Press Releases - Financial Services Commission

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Jul 17, 2009

SME Loans & Credit Guarantees in the First Half of 2009

Bank LoansLoans provided by the 18 domestic banks to small and medium-sized enterprises (SMEs) in the first half of 2009 increased by KRW 16.2 trillion from KRW 422.4 trillion to KRW438.6 trillion as of end-June.In June alone, the preliminary net increase in SME loans was KRW1.1 trillion won, but if you take into account loan dispositions and write-offs, it rose KRW3.1 trillion.Fast Track ProgramSince the Fast Track program got started on October 13, 2008, a total of 9,803 companies have been extended KRW17.7 trillion in support, KRW4.7 trillion of which was provided to those having incurred losses in KIKO and other currency options.A total of KRW2.4 trillion was extended to 1,929 companies through the Fast Track program in June, including 716 new applications.Due to improving internal liquidity status, the number of newly registered companies for support has been continually on the decrease since March, 2009.Support through the Center of the SME Financial OmbudsmanSince the Center of the SME Financial Ombudsman opened on September 11, 2008 up until end-June 2009, a total of 2,821 cases were heard of which 49.2% or 1,387 cases were merited with KRW1,161.4 billion in support from the banks.In particular, the six SME Financial Support Offices located in industrial parks counseled 658 cases and accepted 35.3% or 232 cases for support between February 23 and June 30.Guarantees Bank Loan Maturity ExtensionsSince the start of expansion of guarantees on February 16, there has been KRW24.7 trillion in new guarantees to ease the burden on SME liquidity status. Since the peak in March (KRW5.9 trillion), it has been on the decrease and stabilizing.Despite the slowing of SME lending increase of KRW16.2 trillion from KRW35.1 trillion last year, maturity extensions rose to KRW16.4 trillion from KRW15.1 trillion a year earlier. The rollover ratio consistently showed over 90%.In the first half of 2009, KRW16.7 trillion (KRW3.8 trillion in June) was extended in support of core busin
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Jul 16, 2009

State of FX Margin Trading and Plans for Regulatory System Improvement

1. SummaryFX margin trading had gained considerable popularity from retail investors in such countries as Japan and the United States for its advantage of making it possible to invest in the fluctuating currencies of other countries with only a small deposit. But a rise in fraud cases and swindles, and heightened risk to investors caused regulations to be strengthened around related activities.Retail investor interest in FX margin trading also started picking up in Korea in 2008 from a number of factors that included low interest rates and increased currency volatility from the global economic crisis. This has brought to the fore a host of concerns with a spike in related crimes, such as illegal transactions and fraud as well as mounting investor losses.To prevent the equivalent of the ‘Mrs. Watanabe Syndrome’in Japan from taking hold in Korea, the financial supervisory authority will raise domestic investors’awareness of FX margin trading and take measures to ensure the transparency of the market.2. State of FX Margin TradingTransaction VolumeThe volume of transactions increased sharply after currency volatility became amplified after 2008 with contracts approximating KRW361.0 trillion as of end-May 2009. From 2007 to 2008, contracts increased by 594%.Entering 2009, the growth of transaction volume and concentration of transactions to retail investors have been markedly prominent with a low interest rate trend and investor sentiment recovering.The volume of transactions for the first five months of this year already exceeded 85% of all transactions in 2008 while the percentage of transactions by retail investors accounted for 99% of all transactions in 2009, up from 92% in 2008. Trading LossesRetail investor losses have risen noticeably from KRW11.8 billion in 2007 to KRW48.9 billion in 2008 and KRW44.9 billion as of May 2009.Losses are being borne to the vast majority of retail investors as short-term investments are being made without adequate information i
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Jul 15, 2009

