Press Releases - Financial Services Commission

Press Releases

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Dec 09, 2020

FSC Will Continue to Ensure Convenient & Safe Certification Mechanisms in Financial Services

As the government announced the discontinuation of the public key certification system beginning on December 10, the FSC has prepared the following frequently asked questions to help financial consumers better understand the changes in their use of financial services.FREQUENTLY ASKED QUESTIONSQ) The public key certification system will be discontinued from December 10. Does that mean that financial transactions can be carried out without a certification?A) In principle, you still need a certification when required by a financial transaction. However, any type of certifications provided by private sector entities can be used in place of the current public key certification.Q) What happens to the existing public key certification when the discontinuation starts on December 10? Can I no longer use my public key certification to conduct financial transactions?A) Even after the discontinuation begins, you may still use your current public key certification to carry out various financial transactions.Q) Can I apply for the issuance of a new public key certification after December 10?A) Yes, you can still apply for the issuance of what will be newly termed the ‘common key certification.’Q) What types of certifications are available for the use in contactless financial transactions?A) There is the ‘common key certification’ issued by the Korea Financial Telecommunications Clearings Institute and KOSCOM, individual bank-issued certifications and certifications issued by telecom companies and platform businesses.Q) As of now, where and how can I get a private sector-issued certification?A) You can easily get it online by visiting websites of a commercial bank or a securities firm or on their mobile apps.Q) What are some of the upsides of the private sector-issued certification system?A) There is no need to download and install special software. You can use online cloud services to store your certification. Plus, biometric authentication and passcode identification off
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Dec 09, 2020

Government to Tighten Penalties on Illegal Stock Short Sale

The FSC announced the passage of a revision bill to the Financial Investment Services and Capital Markets Act at a plenary session of the National Assembly on December 9. The revision bill focuses on regulating illegal short sale activities including naked short sale to improve the accountability of domestic stock markets. The revision bill contains the following provisions.KEY PROVISIONS(A) IMPOSE PENALTY SURCHARGE AND CRIMINAL PENALTY ON ILLEGAL SHORT SALECurrently, illegal short sale activities are punishable with minor fines. To strengthen punishment, penalty surcharges will be imposed up to the amount of short orders as well as criminal penalties of a minimum one year of imprisonment or a fine of more than three times and up to five times the avoided loss amount. The introduction of strict monetary sanctions and criminal penalties will help prevent intentional attempts at illegal short sale while preventing investor errors and mistakes.(B) REQUIRE SHORT SELLERS TO KEEP RECORDS OF LOAN AGREEMENTS FOR FIVE YEARSShort sellers need to keep their securities lending agreements for five years and promptly submit them to the financial authorities when requested. This will help improve transparency and help financial authorities to more readily identify illegal short sale activities.(C) RESTRICT SHORT SELLERS’ PARTICIPATION IN EQUITY FINANCINGShort sellers will be prohibited from participating in equity financing of companies whose stocks they have shorted once the companies’ plans for equity financing have been disclosed. A penalty surcharge of up to KRW500 million will be imposed on violation of this provision.(D) STRENGTHEN REGULATION ON SHORT SALE BANThe temporary provision in the current enforcement decree that allows the authorities to prohibit stock short sale if it is deemed necessary to ensure the safety of stock markets and guarantee fair prices will be made permanent through this revision to the Act.FURTHER PLANSOnce the revision to the Financial Investme
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Dec 09, 2020

Household Loans, November 2020

The outstanding balance of household loans in all financial sectors rose KRW18.3 trillion from the previous month at the end of November 2020 (up 7.9% year-on-year). The household loan balance increased KRW13.6 trillion in the banking sector and KRW4.7 trillion in the non-banking sector.By type, mortgage loans increased KRW6.8 trillion in November, dropping KRW0.5 trillion from the previous month (up KRW7.3 trillion y-o-y). In the banking sector, mortgage loans expanded KRW6.2 trillion, down KRW0.6 trillion from the previous month, as jeonse loans grew at a slower rate. Mortgage lending by non-banks saw an increase of KRW0.6 trillion from the previous month. Other types of loans grew KRW11.5 trillion as credit-based lending by both banks and non-banks rose KRW7.4 trillion and KRW4.1 trillion, respectively, due to high demand for IPO deposits and front-loaded demand ahead of tougher regulations on credit lending.The government will continue to closely monitor trends in household loans and check the implementation of household debt management plan.* Please refer to the attached PDF for details.
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Dec 09, 2020

