Press Releases - Financial Services Commission

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Feb 27, 2014

Measures to Improve Structural Soundness of Household Debt

BACKGROUNDAs of the end of 2013, Korea’s household debt amounted to KRW 1,021 trillion. The government has been taking a series of measures so far to improve the quality of household loan and to rein in the pace of household debt growth. As a result, the government significantly lowered a possibility that household debt issue might be worsened into a systemic risk.Morgan Stanley(Oct. 2013) evaluated that Korea’s household debt risk is manageable, citing grounds such as financially stable structure of household assets and mortgage rules on loan-to-value(LTV) and debt-to-income(DTI) ratios. The IMF stress test result (Jan. 2014) also shows Korea’s household debt has a low possibility to pose a systemic risk in the event of economic shock.Despite such achievement, the household debt issue still exposes vulnerability in some parts. The share of floating-rate and interest-only mortgages remains high. Low-income households’ ability to repay debt deteriorated.The FSC and relevant ministries jointly announced today a package of measures to improve the structural soundness of household debt, as part of the government’s follow-up measures to push forward the three-year plan for the next phase of Korea’s economic growth.KEY CONTENTS1. The government will set the ratio of households’ debt to income as a key target indicator in managing household debt and lower the ratio by 5%p until the end of 2017.2. The government will set new targets for banks to increase the proportion of fixed-rate and amortizing loans out of total mortgages, up to 40% by the end of 2017.3. The government will prompt banks to offer a variety of loans tailored to consumers’ debt repayment ability such as loans with a cap on floating rates or loans amortized over a mid-term maturity, for example, 5 to 10 years.4. Borrowers with fixed-rate and amortizing loans will be granted a bigger tax exemption up to KRW 18 million, up from the current ceiling of KRW 15 million. For loans with a long-term
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Feb 20, 2014

Financial Policy Direction for the Year of 2014

KEY POINTS- Establish a specialized IT security agency for the financial sector- Abolish financial regulations that hinder sound competition in financial markets- Develop new pension products tailored to various consumer needs- Establish a special agency to provide guarantee for the shipping industry- Stimulate PEF industry- Establish a technology credit bureau (TCB)- Conduct annual survey on public awareness of financial policyOVERVIEWThe FSC announced its financial policy direction for the year of 2014 in pursuit of Korea’s financial service industry more trustworthy and globally competitive.In 2013, the FSC achieved its policy goals such as protecting financially-marginalized individuals and laying a foundation for creative finance. A recent string of financial incidents, however, undermined public trust in the financial sector. It has become essential to restore the trust.‘Public trust’, ‘market confidence’ and ‘consumer satisfaction’ are three pillars under which the FSC will push forward its financial policy throughout this year. The FSC set three policy goals: (a) establish market discipline in financial markets; (b) secure stability in financial system; and (c) strengthen financial industry’s competitiveness.KEY CONTENTS1. ESTABLISH A SPECIALIZED IT SECURITY AGENCY FOR THE FINANCIAL SECTORA specialized IT security agency will be established to better protect financial consumers against rapidly evolving methods of financial fraud. Currently, IT security functions are carried out separately by the Financial Security Agency(FSA), the Korea Financial Telecommunication Clearing Institute(KFTC) and KOSCOM. Some functions will be transferred to the new agency to provide financial institutions with a total package of specialized IT security service.The new agency will serve as an integrated control for IT security, responsible for a whole process of monitoring, security alert, analysis and response in the event of IT security breach in all financial
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Feb 04, 2014

Follow-up Measures on Telemarketing Ban

BACKGROUNDThe FSC temporarily banned (Jan.24) financial firms from selling their products by phone, SMS or e-mail until the end of March in order to protect financial consumers from any possible financial scam using illegally-circulated personal data.Since then financial firms are conducting self-inspections due February 14 on their data security to submit a report to the FSS. Based on the result, the FSS plans to inspect financial firms deemed vulnerable to da ta breach in March.FOLLOW-UP MEASURESThe FSC will thoroughly examine whether personal data held by financial firms are all obtained legitimately in order to ease financial consumers’ concern about possible financial fraud, while lifting the temporary ban on telemarketing as soon as the legitimacy is confirmed in a bid to ensure job security of telemarketers.□ TelemarketingInsurance companies are required to submit their CEOs’ confirmation to the FSS by February 7 that ensures personal data used for telemarketing is obtained legitimately from customers. After the FSS review the report, insurers will be allowed to resume telemarketing as early as late next week. If the confirmation submitted by insurers is found to be opposed to facts, the insurers will be faced with strict sanctions.General agencies and card companies will be also allowed to resume telemarketing, presumably at the end of February, as soon as the FSS confirms that person al data used for such marketing activities are legitimately obtained.□ Sales activities by SMS or e-mailFinancial firms will be allowed to sell their products by SMS or e-mail as soon as the FSS confirms the legitimacy of data collection and use and introduce relevant guidelines around the end of March. The FSS will offer financial firms guidelines on strict internal control and compliance procedure about customer data protection.* Please refer to the attached PDF for details.
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Jan 29, 2014

