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Apr 01, 2022
- FSC Approves Rules Change to Gradually Introduce Mark-to-Market Valuation on Corporate MMFs
- The FSC approved a revision to the regulation on financial investment business at the 6th regular meeting held on March 30 for gradually introducing the mark-to-market valuation method on corporate money market funds (MMFs) and to check relevant preparation and implementation to facilitate a soft-landing of the mark-to-market method in the market. Background The mark-to-market valuation method on corporate MMFs is scheduled to take effect from April 1, 2022, which was introduced through amendments to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) and the regulation on financial investment business in March 2020. Although the mark-to-market valuation method is considered as the rule of the game in principle, prior to the amendments, the book value method was permitted on MMFs as long as the disparate rate in the market-to-book value is within 0.5 percent. However, when disparity in the market-to-book value widens, there is a possibility of causing an abrupt and large-scale redemption as the earlier the investor redeems his/her money, the higher valuation s/he will get on return. As such, the amendments have been introduced to bring about improvements by introducing and implementing the mark-to-market valuation method on corporate MMFs from April 2022. Some of the key changes include (a) making an exemption to allow the book value method on corporate MMFs with more than 30 percent of stable assets as prescribed by the regulation on financial investment business and (b) expanding the duration of corporate MMFs using the mark-to-market valuation method from 75 days previously to 120 days to promote a wider use. However, with a growing potential of rising volatility in short-term money markets recently, there have been calls for a need to introduce the mark-to-market valuation method in a step-by-step manner in order to prevent corporate MMFs from turning into potential risk factors. With the MMFs current preference for the bo
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Mar 31, 2022
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Nov 22, 2021
- Additional Types of Public Financial Data Made Available through Open APIs
- The FSC announced an expansion in the availability of public financial data offered through open APIs at www.data.go.kr. From November 22, public financial data managed by the Korea Exchange, Korea Financial Investment Association, Korea Life Insurance Association, General Insurance Association of Korea and Korea Inclusive Finance Agency will be opened up for use at www.data.go.kr through 18 standardized APIs with 40 functions. Since launching the public financial data platform in April 2019, which began to offer data managed by nine state-backed financial institutions and relevant agencies, the FSC has worked on making more types of public financial data available for a wider use. From June 9, 2020, public financial data from businesses and financial companies became available through open APIsand in September 2020, the authorities along with relevant institutions agreed to promote further opening of public financial data and facilitate its use in the private sector. As a follow-up measure to the last years agreement, the authorities will further open up public financial data managed by the five aforementioned institutions to promote big data analytics through data convergence, etc. The newly added data types include information about stocks and bonds, funds, insurance products, microloan products, etc. The authorities expect that opening up financial data stored and managed by public financial institutions and relevant agencies will help promote innovation and contribute to job creation in the private sector. The authorities will continue to work to meet data demands and seek improvements in the provision of public financial data. * Please refer to the attached PDF for details.
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Sep 03, 2021
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Jul 06, 2021
- FSC Holds Symposium on COVID-19 Financial Policy
- The FSC and the Korea Institute of Finance co-hosted a policy symposium on the effectiveness of COVID-19 financial policy on July 6. FSC Chairman Eun Sung-soo attended the symposium and delivered a keynote address highlighting the progress of policy implementation and future policy direction. The following is a summary of Chairman Euns remarks. (COVID-19 Crisis Policy Response) In the wake of the COVID-19 pandemic, the government rolled out policies focusing on the prevention of risk transfer channels, provision of an exhaustive level of support and setting up firewalls in financial markets to help remove market anxieties. The authorities worked on stock market and bond market stabilization measures while prioritizing support for small-scale businesses. Financial support was extended to businesses of all sizes that have been hit by the pandemic. The KRW175 trillion-plus COVID-19 financial support programs were introduced to contain fear and anxiety in markets. This unprecedented level of financial support by the government helped to quickly stabilize the financial system, provide liquidity to small merchants and SMEs while preventing large-scale bankruptcies or job losses in key industries. As a result, the Korean economy saw the smallest negative growth last year while stock markets continue to set new record highs. In March this year, the IMF stated that Koreas decisive policy response has helped the country navigate the COVID-19 shock. (Future Policy Direction) In order to overcome the pandemic-induced crisis and be prepared for potential aftershocks, an orderly process for policy normalization is necessary. First, the government will maintain close monitoring on the status of virus prevention, real economy and financial market conditions as there still exist uncertainties, such as the spread of COVID variants. Second, the government will work to ensure financial stability by preemptively managing potential risk factors, such as an excessive accumulation of debt.