Key Financial Policy Issues

This is a summary of the report submitted to the National Policy Committee at a special session of the National Assembly on the most current and pressing key issues in financial policies.There are five key topics on the report:I. Plans to finance green growth related industries (MOSF/FSC – July 6) II. Privatization of Korea Development BankIII. Progress on corporate restructuring (FSS – July 15)IV. Strengthened risk management on mortgage loans (FSS – July 6) V. Amendments to the medical insurance business (FSC – July 1)Relevant announcements or press releases have recently been released through the FSC, FSS, or the MOSF (Ministry of Strategy and Finance). They are available on our website for your reference.The second topic which has not been dealt with previously is covered herein;Privatization of Korea Development Bank (KDB)1. Current stateThe privatization of KDB and the establishment of Korea Public Banking Corporation (KPBC) are well underway. This is to resolve market conflict with private financial companies and conduct policy lending more effectively.A. Related policiesThe National Assembly has agreed to have the KPBC Act established (March 3, 2009) and the KDB Act amended (April 29, 2009). Consequently, relevant laws and decrees were enforced on June 1, 2009.B. KDB spin-off planA committee of members from the FSC, MOSF, MKE, KDB and professionals from the private sector are discussing ways to break up the current KDB into KDB Holding Company, KPBC, and the remaining KDB.Due diligence has been conducted by an accounting firm on two accounts, from March 16 toApril 30 and May 22 to June 5. The spin-off will be based on the projected financial statement as of end-August 2009. KDB is forecast to have assets of KRW 172.2trn, liabilities of KRW 155.0trn, shareholders’ equity of KRW 17.1trn and a BIS ratio of 13.1% as of end-August.Assets will be allocated in a reasonable manner so that KDB can be privatized smoothly and KPBC can conduct public lending e
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Jul 10, 2009

Plans to Advance Financial Infrastructure of Funds Market

Background IssuesEven as the funds market has continued growing in volume and quality, investors’ interest in funds are expected to rise further from a number of factors, such as an aging population.Among other contributing reasons, tax exemptions on overseas stocks and the need to globally diversify private assets caused assets under management to increase sharply at overseas investment funds, climbing from KRW9.1 trillion at end-2005 to KRW54.9 trillion as of June 18 this year.As the availability of asset classes for investment has increased, the variety of funds has also broadened to include real estate, special asset, derivatives and other assets in their funds.But at the same time, the financial infrastructure related to the funds market has been pointed out to have room for improvement.In a few exceptional cases, investors who held overseas investment funds and fund of funds took advantage of other beneficiary owners by buying into a fund with prior information on the direction of stock prices as funds’ base prices are based on the previous day’s closing prices.In other instances, shortfalls in the financial infrastructure related to overseas investment could erode investor confidence as a result of discrepancies in the base price of overseas investment funds.There is also a loss in efficiency as trades, settlement, and the review of assets held in overseas investment funds are conducted manually.Improvement PlansTo raise the level of confidence in the base price and improve the efficiency of fund-related systems, the financial supervisory authorities are to jointly develop the financial infrastructure of the funds market with the funds industry.To prevent buying a fund with foreknowledge in the direction of stock prices, the applicable base price of overseas investment funds and fund of funds will be changed from the current T+1 day to T+2 days. To prevent the frequent resetting of the base price, the current base price tolerance will be adjusted after
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Jul 09, 2009

Countermeasures for Recent Cyber Attacks on Financial Companies

Recent cyber attacks from July 7 to 9 made on seven domestic banks briefly delayed or halted their personal internet banking services, but there were no illegal money transfers that took place and no confidential or private information leaked out during the attacks.Currently, all banking systems are back to normal, working in full capacity, including personal internet banking services.The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) have detected the cyber attacks (program name: ‘DDoS’) through the Electronic Financial Emergency System and acted swiftly by running a cyber attack countermeasure system at banks and at the Korea Financial Telecommunications and Clearings Institute (KFTC) which minimized any potential damage.An Emergency Countermeasure Task Force was formed between the FSC/FSS, and the KFTC to closely monitor any suspicious activities or signs of further attack. The team will be headed by the Director General of FSC’s Planning Coordination Bureau.All banks and financial companies were alerted and directed to run a 24-hour emergency monitoring system as of yesterday.* Please refer to the attached PDF for details.
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Jul 06, 2009

