Press Releases - Financial Services Commission

Press Releases

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Apr 19, 2021

Improved Securities Lending System for Retail Investors to Come into Place from May 3

The FSC announced that the improvements made to the securities lending system for retail investors will come into place from May 3, 2021. From May 3, seventeen securities firms will begin to provide stock lending services in the amount of about KRW2 trillion to KRW3 trillion. Retail investors wishing to participate in stock short selling are required to complete pre-learning and mock trading programs which will be available from April 20. Based on the level of experience of individual investors, the maximum investment amount allowed for short selling will be differentially applied. Key Details Retail investors access to stock short selling has been limited as a shortage in securities lending led to the decline in the demand for stock borrowing and number of securities firms offering such service. As of the end of February 2020, securities lending services were available from only six securities firmsin the amount of about KRW20.5 billion. In order to improve retail investors access to stock short selling, the FSC and financial investment businesses will begin to offer more opportunities for stock borrowing. A total of twenty-eight securities companies will provide securities lending services. However, as these companies have different schedules for completing the development of their IT system, from May 3, stock lending service will be available from seventeen securities firms first with the rest expected to join within this year. As such, it is expected that a total of KRW2.4 trillion in stock lending will become available for KOSPI 200 and KOSDAQ 150 stocks on May 3.For retail investors, a maximum of sixty days of stock borrowing period is guaranteed unlike institutional or foreign investors. Safeguards and Regulations for Retail Investors The following safeguards have been put in place to bolster investor protection against excessive loss. First, investors should have securities lending agreements with their trading firms and those without an existing account nee
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Mar 11, 2021

FSC Announces Revisions to the Supervisory Regulation on Insurance Business

The FSC announced revisions to the supervisory regulation on insurance business on March 11 to prepare for the implementation of the revised Insurance Business Act which is expected to take effect on June 9, 2021. The revised regulation will go into effect in the first half of this year. Key Revisions I. Disclosure Rules Regarding Litigation Information Currently, insurers are required to disclose information about the number of litigations on insurance claims and the rate of claims payments vis--vis litigations. In order to prevent insurers from misusing the litigation process against the underaged or financially vulnerable customers, the revised regulation will expand their disclosure requirements to include information about how many times they have convened litigation control committee meetings as well as their decisions. II. Insurance Coverage Period on Small-sum Short-term Insurance Policies As small-sum and short-term insurance products are still at an early stage of being introduced, their coverage period will be limited to one year to ensure consumer protection. III. External Evaluation on Policy Reserves Under the revised Enforcement Decree, insurance firms are required to have external actuaries approve the appropriateness of their policy reserves.In this regard, the result of external evaluation should be submitted to the Financial Supervisory Service, which may in turn request a re-evaluation. IV. Foreign Exchange Position Limit Currently, the foreign exchange position limit of insurance companies is set at twenty percent of the total adjusted capital. The revised regulation will increase this to thirty percent of the total adjusted capital as the foreign exchange position limit of insurance companies has remained low compared to other financial sectors, such as banks and financial investment businesses. * Please refer to the attached PDF for details.
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Feb 03, 2021

FSC Announces Decision on Short-selling Ban

FSC Chairman Eun Sung-soo held a press briefing on February 3 and announced the decision to extend the short-selling ban until May 2, 2021 and to allow a partial resumption of short-selling from May 3 on KOSPI 200 and KOSDAQ 150 stocks. Summary of Chairmans Remarks (FSCs Decision) The FSC has decided to extend the current short-selling ban until May 2 this year and allow a partial resumption from May 3 on KOSPI 200 and KOSDAQ 150 stocks. The partial resumption is intended to minimize the impact on markets, given these stocks have large market caps and liquidity so that the resumption of short-selling would have limited impact on stock prices. Meanwhile, the short-selling ban will remain on the rest of stocks (2,037 stock items) with further decisions on the resumption of short-selling on these stocks to be made later based on market conditions. The resumption date of May 3 has been decided to give the Korea Exchange (KRX) some time for system development and testing. With the revised Financial Investment Services and Capital Markets Act scheduled to go into effect on April 6 this year, with stronger penalty rules for illegal short-selling activities, there will be no issue of a legislative gap. Today, the FSC commissioners raised the same voice on the need to improve the short-selling system as there are investor demands for more transparency and fairness in the short-selling system. (Improving the Short-selling System) Prior to the May 3 partial resumption, the FSC will work on measures to improve the short-selling rules. First, The FSC will work to ensure the detection of and punishment on illegal short-selling activities. With the revised Financial Investment Services and Capital Markets Act, short-sellers will be required to keep their securities lending data for five years and the securities firms will be required to tighten monitoring of illegal short-selling activities. The securities firms are currently in the process of getting their systems ready according
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Feb 03, 2021