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Jul 02, 2021
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May 29, 2021
- FSC Chairman Delivers Opening Remarks at the Green Finance Special Session of P4G Seoul Summit
- FSC Chairman Eun Sung-soo delivered opening remarks at the special session on green finance held on May 29. Please see below for the full text of the speech. I. Introduction Good evening, everyone. Good afternoon, Europe. Good morning, America. Welcome to the 2021 P4G Seoul Summit Special Session on Green Finance. The world is still in the midst of the Covid-19 crisis. Covid-19 is not an individuals problem, nor a regions or a countrys problem. It is the whole humanitys problem. Likewise, climate change is everyones problem. In this regard, P4G puts emphasis on the value of partnerships across all sectors. I hope P4G Seoul Summit can induce everyone to take part in climate action. II. Why Green Finance? Achieving carbon neutrality involves a fundamental restructuring of industry. This might require trillions of dollars across the world. Many countries including Korea, have announced large-scale fiscal stimulus under Green New Deal schemes. However, public finance alone cannot cover the scale of investment we need. MDBs and private sector investors need to get involved as well. In a different angle, the financial industry can induce companies to lessen their environmental impact by altering the lending or investing criteria. For example, BlackRock, the worlds largest asset manager, evaluates a companys ESG performance when making an investment decision. III. Progress of Green Finance Green finance has been rapidly taking root in the global financial market over the past years. By the end of 2020, around 3,000 institutional investors have joined the UN Principles for Responsible Investment. Globally, ESG fund assets are nearing $2 trillion. Also, quarterly issuance of green bonds has risen to $150 billion. South Korea is also actively stepping up efforts to promote green finance. Last year, the government pledged to double the share of funding for green projects in public financial institutions by 2030. We are also planning to gradually make ESG data disclosures manda
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May 24, 2021
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May 06, 2021
- Adjustments Made to the Corporate Bond and CP Purchase Program for Low-rated Companies
- The FSC and the state-backed financial institutions announced that they will bolster support for low-rated companies through the pandemic-related support measures already put in place last year, which include a special purpose vehicle (SPV) aimed at purchasing low-rated corporate bonds and CP, primary collateralized bond obligations (P-CBOs) and the corporate bond and CP refinancing support program. In response to the spread of market anxieties in the wake of the COVID-19 pandemic, the government launched the corporate bond and CP market support programs covering businesses with credit ratings ranging from AA or above to A to BB. As a result, the corporate bond and CP markets have been stable thus far. However, there have been rising concerns about credit downgrades, limited support available through P-CBOs and the redundancy in the utility of some of the programs. As such, the authorities will make following adjustments to the programs to bolster support for SMEs. Key Measures (Support for low-rated businesses) First, more flexible eligibility requirements will be applied to low-rated companies. For the so-called fallen angels whose credit rating has declined after the announcement was made on the governments plan to operate an SPV on April 22, 2020, the provision of support will continue to be available for BB rated companies. For companies facing the risk of credit downgrades, state-backed financial institutions will provide comprehensive consulting services on their management status, financial structure, etc. (Temporary expansion of P-CBO support) First, individual companies sales cap will be expanded for SMEs that have seen their sales drop fifty percent or more and for low-rated (BB ratings) SMEs. The current standard of measuring their sales performance that is based on the estimated sales expected for the upcoming year will be changed to an arithmetic mean from the past three years. The sales cap on low-rated SMEs will also be expanded based on their fields
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May 03, 2021
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Apr 08, 2021
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Mar 25, 2021
- FSC to Closely Monitor Market Situations and Gradually Roll Back Crisis Response Measures
- Vice Chairman Doh Kyu-sang held the 37th financial risk assessment meeting via teleconference on March 25 and discussed the progress in the implementation of the COVID-19 financial support for small merchants and SMEs. The following is a summary of Vice Chairman Dohs remarks. (Pandemic Response Measures) In response to the COVID-19 pandemic, the government implemented a KRW175 trillion-plus emergency financial support package to provide support for small merchants and SMEs, stabilize financial markets and help businesses in key industries with liquidity shortages. Thanks to the active support shown by the financial institutions, markets quickly bounced back and financial difficulties experienced by small merchants and other vulnerable groups began to ease. On the Korean governments bold response to the crisis situation, the IMF in January this year released a positive assessment, and the OECDs recent growth forecast expects Korea to achieve a full recovery within this year. Bold and preemptive responses were effective given that the scale of policy response had to exceed market expectation at a time when extreme anxieties were spreading across markets. However, with signs of an economic recovery in the US, inflation expectations have been rising as well as the long-term bond yields. In this regard, the government will closely monitor market situations and work on preemptive management to prepare for a possible rate hike in domestic markets. In addition, there have been growing concerns about inappropriate trading activities in stock markets. There are active discussions going on in this regard at the National Assembly to strengthen penalties on unfair and inappropriate trading activities, such as price rigging. The government will closely cooperate with the relevant institutions to work on the prevention of inappropriate trading activities. (Maturity Extension Payment Deferral) Since April 1 of last year, all financial institutions made available maturity extensions
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Feb 26, 2021
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Feb 22, 2021
- FSC to Strengthen Liquidity Management of Specialized Credit Finance Companies
- The FSC announced a set of measures aimed at strengthening the liquidity management of specialized credit finance companies on February 22. The measures include (a) establishing best practice guidelines, (b) strengthening disclosure requirements and (c) gradually reducing the maximum leverage on credit finance (non-credit card) businesses. Background Specialized credit finance businesses are lenders without deposit-taking functions.They usually finance their business through borrowings or the issuance of corporate bonds and asset-backed securities (ABS). In particular, their heavy reliance on debt finance, about 73.9 percent of their financing,creates a problem of risk transfer to financial institutions holding their corporate bonds, especially if credit finance companies face solvency problems. In this regard, there have been concerns about credit finance companies turning into a conduit of systemic risk in times of an unexpected economic shock such as COVID-19. Therefore, liquidity problems of credit finance businesses can pose a risk not only to the borrowers with mid-to-low credit backgrounds but also to the real economy as they may cause a drop in consumption and corporate facility investment. Key Measures I. Best Practice Guidelines on Liquidity Management The best practice guidelines on specialized credit finance companies liquidity management will be introduced for implementation beginning in April this year. - (Target) Bond issuing credit finance companies and those with more than KRW100 billion in total assets will be subject to the new guidelines. - (Role of Board and Management) Board of directors should oversee the establishment and operation of liquidity management strategies and the company management should prepare specific management process and criteria and regularly report to its board members. - (Liquidity Risk Indicators) Major liquidity risk indicators include corporate bond maturity distribution, liquid asset ratio, short-term debt ratio, etc.