Plans to Finance Green Growth Related Industries

The Korean government plans to promote investment in green growth related industries. The plan is aimed at creating funds fit for the industries and expanding sources of financing as a way to prevent potential bubble in the industries.BackgroundBoth financing in the financial market and by the government are not fit for green growth related industries because 1) projects in the industries have a lot of uncertainties, 2) it will take long to realize return on investment in those projects, and 3) the external benefit is larger than that of other projects.Directions of the planTo attract private investment, the government decided to remove uncertainties: The government will introduce a certification system to approve green technologies and projects, and verify companies involved in green growth related projects as “green enterprises” if they qualify for government’s requirements.The planThe plan is formulated on the basis of the three stages of development.Stage 1: RD and commercializationTo promote RD projects and their commercialization, the government will increase fiscal support from 2.0 trillion won in 2009 to 2.8 trillion in 2013, along with 300 billion won funds set up by the KDB (Korea Development Bank).SMEs doing projects in stage 1 will access fiscal funds exclusive for them, which will be expanded form 60 billion won in 2009 to 1.1 trillion won in 2013.Credit guarantee offered to “green enterprises” and green projects will also be increased almost three folds from 2.8 trillion won in 2009 to 7 trillion won in 2013.Stage 2: Industries maturingTo boost maturing industries, the “green funds” of 500 billion won will be formed by the KDB and National Pension Fund in the last half of this year, along with long-term deposit products and “green bonds” launched by banks to attract private investors. The government will grant tax incentives on capital gains: no tax on dividend up to 30 million won, among others.Stage 3: Industries fully grownTo suppo
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Jun 29, 2009

FSB Inaugural Meeting in Basel

The Financial Stability Board (FSB) held its inaugural meeting in Basel on 26-27 June, the first meeting since its re-establishment as the FSB with an expanded membership and a broadened mandate. The FSC Chairman, Dong-Soo Chin and the BOK Governor, Sung-Tae Lee attended the meeting as Korea’s official representatives.The FSB, which was re-established in April 2009 as the successor to the Financial Stability Forum (FSF), brings together national authorities responsible for financial stability in significant international financial centers, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. It is currently chaired by Mario Draghi, Governor of the Bank of Italy.The new structures of the FSB include, in addition to the FSB Plenary, a Steering Committee and three Standing Committees – for Vulnerabilities Assessment; Supervisory and Regulatory Cooperation; and Standards Implementation.Representing Korea, the FSC has been included in the Steering Committee among 23 other country representatives and international standard-setting bodies (SSBs). The term of service for the Committee members is two years.The Steering Committee will be chaired by the FSB Chair and will provide operational guidance between Plenary meetings to carry forward the directions of the FSB. The Committee will also be responsible for providing guidance and monitoring of the work progress, as well as coordination between Working Groups. It will also be conducting Joint Strategic Reviews on new international standards and policies put forth by SSBs.The Steering Committee’s composition is decided by the FSB Chair in a manner that ensures maximum effectiveness in taking forward the FSB’s work while having regard to balanced representation in terms of geographic regions and institutional functions. The Committee ensures effective information flow to the full membership.The three Standing Committees –
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Jun 25, 2009

