Press Releases - Financial Services Commission

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Nov 13, 2013

Plan to Improve Regualtions on Short Selling

BACKGROUNDShort selling is one of investment techniques that investors sell either securities they do not own or ones they borrowed. Short selling can contribute to enhancing market efficiency as it provides liquidity and serves as a hedging tool for investors when stock prices fall. However, it has side effects as well. Naked short selling involves a risk of unfulfilled settlement.Speculative short selling prevents fair price forming the market.The Korean government has been strictly regulating short selling, compared to other countries.1 Naked short selling is prohibited. Since October 1, 2008, covered short sales of all stocks were banned. Short sales of financial stocks have been banned since then, while ban on short selling of non-financial stocks was lifted in June 1, 2009 except for the period from August 10 to November 9, 2011 when the ban was temporarily reinstated due to concerns about the European debt crisis.As the stock market have stabilized since the second half of 2013, however, there is a need to shift the government’s regulatory approach to short selling from direct regulations, which has been in place since the financial crisis in 2008, to indirect ones.After reviewing short-selling regulations in other advanced countries and problems raised about the current regulations, the FSC announced today its plan to improve regulations on short selling so that we can minimize side effects of short selling, while boost trading activities.KEY CONTENTS1. Lift ban on short sale of financial stocksBan on short sales of financial stocks, which has been in place since October 2008, will be lifted from November 14, 2013.2. Introduce disclosure requirements of investors’ short-selling positionsInvestors whose short-selling position in a stock exceeds 0.5% of total shares will be required to disclose their position on the KRX website.3. Improve effectiveness of the current regulations on disclosure of short-selling positionsThe FSC will establish a legal ground
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Oct 16, 2013

Progress Report on National Happpiness Fund

ACHIEVEMENT1. Debt restructuringSince the National Happiness Fund was officially launched in March 29, 2013, a total of 192 thousand individuals have applied for the debt restructuring from April 22 to October 10. Out of the applicants, 160 thousand individuals have had their debt restructured under the program. At the current pace of 1,300 applicants per day, a total of 210 thousand individuals are expected to apply for the debt restructuring until the end of October when the application is due. Under the program, overdue debt of more than 2.84 million individuals was acquired or transferred from lenders and public asset management companies (AMCs).2. Debt converted to low-interest loansFrom April 1 to September 30, a total of 350 thousand debtors had their high-interest loans worth KRW 378.7 billion converted to lower-interest loans.EVALUATIONThe number of beneficiaries far exceeds the initial estimation at the time the National Happiness Fund was launched. In six months since its launch in March, the Fund has already assisted 180 thousand debtors, more than half of the initially estimated number of 326 thousand individuals that the program would reach over five years.The National Happiness Fund outperformed similar programs by public AMCs in terms of the number of debt restructuring beneficiaries and the amount of purchased overdue debt.There were some concerns that the program might cause moral hazard among debtors; however, the problem of moral hazard has not been so serious as initially concerned as most of beneficiaries are found to be low-income borrowers struggling with debt overdue for long time.The government will continue to make efforts to help as many debtors as possible pay back their debt by closely working with relevant ministries and institutions.*Please read the attached file for details.
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Sep 16, 2013

Launch of Capital Market Investigation Unit

The FSC officially launched a ‘Capital Market Investigation Unit’ on September 17, 2013 in a bid to address unfair financial transaction practices as announced in the ‘Comprehensive Measures to Eradicate Unfair Transaction’ dated April 18, 2013.The Capital Market Investigation Unit is an organization dedicated to monitoring and investigating unfair trade practices including stock price manipulation. The investigation unit is established under direct control of the FSC Secretary General and staffed with 18 experts from the FSC, the Ministry of Justice, the Financial Supervisory Service(FSS) and the Korea Exchange(KRX).The unit will be notified of all information related to unfair transactions from capital market oversight authorities including the KRX. The reported cases will be classified into urgent and non-urgent categories according to the necessity of forced investigation and potential social impact which will then be assigned to respective authorities. The Capital Market Investigation Unit will serve as a control tower directing and monitoring all procedures throughout the investigation from recognition of case to prosecution phases.The Capital Market Investigation Unit will be tasked with investigating and monitoring unfair trade practices such as stock price manipulation while drafting policies on unfair transactions will remain as the FSC Capital Markets Bureau’s function.*Please read the attached file for details.
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Aug 27, 2013