Guideline for Personal Data Protection

10 CHECKLISTS FOR PERSONAL DATA PROTECTION1. Be aware that your credit cards are safe to use. All files and USB drives containing personal information from the three credit card companies were confiscated by the prosecutors and there is no possibility that your credit cards could be used fraudulently.2. Sign up for “credit card payment notification SMS service” provided by credit card companies free of charge to receive SMS notice on every payment settled using your credit card.3. Visit the website of respective credit card companies or make a phone call to call centers to check whether your credit card has been misused.4. No need for extra charge when cancelling or re-issuing credit cards.5. Report to the respective credit card company for any loss via website, call centers, or by visiting nearby office. Cred it card companies will cover all financial loss in case any fraudulent transaction incurs.6. Be reminded that credit card companies, in any case, do not send SMS related to personal data breach.7. Do not click any links attached to emails or SMS from anonymous sources and erase them immediately.8. Do not answer any questions but hang up immediately if you receive phone calls asking for credential information such as credit card PIN number or CVC code from someone claiming to be as someone from public institutions, financial authorities, or financial companies.9. Report immediately to the police(☎112), Financial Supervisory Service(☎1332), or respective financial companies if you suspect any financial fraud.10. Damage Report Center is open 24 hours to provide any assistance related to personal data breach.* Pleaserefer tothe attachedPDF for details.
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Jan 24, 2014

Measures to Protect Personal Data from Illegal Circulation and Use

The FSC and relevant ministries held an emergency meeting on January 24 to come up with measures to protect personal data from illegal circulation and use in a joint effort to relieve financial consumers’ concern that illegally-circulated personal data could be used for fraudulent transaction.BACKGROUNDProsecutors announced (Jan.8 /Jan.19/Jan.21) that about 100 million credit card account details were leaked from Kookmin Card, Nonghyup Card and Lotte Card by a contractor with the personal credit rating company Korea Credit Bureau (KCB) over the course of a year beginning in December 2012. The contractor and the alleged buyers of the information were arrested; and the original files and USB of the stolen data were confiscated with no sign of further circulation.The three credit companies said that there had been no financial damage reported so far related to the breach. The FSS found that sensitive information such as credit card passwords or CVC codes was not included in the stolen data. There is no concern that the leaked information would be used for fraudulent transactions.The measures announced today are to take comprehensive and prompt actions against any possibility of financial fraud using illegally-circulated personal information in order to relieve people’s anxiety about their personal data safety.1. PROTECT PERSONAL DATA FROM ILLEGAL CIRCULATION AND USEProsecutors, the police, and the FSS will immediately launch a joint crackdown indefinitely on illegal circulation and use of personal information. Particularly, unregistered money lenders will be subject to intense scrutiny. For those who illegally circulated and used personal data, prosecutors will demand the maximum sentence possible under the current law.The FSS will conduct inspections on all financial firms to check how they manage customers’ personal data. Monitoring will be strengthened to detect financial fraud using illegally-circulated personal data.Phone numbers suspected to be compromised
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Jan 22, 2014

Measures to Prevent a Recurrence of Personal Data Breach

The FSC and relevant ministries1announced a set of preventive measures to protect financial consumers from personal data breach. The measures are focused on alleviating people’s concerns and inconvenience caused by the recent data leaks; punishing those responsible for the incident; and preventing a recurrence of data theft.BACKGROUNDProsecutors announced (Jan.8 /Jan.19/Jan.21) that about 100 million credit card account details were leaked from Kookmin Card, Nonghyup Card and Lotte Card2 by a contractor with the personal credit rating company Korea Credit Bureau (KCB) over the course of a year beginning in December 2012. The contractor and the alleged buyers of the information were arrested; and the original files and USB of the stolen data were confiscated with no sign of further circulation.The FSS received the data from prosecutors (Jan.10) and found that about 85 million accounts were compromised in total, excluding the number of cards held by the deceased, companies or merchants, although overlaps in multiple cardholders were included.The stolen data includes basic personal data such as names, resident registration numbers, addresses, mobile phone numbers and company names, as well as financial information such as credit card numbers, account numbers, expiry dates and annual income. However, no passwords or CVC codes3 had been stolen.MEASURES TO EASE CONCERNS AND INCONVENIENCE FROM THE INCIDENTThe three credit companies said that there had been no financial damage reported so far related to the breach. The FSS found that sensitive information such as credit card passwords or CVC codes was not included in the stolen data. Credit card companies will cover any financial damage incurred by fraudulent transactions.They will provide a service for free that sends text message notifications for each card transaction to mobile phones. KCB will provide a privacy protection service for one year to anyone who asks for it.Regulators will consider additional identity valid
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Jan 20, 2014