Economic Policy Directions for the Second Half of 2009

Key DirectionsCurrent expansionary policies will continue until clear signs of economic turnaround are apparent, given uncertainties surrounding the economy. However, temporary measures will be reviewed in terms of their impact on the economy, and subject to be withdrawn when they expire. Real estate markets will be under close scrutiny, and any signs of market instability are sure to be responded to in advance with appropriate measures, in particular mortgage loans with tighter provisions. (According to the press briefing given on June 24, the Korean economy saw better-than-projected real GDP growth in the second half of 2009, registering a 1.7 percent increase from the previous quarter, while 0.7 percent growth was forecast originally.)The current policies concerning job creation and public welfare will continue to be pursued in the second half, but their impact and effectiveness will be reviewed. In this respect, supplementary budget spending, measures for promoting the service sector promotion and supporting business startups, and programs for training human resources will be put under evaluation.Market fund flows will be improved so that rich liquidity can move smoothly into the real sector. Long-term funding, such as MA funds and early IPOs of public companies, will be encouraged. Non-performing loans in the financial sector will be purchased through the KRW40 trillion Restructuring Fund.On-going corporate reform efforts will definitely be made: Creditor-led corporate restructuring at all times, early removal of bad loans in the financial sector, and more flexible job markets with improved labor-management relations. Relaxed lending conditions and expanded credit limits will be removed if the financial market stabilizes state-owned agencies are obliged to make on-going efforts to improve their management efficiency, and those subject to privatization will be prepared for it.The government will boost its efforts to raise the nation’s growth potential to prepa
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Jun 22, 2009

Restructuring Plan for SMEs

BackgroundTogether with large companies with debts of more than KRW50 billion, the companies in construction, shipbuilding and shipping industries are now under a full-fledged restructuring process as credit risk assessment have wrapped up on them. SMEs will also be subjected to restructuring programs through creditor bank-led credit risk assessment.Restructuring ScheduleThe credit risk assessment will be conducted on SMEs in order according to the size of their debts given a large number of firms involved and limited information available for them.The first round of credit assessment will be completed by July 15 on SMEs which have KRW5.0 billion or more in borrowing and are required to have external audit. This includes 5,214 basic assessment target companies out of a total of 10,738 SMEs, excluding public and special purpose corporations, and confirmed 861 companies as detailed assessment target companies according to the following financial factors; 3-year operating cash flow deficit, 3-year interest coverage ratio below 1, precautionary and below companies.The second round of credit risk assessment, which will be finished by the end of September, will center on SMEs that have between KRW3.0 billion and KRW5.0 billion in borrowing and are subject to external audit. Unlike the first round of assessment where only financial factors were considered, the second round is expected to include qualitative factors such as the level of delinquencies, discounted bills, and uncommitted overdraft rates. Qualitative factors will also be applied to companies that underwent the first round of assessment for inclusion in the in-depth assessment.The third round of credit risk assessment is due to be completed by the end of November this year. The assessment will include companies that are not subject to external audit or sole proprietorships with more than KRW 3.0 billion in debt, and those that have between KRW1.0-3.0 billion in debt and are subject to external audit.Each credito
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Jun 12, 2009

SME Loans and Credit Guarantees in May 2009

Bank LoansContinuing its upward trend since the beginning of the year, the month-on-month net increase in loans provided by the 18 domestic banks to small and medium-sized enterprises (SMEs) grew by KRW3.2 trillion from KRW434.5 trillion in April to KRW437.7 trillion in May.During the first five months of the year, the net increase in SME loans was KRW15.2 trillion, and KRW17.3 trillion when the actual support amount is added, including deposit-loan nettings.Fast Track ProgramDuring May, a total of KRW2.0 trillion was extended to 893 SMEs through the Fast Track program. Demand for loans through the program has been slowing since March due to improved financial conditions of SMEs following the liquidity injections.From October 13, 2008 to May 30, 2009, a total of 9,087 SMEs were extended KRW15.3 trillion in support, including 588 companies that received KRW4.0 trillion for losses stemming from KIKO contracts.Support through the Center of the SME Financial OmbudsmanDuring May, the Center of the SME Financial Ombudsman heard 232 cases and extended KRW66.9 billion in support. From September 11, 2008 to May 31, 2009, a total of 2,613 cases were heard of which 47.6% or 1,245 cases were merited with KRW990.7 billion in support from the banks.In particular, the six SME Financial Support Offices located in industrial parks counseled 551 cases and accepted 171 or 31.0% of the cases for support between February 23 and May 29.Guarantees Bank Loan Maturity Extensions Future SupportIn May, new guarantees more than tripled to KRW4.4 trillion from KRW1.5 trillion over the same period last year. But the uptrend in the applications for and issuance of guarantees, which shot up until March this year, started slowing in April.Maturity extensions have also been running smoothly with the average maturity extension of guarantees of KRW3.2 trillion and an average maturity extension rate of 94.3% in May.During the first five months of the year, there was KRW13.1 trillion in support for core
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Jun 11, 2009