Financial Industry Policy Agenda to Focus on COVID-19 Recovery and Financial Stability

The FSCs Financial Industry Bureau announced its specific policy agenda for this year, which aims to support COVID-19 recovery and ensure financial stability while seeking innovation in the financial industry. The key policy tasks are the following(a) bolstering pandemic response and risk management, (b) improving the role of region-based and microfinance institutions, (c) strengthening the competitiveness of the financial industry and (d) facilitating digital innovation in the financial industry. Policy Tasks A. Pandemic Response and Risk Management (1) Prepare measures for a gradual rollback of the pandemic-related temporary financial support programs - (Maturity extension, etc.) Introduce plans for loan maturity extension and deferment of payments currently in place to cope with COVID-19 (Feb 2021) - (Temporary deregulatory measures) Review whether to extend the period of the temporary deregulatory measures put in place due to the COVID-19 pandemic - (Loss absorbing capacity) Require financial institutions to maintain a sufficient level of loss absorbing capacity through loan loss provisions and dividend limits (2) Strengthen risk management in the non-banking sector - (Credit finance companies) Introduce measures to more effectively manage liquidity risks - (Savings banks) Introduce capital buffers (+2%p) to boost their loss absorbing capacity in a preemptive way - (Mutual finance companies) Strengthen management on large loans (March 2021) (3) Prepare for the implementation of IFRS 17 - (Impact analysis) Conduct an impact analysis on insurance companies regarding the implementation of IFRS 17 and the new accounting standards (K-ICS) from 2023 (within 2021) - (Implementation capabilities) Ensure a seamless implementation of K-ICS through a gradual application and by allowing insurance companies capital expansion - (Law revision) Introduce revisions to the Insurance Business Act to prepare for the implementation of IFRS 17 from 2023 (H2 2021) B. Region-based and
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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 14, 2021

FSC Plans to Improve Corporate Disclosure Rules

Vice Chairman Doh Kyu-sang held a meeting with industry officials and experts via teleconference on January 14 and discussed the government’s plans to improve rules on corporate disclosure.The following is a summary of Vice Chairman Doh’s remarks.BACKGROUNDAs the pandemic situation continues, there are growing uncertainties throughout the economy and rapid changes are taking place in the business management environment. As such, the accuracy and promptness in corporate disclosure has become ever more important. Considering a surge in retail investors’ participation in stock markets last year, the disclosure rules need to be improved to allow retail investors to more easily understand disclosure information while reducing filing burdens for companies. In addition, with growing significance of environmental, social and governance (ESG) factors and responsible investing, it is necessary to set up an appropriate regulatory environment.PLANS FOR IMPROVEMENTI. IMPROVE INVESTOR CONVENIENCE IN USING DISCLOSURE INFORMATIONThe required criteria for company disclosure reports and the categorization system will be changed and redundancy will be removed to help improve retail investors’ understanding of disclosure information. An easy-to-understand information booklet will also be published for retail investors. In addition, the Data Analysis, Retrieval and Transfer (DART) System managed by the Financial Supervisory Service will be improved to make it more user-friendly with the introduction of more useful menu categories and enhanced search capabilities.II. REDUCE COMPLIANCE BURDENS FOR BUSINESSESQuarterly reports which have placed relatively heavy burdens on companies will be simplified to contain only key disclosure information, reducing the current requirement items by about forty percent. In addition, corporate filing burdens will be reduced for a greater number of smaller sized companies. III. PROMOTE ESG/RESPONSIBLE INVESTINGThe Korea Exchange will provide a guida
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Jan 13, 2021

