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Oct 26, 2021
- Government Unveils Additional Measures for Household Debt Management
- The government announced additional measures to strengthen household debt management at the 47th Meeting of Central Economic Response Headquarters held on October 26. The measures are aimed at preemptively managing household debt-related risks and resolving financial imbalances while ensuring the availability of loans to individuals in actual need. Some of the key measures include improving the effectiveness of DSR rules applied on individual borrowers, strengthening targeted management in the nonbank sector and promoting more installment payments on both housing and personal credit-based loans. These are supplementary measures to the initial household debt management plan announced on April 29, 2021. Background (Recent Trends) The household debt growth has shown a downward trend in recent years after reaching an 11.6 percent growth in 2016. However, it has spiked up again in 2020 due to the pandemic-related policies and rise in asset prices.For this year, the government had previously set the goal of containing the growth of household debt to five to six percent as it sought to control debt levels while continuing to make financing available for first time homebuyers, renters, etc. Along this line, the government introduced the measures to curb credit-based loansand expand the application of the debt service ratio (DSR) rules on individual borrowers in April this year. At the same time, the loan-to-value (LTV) ratio has been eased with the support for rent deposit (including jeonse) made available for young adults, newly married couples, etc. However, household debt levels spiked in the first half of this year due to instability in the housing market and resurgence in the coronavirus infection cases. The growth in credit loans and personal mortgages that led the surge in total debt levels at the end of 2020 stabilized. But loans for rent deposits, collective lending and government-backed housing mortgages all continued to rise with a spillover effect into the nonba
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Oct 07, 2021
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Sep 23, 2021
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Jun 15, 2021
- Multiple Subscriptions Restricted for IPO Shares
- The government approved the revisions to the Enforcement Decree of the Financial Investment Services and Capital Markets Act during a cabinet meeting held on June 15. The revisions (a) restrict retail investors from applying for multiple subscriptions for IPO shares, (b) increase the annual cap for issuing securities via crowdfunding and (c) introduce specific rules for financial investment companies credit extension to overseas branches. The revisions will go into effect from June 30, 2021, except for the provision on the restriction of multiple IPO subscriptions, which will begin to apply for securities reports being filed after June 20, 2021. (Restricting Multiple Subscriptions for IPO Shares) With the introduction of a more equitable share allocation method in last December, retail investors are given more opportunities for IPO share subscription. However, in IPOs with multiple lead managers, multiple subscriptions were made possible as retail investors could open up accounts at multiple brokerage firms and apply at each brokerage firm. This resulted in inconvenience for investors and heavy workload for brokers. As such, multiple subscriptions for IPO shares will be banned for retail investors. Brokerage firms will be required to check whether investors have applied for share subscriptions at other brokerage firms. Even when an investor applies for multiple subscriptions, share allocation will be made only on the first subscription. (Follow-up Measures to Promote Crowdfunding) The annual cap for issuing securities through crowdfunding will be increased from KRW1.5 billion to KRW3 billion. The authorities will strengthen supervision over the financial soundness of crowdfunding platforms by checking their capital requirement more frequently from once a year to once every month and shortening the grace period before withdrawal from one year to six months. (Financial Investment Companies Overseas Operation) Financial investment companies can extend credit to oversea
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Jun 03, 2021
- FSC Announces Analysis on Stock Markets with Partial Resumption of Short Selling