Plan to Reshape Roles of Policy Banks

The FSC announced its plan to reshape policy banks in order to streamline their overlapping functions and reinforce their policy financing roles for start-ups SMEs, new growth industries and overseas projects.MERGER OF KDB WITH KOFCThe Korea Finance Corporation (KoFC)1 will be re-merged with KDB, while its overseas assets worth KRW 2 trillion will be transferred to the Export-Import Bank of Korea (Korea Eximbank).KDB Financial Group Inc. will be merged with KDB, while its subsidiary units2 will be put up for sale. The timing and method of selling KDB subsidiaries will be determined later depending on market demands and conditions.The government will maintain its controlling stake3 in KDB, while portions of minority stake could be divested through an initial public offering (IPO).KDB will continue to offer retail banking services of the current level for the time being to minimize customers’ inconvenience but gradually reduce its retail banking business. KDB will no longer open new branches or attract deposits for retail banking service.The KoFC, KDB Financial Group Inc., and KDB are entities consolidated in financial statements; therefore, the merger will have an insignificant impact on BIS ratios of KDB.4The revision bill on the KDB Act will be submitted to the National Assembly forparliamentary approval this year so that the consolidated KDB could be launched in July 2014.POLICY FINANCING FOR EXPORTERS OVERSEAS PROJECTSKorea Eximbank and the Korea Trade Insurance Corporation (or ‘K-sure’) will continue to provide loan guarantees for exporters and finance overseas projects under the current framework with focus on their core functions.Non-core businesses of Korea Eximbank and K-sure will be gradually curtailed. In principle, K-sure will stop providing guarantees for loans extended by policy banks such as KDB, Korea Eximbank, and the KoFC. Korea Eximbank will gradually reduce its short-term loans5 up to less than 40% until 2017.Short-term export insurance busi
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Aug 20, 2013

Revision to Enforcement Decree of FSCMA Approved at Cabinet Meeting

The revised Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA)1 was approved at the Cabinet Meeting on August 19, which will take effect on August 29 in line with the implementation of the revised FSMCA.INTRODUCTION OF ALTERNATIVE TRADING SYSTEM(ATS)To be registered as an ATS, a securities firm will be required to hold equity capital worth KRW 20 billion or more. The Enforcement Decree specifies types of products that can be traded through ATSs as stock certificates and depository receipts (DRs).An ATS will be subject to the same rules applied to exchanges in regard with measures on market surveillance and market stabilization such as daily price limit or trading halt, while it will be granted greater autonomy and flexibility in regard with trading business2.The revised Enforcement Decree specifies cases in which an ATS is permitted to own more than 15% shares: for example, the ATS forms a partnership with an overseas ATS; or its largest shareholder is a financial holding company.Trading volume of an ATS (during the past 6 months) through a competitive bidding method should not exceed 5%3 of the total trading volume in securities market.If trading volume of an ATS through a non-competitive bidding method exceeds a certain level4, the ATS will be required to beef up its staff electronic facilities and ensure a system to prevent a conflict of interest.MAJOR CHANGES TO A DRAFT OF REVISION SINCE ITS LEGISLATION NOTICE51. Condition for an ATS to become a stock exchangeAn ATS is required to be converted to a stock exchange in case the trading volume through the ATS on a competitive bidding for six months exceeds 5% of the entire stock market.6 An ATS on a non-competitive trading basis will be required to reinforce its manpower, electronic facilities, and conflict of interest prevention system in case it exceeds the threshold of the trading volume.2. Scope of gold banking deregulationIn case a financial institution intends to operate go
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Aug 06, 2013

