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Nov 07, 2016
- FSC Holds Emergency Meeting on Financial Markets
- FSC Chairman Yim Jong-Yong convened an emergency meeting with top officials from the FSS and other relevant financial organizations to respond to recent uncertainties in financial markets at home and abroad. Followings are key messages from his opening remark: The Korean economy is now facing internal and external challenges with slump in exports; slow recovery in domestic consumption; and household and corporate debt risks. However, our economy has sound fiscal health and strong fundamentals to weather these challenges. The government maintains fiscal soundness with its debt-to-GDP ratio of 35.5% at the end of 2015, which is the 4th lowest among 31 OECD countries. South Korea has the world’s 7th largest foreign currency reserve. Its short-term external debt accounts for only 29% of the foreign currency reserve, as of the 2nd quarter of 2016, which is much lower than 74% at the end of 2008. The financial system is resilient enough in terms with capital adequacy and asset soundness of financial institutions. The government will stay alert to internal and external uncertainties and take bold and preemptive measures, if necessary, to prevent any of risk factors from spilling over into a wider financial system to threaten our economy. Starting from today, the FSC and the FSS go into an emergency operation mode with a 24-hour monitoring on financial markets, in a close cooperation with the Ministry of Strategy and Finance, and the Bank of Korea. If necessary, we will take market stabilizing measures in accordance with contingency plans in a timely manner. We will continue to respond to household and corporate debt risks in a preemptive manner. For household debt, the government will continue our effort to improve soundness of household debt by holding the principle of ‘debt should be borrowed within repayment ability and paid back in installments.’ We will also closely monitor and respond to rapid growth of household debt in non-banking sectors. For ong
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Sep 26, 2016
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Sep 09, 2016
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Sep 06, 2016
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Sep 02, 2016
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Aug 31, 2016
- FSC Statement on Hanjin Shipping's Filing for Court Receivership
- FSC Vice Chairman Jeong Eun-bo held a meeting on August 31 with officials from relevant agencies to discuss the possible government’s responses following Hanjin Shipping’s decision to file for court receivership. 1. Impact on financial market will be limited.Hanjin’s filing for court receivership will have only limited impact on financial markets as the event has been already reflected to a considerable extent in the process of restructuring. In the stock market, Hanjin Shipping accounts for 0.03%, worth KRW 401 billion, of Kospi’s market capitalization. Its share price has declined 53.8% from KRW 3,540 per share on January 2 to KRW 1,635 on August 29, 2016. The impact on corporate bond market will be limited as credit ratings of Hanjin Shipping and Korean Air Lines already factored in the event. 2. Impact on financial institutions and corporate bond investors will be limited as well. Creditor banks have set aside loan loss provisions against most of possible losses. The additional amount of loan loss provisions the banks need is estimated to be KRW 0.3 trillion as Hanjin Shipping files for court receivership. The outstanding issuance of corporate bonds has continuously decreased in the restructuring process so far from KRW 2.2 trillion at end-2013, KRW 1.7 trillion at end-2014, KRW 0.8 trillion at end-2015, to KRW 0.5 trillion at end-June, 2016. Most of issued bonds are held by institutional investors. 3. The government will promote acquisition of Hanjin Shipping’s healthy assets by Hyundai Merchant Marine in a bid to maintain competitiveness of the shipping industryIn response to the market concern over the shipping sector, one of Korea’s key industries, the government will make sure to maintain the shipping industry’s competitiveness. Hyundai Merchant Marine (HMM) would acquire Hanjin Shipping’s core assets such as ships, overseas sales network and key work forces to retain Hanjin Shipping’s competitiveness as much as possible. 4. The government