Improvements to Indemnity Health Insurance to be Introduced in July Next Year

The FSC announced the introduction of improvements to the current indemnity health insurance system beginning in July next year, which will help prevent moral hazard and lower premiums for the insured. The FSC expects that the improved structures will help ensure that indemnity health insurance plans can continue to provide important social safety nets alongside the state-operated national health insurance (NHI) service.BACKGROUNDIndemnity health insurance policies provide important social safety nets as they offer coverages to health care costs that are not covered by the NHI. As of the end of 2019, some 38 million individuals were covered by indemnity health insurance plans. When it was first introduced in 1999, the availability of fully covered plans guaranteeing no out-of-pocket expenses created moral hazard of excessive hospital visits and medical testing. Excessive use of health care services by a few has been pushing up premiums for others while insurers have seen a spike in loss ratios. A continuation of this trend in indemnity health insurance raises concerns about rising premiums and the sustainability of indemnity health insurance services. As such, the FSC has prepared the following measures to address these issues.KEY MEASURESI. LOWER PREMIUMS WHILE GUARANTEEING THE SAME LEVEL OF COVERAGE(COVERAGE) New indemnity health insurance policies will provide the same level of coverage as previously available on most types of illnesses and injuries with the maximum coverage of about KRW100 million for both in- and outpatient services. However, in order to prevent moral hazard of excessive and unnecessary use and provision of medical services, out-of-pocket expenses and deductions for outpatient services will be increased.(PREMIUM) Due to the increase in out-of-pocket expenses and outpatient deductions, insurance premiums will be significantly lower compared to the previous levels. Considering high levels of loss ratios, it is expected that premiums of newly avai
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Dec 09, 2020

Legal Grounds Established for Supervision of Non-holding Financial Groups

The FSC announced the establishment of new legal grounds for the supervision of non-holding financial groups as the new legislation was passed at a plenary session of the National Assembly on December 9.KEY PROVISIONS- NON-HOLDING FINANCIAL GROUPS: Have two or more subsidiaries operating financial businesses with total financial assets of KRW5 trillion or more.- INTERNAL RISK MANAGEMENT: An internal group-wide risk management body should be established led by the group’s top representative company to oversee the group-wide risk management policy, handle regulatory compliance, pursue prudential management, etc.- INTERNAL ASSESSMENT: Non-holding financial groups should conduct self-assessment on their capital adequacy requirements to maintain financial soundness while taking into account intra-group transactions and risk concentrations.- REPORTING DISCLOSURE REQUIREMENTS: Non-holding financial group’s top representative company is required to report and disclose the group-wide capital adequacy status and risk factors to the FSC, which in turn may request a submission of a management improvement plan if deemed necessary to prop up capital or reduce risky assets.The authorities expect that the new legislation on the supervision of non-holding financial groups will help foster a self-regulating risk management system for the regulated entities. The authorities will be able to more preemptively manage systemic risks in financial markets while minimizing the possibility of risk transfers and preventing damages to consumers and investors. In this regard, the government will continue to work for the advancement of both group-wide and systemic risk management schemes. * Please refer to the attached PDF for details.
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Dec 09, 2020

FSC to Work on Risk Management and Inclusive Finance

Vice Chairman Doh Kyu-sang held the 31st financial risk assessment meeting via teleconference on December 9 and discussed the year-end financing situation of businesses as well as the outlook for financial markets in 2021 and risk preparation. The following is a summary of Vice Chairman Doh’s remarks.(CURRENT MARKET SITUATION) Financial markets have been enduring difficulties presented by the protracted COVID-19 pandemic. The OECD projects Korea’s economic growth in 2020 to be the highest among its members and second to China among the G20 economies. KOSPI rose to a record high of 2,700 points on December 4 and KOSDAQ’s market capitalization is continuing to set new record highs. The corporate bond market also shows a smooth interplay between demand and supply with interest rates at stable levels. In terms of the recent surge in stock markets, some KRW60 trillion net buying by retail investors this year contributed most to the quick recovery of stock markets. In this regard, the government will continue to work for the fairness and transparency in stock markets and to foster trust from market participants.(ASSESSING RISK FACTORS) With the availability of vaccines in major economies, there are expectations for normalization. However, it may take a long time to reach a level of herd immunity given the time it takes for mass production and distribution of vaccines. Thus, excessive optimism should be cautioned against and various risk factors should be closely monitored. While many countries are maintaining expansive fiscal and monetary policies at unprecedented levels, BIS and IMF warned against the rise of asset prices detached from the real economy, concentration of liquidity and expansion of leverage. The rise of high-risk asset investments amid an ultra-low rate environment also poses a risk. The financial authorities will closely monitor these risk factors and respond promptly when necessary.The authorities will also keep a close eye on the business and hous
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Dec 07, 2020