Plan to Boost Personal Pension Plans

BACKGROUNDWith the rapidly aging population, it is important to ensure financially-stable life for the elderly after their retirement through pension plans. Public pension scheme or retirement pension plans alone are not enough to provide sufficient retirement income. Therefore, there is a need to expand personal pension scheme so that more individuals could be better prepared for their elderly life after retirement.The FSC announced its plan to attract more persons to sign up for personal pension plans and to make them hold their pension plans for a longer period of time.KEY CONTENTS1. Provide various types of pension productsThe FSC will encourage financial institutions to provide various types of pension products tailored to retirees’ specific needs. For example, a savings-type pension product designed to allow its policy holders to withdraw their money for medical care if needed will be able to guarantee both retirement income and medical costs for the retirees.2. Enhance accessibility to pension products through Internet-only insurance providersThe FSC will permit the establishment of Internet-only life insurance providers and reduce sales commission paid to insurance agents per contract for Internet-only pension products.3. Reform the structure of business cost for pension insurance.Business cost of pension insurance consists of sales commission and other expenses incurred in business operation. Under the current structure of business cost, insurers require policy holders to pay sales commission mostly upfront, which consequently tends to lower the rate of return in the early phase of the contract period and reduce the amount of refund that policy holder could receive in case of policy cancellation before maturity. To address such problems, the FSC plans to gradually increase the percentage of installment payment of sales commission.4. Launch a web portal about pension productsA website will be launched in December 2013(tentatively) to provide a package of i
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Aug 01, 2013

Basel III Capital Regulations To Be Implemented To Bank Holding Companies From December 2013

Basel III capital regulations will be implemented to bank holding companies from December 1, 2013 to meet the global capital standards.BASEL III CAPITAL REGULATIONSA. Minimum Capital RatioWith the implementation of Basel III, minimum capital requirements for bank holding companies will be subdivided according to each category of capital: common equity capital ratio (4.5%), Tier 1 capital ratio (6%), and total capital ratio (8%).Minimum Capital Ratio under Basel III Common Equity Ratio Tier 1 Capital Ratio Total Capital Ratio ‘15 ‘16 ‘17 ‘18 ‘19 ‘15 ‘16 ‘17 ‘18 ‘19 ‘15 ‘16 ‘17 ‘18 ‘19 Min. Capital Ratio (A) 4.5 4.5 4.5 4.5 4.5 6.0 6.0 6.0 6.0 6.0 8.0 8.0 8.0 8.0 8.0 Min. Capital Buffer (B) - 0.625 1.25 1.875 2.5 - 0.625 1.25 1.875 2.5 - 0.625 1.25 1.875 2.5 (A)+(B) 4.5 5.125 5.75 6.375 7.0 6.0 6.625 7.25 7.875 8.5 8.0 8.625 9.25 9.875 10.5 B. Capital Conservation Buffer1Capital conservation buffer will be introduced to bank holding companies from 2016 in accordance with implementation schedule proposed by the Basel Committee on Banking Supervision (BCBS).Basel III Minimum Capital Ratio Common Equity Ratio Tier 1 Capital Ratio Total Capital Ratio ‘15 ‘16 ‘17 ‘18 ‘19 ‘15 ‘16 ‘17 ‘18 ‘19 ‘15 ‘16 ‘17 ‘18 ‘19 Min. Capital Ratio (A) 4.5 4.5 4.5 4.5 4.5 6.0 6.0 6.0 6.0 6.0 8.0 8.0 8.0 8.0 8.0 Min. Capital Buffer (B) - 0.625 1.25 1.875 2.5 - 0.625 1.25 1.875 2.5 - 0.625 1.25 1.875 2.5 (A)+(B) 4.5 5.125 5.75 6.375 7.0 6.0 6.625 7.25 7.875 8.5 8.0 8.625 9.25 9.875 10.5 It is not mandatory for bank holding companies to maintain minimum capital conservation buffer ratios. If their holdings of capital conservation buffer fall short of minimum requirements, however, bank holding companies will be limited in distributing dividends or repurchasing of their shares.Limitations in Income Outflow Common Equity Ratio Tier 1 Capital Ratio Total Capital Ratio ‘15 ‘16 ‘17 ‘18 ‘19 ‘15 ‘16 ‘17 ‘18 ‘19 ‘15 ‘16
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Jul 23, 2013