FSC Grants Preliminary Financial Investment Business License to IMC Trading BV

The FSC decided to grant a preliminary financial investment business license to IMC Trading BV, a Netherlands-based trading firm on January 13. It marks the first approval of a foreign-based trading firm in three and a half years.Based on the application processing results by the Financial Supervisory Service, the FSC decided that IMC meets the requirements set forth by the Financial Investment Services and Capital Markets Act.The entry of a new foreign-based securities firm into domestic markets has favorable effects as its market making function can help propel transactions on low-liquidity stocks and help promote domestic markets as global financial hubs.As such, the authorities will continue to work on close supervision of market makers to ensure their proper function.IMC is required to apply for the final approval within six months.* Please refer to the attached PDF for details.
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Dec 21, 2020

Plans to Improve Rules on Market Makers & Tighten Monitoring of Illegal Short Sale Trades

The FSC introduced measures to improve market maker rules and strengthen detection of illegal stock short-selling activities on December 21 with an aim of boosting accountability in the market and establishing an effective monitoring system for illegal short sale activities. BACKGROUND The National Assembly passed a revision bill to the Financial Investment Services and Capital Markets Act on December 9, which introduces stricter penalties on illegal short sale activities. Along the same line, the government has prepared the following measures to improve rules on market makers and to strengthen monitoring of illegal short sale activities in order to boost accountability and develop a more effective system for market supervision. KEY MEASURES I. IMPROVING RULES ON MARKET MAKERS Marker makers quote prices on both buy and sell sides to satisfy the market. The marker maker system was first introduced in the derivatives markets in 1999 and then in stock markets in 2005. Recently, however, there have been concerns about the possibility of the abuse of the system as the trade volume of market makers has grown significantly as well as their short sale orders. In this regard, the Korea Exchange has conducted inspections on market makers compliance with short sale regulations, covering their transactions data from January 2017 to June 2020, and has found a few suspicious cases of naked short selling and violation of the uptick rule. To address this problem, the following measures have been drawn up to help restore confidence in market makers and foster their market making function. a) Introduce restrictions on short sale trades - Ban market makers short selling of mini-KOSPI 200 futures and options (when acting in their capacity as market makers) - Discontinue the uptick rule exemption for market makers in stock markets to address the issue of unfairness - Develop an automated monitoring and detection system for naked short selling activities and violation of the uptick rule
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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Oct 14, 2020

Government Reviews Financial Policy Agenda for Post-pandemic Era

Vice Chairman Sohn Byungdoo held the 25th financial risk assessment meeting via teleconference on October 14 and reviewed financial policy tasks for the post-pandemic era. The policy agenda focuses on four key areas—(a) supporting innovation-driven growth, (b) promoting digital finance, (c) expanding support for inclusive finance and (d) ensuring stability in the financial system.The following is a summary of Vice Chairman Sohn’s remarks.(NEED TO PREPARE FOR POST-PANDEMIC ERA) In response to the pandemic-induced economic shocks, the government has provided emergency financial support for small merchants and businesses. However, the disruption caused by COVID-19 may be just beginning. With global supply chains being reshuffled, contactless, medical, bio and green industries are becoming more prominent. This type of restructuring is also inevitable in the financial industry. There are also growing concerns about a deepening wealth gap between the haves and the have-nots. Potential risks in financial sectors, such as growing appetite for riskier and higher yield products as well as rising debt, have been accumulating. These are all the reasons that financial policies should account for the preparation of the post-COVID-19 era.(FINANCIAL POLICY AGENDA FOR POST-PANDEMIC ERA) The policy agenda announced on July 24 includes (a) supporting innovation-driven growth, (b) promoting digital finance, (c) expanding support for inclusive finance and (d) ensuring stability in the financial system. First, with regard to the first policy agenda, the government has been providing targeted financial support to innovative and promising businesses. Under the government-wide initiative to develop a thousand innovative firms, a total of thirty-two businesses have been selected with KRW211.1 billion in lending support being provided to sixteen of them. In November, more than 168 additional firms in the future car, biochemical and high-tech medical device industries are expected to be se
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Sep 24, 2020

FSC Adds 5 More 'Innovative Financial Services' to Regulatory Sandbox

The FSC added five more 'innovative financial services' to the regulatory sandbox on September 23, bringing the total number of designated services to 115 since the sandbox program was first launched on April 1, 2019.Five credit card companies (Shinhan Card, KEB Hana Card, Woori Card, KB Kookmin Card and Lotte Card) will be granted regulatory exemptions to provide small-sum overseas remittance services for non-residents or foreigners.The service is expected to be launched after March 2021. The government expects that the newly available service will improve consumer access to low-cost overseas money transfer services while promoting competition and innovation in the industry.* Please refer to the attached PDF for details.
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Aug 27, 2020