- With the partial resumption of short selling being in place for about a month, the FSC announced an analysis on stock market trends for the period of May 3 to June 2. During this period, stock prices moved in a similar pattern as global stock markets while domestic stock prices showed relatively stable movements compared to other markets. Although the average daily amount of short selling transactions rose somewhat, it appears that there exists no significant relationship between short selling and stock prices for the given period. The FSC and other relevant institutions will continue to closely monitor market trends while working to bring about transparency and fairness in the markets. Stock Market Trends As of June 2, KOSPI and KOSDAQs closing prices were up 2.4 percent and down 0.2 percent, respectively, compared to April 30, the last trading day before the partial resumption of short selling began. In May, global stock prices showed mixed trends with the possibility of tapering by the Fed amid price increases in the U.S. Asian stock markets moved in the same direction as global stocks while domestic stock markets showed relatively stable trends as corporate earnings improved and retail investors remained net buyers. In May, foreigners net sold KRW9 trillion but turned to net buying in the last week of the month. Due to concerns about a monetary tightening from the U.S., other Asian markets also experienced foreign outflows. Short Selling Trends During the one-month period from May 3 to June 2, the average daily amount of short selling transactions increased somewhat to KRW688.2 billion. However, considering the fact that the total transaction amount increased more than twice the level seen before the partial resumption of short selling began, the growth is not that considerable.Also, as the built-up demand for short selling begins to fade out, the growth in the amount of short selling transactions also shows a downward trend toward stability. During the one-mont
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May 29, 2021
- FSC Chairman Delivers Opening Remarks at the Green Finance Special Session of P4G Seoul Summit
- FSC Chairman Eun Sung-soo delivered opening remarks at the special session on green finance held on May 29. Please see below for the full text of the speech. I. Introduction Good evening, everyone. Good afternoon, Europe. Good morning, America. Welcome to the 2021 P4G Seoul Summit Special Session on Green Finance. The world is still in the midst of the Covid-19 crisis. Covid-19 is not an individuals problem, nor a regions or a countrys problem. It is the whole humanitys problem. Likewise, climate change is everyones problem. In this regard, P4G puts emphasis on the value of partnerships across all sectors. I hope P4G Seoul Summit can induce everyone to take part in climate action. II. Why Green Finance? Achieving carbon neutrality involves a fundamental restructuring of industry. This might require trillions of dollars across the world. Many countries including Korea, have announced large-scale fiscal stimulus under Green New Deal schemes. However, public finance alone cannot cover the scale of investment we need. MDBs and private sector investors need to get involved as well. In a different angle, the financial industry can induce companies to lessen their environmental impact by altering the lending or investing criteria. For example, BlackRock, the worlds largest asset manager, evaluates a companys ESG performance when making an investment decision. III. Progress of Green Finance Green finance has been rapidly taking root in the global financial market over the past years. By the end of 2020, around 3,000 institutional investors have joined the UN Principles for Responsible Investment. Globally, ESG fund assets are nearing $2 trillion. Also, quarterly issuance of green bonds has risen to $150 billion. South Korea is also actively stepping up efforts to promote green finance. Last year, the government pledged to double the share of funding for green projects in public financial institutions by 2030. We are also planning to gradually make ESG data disclosures manda
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May 25, 2021
- Government Approves Revised Rules to Introduce Small-sum & Short-term Insurance
- The government approved the revisions to the Enforcement Decree of the Insurance Business Act at a cabinet meeting on May 25, aiming to introduce a small-sum, short-term specialized insurance business with a variety of insurance coverage such as pet, leisure and travel insurance. Key Revisions (Small-sum Short-term Insurance Business) The minimum capital requirement for a small-sum, short-term specialized insurance business will be set at KRW2 billion. They are allowed to provide various types of insurance coverage e.g. pet insurance, leisure travel insurance, weather insurance, etc with a one-year renewable term and premiums of up to KRW50 million. The insurers annual gross premium revenue will be capped at KRW50 billion. (Scope of Insurers Subsidiaries) To promote digital transition in the insurance sector, the revision permits insurers to own more than a 15% stake in a healthcare or MyData service provider as subsidiaries. (Access to Administrative Information) Currently, insurance policy holders are required to submit required administrative documents such as a copy of residence registration, family relation certificate, drivers license, etc, to insurers. To ease such a burden, the revision will allow insures to access to administrative information upon policy holders consent. (External Evaluation of Policy Reserves) Insurance businesses with total assets of KRW1 trillion or more will be required to have external actuaries approve the appropriateness of their policy reserve. Schedule The revisions will take effect from June 9, 2021. The FSC will complete revisions to subordinate rules including the Regulation on Supervision of Insurance Business in accordance with the revised Enforcement Decree. * Please refer to the attached PDF for details.
