-
Mar 11, 2021
-
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
-
Feb 03, 2021
-
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
-
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
-
Jan 13, 2021
-
Dec 21, 2020
-
Nov 26, 2020
-
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
-
Sep 24, 2020
-
Aug 27, 2020
-
Aug 20, 2020
-
Aug 05, 2020
-
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
-
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
-
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.
-
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.
-
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
-
Jun 17, 2020
-
May 18, 2020
- Vice Chairman Holds Meeting on Measures to Improve Asset-backed Securities Market
- FSC Vice Chairman Sohn Byungdoo held a meeting with industry officials and experts on May 18 to discuss ways to improve the asset-backed securities market.The following is a summary of Vice Chairman Sohn’s remarks.(IMPORTANT ROLE OF ASSET-BACKED SECURITIES) The asset-backed security (ABS) provides businesses with a great means to raise funds and offers more favorable terms than credit-based financing. Businesses are able to treat securitized assets off-the-book for accounting purposes, which helps to improve their financial structure. The ABS allows businesses to securitize diverse assets including future assets and intellectual property rights to generate funds needed for now. In Korea, the enactment of the Asset-backed Securitization Act in 1998 contributed to clearing troubled assets and helped ride out the foreign exchange crisis. Since then, the ABS has been used as an innovative means to raise funds by enterprises and financial companies.(IDENTIFYING PROBLEMS) (a) With regard to risk management, the rapid expansion of the unregistered securities market can be a risk factor as it is difficult to identify the issuing entity, records of underlying assets and securitization structure. In particular, the real estate project financing asset-backed commercial paper (ABCP) poses problems for securities firms as they have to take the burden of refinancing risk due to a duration mismatch between fund raising and fund management. (b) The role of ABS in corporate financing has also been in decline. Over the years, the ABS market’s focus has been shifting toward transactions that follow interest margins. Due to the delayed reforms in the registered securities system, the current ABS market has been unable to fully accommodate diverse securitization demand in the market.(MEASURES FOR IMPROVEMENT) (a) To enhance risk management, the government will introduce the risk retention rule, requiring asset holders to possess about 5 percent of credit risk to prevent conflict of
