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Dec 19, 2022
- FSC Unveils Measures to Improve the Soundness of IPO Market
- The FSC unveiled measures to bolster the soundness of the initial public offering (IPO) market. The key measures include (a) allowing bookrunners to test the waters through demand survey to determine an appropriate price band of an IPO, (b) making bookrunners check institutional investors abilities to pay for stocks under their responsibility and, after that, accept subscriptions and carry out allotment of shares, and (c) increasing the limit range of the quotation price on the day of IPO to promote formation of an equilibrium price early on. Background An initial public offering (IPO) is a gateway for unlisted firms going public as well as an essential mechanism in capital markets. In this regard, it is important to make sure that price discovery function in public offering markets works properly and enables investors to make stable investments at fair value. Although the recent IPO market boom has somewhat subsided, the following behaviors that threaten a sound order in the market still exist. First, it can be challenging to determine the right price band for an IPO because assessing how market demand will change as an IPO price shifts remains difficult. Second, at the subscription stage, investors subscribe in shares which far exceed the actual demand to secure the portion of shares they hope to get allocated. Such actions set up a vicious cycle where investors fictitiously oversubscribe, resulting in excessive competition, which in turn leads to oversubscription. Third, after going public, there are worries about harm to investors from the phenomenon where stock quotation prices immediately reach the upper limit price on the first day or on the first and second days of an IPO, causing a situation of de facto transaction halt, and then collapse. Against this backdrop, in order to ensure that the IPO market can serve its original goal of helping unlisted firms entry into public offering markets and to promote the development of the IPO market based on more fairnes
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Dec 01, 2022
- Authorities Plan to Disclose Identity of Entities Committing Unfair Trading Practices
- As a way to bolster prevention of unfair trading practices in capital markets, the FSC plans to disclose the identity (corporate name, etc.) of those who violate capital market regulations such as restriction of short sales and prohibition of market disturbances and receive a disposition of a penalty surcharge or an administrative fine for that violation. This measure shall apply to the violators receiving sanctions at the 22nd regular meeting of the Securities and Futures Commission (SFC) scheduled to be held in December 2022. Their identities will be announced through the FSC website in February 2023. Background The FSC has gradually extended the scope and detailsstock items, dates and penaltiesof disclosure of the SFC resolutions on sanctions that are made available for unfair trading practices in capital markets. However, the identity of violators is not being disclosed currently due to the potential misuse of their corporate or individual financial transaction information by a third party. Nonetheless, there is a growing need to secure effectiveness of sanctions measures imposed on unfair trading activities in capital markets such as illegal short sales. Therefore, after a careful consideration, the FSC decided to expand the scope and details of disclosure of sanctions by unveiling the identity of violators. Disclosure of Identity of Entities Violating Capital Market Regulations If an investigation led by financial authorities ends up with sanctionsof imposing a penalty surcharge or an administrative fine, the identity (corporate name, etc.) of the violator will be unveiled. Although the violators that become subject to sanctions are mostly corporate entities, in some cases, individuals also become subject to sanctions when they commit unfair trading practices such as activities of disturbing market order. If unfair trading activities in capital markets under the investigation led by financial authorities are subject to criminal punishment,in consideration of t
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Nov 29, 2022
- Taskforce on Improving Internal Control of Financial Companies Announces Interim Results
- The taskforce on improving rules regarding financial companies internal control announced its interim discussion results on November 29. The key discussion details focus on strengthening the role and responsibility of chief executives, boards of directors and executive officers over their companies internal control affairs to boost the effectiveness of internal control mechanisms. Background Pursuant to the requirement for internal control standards and procedures (Article 24-1) prescribed under the Act on Corporate Governance of Financial Companies, all financial companies are currently operating their own internal control mechanism to prevent illegal activities committed by their executive officers or employees and the like. It is aimed at avoiding the risk of potential loss in the future and erosion of a companys reputation related to the soundness of company management and consumer protection. Since its introduction, there is an increased level of awareness throughout financial sectors about the significance of internal control. However, in reality, as setup and operation of an internal control system requires considerable efforts and costs, different companies have different levels of internal control standards and procedures, which vary significantly depending on the business strategy and willingness of the management. The more a company focuses on short-term performances, the more its internal control will remain perfunctory, which will probably prove inadequate in its function and effectiveness for the operation in the field. In particular, the successive occurrence of a number of financial accidents such as incomplete sales of financial products and large-scale embezzlement recently has raised the awareness and concerns about internal control of financial companies. Apart from inflicting losses to consumers and shareholders, financial accidents can have a significant impact on the overall health of the economy and society with a degradation of trust in fina
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Nov 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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Oct 26, 2022
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Oct 26, 2022