Corporate Credit Assessment Results

18 creditor banks have carried out regular assessments of large individual companies with credit facilities in excess of KRW 50 billion sinceApril. In the second stage of the credit assessments, 433 companies were analyzed, and as a result, 33 companies are targeted for restructuring.Of the 33 companies, 22 companies are C-rated which will accept creditor-led workout programs, and 11 companies are D-rated which will have to develop self-normalization efforts and apply for corporate restoration process.Compared to the results from regular credit assessments in previous years*, this year there has been a large increase of companies that are up for restructuring. This is believed to have been resulted from creditor banks’ active efforts for restructuring.*2006/07/08: 3, 7, and 0 respectivelyThe total sum of credit facilities rendered to the 33 selected companies amounts to KRW 3.4 trillion. An increase of KRW 980 billion* of additional loan loss provisioning is expected within the financial sector.*Banks/Mutual savings banks/Credit specialized companies: KRW 830bn, 30bn, 20bn respectivelyThe assessments were originally planned to be completed by the end of June, but have been finalized earlier than expected to speed up the restructuring process. Consequently, the Mediation Committee for Creditor Financial Institutions will head the accelerated process of workout programs on selected companies to normalize operation as soon as possible.Creditor banks will start conducting credit assessments of corporations with credit facilities under KRW 50 billion in July. The Corporate Credit Support Task Force will oversee the operation to ensure that the ongoing restructuring process goes as smoothly and effectively as possible.Please be aware that, to minimize disruptions in regular operational activities of the companies that will undergo restructuring, their identities are not revealed.* Please refer to the attached PDF for details.
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May 20, 2009

Short Selling Permitted on Non-Financial Stocks

The Financial Services Commission made a decision today to start allowing short selling transactions of non-financial company stocks beginning June 1.However, for the time being, the ban on short selling for financial stocks will continue to be in effect due to volatility still lingering in the market. These stocks include stocks of banks, securities companies, and insurance companies that are traded in the Kospi and the Kosdaq markets.Furthermore, as stipulated in the Financial Investment Services and Capital Markets Act (FSCMA), naked short selling will not be permitted, but only covered short selling will be permitted.To effectively monitor and supervise the short selling activities, a Short Selling Confirmation System will be placed, as well as Short Selling Execution Guidelines. Systemic Enhancements relating to Short Selling1. Disclosure of short selling and stock borrowing information in the stock market through the Korea Exchange (KRX) and the Korea Financial Investment Association (KOFIA).2. Establishment of Short Selling Confirmation System (March 2009) to effectively enforce short selling regulations. Under this system, an investment broker is required to verify whether he or she has followed the short selling regulations correctly.3. The Execution Guidelines for Short Selling (May 2009) have been drawn up to introduce a concept of ‘net short position’ in order to set a clear standard of what is considered short selling and what is not. The ban on short selling of non-financial stocks will be lifted on June 1, 2009, to give ample time for investors and financial investment companies to conduct preparations.Only the financial investment companies that have completed their preparations according to the guideline measures will be allowed to start placing short sell orders and conduct brokerage transactions for clients.The FSC intends on removing the ban also on short selling of financial stocks given further signs of improvements in the markets.* Please
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May 18, 2009