Reform Plan of Financial Supervisory System

BACKGROUNDThere have been discussions on reform of the financial supervisory system among political circles, media and academia as opinions divided over the current supervisory system.Korea’s financial supervisory system earned the credit from the International Monetary Fund (IMF) for its effectiveness as it successfully overcame the global financial system in 2008.The current system, however, revealed some problems to be addressed in the restructuring process of mutual savings banks in 2011.The FSC reported a reform plan of financial supervisory system at the cabinet meeting on July 23 to be submitted to the National Assembly this week.1CLOSER COOPERATION AMONG FINANCIAL SUPERVISORY ORGANIZATIONSThe Ministry of Strategy and Finance (MOSF), the Financial Services Commission (FSC), the Bank of Korea (BOK) and the Financial Supervisory Service (FSS) will operate the existing inter-agency meeting more actively for strengthened coordination and cooperation in macro- economic, financial and supervisory policies.Information sharing across related government agencies will be expanded as much as possible. For better inter-agency communication and cooperation, the personnel exchanges on a regular basis will be encouraged among the MOSF, the FSC and the BOK.ESTABLISHMENT OF AN INDEPENDENT AGENCY FOR FINANCIAL CONSUMER PROTECTIONAn independent agency for financial consumer protection will be established, separated from the FSS. The newly established agency will be granted an appropriate level of authorities and functions needed under its mandated mission of financial consumer protection.A. (Form of the Agency) The agency will be established as an independent entity separated from the FSS in the form of a non-capital based special entity.B. (Executives of the Agency) Executives of the agency will be appointed through the same procedures and serve an equal term with the FSS executives. The head of the agency will be appointed as a commissioner of the FSC.2C. (Scope of Supervis
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Jul 12, 2013

Comprehensive Measures to Reinforce Financial Institutions' Data Security

The FSC announced 'Comprehensive Measures to Reinforce Financial Institution's Data Security' on July 12, 2013. *Please read the attached file for details.
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Jul 08, 2013

Measures to Normalize Corporate Bond Market

The FSC announced measures to invigorate the sluggish corporate bond market as a preemptive response to prevent worsening corporate funding condition and destabilizing factors in corporate bond market from spilling over the broader economy.MARKET OVERVIEWCorporate bond issuance has decreased since the beginning of 2013. The market condition has been further deteriorated since May this year as yields for corporate bonds and credit spreads began to rise due to growing concerns about potential tapering of the U.S. Federal Reserve’s quantitative easing. Corporate Bond Issuance Volume (unit: KRW trillion) ’09 ’10 ’11 ’12 ’13 Jan Feb Mar Apr May Jun Net Issuance (monthly average) 34.6 (2.9) 18.1 (1.5) 30.8 (2.6) 32.2 (2.7) 11.8 (2.0) 1.4 3.5 1.3 2.8 1.2 1.5 Corporate bond issuance with a BBB rating or lower has decreased since the global financial crisis as investors are reluctant to invest in such bonds. The risk-averse attitude is now spreading to investment in corporate bonds with a single-A credit rating. Corporate Bond Issuance Volume by Credit Rating (unit: KRW trillion) ’09 ’10 ’11 ’12 ’13 Jan Feb Mar Apr May Jun Net Issuance (monthly average) 34.6 (2.9) 18.1 (1.5) 30.8 (2.6) 32.2 (2.7) 11.8 (2.0) 1.4 3.5 1.3 2.8 1.2 1.5 MEASURES TO NORMALIZE CORPORATE BOND MARKET1. Liquidity support program through P-CBOsThe government will issue primary collateralized bond obligations (P-CBOs) with a total of KRW 850 billion.Eligible candidates are companies below certain level of credit rating with corporate bonds set to mature between July 2013 and December 2014. A review committee2 will select recipient companies based on its comprehensive review of such companies’ self-help plan.Once the review committee selected recipient companies, 20% of maturing bonds for a recipient company will be repaid by the recipient company itself. The remaining 80% debt will be taken over by the Korea Development Bank (KDB), which will be resold to financial institutions (1
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Jul 07, 2013