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Oct 20, 2022
- Scope of Data Categories for Financial MyData Service to be Expanded
- The FSC announced a plan to expand available data on financial MyData service from the end of this year. The number of personal data categories will grow significantly from 492 to 720, which can cover most financial sectors including banks, insurers, card companies, financial investment firms and public financial institutions. A demand survey on MyData service providers in March 2022, which was conducted right after the launch of financial MyData service in last January, revealed additional data categories that need to be added. To insert these categories into MyData ecosystem, many data providers like financial industry groups, financial institutions and MyData service providers voluntarily organized MyData taskforce to discuss mutual development and cooperation. Between April and August this year, the taskforce held over 40 meetings and reached an expansion plan. MyData portal (www.mydatacenter.or.kr) will provide information on new service offerings and service improvement of MyData service providers, enabled by this expansion of data categories available. Achievement So Far (Penetration of MyData Service) Since the launch of financial MyData service on January 5 this year, financial MyData service has grown rapidly. The cumulative number of subscribers grew to about 54.8 million (in September 2022), increased about 3.9 times from about 14 million users in January. The volume of API (Application Programming Interface) transfers per day went up from 274 million at the end of January to about 384 million at the end of September. The number of MyData service providers also increased from 33 to 52 for now. (Enhanced Consumer Convenience) Financial MyData service made data ecosystem more consumer-oriented where financial consumers can quickly and conveniently access a variety of their personal data scattered around financial sphere with a single sign-on. As data sharing practice changes from indiscriminate data scraping to formal data transfer under consumer acknowled
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Oct 05, 2022
- Relief Conversion Loan Available for Mortgagors Owning Houses Worth KRW400 Million or Less
- The FSC announced that mortgage holders owning only one house which is worth KRW400 million or less can apply for Relief Conversion Loan from Thursday, October 6 (The application period already started on September 15 for mortgage holders owning house worth KRW300 million or less). This preferential Relief Conversion Loan program which covers KRW25 trillion in total loan amount offers eligible mortgage holders to refinance their adjustable-rate or mixed-rate mortgages to those with long-term maturity, fixed interest rate and monthly principal payments. Application for Relief Conversion Loans will be accepted from October 6 to 17.Exact date will be allocated like the table below according to the last digit of birth year on applicants resident registration number (RRN). Depending on the type of the institution an applicant borrowed from, the institution receiving the application differs. When an original lender is Kookmin, Shinhan, Nonghyup, Woori, Hana Banks or Industrial Bank of Korea, the applicant should submit to the original lender. However, when an original issuing institution is other bank or nonbank financial institution, the application should be submitted to Korea Housing Finance Corporation. Applicants need to keep in mind the following factors before application. a) Check the type of benchmark rateyour mortgage uses and its adjustment periodas well as trends in benchmark rates to understand when your interest rate will be adjusted next and how much your benchmark rate will be increased during the interval. b) Decision to apply for Relief Conversion Loan should be made after comparing the expected interest rate of the forthcoming adjustment datenot your current interest ratewith the interest rate of Relief Conversion Loan. c) If interest rates fall in the future and then a borrower wishes to switch Relief Conversion Loan to another mortgage loan that offers a lower interest rate, a refinancing is possible without burden of an early termination fee. If the
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Sep 30, 2022
- Measures to Soft Land Loan Maturity Extension and Payments Deferment for Self-employed and SMEs
- The government and financial institutions decided to provide loan maturity extension for up to three more years and payments deferment for up to one more year for the borrowers currently using these programs.While providing sufficient time for the self-employed and SMEs to recover their repayment capabilities, authorities will ensure thorough protections for those who are unable to recover on their own with New Start Fund for the self-employed and a debt adjustment program for SMEs. During the extended period, loan forbearance programs will allow businesses to draw up their repayment plans tailored for individual situations in consultation with financial institutions. This will help ease the concern about financial institutions financial soundness and support soft landings for both borrowers and financial institutions. Overview Since April 2020, the financial authorities and financial institutions have made available loan maturity extension and principal or interest payments deferment for SMEs and small merchants experiencing temporary liquidity shortage from COVID-19. As businesses continued to incur damages from COVID-19, the maturity extension and payments deferment program has been extended six-month each for four times over the past two and a half years. Financial institutions have provided forbearance support for KRW362.4 trillion loan through this program till June 2022. As of the end of June 2022, 570,000 borrowers and KRW141 trillion loans are still under this support. Evaluation on Current Situation After COVID-19 business restrictions were completely lifted on April 18, business conditions for the self-employed and SMEs are gradually returning to normal. However, deterioration in economic and financial conditions such as rising interest rates, high price level and falling currency value delays a full recovery. Amid slow business recovery, there is a concern that the self-employed and SMEs may default on their debts if the loan maturity extension and payme
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Sep 26, 2022
- KoFIU Unveils H1 2022 Survey Result on Virtual Asset Service Providers