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May 24, 2021
- Financial Authorities and Relevant Institutions Declare Support for TCFD and Its Recommendations
- The FSC along with thirteen other relevant institutions announced their official declaration of support for the Task Force on Climate-related Financial Disclosure and its recommendations on May 24. The declaration was followed by the green finance consultative bodys kick-off meeting chaired by Vice Chairman Doh Kyu-sang. Vice Chairmans Remarks Last year, the average temperature in Europe and Asia reached a record high in 111 years according to the Global Climate Report 2020 by the U.S. National Oceanic and Atmospheric Administration. Considering ripple effects of climate change on the stability of financial systems, the financial sector should preemptively take a responsible role in global issues such as the climate change. Recently, the EU has introduced green taxonomy which provides standards on support for green industries. The Biden administration in the U.S. has strengthened its climate leadership by rejoining the Paris Agreement and holding a Leaders Summit on Climate. The Korean government, too, declared the 2050 carbon net zero goals and enhanced its carbon reduction objectives while suspending state-backed financial institutions financing of overseas coal plants. With the K-New Deal initiative, the government has been expanding investments in green sectors as well. (Support for TCFD and its significance) The financial authorities plan to boost cooperation with the international society to more actively respond to climate change. Last week, the FSC and FSS applied for membership to the Network of Central Banks and Supervisors for Greening the Financial System. Today, the FSC and thirteen relevant institutions are here to announce official declaration support for the TCFD. The TCFD is a global consultative body created to promote climate-related financial disclosures. In 2017, the TCFD introduced its recommendations and more than 2,000 institutions from 78 countries across the globe have shown support for the TCFD and its recommendations. In Korea, a total of
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May 24, 2021
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May 06, 2021
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May 03, 2021
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Apr 29, 2021
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Apr 29, 2021
- Government Announces Household Debt Management Plan for 2021-2023
- The government announced the household debt management plan for 2021-2023 on April 29. The plan is aimed at (i) managing the growth rate of gross household debt at stable levels for the mid- to long-term and (ii) establishing lending practices based on individual borrowers repayment capability. Background Household debt growth remained stable from 2017 to 2019 as the government was able to implement a consistent policy for household debt management. However, due to expansionary fiscal and monetary policies put in place in response to the COVID-19 pandemic, the household debt growth rate accelerated in 2020.In this year, the growth rate has slowed down somewhat since the government announced a series of policy measures to tighten mortgage regulations and boost housing supply. However, the household debt level still remains high even though credit loans which was a dominant factor in the last years household debt growth in the second half appears to have come down to a stable level. Koreas household debt has been regarded as one of the potential sources of financial risk, given its relatively high ratio against GDP and fast pace of growth compared with major economies. However, the increase in private sector debt in response to COVID-19, which is a common phenomenon, has been inevitable to some extent. In addition, due to the governments efforts at improving the structural soundness of household debt, it is unlikely that household debt turns into a systemic risk in the short-term. Against this backdrop, the government intends to preemptively manage household debt from a macroprudential perspective to prevent it from turning into potential risk factors. Regulatory adjustments at a micro level are also needed to ensure that a tightening of mortgage regulations do not curtail first-time homebuyers access to mortgages. The current regulation of loan-to-value (LTV) ratio, uniformly applied across all homebuyers, has limited opportunities for first-time homebuyers. Moreover
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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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Apr 15, 2021
- FSC Chairman Holds Talks with Relevant Officials Ahead of Partial Resumption of Stock Short-selling