Insurance Coverage by Local Insurers for Asiana Airline Accident

The Boeing 777 owned by Asiana Airlines that crashed in San Francisco is under aviation insurance worth a total of USD 2.38 billion.The insurance is jointly covered by nine local insurers including LIG Insurance. The local insurers cover only 0.55% of insurance coverage, and the remaining is reinsured by Korean Re (3.45%) and foreign reinsurers (96%).Given that local insurers including Korean Re only cover a 2.5% of the insurance coverage, estimated costs of the airline accident amount to around KRW 5 billion. Insurers Share of underwriting (%) Share of insurance coverage(%) LIG (main insurer) 34.0 0.04 Samsung 14.0 0.3 Hyundai 11.0 0.1 Dongbu 11.0 0.01 Lotte 11.0 0.03 Meritz 7.0 0.03 Hanhwa 7.0 0.02 Heugngkuk 3.0 0.01 NH 2.0 0.01 Korean Re (reinsurer) - 2.0 Total 100.0 2.55 The FSC will closely work with the General Insurance Association of Korea and local insurers to ensure prompt payouts of compensations for victims’ families and injured passengers.* Please read the attached file for details.
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Jul 02, 2013

Basel III Capital Regulations To Be Implemented From December 2013

Basel III capital regulations will be gradually implemented to the banking sector from December 2013 as the revised Regulation on Supervision of Banking Institutions is scheduled to take effect.A. Minimum Capital Ratio- Before revision: Total capital ratio (8%)- After revision: Minimum common equity capital ratio (4.5%), minimum Tier 1 capital ratio (6%), minimum total capital ratio (8%) (effective from Dec. 1, 2013)B. Capital Buffer- Banking institutions must accumulate 2.5%p of capital buffer in addition to the minimum capital ratio. (effective from Jan. 1, 2016)C. Prompt Corrective Action- The financial authorities will take prompt corrective action against financial institutions which fail to satisfy minimum level of total capital ratio, Tier 1 capital ratio, and common equity capital ratio. (effective from Jan. 1, 2015)Basel III Implementation Schedule Dec.1, 2013 2014 2015 2016 2017 2018 2019 ▪ Minimum Common Equity Capital Ratio (A) 3.5 4.0 4.5 4.5 4.5 4.5 4.5 ▪ Minimum Tier 1 Capital Ratio 4.5 5.5 6.0 6.0 6.0 6.0 6.0 ▪ Minimum Total Capital (C) 8.0 8.0 8.0 8.0 8.0 8.0 8.0 ▪ Capital Conservation Buffer (B) 0.625 1.25 1.875 2.50 - Minimum Total Capital Plus Conservation Buffer (B+C) 8.0 8.0 8.0 8.625 9.25 9.875 10.5 - Suhyup bank (National Federation of Fisheries Cooperatives) will implement Basel III capital regulations from December 20161 after three years of grace period.*Please read the attached file for details.
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Jun 26, 2013