FSC to Introduce Routine Inspection of Personal Data Protection at Financial Institutions

The FSC unveiled its plans to introduce a routine inspection of personal data protection at financial institutions on December 4 to ensure consistency in data protection and improve accountability. The plans include establishing specific inspection standards according to the data lifecycle, providing feedbacks on a regular basis through Financial Security Institute and setting up self-inspection guidelines for financial institutions. The routine inspection on the performance of data protection is scheduled to go into effect on February 4, 2021.BACKGROUNDWith the availability of new technologies, data pseudonymization/anonymization, data convergence and so on, the process of monitoring and inspecting how financial institutions handle data protection needs improvements. In this regard, the following issues have been identified as problematic—(a) lack of specific inspection standards, (b) difficulty in carrying out a comprehensive and systematic inspection on more than 3,000 financial institutions and (c) lack of self-inspection guidelines for financial institutions. To address these issues, the FSC has drawn up the following measures.KEY MEASURESI. IMPROVE INSPECTION CRITERIA STANDARDSIn order to ensure a close inspection of the performance of data protection, specific inspection criteria will be established with 9 overall categories and 143 subcategories. The detailed inspection criteria will reflect the different stages of data lifecycle and will be measured in four levels—(a) compliant, (b) partially compliant, (c) not compliant and (d) not applicable.To guarantee a systematic management and monitoring of the newly available technologies, such as data pseudonymization/anonymization, data convergence and so on, a close inspection on the compliance status of technical and managerial data protection measures will be carried out. Financial institutions with outstanding performance and an accident-free status for a certain period will be awarded safety certification
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Dec 03, 2020

FSC to Introduce Improvements to Subscription Economy's Payment and Refund System

The FSC announced its plan to improve rules on subscription businesses’ payment system to enhance consumer protection and user experience on December 3.Subscription businesses generally attract customers by offering free subscription to their services first. However, once the free subscription period expires, the procedure of informing customers about the details of recurring payments and their cancellation and refund policy has remained inadequate. As such, the FSC plans to work on the following measures to strengthen consumers’ right to information, simplify the cancellation process and make more refund options available in subscription businesses.KEY MEASURESI. ESTABLISH STANDARDIZED TERMS AND CONDITIONS(DEFINITION OF RECURRING PAYMENTS) A clearly defined scope of recurring payments will be introduced on the standardized terms and conditions.(NOTIFICATION REQUIREMENT) Subscription businesses will be required to notify their customers at least seven days prior to switching their services from free offering to recurring payment-based services.(CANCELLATION) The process of cancelling a subscription service will be made easier through mobile applications and online platforms and the cancellation of services will be made available even after the regular customer service hours.(REFUND POLICY) When a cancellation of recurring payments occurs, only the amount of fee commensurate with the used monthly service may be charged, while more refund options will be made available through credit cards and account transfers.II. STRENGTHEN PAYMENT GATEWAYS’ SUPERVISION OVER THEIR AFFILIATESBy introducing revisions to the Enforcement Decree of the Specialized Credit Finance Business Act, legal grounds will be established that will allow payment gateways to strengthen supervision over their affiliates and ensure that their affiliates provide appropriate transaction information to customers.* Please refer to the attached PDF for details.
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Dec 02, 2020