2009 Corporate Restructuring Fund Management Plan

Amid a global financial crisis, the government has taken a number of steps to facilitate and expedite corporate restructuring of distressed companies in order to dismiss concern of worsening financial soundness of financial institutions. In line with this effort, on May 13, the legislative bill relevant to the establishment of the Korea Asset Management Corporation (KAMCO) was amended to enable the Corporate Restructuring Fund to be set up within the KAMCO. The National Assembly has previously passed a motion on providing debt service guarantees for bonds that will be issued for the envisioned KRW 40 trillion Fund throughout 2009 and 2010.Subsequently, the 2009 Corporate Restructuring Fund Management Plan will be submitted to the National Assembly in late May, after a cabinet meeting held on May 19.The planned amount for the Fund in 2009 is KRW 20.2 trillion, which is subject to changes in further economic developments, whereas the actual total bond issuance for the Fund will depend on the amount of distressed assets it needs to purchase, and prevailing market conditions. The payments for the purchase of the distressed assets will be made by bonds from the Corporate Restructuring Fund, so as to minimize the impact on the bond market. The liquidity support of KRW 120 billion for the companies experiencing temporary liquidity shortage is included in the Fund as well.The majority of the Fund, KRW 20 trillion, will be used to acquire impaired loans from financial institutions and distressed assets from companies undergoing restructuring. This will preferentially include acquisitions of KRW 4.7 trillion of financial institutions’ non-performing loans from project financings and KRW 1 trillion worth of struggling ships that are in operation.The implementation of the Corporate Restructuring Fund is expected to enhance and expedite the restructuring process to preempt deterioration of asset quality of financial institutions. Through effectively utilizing the Fund in the p
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May 15, 2009

FSC Chairman, Dong-Soo Chin Meets Foreign Correspondents

I. GreetingsDistinguished members of the Seoul Foreign Correspondents’ Club, and ladies and gentlemen,It’s great to be here with you and I thank you for coming.I also thank the Seoul Foreign Correspondents’ Club for helping us arrange today’s meeting and giving me a chance to speak to foreign correspondents about Korea’s policy response to the global financial crisis.It is my hope that today’s meeting will shed new light on recent market and policy developments in Korea and what you can expect going forward in terms of financial policy from the FSC.II. The Financial Crisis and Korea’s ResponsePolicymakers in the U.S. and other major countries have responded aggressively and forcefully to the global financial crisis.With many characterizing the crisis as the worst since the Great Depression, there was more than ample justification for bold policy measures.Korea’s policymakers acted in a similarly bold fashion to cushion the impact of the crisis on the financial system and the broad economy.In terms of financial policy, we had two broad goals to accomplish: safeguarding the financial markets and reinstating the financial sector as the patron for thereal economy.Safeguarding the Financial MarketsAs the financial crisis began to spread around the world, it became clear to us that we had to act swiftly on several fronts to avoid systemic risk, and maintain the stability of the financial markets.To stabilize the foreign currency market, the government provided external debt guarantees for domestic banks and signed currency swap arrangements with major countries.On the other hand, to bring back stability to the financial markets, interest rates were cut and the Bond Market Stabilization Fund was created to increase liquidity and help restore the flow of credit to the real sector.Steps were also taken to prevent market instability due to abrupt capital outflow from the short-term money market.Reinstating the Financial Sector as the Patron for the Real Eco
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May 15, 2009

Opening of the Fn Hub Korea, Busan

The opening ceremony of ‘Fn Hub Korea, Busan’ will be held on May 15, 2009 at 2p.m. Fn Hub Korea, Busan was established to support Busan (Munhyeon), designated as a specialized financial cluster on January 28, 2009, develop into a global financial center.More than 30 representatives from financial institutions and related agencies will be present to celebrate the opening of Fn Hub Korea, Busan, including the FSS Governor, Jong Chang Kim, the Mayor of Busan, Nam Sik Hur, members of the National Assembly, Byung Soo Suh, Jong Hoon Kim and Jin Bok Lee, the President of the Busan Metropolitan Council, Jong Mo Je, as well as the Chairman of the Foreign Banks Group, Michael Hellbeck.Fn Hub Korea, Busan will assist in the promotion of Busan as an attractive business destination for global financial companies as well as provide assistance to domestic financial companies planning overseas expansion. It will also provide one-stop services to support with regulatory approval processes and work to resolve any business difficulties and obstacles encountered by the financial companies to contribute to the growth and development of Busan into a financial center specializing in marine related finance* and derivatives.* For the development and the transaction of financial products related to the marine industry such as shipbuilding, marine transportation, and logistics.* Please refer to the attached PDF for details.
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May 13, 2009

