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Dec 11, 2016
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Nov 24, 2016
- Follow-ups on the Household Debt Management Measures Announced on Aug.25
- The FSC announced follow-up measures on household debt management as the measures announced on August 25, 2016 started to show a sign of policy effects, particularly in slowing down the pace of household debt growth in the non-banking sector and collective lending. Since the August 25 measures took effect, collective lending for apartment buyers and non-residential mortgages from the mutual banking sector fell significantly. (i) The outstanding balance of collective loans remains on the rise as loans for middle payments for previously-signed contract were taken out. However, the amount of newly approved loans for middle payments to purchase an apartment sharply fell in October.(ii) The growth pace of household loans in the mutual banking sector started to slow down in November since the loan-to-value ratios on non-residential mortgages in the sector were tightened on October 31. The follow-up measures are aimed to extend tighter screening standards for loan approvals, to collective mortgages and loans from mutual finance institutions, which have been under less strict standards than bank mortgages. Guidelines for loan screening will be applied to such collective loans and mutual finance loans as well, under the principle that household debt should be borrowed within the borrower’s repayment ability and repaid in installments from the beginning.- For pre-sale of new apartments after January 1, 2017, home buyers’ collective loans to pay the remainder of the money will be subject to tighter screening standards, as currently applied to banks’ mortgages. - Mutual finance institutions will establish and implement their guidelines for screening loan applications in the first quarter of 2017. - The debt service ratio(DSR) will be used as a reference from early December whenfinancial institutions screen loan applications and assess borrowers’ repayment ability. * Please read attachedf file for details.
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Nov 22, 2016
- Measures for Improvement of Derivatives Markets
- The FSC announced a set of measures to make South Korea’s derivatives markets more advanced and sounder as this year marks the 20th anniversary of the establishment of derivatives markets in 1996. Key Points EXCHANGE-TRADED DERIVATIVES MARKETTo boost derivatives trading and enhance diversity of derivatives in the market, improvements will be made on both supply and demand sides. - Supply side: simplification of listing procedures, diversification of derivatives, adjustment of trading units for KOSPI200 futures and options - Demand side: flexible requirements for investors, introduction of the ‘omnibus account’ for foreign investors OVER-THE-COUNTER(OTC) DERIVATIVES MARKETRisk management system will be established with the introduction of global regulatory standards such as margin requirements for non-centrally cleared derivatives and electronic trading platforms. DERIVATIVE-LINKED SECURITIES MARKETThe FSC will strengthen risk management and investor protection, while pursuing more diversification of products to meet various investment needs. - For ELS DLS markets, stress tests will be conducted on regular basis to strengthen risk management of securities firms. To enhance transparency in fund management, assets of ELS issuance and management will be separately managed. - Investor protection will be strengthened in ELS DLS markets with the introduction of tougher “Know-your-Product Rule” and a “cooling-off period” for investors. - Development and listings of more derivatives-linked products will be promoted as alternatives to ELS products. Detailed Measures1. EXCHANGE-TRADED DERIVATIVES MARKET Supply Side(1) Simplification of listing procedures Listings of derivatives linked to new underlying assets, which currently requires the FSC’s approval, will be streamlined. Relevant rules will be revised to allow the KRX to decide on the listings of new derivative products, while the FSC will only approve the scope of the underlying assets. (2) Di
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Nov 13, 2016
- Seven Investors Were Picked to Buy Government's Stake in Woori Bank
- *Please read the attached file for details.The government decided to sell its 29.7% stake in Woori Bank to seven investors on its fifth attempt to privatize Woori Bank since 2010. The seven final winning bidders and amount of shares auctioned to each bidder are as follows: Investors % of auctioned shares1 Eugene Asset Management 4.0%2 Hanwha Life Insurance Co., Ltd. 4.0%3 IMM Private Equity, Inc. 6.0%4 Kiwoom Securities Co., Ltd. 4.0%5 Korea Investment Securities Co., Ltd. 4.0%6 Mirae Asset Global Investments Co., Ltd. 3.7%7 Tongyang Life Insurance Co., Ltd. 4.0%The government would recoup KRW 2.4 trillion from this sale, recovering a total of KRW 10.6 trillion out of KRW 12.8 trillion, which is 83.4% of the public funds injected into Woori Bank. We will continue our effort to sell the remaining 21.4% in Woori Bank for a full recovery of the public funds. The sale will be closed in mid-December this year. The Korea Deposit Insurance Corporation (KDIC) will terminate its MOU with Woori, signed for helping normalizing the bank’s business operation, as soon as the sale is closed, to guarantee the new shareholders autonomy in the bank’s management.
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Nov 10, 2016
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Nov 09, 2016
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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