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Aug 30, 2016
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Aug 26, 2016
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Aug 22, 2016
- Government Decides to Sell Its 30% Stake in Woori Bank to Multiple Buyers
- The Public Fund Oversight Committee (PFOC) decided to sell the government’s 30% stake in Woori Bank to multiple buyers with an aim to close the deal by the end of this year. Since the PFOC announced its two-track approach in July 2015 , the government has been tapping demand for the both options. We found that it would be difficult to proceed with the plan of selling a controlling stake to a single buyer under the current market situation, while there is considerable potential demand for acquiring a smaller stake. As a result, the PFOC came to a conclusion that selling the government’s stake to multiple buyers in a smaller stake of 4 to 8% each is the best option to sell Woori Bank in a swift manner, while maximizing the recovery of public funds and contributing to further development of the financial industry. 1. (Shares for sale) 30% out of 48.09% owned by the Korea Deposit Insurance Corporation (KDIC) will be put up for sale2. (Minimum and maximum bidding volume) Minimum bidding volume is 4%, including the percentage of the shares bought in previously. The bidding volume cannot exceed 8%, excluding the previously-bought shares. However, under the Banking Act, non-financial companies must acquire FSC approval in order to buy a stake more than 4% and are not permitted to acquire a bank’s stake exceeding 10%.3. (Competitive auction) The bidding will proceed in competitive auction scheme. In principle, the shares will be sold to the highest bidders, however, the PFOC will take into account factors other than bidding price considering the winning shareholders’ potential influence on Woori Bank’s management. Further details of non-price factors will be decided by the PFOC.4. (Incentives for final bidders) A winning bidder who newly acquired more than 4% will be granted right to recommend one outside director. The PFOC will devise differentiated incentives for bidders depending on their bidding volume in order to encourage bidders to bid for a larger amount of
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Aug 02, 2016
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Jun 24, 2016
- FSC Meeting on Financial Market Stability after UK's Decision to Leave the EU
- As it seems inevitable that the ‘Brexit’ decision would have short-term impact on financial market, financial authorities will respond in a swift and decisive manner to developments in financial markets. The government will monitor international and domestic financial market conditions around the clock while strengthening communication with global IBs and foreign media. The FSC/FSS will immediately form and operate a contingency response team led by the FSC Secretary General to strengthen monitoring and respond preemptively to possible volatility in financial markets. The government will also review its contingency plan to ensure that the detailed action plans are executed without any delay in case of abrupt financial market turmoil.In particular, the government will closely monitor domestic banks’ foreign currency liquidity conditions and make sure that they are well prepared to respond to market developments. The government views that the Korean economy is resilient enough to withstand possible impact of the Brexit decision on global financial market, given its strong economic fundamentals and financial soundness. * short-term external debt / total external debt: 43.1% (2009), 34.9% (2011), 26.4% (2013), 27.4%(2015) * short-term external debt / total foreign reserve: 52.0% (2009), 45.6% (2011), 32.3% (2013), 29.1% (2015) * current account surplus/ GDP: 3.7% (2009), 1.6% (2011), 6.2% (2013), 7.7% (2015) We ask investors not to overreact to temporary increase in financial market volatility and remain calm to future market developments from a mid-to long-term perspective with confidence in the Korean economy’s fundamentals. * Please read the attached file for details.