SME Financial Support Results (April 2009)

1) Bank LoansDespite the economic slowdown, loans provided by 18 domestic banks to small and medium-sized enterprises (SMEs) increased to total KRW434.3 trillion as of end-April this year on the back of expanded guarantees and maturity extensions.For the first four months of 2009, the net increase in SME loans was KRW12.0 trillion from the end of last year. When adding the actual support amount, including SME bank deposit-loan nettings, which is to be reflected in MOU evaluations, the net increase amounted to KRW13.7 trillion.In April alone, the preliminary net increase in SME loans was KRW2.2 trillion won, lower than a monthly average of KRW3.0 – 3.7 trillion during the first three months of the year. The drop was largely attributed to NACF’s KRW900 billion policy fund coming due and sluggish overall demand for capital including slowed issuance of credit guarantees.More recently, conditions have also turned in favor of small and medium-sized companies, as witnessed with the Business Survey Index going up from 56 in January 2009 to 83 in April.2) Fast Track ProgramKeeping up with the high pace set in January this year, a total of KRW2.6 trillion was extended to 1,231 companies through the Fast Track program in April.Since the Fast Track program was initiated on October 13, 2008, a total of 8,194 companies have been extended KRW13.3 trillion in support, KRW3.8 trillion of which was provided to 583 companies that had incurred losses in KIKO and other currency option contracts.3) Guarantees Bank Loan Maturity ExtensionsIn April, there was KRW4.9 trillion in new guarantees, 3.1 times more than the KRW1.6 trillion issued during the same period last year. But as the number of applications for guarantees has fallen on month by 14.8% to 66,307 cases inApril, the pace of increase is slowing for both guarantee applications and their issues.Also last month, there was KRW3.6 trillion in maturity extensions with a 95% rollover rate.From January to April, KRW9.5 trillion was
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May 04, 2009

Notice of Amendments to the KAMCO Act

On April 29, 2009, the National Assembly has approved amendments to be applied to the KAMCO Act’s enforcement decree. Accordingly, from May 4 to May 11, the government will make official announcements of these amendments.The main purpose is to activate the KAMCO’s role of purchasing troubled assets from distressed financial institutions and companies that will undergo restructuring through establishing a pre-announced Restructuring Fund.Therefore the amendments will be made in the following areas:Improvement in Payment Method for Acquiring Troubled Assets;- Allow payments to be made with bonds from the Restructuring Fund.Executive Rights Given to the KAMCO;- Allow the KAMCO to exercise executive actions to manage the buyer/seller companies’ assets.Settlement of Residual Assets for the Restructuring Fund;- The process of returning the Fund’s residual assets back to the government must beclear and straight-forward. The return may be made in kind, if in agreement with the Ministry of Strategy and Finance. When residual assets are to be placed with the national treasury, a full list of assets and a balance sheet of the Restructuring Fund must be completed prior to the event. After the return of residual assets, a statement of accounts must be created.The amendments will be reviewed by the Ministry of Government Legislation and presented to the Cabinet Council meeting, which then will be officially promulgated and take effect within May 2009.* Please refer to the attached PDF for details.
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Apr 30, 2009