2021 Budgetary Expenditures to Focus on Economic Recovery and Financial Inclusiveness

The FSC announced its budgetary expenditures of KRW3.9 trillion for 2021, which will be allocated for (a) pandemic recovery and post-COVID-19 preparation measures, (b) boosting economic recovery and (c) ensuring support for the financially vulnerable groups.I. COVID-19(MARKET STABILIZATION) Liquidity injection of KRW229.6 billion and KRW12.6 billion through Korea Development Bank and Industrial Bank of Korea, respectively, to minimize effects of the pandemic(KOREAN NEW DEAL FUND) KRW510 billion investment in the Korean New Deal fund through KDBII. ECONOMIC RECOVERY(NEW GROWTH ENGINES IN FINANCIAL INDUSTRY) KRW18.4 billion in comprehensive support for fintechs and KRW1.24 billion in support for KONEX listing of early stage SMEs and startups(SMES MIDDLE MARKET ENTERPRISES) (a) KRW65.2 billion investment in innovative solutions in key industries and in facility investment in new growth sectors, (b) KRW45 billion in facility investment to improve the industrial workplace environment and (c) KRW240 billion investment toward the innovation venture fund in support of the country’s materials, parts and equipment industriesIII. FINANCIAL INCLUSIVENESS(STEADY SUPPLY OF STATE-BACKED HOUSING LOANS) KRW50 billion investment in Korea Housing Finance Corporation to ensure a steady supply of fixed rate housing loans(MICROFINANCING OPPORTUNITIES) KRW195 billion investment in Korea Inclusive Finance Agency to ensure a steady supply of microloan products for various groups* Please refer to the attached PDF for details.
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Dec 02, 2020

FSC Revokes Business Registration of Lime Asset Management

The FSC announced its decision to revoke the business registration of Lime Asset Management on December 2 and to impose a fine of KRW950 million and issue suspension of duties on its staff and executive personnel. According to inspections carried out by the Financial Supervisory Service, Lime Asset Management was found to have engaged in illegal and inappropriate fund management activities, which caused a large scale suspension of redemptions for investors in the amount of about KRW1.7 trillion. To help minimize losses for investors, between November 2019 and September 2020, the financial authorities focused on closely examining fund assets managed by Lime Asset Management, drawing up a redemption plan for investors and setting up a new fund manager (Well Bridge Asset Management) to take over funds from Lime Asset Management. As such, the FSC also ordered a transfer of some 215 funds currently managed by Lime Asset Management to Well Bridge Asset Management effective from December 3, 2020. * Please refer to the attached PDF for details.
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Nov 30, 2020

FSC to Work on Revisions to Insurance Business Act for Implementation of IFRS 17 in 2023

Vice Chairman Doh Kyu-sang held a virtual meeting on November 30 to discuss ways to improve rules on insurance businesses in preparation for the implementation of IFRS 17 in 2023. At the meeting, Vice Chairman Doh announced the FSC’s plans to introduce a revision bill to the Insurance Business Act to the National Assembly during the first half of 2021.The International Accounting Standards Board (IASB) announced the finalized amendments to IFRS 17 in June and decided on a new effective date from 2023. In order to ensure a seamless implementation of IFRS 17, the FSC will set up and operate a task force charged with drawing up specifics of the revision to the Insurance Business Act to reflect the changes in accounting standard and prepare measures to support insurers with their capital reinforcement.The implementation of IFRS 17 will help improve the financial soundness and transparency of insurance businesses. The new accounting standard from IFRS 17 is expected to have a wide-ranging impact on the management of insurance businesses with respect to the development of new insurance policies, sales strategies, risk management, performance assessment, etc.The FSC expects that the implementation of IFRS 17 will provide an impetus for insurance businesses to seek more innovative management solutions and sustainable growth strategies.* Please refer to the attached PDF for details.
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Nov 26, 2020