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Jun 16, 2016
- Foreign Currency Liquidity Coverage Ratio (LCR) Will Apply to Banks from 2017
- The FSC will introduce foreign currency liquidity coverage ratio (LCR) rule starting 2017, which requires commercial banks to hold 60% of their foreign exchange debt in high-quality liquid assets (HQLA) to withstand a 30-day net cash outflow in systemic risks. The FSC/FSS adopted the foreign currency LCR in 2015 as a guideline to monitor banks’ foreign exchange liquidity risks, in accordance with the Basel III recommendation. Since then, commercial banks have been advised to maintain the foreign currency LCR of at least 40% in 2015 and 50% in 2016. From next year, banks will be required to comply with the foreign currency LCR rule. - The foreign currency LCR rule will apply to all banks with the exception of:(i) commercial banks with foreign exchange debt of less than 5 % of their total debt and USD500 million or less in foreign exchange debt; (ii) Export-Import Bank of Korea (KEXIM); and (iii) branches of foreign banks operating in Korea. - The foreign currency LCR for commercial banks will be set at 60% in 2017, increased gradually to 70% in 2018 and 80% in 2019. * Specialized banks – IBK, Nonghyup Bank and Suhyup Bank – will be applied the foreigncurrency LCR of 40% in 2017, 60% in 2018 and 80% in 2019. * KDB will be subject to less stringent LCR requirement, given its special role as a state lender. (40% in 2017, 50% in 2018, 60% in 2019) - Banks will be required to calculate their foreign currency LCR each business day and maintain a monthly average of the ratios above the minimum requirement. - The ratio may be lowered by FSC approval for a temporary period of time in a crisis in order to prevent banks from reducing their foreign exchange liquidity provision. - Overlapping regulations – e.g. seven-day and one-month maturity mismatch ratio requirements, three-month foreign exchange liquidity requirement – will be abolished or replaced by the foreign currency LCR. For the next six months, the FSC will gather opinions from the banking sector about the p
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Jun 15, 2016
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Jun 08, 2016
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May 24, 2016
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May 20, 2016
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Apr 26, 2016
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Mar 30, 2016
- FSC Announced CCyB Rate for Korea
- The Basel Committee on Banking Supervision set global regulatory standards of bank capital adequacy and liquidity, including Countercyclical Capital Buffer (CCyB), on December, 2010, in order to protect the banking sector against excessive aggregate credit growth that have often been associated with the build-up of systemic risks. Therefore, the Financial Services Commission established the domestic regulatory basis for CCyB on December 16, 2015, with the amendment to the Regulation on Supervision of Banking Business.The FSC announced its first CCyB rate for banks and bank holding companies in Korea, with effect from March 31, 2016. At present, the buffer rate is set at 0% considering the current sequence of credit-to-GDP gap, macroeconomic conditions, coordination with relevant fiscal and monetary policies, and the current CCyB implementation cases of the other countries.The FSC will continue to check whether the Korean banking sector is in an appropriate position in light of the current credit growth and system-wide risks, and will adjust the buffer rate if necessary. Furthermore, the FSC will conduct its quarterly review based on analyses and data provided by Financial Supervisory Service, in which the result will be shared with the policy-relevant institutions, such as Ministry of Strategy and Finance and the Bank of Korea.*Please read the attached file for details
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Mar 24, 2016
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Mar 14, 2016
- Introduction of Korea's Individual Savings Accounts (ISAs)
- Korea’s Individual Savings Accounts (ISAs) were introduced on March 14, 2016, in which individuals can invest into various financial products such as savings, funds and derivative-linked securities. Previously, individuals had to open separate accounts for each financial product. The introduction of ISAs is expected to help individuals build an investment portfolio tailored to their risk appetite and investment purpose and manage their wealth more efficiently with the aid of asset management experts. ISA products are now on sale starting from March 14 through branches of 33 financial institutions – banks, securities firms and insurers. TYPES OF ISASThere are two types of ISAs: a trust-type product and a discretionary investment product. ▪ Trust-type ISAs The trust-type ISA is aimed at individuals who want to choose financial products to be included into their accounts on their own. Without the account holder’s direction, financial institutions cannot change the composition of investment portfolio. ▪ Discretionary ISAs The discretionary ISA is targeted for those who want to let asset managers manage their money. Financial institutions provide clients with model portfolios, considering their risk appetite and investment purpose. The client is then supposed to pick one of the model portfolios to let asset managers on behalf of them choose products to be included in the account. Without the account holder’s direction, financial institutions are allowed to rebalance assets within the account every quarter, evaluating profitability and safety of such assets. ※ Since only one ISA is allowed per person, individuals have to choose either a trust-type ISA or a discretionary ISA, considering which type of the ISAs is more suitable for themselves. WHAT PRODUCTS CAN BE INCLUDED IN ISAS▪ Savings products – savings and installment savings with banks and mutual savings banks; deposits with mutual financial institutions; and RPs▪ Investment products – public of