FSC Chairman Discusses Improving Rules for Retail Investors

FSC Chairman Eun Sung-soo met with the heads of the Korea Financial Investment Association and major securities firms on August 27 and held talks on the current market situation, temporary ban on stock short sale, improving rules for retail investors and channeling liquidity to the real economy sectors.(CURRENT MARKET SITUATION) With the recent resurgence in COVID-19 cases, volatility has increased in stock markets. However, compared to other major economies, the stock markets in Korea have shown a tendency of faster recovery. In the recovery process, retail investors have been strong net buyers. Overseas observers attributed this rapid recovery in Korea’s stock markets to successful pandemic response and market trust for the stability of the country’s macroeconomic conditions and corporate performances. In this regard, the six-month short sale ban put in place from March 16 until September 15 may have contributed in maintaining the stability of investor sentiment for retail investors.(TEMPORARY BAN ON SHORT SALE) The six-month temporary ban on stock short-selling is scheduled to expire on September 15. Public hearings and discussions on whether to extend the short sale ban revealed that the short sale system needs to be improved. In particular, there are legitimate concerns about the legality of short-selling activities involving institutional and foreign investors while the system is less accessible by retail investors. This suggests that the public demand for more transparency and fairness in opportunities also exists on the issue of stock short sale. Measures to strengthen sanctions and penalties on illegal short-selling activities are pending at the National Assembly. In addition, the government will reexamine the role of market makers while considering their side effects. The government also plans to look into ways to promote short sale for retail investors as it expands the horizon of opportunities.(IMPROVING RULES FOR RETAIL INVESTORS) To achieve a stabl
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Aug 20, 2020

FSC Seeks Innovation in Financial Regulations through Regulatory Sandbox Program

The FSC announced recent progress in the operation of the financial regulatory sandbox on August 20. Through its sandbox program, regulatory improvements were made to eight specific areas with five more currently in the process of revision and fourteen more recognized as necessary for reform.The FSC will continue to promote regulatory innovation through its sandbox program to facilitate a digital transformation in the 4th industrial revolution and for the post- pandemic economy. The FSC will work to remove regulatory obstacles and ensure a steady operation of the sandbox designated ‘innovative financial services.’BACKGROUNDThe FSC has been operating a financial regulatory sandbox program since April 1, 2019 to promote competition and innovation in the financial industry. A total of 110 ‘innovative financial services’ have been designated to be included in the sandbox until now. While providing consumers with opportunities to experience more innovative financial services, the sandbox program offers more business opportunities to financial institutions, fintechs and start-ups. At the same time, the sandbox also allows a reassessment of regulations in the financial sector in a more proactive manner.The 110 sandbox designated ‘innovative financial services’ are granted exemptions from 62 financial regulations, of which improvements have been made to eight areas, revisions are taking place in five areas and plans for making improvements are being drawn up for fourteen areas.REGULATORY IMPROVEMENTS► Revision completeda) Rules on the supervision of insurance businesses revised to simplify the process of insurance renewal (Oct 2019)b) Credit Information Use and Protection Act revised to (i) break down the uniform credit bureau business category into three specific sub-categories and lower entry barriers and (ii) allow credit card companies to operate own credit bureau businesses (Feb 2020)c) Credit Information Use and Protection Act revised to (i) allow credit
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Aug 05, 2020

30-Day Extension of Reporting Deadline Granted to 15 Companies

The Securities and Futures Commission decided on August 5 to lift administrative sanctions and grant a 30-day extension of reporting deadline to all fifteen companies that applied for sanctions exemptions due to pandemic-related disruptions in their business operation. Following the SFC’s decision, the semi-annual reporting deadline for eleven domestic companies and four KRX-listed foreign companies will be extended for 30 days from August 14 to September 14 and from August 31 to September 28, respectively.* Please refer to the attached PDF for details.
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Jul 30, 2020