Plan for Privatization of Woori Finance Holdings

BACKGROUNDThe Public Funds Oversight Committee (PFOC) announced the privatization plan for Woori Finance Holdings after its 78th meeting on June 26, 2013. The Committee members shared common opinion that prompt privatization of Woori Finance Holdings is crucial for recovering the injected public fund and establishing a firm foundation to strengthen our financial industry’s competitiveness. The plan was devised based on the recent market conditions and investment climate.GENERAL PLAN1. General DirectionThe government will sell subsidiary units of Woori Finance Holdings in separate deals to better serve market demands. The 14 subsidiaries of Woori Finance Holdings will be split into three groups for sale. The sale process of each group will be proceeded by the KDIC or Woori Finance Holdings. To facilitate the sale process, the government will simultaneously proceed with the spinoff/merger and the sale process.2. Detailed PlanA. (Regional bank unit) The government will spinoff Woori Finance Holdings to set up Kyongnam Finance Holdings and Kwangju Finance Holdings. The two regional banks, Kyungnam Bank and Kwangju Bank, will be merged with their respective holding companies for sale. The KDIC will sell its 56.7% stake in the two regional banks.B. (Brokerage unit) Sale of Woori Finance Holding’s stake in Woori Investment Securities Co.3, Woori FI, and Woori Financial Group will be initiated concurrently with the sale of regional bank unit.C. (Woori bank unit) Woori Bank will be merged with the remaining Woori Finance Holdings and sold by the KDIC as a bank. Such procedure will be initiated after completing regional bank units’ spinoff and deciding the final bidder of brokerage unit. Minimum bidding level will be decided later with market conditions upon initiation of Woori Finance Holdings’ sale process taken into consideration.* Woori Credit Card, Woori Private Equity Co., Woori FIS Co., Kumho Investment Bank, Woori Finance Research Institute and unsold subsidia
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Jun 24, 2013

Regulations on Financial Institutions' Outsourcing of Data Processing Business and IT Facilities

BACKGROUNDThe FSC approved the proposed legislation of ‘Regulations on Financial Institutions’ Outsourcing of Data Processing Business and IT Facilities’ on June 19, 2013. The legislation is to establish detailed regulations in accordance with Korea’s free trade agreements (FTAs) with the US and the EU on the cross-border transfer of financial information required in the ordinary course of business of financial institutions, while reflecting a global trend that financial firms are increasingly outsourcing their data processing business and IT facilities.MAJOR CONTENTS1. Scope and procedure of outsourcingA financial institution is permitted to outsource data processing business “required in the ordinary course of business” to a third party, domestic or overseas. In case a financial institution intends to outsource data processing business to an overseas company only its head office, branches, and affiliates subordinated to such financial institution are permitted to do so as a means to ensure consumer protection and financial regulators’ access to records of financial institutions relating to the handling of information.In principle, the outsourced company, domestic or overseas, is prohibited to extend the contract to another subcontractor.If related laws prohibit outsourcing, or if a financial institution has punitive records under related laws, the financial firm is forbidden to outsource data processing to a third party.Financial institutions are mandated to apply the provisions of standard form contract when signing an outsourcing contract with a third party to ensure consumer protection and financial regulators’ access to records of financial institutions relating to the handling of information.A financial institution is obliged to report the FSS governor in advance to outsourcing data processing business.2. Protection of data outsourced to a third partyIn regard with outsourcing data processing, all protective measures must be ensured under rele
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Jun 18, 2013

Measures to Improve Financial Institutions' Corporate Governance

The FSC formed a task force team1 to work on ‘measures to improve financial institution’s corporate governance (hereinafter ‘measures’)’ on April 19, 2013 and came up with the draft of measures based on what have been discussed so far.The FSC will proceed with follow-up measures in the nearest future, building upon the opinions gathered from academia and financial industry at the public hearing held on Monday, June 17.TASK FORCE DISCUSSIONSFinancial institution’s corporate governance is nearing the level of international standards thanks to continuous efforts to improve corporate governance since the Asian financial crisis in 1997. Such efforts still fell short of actual changes in practices. Compared to general corporations, financial institutions’ poor governance has a greater risk as it poses direct threat to the financial system. In this respect, financial institutions’ corporate governance needs to have greater accountability and better represent interests of all stakeholders including depositors and financial regulators.Under such awareness, the team has drafted the measures focused on two respects: i) how to bring about actual changes to financial institutions’ governance behavior; and ii) how to make corporate governance of financial institutions better represent public interest.i) The FSC has set a minimum level of standards and adopted the ‘Comply or Explain’ principle to respect diversity of financial institutions within the minimum boundaries of institutional framework in implementing corporate governance rules. Financial institutions will be required to disclose more information on their corporate governance and continuously monitor their own compliance situation.ii) The FSC has raised standards for responsibility and transparency of financial institutions towards their stakeholders so that their corporate governance could well represent both interest of shareholders and the public interest. Boards of directors will be granted grea
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Jun 14, 2013