FSC to Work on Preventing Economic Shocks and Managing Financial Market Risks

Vice Chairman Doh Kyu-sang held the 30th financial risk assessment meeting via teleconference on November 26 to check the implementation of the COVID-19 emergency financial support programs. At the meeting, Vice Chairman Doh also discussed the current financial market conditions and potential risks, credit lending in the banking sector and the government’s plans to extend the period of support available for vulnerable debtors.The following is a summary of Vice Chairman Doh’s remarks.(CURRENT ECONOMIC CONDITIONS) In November, consumer confidence and business survey index rose while exports increased for a second consecutive month. KOSPI rose to a record high of 2,617.76 points on November 24 on strong foreign net buying. The corporate bond and short-term money markets also show signs of stability. The low-rated corporate bond and CP purchase program (SPV) launched in July helped to improve market conditions. While considering the past performance and market conditions, the FSC will decide in December whether to extend the operation of the SPV beyond its initial six-month period.(POTENTIAL MARKET RISKS) The Korean economy and domestic financial markets have shown speedy recovery from the pandemic due to the government’s aggressive stimulus programs and abundant liquidity supply. However, household loans have expanded more rapidly in that process. Amid an ultra-low rate environment, high-yield hunting in stock and real estate markets and more recently in cryptocurrencies may pose risks. The resurgence of COVID-19 infection cases throughout the world may hold back economic recovery and the uncertainty surrounding major economies’ stimulus measures also pose risks. Against this backdrop, the FSC will work to ensure an effective management of household debt and closely monitor the flow of capital into high-risk assets.(RECENT TRENDS IN CREDIT LENDING) Since the FSC announced the measures to curb credit lending on November 13, the growth of credit loans in the bank
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Nov 26, 2020

Deferment of Principal Payment for Vulnerable Debtors to be Available for Six More Months

The FSC and other relevant institutions decided to make available the deferment of principal payment programs for vulnerable debtors for six more months until the end of June 2021 due to concerns about a protracted pandemic situation. (PRE-WORKOUT BY LENDING INSTITUTIONS) Credit loan and microloan users experiencing a diminished debt servicing capacity due to a drop in income amid COVID-19 may apply for a pre-workout program (deferment of principal payment) for six to twelve months at the originating lending institution until June 30, 2021.(DEBT ADJUSTMENT BY CCRS) The current deferment of principal payment (one-year maximum) offered by the Credit Counseling Recovery Service for those who have seen their income drop due to COVID-19 will be made available on a more regular basis from December 1, 2020. (INDIVIDUAL DEBT PURCHASE BY KAMCO) The Korea Asset Management Corporation (KAMCO)’s debt purchase program will help purchase unsecured debt accrued between February 1, 2020 and June 30, 2021. Both lending institutions and debtors may apply during this period.* Please refer to the attached PDF for details.
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Nov 25, 2020

FSC Holds Meeting on Future Outlook and Competitiveness of Financial Industry

The FSC held a meeting on the future outlook and competitiveness of the financial industry chaired by Vice Chairman Doh Kyu-sang on November 25. A new twelve-member expert review committee has been set up to lead the future outlook and competitiveness assessment of the financial industry. It will focus on lowering entry barriers into the financial industry and building financial infrastructures appropriate for the 4th industrial revolution era.VICE CHAIRMAN’S REMARKS(CHANGING ENVIRONMENT TASKS) The financial industry in Korea has continued to grow over the past decade. The size of Korea’s financial and insurance industry rose from 5 percent of GDP in 2009 to 5.6 percent of GDP in 2019, and the market capitalization of Korea’s capital markets rose to the twelfth in the world. However, there need to be more efforts to bring about qualitative improvements in the areas of global competitiveness and digital innovation. In response to an aging population and the low-rate and low growth environment, it is necessary to look for innovative solutions. With AI, big data and platform-based services being introduced by fintechs and big techs, it is necessary to accelerate digital transformation and gain consumer trust. The 4th industrial revolution has led to the blurring boundaries between financial and non-financial services, the unbundling of manufacturing and sales and the acceleration of the big blur where consumer experience is becoming ever more important.(ASSESSING THE COMPETITIVENESS OF FINANCIAL INDUSTRY) The future outlook and competitiveness assessment should focus on forecasting the future of the financial industry and looking for appropriate strategies based on long-term perspectives. It should offer an objective analysis on the current status of Korea’s financial industry, while checking to see whether the current regulations on entry and sales requirements are appropriate for the advancement of digital finance and innovation.FUTURE OUTLOOK COMPETITIVENESS
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Nov 19, 2020