TF Formed to Respond to Personal Information Leaks

The FSC formed a task force (T/F) to respond to the recent leakage of personal information on credit card holders and held its first meeting on January 17 to discuss how to prevent consequences of the incident from spreading and seek for fundamental measures to prevent a repeat of such an incident.BACKGROUNDProsecutors announced on January 8 that personal information of credit card holders were leaked by an employee of an outsourcing company of three credit card companies.The stolen data does not include credit cards’ pass word or CVC code; therefore, it is very unlikely that the leaked information might be misused for financial frau d. Prosecutors also judged that there was no further leakage of the stolen data as they arrested those who had stolen the information and first distributed. There has been no case yet reported as direct damage of the incident.MAJOR CONTENTS OF DISCUSSION1. Measures to prevent further leaks and remedies for those affectedThe card companies will identify details as soon as possible about how and when personal information was leaked and will inform affected customers via SMS, phone, e-mail, and respective financial company’s website.To prevent further damages, the three credit card companies will issue new credit cards to the victims upon request, provide free credit card payment notification SMS service(temporary service), and ban other financial companies subordinated to their mother group from using customers’ private information when promoting their products.Moreover, the responsible credit card firms will operate 24-hour call center, damage control team, and hot line with the FS S to immediately respond to further damages. Respective credit card companies will provide financial reimbursements to the victims of further damage.The FSS is verifying the details of the accident based on information received from the prosecutors. Damages from the data leak will be responded and normalized in a swift manner. The FSS will respond to the
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Jan 17, 2014

Plan to Improve Security of Derivatives Transactions

The FSC, the FSS, the KRX, and the KoFIA jointly announced a plan to improve security of derivatives transactions in a bid to prevent accidents of huge losses caused by erroneous orders as well as to reduce settlement risks and excessive price fluctuation in derivatives trading.BACKGROUNDAlgorithmic trading through direct market access (DMAs) has been increasing in Korea’s derivatives market. For KOSPI 200 options trading, for example, algorithm ic trading accounts for about 40%. However, there is a potential risk in algorithmic trading that huge losses could be incurred by erroneous orders due to system errors as witnessed in a recent incident of Hanmag Securities.Huge losses consequent on erroneous orders could undermine derivatives markets’ stability as well as securities firms’ soundness. The FSC and relevant agencies came up with a plan to improve security of derivatives transaction, while ensuring such measures would not curt ail derivatives trading.KEY CONTENTS1. Strengthen securities firms’ internal controlThe FSC will encourage securities firms to voluntarily reinforce their internal control standards to prevent excessive orders that exceed limit bid or limit offer. The FSS and the KRX will also strengthen their oversight on such trading.2. Introduce price banding limitsCurrent safety mechanisms such as price limits and circuit breakers (CBs) exposed limitations in responding to excessive price fluctuations. To such backdrop, the FSC plans to introduce price banding limits on futures and options trading. Upon implementation, investors will only be allowed to place orders of futures and options transaction within a certain range of the latest trade price during market hours.3. Improve remedies for erroneous ordersCurrently, derivatives price could only be corrected when the two respective parties of the transaction reach to an agreement. However, the KRX will be given direct authority to cancel orders if such transaction is deemed to pose threats to
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Dec 16, 2013

Plan to Stimulate M&As among Securities Companies

The FSC announced its ‘Plan to Stimulate MAs among Securities Companies’ on December 16 in a bid to revitalize capital markets as part of the so-called ‘10-10 Value-up Plan’ previously announced on November 27, 2013.BACKGROUNDKorea’s securities industry has 62 securities firms, small in size compared to those of the advanced countries, and their business scope is mostly limited to brokerage businesses in domestic market.1 Securities firms have been competitively lowering their brokerage fees to compete over the limited size of the domestic market, consequently hurting their profitability.2 Against this backdrop, the FSC came up with measures to encourage the securities industry’s consolidation through market-led MAs.MAJOR CONTENTS 1. Incentives for securities firms pursuing MAThe FSC will offer securities firms incentives for MAs by easing requirements eligible for investment banking (IB) licenses or allowing enter new businesses such as pension fund trusts or PEFs.① The Minimum equity capital requirements eligible for investment banking licenses will be eased from the current KRW 3 trillion to KRW 2.5 trillion for securities firms making MAs that would increase their equity capital by KRW 500 billion.② Securities firms making MAs that would raise their equity capital by KRW 100 to 300 billion will be allowed to enter new businesses such as personal pension fund trusts.③ Securities firms making MAs that would increase their equity capital by KRW 50 to 150 billion will be preferentially granted approval for operating private equity funds.2. Strengthened supervision for poorly-performing securities firmsCurrently, securities firms are either recommended or required to take necessary measures for management improvement in case their net capital ratios (NCR) fall below certain levels.3 However, the NCR is to evaluate securities firms’ capability in case of liquidity risk. It is not enough to encourage securities firms to improve their management in a
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Nov 27, 2013