Corporate Restructuring - Results of Economic Policy Meeting

The following is a statement the Financial Services Commission and the Financial Supervisory Service issued at the conclusion of an economic policy meeting the President convened on April 30 for discussions on corporate restructuring. In the meeting, a comprehensive package of measures and steps were discussed and agreed for implementation to increase the speed and effectiveness of the corporate restructuring efforts.BackgroundThe government has taken a number of steps beginning in the second half of 2008 in order to facilitate and expedite creditor-led restructuring of distressed companies. They range from support measures for restructuring of 36 construction and shipbuilding companies and stepped-up monitoring of large companies facing credit shortage, to the creation of Bank Recapitalization Fund and the Corporate Restructuring Fund to help facilitate the restructuring.There have been some calls of concern, however, that the restructuring process was held up and the impact of creditor-led restructuring efforts was limited, giving rise to consensus for the employment of decisive measures to increase the speed and effectiveness of the restructuring process. The consensus for expeditious restructuring efforts were backed by the enhanced capacity of the domestic economy to absorb shocks arising from the corporate restructuring and the improved economic conditions, marked by increased liquidity in the foreign exchange market and stability in the financial markets. The establishment of funds and legal foundation also added to pave the way for the full-fledged implementation of restructuring measures. (Relevant legislations are due at the April 30 plenary session of the National Assembly.)Restructuring of ConglomeratesMajor creditor banks will encourage conglomerates running a risk of deteriorating liquidity to take stepped-up measures of improving their financial conditions, which may include sale of their subsidiaries.The FSS classified corporate groups, via their maj
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Apr 23, 2009

Restructuring Plans for the Shipping Industry

1. BackgroundIn recent years, shipping companies have continuously grown in size* driven by drastic rise in freight rates (Baltic Exchange Dry Index (BDI)).Starting from the end of last year, the business environments have gotten drastically worsened with sudden freefall of freight rates. Consequently, many had to curtail their operations and some became insolvent.For instance, Samsun Logics, the 9th biggest in terms of asset size, filed for petition for a rehabilitation program in February.Although the freight rates have gone up a bit lately, up to 2,084 by March 4, due to prevalent oversupply, a recovery in full scale is deemed difficult.As such, there has been some concern about increasing insolvency among shipping companies as it might burden other related industries, especially shipbuilding or financial companies. Furthermore, their insolvency can be easily spread over to the overall shipping industry because of the complex, multi-layered chartering contracts.Most certainly, if the number of chartering contract cancellation continues to increase, then shipbuilding and financial companies will inevitably face the risk. Therefore, the following restructuring plans, which are to be carried out on a day-to-day, ongoing basis, will help contain increasing insolvency in the shipping industry and to revamp the industry so as to strengthen its competitiveness in the global market.2. Restructuring PlansA. Continuous restructuring of shipping companiesIn line with the existing corporate restructuring procedures* supported by the Corporate Restructuring Promotion Act, creditor banks will conduct credit risk assessment of subject shipping companies on an ongoing basis.*Already, companies whose total loans amount to KRW 50 billion or more are subject to annual mandatory credit risk assessment, due June every year, by their creditor banks.To facilitate the restructuring process, creditor banks will be advised to complete risk assessments by early May this year for shipping c
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Apr 09, 2009

Progress in Credit Gurantee to SMEs

1. Loans to SMEs including micro-enterprisesEncouraged by the initiatives to boost credit guarantees and roll-overs the total loan amount extended to small-, medium-, and micro-enterprises, SMEs hereafter, has been steadily increasing despite the economic recession (Monthly average of KRW3.3 trillion).Even compared to that in household loans (KRW1.1 trillion) and corporate loans (KRW0.7 trillion), the rate of increase in SME loans (KRW 3.3 trillion) is greater.A mid-term liquidity through the Fast Track program was provided to 1,812 SMEs totaling KRW2.97 trillion during the month of March this year.2. Supply of Credit GuaranteeWithin the Q1 of 2009 the total amount of credit supply is KRW16.6 trillion, 2.3 times as big as that in the same term last year (KRW7.1 trillion), demonstrating smooth progress in the SME lending since the launch of the initiative.* Please refer to the attached PDF for details.
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