Revision to Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA)

BACKGROUNDThe revised Financial Investment Services and Capital Markets Act (FSCMA) was promulgated in May 28, 2013, which includes vitalizing investment banking (IB) business, introducing alternative trading systems (ATSs), and amending the current regulatory framework of asset management businesses.In line with the revision to the FSCMA, the FSC plans to revise the Enforcement Decree of the FSCMA to stipulate specific terms on matters delegated by the Act and further improve the current capital markets system.KEY CONTENTS1. Stimulate investment banking (IB) business(Requirements to be registered as an IB) A securities firm will be required to hold equity capital worth KRW 3 trillion or more and have the mechanism of risk management and internal control.(Prime brokerage service) The scope of customers with whom IBs can provide prime brokerage service will be expanded to financial companies, pension funds, overseas hedge funds as well as Korea-based hedge funds stipulated in the revised Act.(Credit extension for companies) The Enforcement decree specifies the scope of credit extension that IBs can provide companies as loans, payment guarantee, and bill discount. It also details types of credit extension exempted from the rule which limits a total amount of credit extension by an IB not to exceed its equity capital.2. Improve capital market infrastructure(Introduction of ATS) To be registered as an ATS, a securities firm will be required to hold equity capital worth KRW 20 billion or more. The Enforcement Decree specifies types of products that can be traded through ATSs as stock certificates and depository receipts (DR).ATSs will be subject to the same rules applied to exchanges in regard with measures on market surveillance and market stabilization such as daily price limit or trading halt, while it will be granted greater autonomy and flexibility in regard with trading business.Securities firms, however, can execute customers’ orders as customers want if there w
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Jun 12, 2013

Public Hearing on Measures to Improve Financial Institution's Corporate Governance

The FSC formed a task force team in April this year to discuss how to improve financial institution’s corporate governance. The team will come up with a draft of measures to improve corporate governance in financial institutions by this week, based on what has been discussed from April to May 2013The FSC plans to hold a public hearing on the draft of measures on Monday, June 17 at 15:00 to gather opinions from experts from academia and financial institutions. The discussion topic will cover how to reinforce functions of boards of directors; how to make outside board members better represent interests of shareholders and the public; and how to strengthen external checks on boards of directors.Based on the opinions raised at the public hearing, the FSC will finalize the measures and proceed with follow-up measures.[Public Hearing]- Host: Financial Services Commission- Time date: June 17(Mon), 15:00-17:00- Place: International conference room, Korea Federation of Bank(2F)- Moderator: Professor Park Kyung-suh, Korea University- Topic: Measures to improve financial institution’s corporate governance- Discussion Panel: corporate governance experts from academia and financial industry*Please read the attached file for details.
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May 31, 2013

Basel III Capital Regulations to be Implemented from December 2013

BACKGROUNDKorea has already finalized preparation of relevant rules for the implementation of Basel III. However, authorities postponed the initially scheduled date for implementation (Jan.1, 2013) considering the uncertainty of adoption status of other member countries and decided to adjust Basel III implementation schedule after closely monitoring the progress of other member countries.CURRENT TRENDAs of April, 23 among 27 Basel Committee on Banking Supervision member countries finalized the implementation schedule. Basel III implementation Schedule (as of April 30, 2013) Region Implementation Schedule Member Countries Asia Not finalized(2) Korea, Indonesia Finalized(7) Japan, Singapore, Hong Kong, China, India, Saudi Arabia, Australia Europe Not finalized(1) Turkey Finalized(11) Switzerland, Russia, EU(UK, France, Germany, Italy, Belgium, Netherlands, Luxemburg, Spain, Sweden) Americas, Africa Not finalized(1) USA Finalized(5) Canada, Mexico, South Africa, Brazil, Argentina IMPLEMENTATION OF BASEL IIIThe FSC, in close coordination with the MOSF, FSS, BOK, and other relevant authorities, came to a decision to implement Basel III on December 1, 2013. The decision was made as major Asian economies have already implemented Basel III capital regulations in 2013 and the banking industry requires time to prepare for the adoption.EXPECTED EFFECTSThe Basel III regulation to take effect this year will be limited to bank capital requirements. Since the capital of most domestic banks consists of common equity, the impact of Basel III capital regulations will not be significant unlike banks in the US and Europe.FUTURE PLANThe authorities will gather additional opinions on the revisions to the ‘Regulation on Supervision of Banking Institutions’ and ‘Enforcement Rules for Banking Supervision’ from May 31 to June 19, 2013. Final decision will be made by the FSC in June.Basel I, II, III Comparison Region Implementation Schedule Member Countries Asia Not finalized(2) Korea
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May 24, 2013