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Feb 01, 2021
- FSC Announces Plans to Improve Competitiveness of Publicly Traded Funds
- The FSC unveiled specific plans to improve the competitiveness of the publicly traded fund market on January 29, with an aim to make the sales and management process more investor-oriented. The plans include (a) increasing the accountability and efficiency of fund management, (b) making the sales process more investor-oriented, (c) encouraging the introduction of diverse types of funds and (d) strengthening support for investors. BACKGROUND Publicly traded funds serve as an importance source of asset management for the general public, allowing small-sum investment and fit for medium risk/medium return appetite. They are also important as they provide capital to productive sectors and help to spread out the real estate-oriented household asset structure. However, the volume of publicly traded funds has stagnated recently as retail investors have become less inclined to invest in publicly traded funds due to the availability of private equity funds, equity-linked securities and other competitive products as well as the relatively low returns, cost burdens related to sellers compensations and fees, inappropriate fund management practices, etc. Meanwhile, amid a low interest rate environment and abundant market liquidity, the general publics interest in financial investment has grown, particularly in direct investing. Over the past 10 years, the volume of private equity funds grew 268.3 percent while that of publicly traded funds rose only 38.3 percent. Stock funds except exchange-traded funds (ETFs) fell 53.2 percent while ETFs and money market funds (MMFs) rose 759.0 percent and 57.3 percent, respectively. The stagnant development of the publicly traded fund market can be attributable to (a) the subpar performance of fund management in generating returns, (b) the declining trust on fund sellers, (c) the lack of diversification in the types of funds and (d) the lack of adequate support for investors. Against this backdrop, the authorities will seek following strategies
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Jan 25, 2021
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Jan 19, 2021
- FSC Announces 2021 Work Plan
- The FSC unveiled its work plan for 2021 on January 18, highlighting the four areas of policy tasks as follows(a) maintaining the COVID-19 financial support and managing potential risks, (b) supporting K-New Deal initiatives for a green and digital economy, (c) promoting financial innovation and digital finance and (d) strengthening financial consumer protection and support for vulnerable groups. KEY ACHIEVEMENTS IN 2017-2020 A. STEADY MAINTENANCE OF FINANCIAL STABILITY AMID COVID-19 PANDEMIC Over the past four years, the FSC has focused on maintaining stability in the financial system as its utmost policy priority. In the wake of the COVID-19 pandemic, the FSC responded by quickly drawing up and providing financial support packages worth KRW175 trillion-plus and worked to prevent the crisis from spreading further into the financial markets. B. SUCCESSFUL CHANNELING OF FUNDS TO PRODUCTIVE SECTORS The FSC has worked to expand the supply of capital into more productive sectors by introducing innovative ways to assess corporate credit and through revisions to the relevant capital markets rules. In addition, the public sector has provided equity-based funding sources via growth ladder fund and other government-backed financing channels. C. ACTIVE PROMOTION OF COMPETITION AND INNOVATION IN FINANCIAL INDUSTRY The FSC has granted new business licenses to internet-only banks, insurance firms and real estate trust companies based on an industry-level competition assessment. In order to promote and expand financial innovation, the FSC has also worked to establish the necessary infrastructures, including the regulatory sandbox, open banking and MyData in financial services. D. ENHANCED INCLUSIVENESS VIA MICROFINANCE SUPPORT AND CONSUMER PROTECTION The FSC has worked to reduce the interest payment burdens of lower income households by lowering the maximum interest rate that can be charged on loans from 24% to 20%. E. IMPROVED FAIRNESS BASED ON RULES AND PRINCIPLES The FSC has al
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Jan 12, 2021
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Dec 24, 2020
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Dec 09, 2020