- The Korea Financial Intelligence Unit (KoFIU) conducted a survey on 35 registered virtual asset service providers (VASPs) in order to see the current state of the domestic virtual asset market. Survey Overview (Respondents) 35 VASPs (26 exchange service providers and 9 other businesses) (Survey Method) Collect data from VASPs by paper surveys (Period Covered) January 1, 2022 to June 30, 2022 Key Survey Findings for H1 2022 The domestic market for virtual assets in H1 2022 has been downsized significantly compared to that of H2 2021 in terms of market capitalization, trading volume, etc.This seems to be caused by a slowdown in economic activities following the crisis in Ukraine, interest rate hikes and decreasing liquidity as well as falling level of confidence in virtual assets in the wake of the Terra-Luna crash. Total sales profits gained by VASPs stood at KRW630.1 billion, a drop of 62 percent compared to KRW1.6 trillion in H2 2021. According to the survey, the number of virtual assets traded in domestic market was 1,371. When excluding duplicates on multiple exchanges, the number of virtual assets stood at 638, and among them, the number of stand-alone virtual assets listed and traded on a single exchange was 391 (or 61 percent). The proportion (% of market capitalization) of the global top ten virtual assets handled by the KRW-based exchange service providers increased from 41 percent to 47 percent, while the proportion (% of market capitalization) of stand-alone virtual assets increased from 84 percent to 86 percent for the coin-only exchange service providers. About 36 percent of stand-alone virtual assets (or 139 of them) were small-scale in their size with market capitalization of KRW100 million or less. For these small-scale virtual assets, users need to practice caution as they may be prone to abrupt price volatilityand liquidity shortage. As of the end of June 2022, the number of users eligible to trade in virtual assets stood at 6.9 million. The amount
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Sep 13, 2022
- Ex-ante Disclosure Rule to be Introduced for Insider Transactions
- The FSC announced a plan to introduce an ex-ante disclosure for stock transactions by company insiders (board members or principal shareholders) which have been subject to only the ex-post disclosure rule thus far. Insiders of listed companies who plan to sell or purchase shares issued by his/her own company within a given year will need to disclose the purpose, price and volume of trading as well as expected trading period at least 30 days before the expected trading date. For nondisclosure, disclosure of false information or failure to comply with the trading plan, authorities will prepare effective compliance measures depending on the severity of violation such as a criminal penalty, fine, administrative action, etc. Introducing ex-ante disclosure is expected to enhance information transparency and market predictability regarding insider stock trading, thereby helping to ease market volatility. Since this measure is a closely anticipated policy task of the new administration, the financial authorities will make efforts to promptly prepare and submit a revision proposal of the Capital Markets Act to the National Assembly. Background Large-scale stock offloading by insiders such as board members of listed firms, etc. causing abrupt fall in stock prices has continued to present a source of discontent for investors and a concern for the society.Some ordinary investors suspect that company insiderswho have the ease of access to undisclosed company informationhave been using that information to pocket personal profits while ordinary investors are burdened with losses. Faced with this problem, the FSC has strengthened safeguards for ordinary investors by improving the rule in March this year to restrict stock sales for six months (a lock-up period) from the time of company being listed even for shares that have been acquired by exercising stock option. However, this measure alone cannot regulate sales of stocks by insiders after the lock-up period (six months) and that
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Sep 05, 2022
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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 08, 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
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Jul 28, 2022
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Jul 13, 2022
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Jul 06, 2022
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Jul 04, 2022
- FSC and FSS Decide to Implement Measures to Mitigate Stock Market Volatility
- In response to a recent increase in stock market volatility, the financial authorities held a market monitoring meeting on July 1 and decided to take measures to mitigate market volatility. (a) Requirement for securities firms to maintain a certain level of collateral ratio on their credit loans will be exempted for three months starting from July 4, which may be extended if needed. (b) Caps on the amount of daily buy orders for acquisition of treasury stocks by listed companies will be eased for three months starting from July 7, which may be extended if needed. (c) The FSS and KRX will jointly conduct a special inspection on short-selling practices. Financial authorities will continue to monitor financial market conditions, holding a joint market monitoring meeting on a weekly basis, and consider or implement market volatility mitigation measures, if needed, in accordance with contingency plans. Background With the KOSPI falling below 2,300 points during intraday trading on July 1, Koreas stock market has shown continued and increasing volatilityon concerns over rising interest rates, expanding inflation, possibility of a global economic recession, etc. Although increased stock market volatility will be inevitable for a while, given macroeconomic conditions at home and abroad, it is necessary to stay alert about the spread of excessive market anxieties. Measures To Mitigate Stock Market Volatility The FSC and FSS held a joint market monitoring meeting with relevant securities institutionschaired by FSC Vice Chairman Kim So-young to examine financial market conditions after the market closing on July 1, and decided to implement the following measures to mitigate market volatility. (a) For three months from July 4 to September 30, which may be extended if needed, securities firms will be exempted from a requirementto maintain a certain level of collateral ratios on their credit loans in order to ease concerns about a surge in forced liquidation with declining stock