Plans to Improve Rules on Structured Products

The FSC announced its plans to improve rules on retail structured products on July 30, with an aim to strengthen securities firms’ preparedness for market volatility, to encourage reduction in the size of the issuance as well as diversified investment for hedge assets and to bolster investor protection measures.BACKGROUNDThe market for retail structured products has grown significantly as the continuing trend of low interest rates made them an attractive alternative to bank savings. Although the structured products have provided relatively high yields and helped individuals to expand their assets, various risk factors began to surface. For securities firms, large volume of structured product issuance and management pose significant burdens on their financial soundness and liquidity. These burdens also may create shocks in the foreign exchange market and short-term money markets. In addition, both distributors and investors often espouse misperception that structured products are safe and non-risky products even though market volatility may rise depending on the performance of underlying assets. Therefore, it is necessary to draw up measures that will help minimize risks to securities firms, financial markets and investors.OVERVIEW OF STRUCTURED PRODUCTS(BALANCE) The outstanding balance of ELS, ELB, DLS and DLB issuance surged from about KRW22 trillion in 2010 to KRW108.6 trillion at the end of April 2020, maintaining an above KRW100 trillion level since 2016. About 60 percent of them are non-principal-protected structured products (ELS and DLS), accounting for KRW64.6 trillion. ELS and ELB (tracking stock indexes) account for 70 percent, or KRW75 trillion.(DISTRIBUTION) For ELS investment, retail investors made up about 98 percent, or KRW40.4 trillion at the end of March 2020. About 82 percent of all ELS issuance, or 88 percent of ELS issued to retail investors were distributed through banks.(RISK FOR SECURITIES FIRMS) Structured products make up increasingly larg
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Jul 27, 2020

FSC Announces Plans to Promote Digital Finance

The FSC unveiled its plans to promote digital finance on July 24, focusing on improving regulations for the industry, ensuring strong protection for digital finance users, building foundations and infrastructure to facilitate large volumes of digital financial transactions and strengthening data security to ensure stability in the financial system.BACKGROUNDDigital finance as a major ‘untact’ industry has grown significantly with the development of simple payment and money transfer services, authentication technologies and platform businesses. With the introduction of new technologies and the expanded use of e-commerce and telecommuting, digital transformation of the financial industry has been accelerated. The convergence of digital finance with ICT sectors and platform businesses will not only lead the transformation toward a digital economy but also help enhance financial inclusiveness.Recognizing the significance of digital finance, major economies have made changes to their regulatory framework to promote competition and innovation. Meanwhile, the Electronic Financial Transactions Act in Korea has not seen major updates since it was first enacted in 2006. As such, the current regulatory framework cannot fully accommodate the changes taking place in the financial industry which pose the following obstacles—a) relatively high entrance barriers for innovative electronic financial business entities, b) lack of strong user protection measures to guarantee safety in digital transactions and earn consumer trust, c) need for new infrastructure fit for new financial environment, and d) need to ensure financial data security.With the revisions to the Electronic Financial Transactions Act, the FSC will boost both convenience and safety of digital finance users, promote innovation and competition in the financial industry, and contribute to the government’s digital new deal initiative.KEY POLICY AGENDAI. PROMOTE GROWTH OF INNOVATIVE DIGITAL FINANCE PLAYERS (INDUSTR
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Jul 16, 2020

FSC to Work on Enhancing Transparency in Financial Regulatory Environment

FSC Chairman Eun Sung-soo presided over the 43rd financial hubs establishment committee meeting on July 16, and discussed ways to reassess the government’s financial hub policy following recent changes in market environments at home and abroad.The following is a summary of Chairman Eun’s remarks.The competition over the status of regional financial center in Asia has been accelerating. The Korean government has been pursuing its financial hub policy since it first unveiled the strategy in 2003 to turn Korea into a financial hub in Northeast Asia. However, due to increasing uncertainties in the global financial markets, financial companies have been reducing the number of overseas branches, and it has become more difficult to attract foreign based financial companies in Korea.Despite difficulties, it is important to regroup strategies based on the strength of our financial industry and renew our efforts. In this regard, the rising demand for asset management and growth in foreign investment continue to accelerate the globalization of the asset management industry. In addition, the rising demand for development finance in neighboring countries provides new opportunities for Korea through the government’s new northern and southern economic cooperation initiatives.Compared to other major financial centers in Asia, high corporate and income tax rates, lack of flexibility in labor markets and that of transparency in financial regulations have been pointed out as obstacles for Korea in becoming a major financial center in the region. From the perspective of macroeconomic management, the government’s capacity to change its tax or employment rules just for the purpose of advancing its financial hub policy will be limited. In the meantime, the government will work to enhance transparency in our regulatory environment and find innovative ways to improve competitiveness of our financial industry.* Please refer to the attached PDF for details.
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Jun 24, 2020