Plan to Strengthen Competitiveness of Korea's Financial Industry

The FSC announced its ‘Plan to Strengthen Competitiveness of Korea’s Financial Industry’ or the so-called ‘10-10 Value-Up Plan’ aimed at raising the added value that the financial industry generates up to 10% of the GDP over the next 10 years.BACKGROUNDThe financial industry greatly contributed to Korea’s rapid economic growth. Since the global financial crisis in 2008, however, Korea’s financial industry has lost its growth momentum and vitality. Moreover, repeated security incidents and fraud scandals in the financial sector significantly undermined financial consumers’ confidence in the industry.At the same time, the financial industry faces new challenges as Korea’s economy is shifting to slower growth, searching for a new growth model based on innovative technology and creative ideas. The population is also rapidly aging. Faced with such paradigm-shifting changes, it is time for both the government and the financial industry to seek new growth drivers.The FSC proposed the ‘10-10 value-up’ as a vision for Korea’s financial industry for the first time when Chairman Shin Je-Yoon met CEOs of financial holding companies in May this year. For the last six months since then, the FSC held 68 meetings with those in the financial industry to gather their opinions.Based on such a bottom-up approach, the FSC drew up the ’10-10 value-up’ plan focused on its feasibility. As a rolling plan, the ‘10-10 value-up plan’ will continue to be reviewed and updated on a regular basis in order to respond to market developments in a timely and flexible manner. OVERVIEWThe ‘10-10 value-up’ plan is to provide a blueprint for the financial industry’s development. The financial industry will be developed into a high value-added service sector as a new growth driver and generate decent jobs. To this end, the plan set three missions and nine objectives.KEY CONTENTS1. Promote competition and innovation in the financial sectorRegulatory barriers will be sig
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Nov 25, 2013

Basel III Regulations To Be Implemented To Domestic Banks From December 2013

Basel III capital regulations will be phased in to domestic banks from December 1, 2013, as part of strengthened prudential regulations for banking sector which have been under discussion since the global financial crisis.KEY CONTENTS1. Minimum capital requirementsThe current capital adequacy ratio for banks is a minimum 8% of their risk-weighted assets (RWAs). Under the Basel III, banks will be required to meet detailed adequacy ratios for each category of capital.From December 2013, banks need to hold at least 3.5% of their risk-weighted assets as common equity capital1, 4.5% as Tier capital, which make their overall minimum capital requirement to 8%.2Changes in Minimum Capital Regulations upon Implementation of Basel III Dec. ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 Minimum Equity Ratio (Total Equity Ratio + Capital Conservation Buffer Ratio 8.0 8.0 8.0 8.625 9.25 9.875 10.5 Total Equity Ratio 8.0 8.0 8.0 8.0 8.0 8.0 8.0 Tier 1 Capital Ratio 4.5 5.5 6.0 6.0 6.0 6.0 6.0 Common Equity Tier 1 Capital Ratio 3.5 4.0 4.5 4.5 4.5 4.5 4.5 Minimum Capital Conservation Buffer Ratio - - - 0.625 1.25 1.875 2.5 2. Qualifying conditions for regulatory capital under Basel IIIUnder the Basel III, banks’ total capital, currently composed of Tier 1 and Tier 2, will be divided into common equity capital, additional Tier 1, and Tier 2 capital. Qualifying conditions for each capital class will be modified to enhance quality of banks’ capital.From December 1, 2013, up to 90% of non-qualifying instruments as contingent capital3 already issued will be recognized as regulatory capital under the Basel III. The percentage will be gradually reduced by 10% points per year.4Types of Capital after Revision of Basel III Capital Regulations Common Equity Capital (A) Equity with priority to be conserved from bank’s loss and last to be redeemed from bank’s liquidation. Equity which is subject to redemption only in case of bank’s liquidation. (e.g. capital, capital surplus accrued from i
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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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