FSC Designates 5 More ‘Innovative Financial Services’ for Regulatory Sandbox

The FSC added five more financial solutions to the financial regulatory sandbox on November 19, bringing the total number of ‘innovative financial services’ to 120 since launching the financial regulatory sandbox program on April 1, 2019.OVERVIEW OF NEWLY ADDED ‘INNOVATIVE FINANCIAL SERVICES’1.A mobile app-based real name verification service for bank customers who visit bank branch without a government-issued identification (Shinhan Bank, expected launch in September 2021)2.A safe driving reward program, which offers a gift certificate of KRW10,000 to navigation app1 users with a car insurance policy2 when their driving records collected via a driving-tag3 meet safe-driving standards (Carrot Insurance SK Telecom, expected launch in December 2020)3.A point-payment service for an insurance claim that allows customers to purchase products or services at a discount with given points on an online platform (Hanwhalife, expected launch in April 2021)4.A credit card membership solution, which allows merchants to join membership through a mobile app (PayHere, expected launch in July 2021)5.A mobile credit card terminal solution, which uses the app on a smartphone as a card reader instead of a terminal machine (ANB Korea, expected launch in May 2021)* Please refer to the attached PDF for details.
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Nov 18, 2020

Government to Increase Amount of IPO Shares Available for Retail Investors

BACKGROUNDWith the recent surge in the number of retail investors in stock trading, their demand for active participation in initial public offering (IPO) has increased. In the IPO process, however, it is important to secure the active participation of institutional investors to precisely price an IPO share. Securities firms as underwriters also play an important role in allocating shares. As stock prices fluctuate widely after an IPO, the expanded participation of retail investors in IPOs could make them more vulnerable to investment risks. The measures announced today are intended to ensure active participation of institutional investors and autonomy of the underwriters in an IPO process, while allowing more participation of retail investors.KEY MEASURES(ALLOCATION METHOD) Currently, shares available for retail investors, more than 20% of IPO stock, are allocated usually in proportion to the number of subscribed shares, or the amount of deposits. To give equal opportunities for all subscribers who deposited a minimum amount, more than half of shares available for retail investors will be allocated in the same amount, regardless of the amount of deposits.(LARGER ALLOCATION FOR RETAIL INVESTORS) i) Retail investors will be allocated a maximum 5% of unsubscribed shares for employee ownership; ii) As the 10% rule, which allocates 10% of public shares to high-yield funds, is set to expire by the end of this year, the amount of shares allocated to high-yield funds will be reduced to 5% from next year, while the remaining 5% will be allocated to retail investors.(SUBSCRIPTION AND ALLOCATION PROCESS) Multiple subscriptions by a retail investor using different underwriters in an IPO will be restricted. Securities firms will be required to inform retail investors of investment risks in subscription advertisements.IMPLEMENTATION SCHEDULEThe new rules will apply to securities registrations submitted after the revision to the Regulations on Securities Underwriting Business by
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Nov 18, 2020

FSC to Implement a New Regulatory Regime for Financial Benchmarks

The FSC enacted an enforcement decree and a supervisory regulation to provide details for the management of financial benchmarks as the Financial Benchmark Act (hereinafter the Act)1 will go into effect on November 27, 2020. KEY PROVISIONS (ESTABLISHMENT OF A REVIEW COMMITTEE) The FSC can establish a review committee to discuss the designation and cancellation of critical benchmarks and other important matters regarding financial benchmarks. (OPERATIONAL RULE ON CALCULATION) The enforcement decree provides details that should be included in an operational rule established by an administrator of critical benchmarks. The operational rule is aimed to stipulate requirements for administrators of critical benchmarks, contributors of input data, and users of critical benchmarks. ▪ Administrators are required to establish rules regarding methods and procedures to calculate critical benchmarks; prevention of conflict of interests; and management and supervision of input data contributors, etc. ▪ Contributors are required to establish rules regarding procedures for preservation and submission of input data; qualification and responsibility of the person in charge of data submission; and internal control, etc. ▪ Users are required to provide consumers with a document explaining the definition of critical benchmarks, methods and procedures of calculation, etc. (CRITICAL BENCHMARK MANAGEMENT COMMITTEE) The Act requires administrators of critical benchmarks to establish a committee for the management of critical benchmarks. The enforcement decree provides details regarding the composition and operation of the management committee. ▪ (COMPOSITION) The management committee shall consist of more than five members with expertise including at least two independent experts. More than half of the members shall have no conflict of interests. ▪ (RESPONSIBILITIES) The committee is responsible for deliberation and decision-making regarding important matters e.g. the appropriatene
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Nov 16, 2020