'Growth Ladder Fund' to be Launched to Support SMEs and Venture Companies

BACKGROUNDA healthy investment ecosystem for start-ups and investors is an essential foundation for “Creative Economy”1 and “Creative Finance.”2Start-up companies are often faced with funding shortages as the early stages of business start- up growth involve greater risks for investors due to uncertainties and asymmetric information. The expectation gap between start-up owners and investors about commercial value of technology and business profitability often creates a supply-demand imbalance of funds, called “Death Valley” for start-ups.The government and public financial institutions are called to take the role of addressing such imbalance and create a sound and well-functioning ecosystem.CURRENT FUNDING CONDITIONS FOR SMES VENTURE COMPANIESOverall, SMEs and venture companies are provided with sufficient funds and liquidity through supportive measures by the government.3The funding structure of SMEs is, however, highly dependent on loans from banks and public financial institutions with 99% of SME financing from loans, while the proportion of investment remain small.Investors remain risk-averse with most investment disproportionately concentrated towards the latter phase of business cycle which involves less risks compared to the early stage of business start-up. The percentage of venture capital invested in companies with less than 3 years of operation remains a mere 30%.Loan type investments with high interest burden such as convertible bond and redeemable preferred stock are increasing.(unit: %, Korean Venture Capital Association) Common Stock Preferred Stock CB/BW PF Etc. 2012 19.5 39.6 14.9 19.9 6.1 2011 27.4 35.2 16.4 17.8 3.2 ∙ ∙ ∙ ∙ ∙ ∙ 2006 46.2 19.9 12.1 12.7 9.0 2005 36.8 17.2 16.7 16.2 13.2 CREATION OF ‘GROWTH LADDER FUND’The government plans to create a dedicated fund, tentatively named ‘Growth Ladder Fund’, to address such problems in funding conditions of SMEs venture companies and to provide innovative SMEs venture c
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May 21, 2013

Debts Held by Joint Sureties during the Asian Financial Crisis to be Written-off

BACKGROUNDJoint sureties heavily indebted as a result of business bankruptcy during the Asian financial crisis are still facing difficulty in returning to normal economic activities. Some of them are limited in access to financial services as their delinquent credit record still remains undeleted and shared among financial institutions. It is imperative for the government to bail out those individuals and give them a second chance.RECIPIENTS OF SUPPORTDebtors involved in joint sureties for bankrupt SMEs from 1997 to 2001 are the subject of the government’s debt write-off program.① 1,104 debtors whose delinquent credit record has not been removed;- 528 debtors whose delinquent credit record remains on the court’s list of defaulter.- 576 debtors who are registered as a person responsible for bankruptcy on dishonored bill.② 113,830 debtors who have not yet repaid debts1 from joint sureties.SUPPORTIVE MEASURES① All delinquent credit records registered on the Korean Federation of Banks (KFB) will be deleted.② Outstanding debts from joint sureties will be rescheduled.- Subject to debtors with combined debt of less than KRW 1bn.- 40~70% of the principal2 will be written-off.- Repayment period of 10 years in maximum.③ Korea Asset Management Corporation (KAMCO) will purchase debts from financial institutions for debt restructuring.FUTURE PLANCandidates may apply for the program through KAMCO main office and branches from July 1 to December 31, 2013.*Please read the attached file for details.
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