FSC Changes Rules on Liquid Asset Requirements for Repo Transactions

The FSC revised the regulations on financial investment business on June 24, laying out specific liquid asset requirements for the sellers of repurchase agreements.The FSC has been pursuing changes in regulations to improve the effectiveness and soundness of the repurchase agreement (repo) market. The revisions to the Enforcement Decree of the Financial Investment Services and Capital Markets Act in December last year introduced a legal basis to require repo sellers (borrowers) to hold liquid assets. The changes in regulations adopted today are a follow-up measure, establishing the specific scope of liquid assets as well as holding requirements.SCOPE OF LIQUID ASSETSLiquid assets include cash, savings accounts, certificates of deposit, liquid loan commitments, readily disposable deposits of securities companies, up to 30 percent of money market trust (MMT) and money market wrap (MMW), promissory notes, payment reserves of the Bank of Korea. Liquid assets in foreign currencies also qualify.LIQUID ASSET HOLDING REQUIREMENTSThe requirements for liquid asset holding for repo sellers (borrowers) will gradually increase in three stages as shown in the table below from up to one percent of the transaction amount in July to up to ten percent between August 2020 and April 2021, and then to up to twenty percent thereafter.The above changes in regulations will go into effect on July 1, 2020 along with the improved rules on minimum margin requirements for repo buyers (lenders).* Please refer to the attached PDF for details.
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Jun 18, 2020

Vice Chairman Holds Meeting to Review Risks in Financial Sectors

Vice Chairman Sohn Byungdoo held a meeting to review market conditions and risk factors in the financial industry on June 18 with experts from the public and private sectors.The following is a summary of Vice Chairman Sohn’s remarks.(END-OF-QUARTER-EFFECT IN JUNE) In March, the global spread of the COVID-19 infection, rising instability in financial markets and the end-of-quarter shortage in capital supply led to difficulties in the corporate bond and short-term money markets. In response, the government launched various financial support and liquidity injection measures, including a bond market stabilization fund and an SPV to purchase lower-rated corporate bonds and CP. As a result, the markets have begun to show signs of recovery with yield spreads growing at a slower rate.However, blue chip companies and non-blue chip companies face different conditions for issuing bonds. In June, a total of KRW68 trillion worth of corporate debt will be up for maturity (KRW12.2 trillion in corporate bonds and KRW55.5 trillion in CP and short-term debt). About 90 percent of them are high rated debt and will face not much obstacle in meeting debt obligation. The securities firms with margin call obligations related to equity-linked securities are maintaining foreign currency liquidity in case of global stock price fall. Thus, the liquidity problem is not a major concern.The government will temporarily ease the liquidity requirements of repo sellers to prevent a surge in cash demand at the end of June. The government will also provide support through policy banks’ corporate bond and CP purchase programs.(INVESTOR PROTECTION WITH DERIVATIVES PRODUCTS) With investors’ interest in derivatives products growing, the volumes of FX margin trading and CFD transaction by retail investors have increased significantly this year. For FX margin trading, the proportion of retail investors is very high at about 92 percent, despite the implementation of various measures, such as stricter ru
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Jun 17, 2020

FSC Maintains Close Market Monitoring in Wake of North's Provocation

Vice Chairman Sohn Byungdoo held a market monitoring meeting on June 17 prior to the market opening to review market conditions in the wake of North Korea’s bombing of the inter-Korean liaison office building yesterday.Despite a momentary spike in offshore forward exchange rate, volatility has largely subsided including in major stock markets around the world and in Korea’s credit default swap premium for 5-year foreign exchange stabilization bonds.Experts at home and abroad see that North Korea’s provocation will have limited impact on the financial markets, while suggesting the need to keep a close eye on future developments.Amid rising volatility in stock markets and growing concern over another spread of COVID-19, the government will intently monitor market conditions and watch out for any spillover effects from geopolitical risks while preparing appropriate responses.* Please refer to the attached PDF for details.
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