective K-quarantine measures. In order to maintain the recovery momentum, financial institutions should closely follow the enhanced K-quarantine guidelines within their workplace.(FINANCIAL RELIEF FOR TORRENTIAL RAIN VICTIMS) The longest recorded monsoon this year (54 days) has incurred heavy damages to households and businesses. The victims of torrential rains face extra hardship amid the pandemic-related economic disruptions. In order to help the businesses and households hit by heavy rains, the government will operate one-stop financial support centers throughout the affected regions and make prompt and targeted assistance available.(STRONG LENDING SUPPORT AMID PROTRACTED PANDEMIC SITUATION) As there are concerns about a protracted pandemic situation, the government will work to finalize its decisions on whether to extend the temporary relief measures, such as loan maturity extensions, deferral of interest payments and some of the temporary deregulatory measures, within August. In an economic downturn, individual financial institutions may become passive in lending. However, each institution’s “own actions can collectively influence the overall risk in the system,” as there is a danger of a fallacy of composition suggested by a BIS report in April. Thus, it is necessary to continue to encourage all financial institutions to support lending in order to maintain the
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Aug 13, 2020
- Green Finance Task Force Holds Kick-off Meeting
- Vice Chairman Sohn Byungdoo presided over a kick-off meeting of the green finance task force on August 13. The task force will work to establish a monitoring system for financial risks emanating from climate change, boost investment in green industries and consider the possibility of joining international networks on green finance.The following is a summary of Vice Chairman Sohn’s remarks.(GREEN SWAN) In January this year, the BIS introduced the concept of the ‘Green Swan,’ warning about the possibility of financial crisis caused by climate change. In the BIS report, the threat of climate change is characterized by unpredictability, severe ripple effects and extensive negative externalities. As such, major countries and international organizations have come to understand the threat of climate change to the financial sector. In July 2017, the FSB Task Force on Climate-related Financial Disclosures made recommendations to help companies disclose climate-related financial risks, and in December of the same year, the Network for Greening the Financial System was launched by central banks and regulators from major economies.(PROACTIVE MANAGEMENT) Climate change can threaten the stability of the financial system in many different ways. There are physical risks that financial institutions may face as physical damages caused by climate change can have ripple effects through insurance, loans and investment. In addition, there are transition risks that can have negative effects on the stability of the financial system as a transition to low carbon economy can lead to an abrupt fall of carbon intensive industries. In this regard, the government will strengthen its efforts to monitor and identify climate change risks to maintain stability in the financial system.Financial institutions should also consider taking into account the environmental, social and governance factors alongside the traditional risk factors such as credit or liquidity risks for their asset management.
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Aug 12, 2020
- FSC Chairman Meets with Heads of Financial Associations and Urges Close Cooperation
- FSC Chairman Eun Sung-soo met with heads of financial associations on August 12, and held talks on the progress of the COVID-19 emergency financial support, ways to promote big techs’ entrance into the financial services industry while ensuring a framework of fair competition and the role of finance in the government’s new deal initiative and the post-pandemic economy. The following is a summary of Chairman Eun’s remarks.The pandemic-induced economic shock was effectively minimized thanks to swift provision of relief programs including maturity extensions and deferral of interest payments by financial institutions. As there are concerns over a protracted pandemic crisis, financial institutions should work to bolster their loan loss provisions and the management of financial soundness.With regard to the big techs’ entrance into the financial services industry, the financial authorities plan to set up a public-private joint consultative body made up of the government, financial institutions, big tech companies along with academia and consumer experts to facilitate discussions on the issues related to fair competition, systemic risks and consumer protection.The post-pandemic era presents both opportunities and challenges, requiring coordinated actions from the financial industry. The government’s new deal initiative aims to transform the Korean economy from a fast follower to an innovative leader. In this regard, the role of the financial industry is crucial in achieving that goal.Financial institutions should be adequately informed about the relevant measures concerning the government’s housing market stabilization policy. The financial authorities will continue to keep a close eye on violations in lending practices to prevent market disturbances.Chairman Eun also expressed his gratitude to financial companies making contributions for victims of torrential rains and urged prompt implementation of financial support to the affected households and businesses,
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Aug 12, 2020
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Aug 11, 2020
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Aug 06, 2020
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Aug 05, 2020
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Jul 31, 2020
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Jul 30, 2020
- Plans to Improve Rules on Structured Products
- The FSC announced its plans to improve rules on retail structured products on July 30, with an aim to strengthen securities firms’ preparedness for market volatility, to encourage reduction in the size of the issuance as well as diversified investment for hedge assets and to bolster investor protection measures.BACKGROUNDThe market for retail structured products has grown significantly as the continuing trend of low interest rates made them an attractive alternative to bank savings. Although the structured products have provided relatively high yields and helped individuals to expand their assets, various risk factors began to surface. For securities firms, large volume of structured product issuance and management pose significant burdens on their financial soundness and liquidity. These burdens also may create shocks in the foreign exchange market and short-term money markets. In addition, both distributors and investors often espouse misperception that structured products are safe and non-risky products even though market volatility may rise depending on the performance of underlying assets. Therefore, it is necessary to draw up measures that will help minimize risks to securities firms, financial markets and investors.OVERVIEW OF STRUCTURED PRODUCTS(BALANCE) The outstanding balance of ELS, ELB, DLS and DLB issuance surged from about KRW22 trillion in 2010 to KRW108.6 trillion at the end of April 2020, maintaining an above KRW100 trillion level since 2016. About 60 percent of them are non-principal-protected structured products (ELS and DLS), accounting for KRW64.6 trillion. ELS and ELB (tracking stock indexes) account for 70 percent, or KRW75 trillion.(DISTRIBUTION) For ELS investment, retail investors made up about 98 percent, or KRW40.4 trillion at the end of March 2020. About 82 percent of all ELS issuance, or 88 percent of ELS issued to retail investors were distributed through banks.(RISK FOR SECURITIES FIRMS) Structured products make up increasingly larg