Government Lowers Statutory Cap on Lending Rates to Reduce Debt Burden on Low-income Borrowers

The government plans to lower a statutory cap on lending rates from the current 24% to 20% to reduce debt servicing burden on low-income borrowers.Since the maximum lending rate was lowered to 24% in 2018, there have been discussions for further cuts, given low interest rates and the need for easing financial burden on low-income households.The 20% statutory cap is expected to benefit 2.08 million borrowers, 87% of those who borrowed at higher rates, by saving KRW483 billion annually in debt servicing burden.In order to more flexibly respond to changes in market conditions, the government intends to adjust the maximum lending rates by revising the enforcement decrees on the Act on Registration of Credit Business and Protection of Finance Users and the Interest Limitation Act. The new statutory cap will apply in the second half of 2021.The government will also come up with complementary measures to ensure low- income borrowers’ access to financial services and better protect them from predatory practices by illegal lenders.* Please refer to the attached PDF for details.
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Nov 13, 2020

FSC Unveils Measures to Curb Credit Loans

Vice Chairman Doh Kyu-sang presided over the 29th financial risk assessment meeting on November 13. At the meeting, Vice Chairman unveiled the government’s plans to more effectively manage household debt and discussed the implementation of the COVID-19 financial support programs.BACKGROUNDHousehold debt in Korea expanded in the past two decades as the economy began to grow in the aftermath of the Asian financial crisis of 1997. In that period, the qualitative structure of household debt continued to improve due to an increase in the proportion of fixed-rate lending and installment payments. The soundness of household debt also improved as the volume of financial assets held by households has been more than twice that of financial debt since the end of 2009, and the default rate across all financial sectors has fallen to 0.70 percent at the end of June 2020 from 1.74 percent at the end of 2009. However, an excessive growth of household debt raises concerns about downside risks to the economy and financial system as the pace of household debt growth in relation to GDP accelerated from 82.9 percent in 2014 to 97.9 percent in 2019. Thus, there needs to be a continuous effort to slow down and more effectively manage the pace of the growth.The level of growth in household debt began to stabilize from the end of 2016. However, a shift toward expansionary policy this year in response to COVID-19 led to an upward trend with a rapid rise in credit lending in particular. Although increased borrowing by lower income households may be inevitable amid a prolonged pandemic situation, the possibility of credit loans moving into real estate markets poses risks. Therefore, the following measures have been drawn up to prevent risks.KEY MEASURESThe government will continue to maintain strong lending support for lower income households and small-scale businesses through existing stimulus programs amid a protracted pandemic situation. At the same time, efforts to more proactively manag
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Nov 12, 2020

4th Digital Finance Meeting Outlines Three Key Principles for MyData Industry

Vice Chairman Doh Kyu-sang presided over the 4th consultative body meeting on digital finance on November 12 and laid out the following three key principles for the MyData industry—(a) guaranteeing consumer rights to data ownership, (b) improving safety and scalability of MyData services and (c) creating a cooperative ecosystem for all stakeholders.The following is a summary of Vice Chairman Doh’s remarks.SIGNIFICANCE OF MYDATA INDUSTRYMyData industry has been introduced to strengthen consumer rights to data ownership and cultivate new data industries. With MyData services, individuals will be able to manage within a single platform not only their credit data from different financial institutions, such as banks, credit card companies and insurance companies, but also non-financial information, such as data on telecommunication and public utilities fees. There have been similar attempts in other countries, such as the EU, the UK and Japan, but their services have been restricted to bank account data.MyData industry in Korea is the first in its kind, offering an integrated credit data management platform beyond banking services. Currently, a preliminary license application review is taking place on thirty-five existing MyData business entities, with the application results expected to be announced at the beginning of next year. The market entrance of MyData businesses as new players will bring about a few changes. First, consumers will be able to practice data ownership instead of financial institutions in which consumer data is stored. Consumers’ control over their own data will be enhanced as they can easily check, manage, correct or delete according to their needs. Second, there will be increased competition and innovation in the financial industry. Large financial companies will no longer have a monopoly over consumer data, but instead be encouraged to compete over consumer utility. Lastly, MyData businesses will help create quality jobs in ICT and fintech s
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