- FSC Chairman Eun Sung-soo met with officials from relevant institutions and heads of securities companies on April 15 and held talks on the preparatory measures for partial resumption of stock short-selling on May 3,recent stock market trends and virus prevention measures taken by the financial investment industry. The following is a summary of Chairman Euns remarks. (KOSDAQ Surpassing 1,000 pts) KOSDAQ recently surpassed 1,000 points for the first time since September 2000. Throughout the years, the authorities have worked to improve the KOSDAQ market for venture capitals and startups by allowing lossmaking companies to be listed and introducing technology-based preferential listing system. As a result, KOSDAQ emerged as a distinct market for investors with many businesses with significant future growth potential being listed. The Korea Exchange, relevant institutions and the financial investment industry have put efforts to improve the investment infrastructure and seek out promising businesses. Through the Korean New Deal initiative and the government-wide effort to cultivate more innovative businesses, the government will work to support venture startups and innovative firms in KOSDAQ market to further strengthen our economy. (Ensuring Investor Trust in the Market) It is important to ensure that investors have confidence and trust about the fairness in the market. In order to root out illegal and unfair marketing or advising practices in stock markets, the government has been operating a response team since October 2020. The response team will continue to work to prevent inappropriate activities and improve regulations. Prior to the partial resumption of short-selling on May 3, the authorities will continue to work to resolve various concerns of investors. Out of the four regulatory improvement measures announced earlier, stronger penalties on illegal short-selling activities and improved rules for market makers have already become effective. The two remaining m
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Mar 30, 2021
- New Regulations on Stock Short Selling to Take Effect from April 6
- The government approved the revisions to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) during a cabinet meeting held on March 30. The amendments and the revised FSCMAwill take effect on April 6. (Penalty standards) The revised FSCMA created the imposition of penalty surcharges on illegal short sale activities. Specific amounts for monetary sanctions will be determined through comprehensive consideration of the total amount of short orders and profits gained from the illegal short sale activity. (Record keeping requirement on securities lending agreements) The revised FSCMA requires short sellers to keep their securities lending agreements for five years to be presented promptly to the relevant authorities upon request. As such, the Enforcement Decree will be revised to prescribe specific criteria to be maintained, including information on stock items, number of shares, transaction dates, counterparties, lending periods, fee rates, etc. It also requires the maintenance of transactions data stored in an electronic transaction processing platform or other format that is not susceptible for alteration. (Restriction on short sellers participation in capital increase) The revised FSCMA restricts short sellers from participating in a companys capital increase via issuing new shares once the company has made such a plan public, except in certain cases. As such, the Enforcement Decree will be revised to determine a specific time period wherein the short sellers participation in capital increase is restricted as well as specific cases for exception as specified below. If an investor has shorted a companys stocks during the restriction period, the investor cannot participate in the companys capital increase, except for the cases where the short selling is deemed to have no unjust effects on the issuing price as stated below. - Restriction Period: From one day after the disclosure of the companys capital increase plan until the dete
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Mar 25, 2021
- FSC to Closely Monitor Market Situations and Gradually Roll Back Crisis Response Measures
- Vice Chairman Doh Kyu-sang held the 37th financial risk assessment meeting via teleconference on March 25 and discussed the progress in the implementation of the COVID-19 financial support for small merchants and SMEs. The following is a summary of Vice Chairman Dohs remarks. (Pandemic Response Measures) In response to the COVID-19 pandemic, the government implemented a KRW175 trillion-plus emergency financial support package to provide support for small merchants and SMEs, stabilize financial markets and help businesses in key industries with liquidity shortages. Thanks to the active support shown by the financial institutions, markets quickly bounced back and financial difficulties experienced by small merchants and other vulnerable groups began to ease. On the Korean governments bold response to the crisis situation, the IMF in January this year released a positive assessment, and the OECDs recent growth forecast expects Korea to achieve a full recovery within this year. Bold and preemptive responses were effective given that the scale of policy response had to exceed market expectation at a time when extreme anxieties were spreading across markets. However, with signs of an economic recovery in the US, inflation expectations have been rising as well as the long-term bond yields. In this regard, the government will closely monitor market situations and work on preemptive management to prepare for a possible rate hike in domestic markets. In addition, there have been growing concerns about inappropriate trading activities in stock markets. There are active discussions going on in this regard at the National Assembly to strengthen penalties on unfair and inappropriate trading activities, such as price rigging. The government will closely cooperate with the relevant institutions to work on the prevention of inappropriate trading activities. (Maturity Extension Payment Deferral) Since April 1 of last year, all financial institutions made available maturity extensions
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Mar 15, 2021
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Mar 11, 2021
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Mar 02, 2021
