Press Releases - Financial Services Commission

Press Releases

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Jun 15, 2020

FSC Chairman Vows Support for Auto Industry

FSC Chairman Eun Sung-soo visited Korea Fuel-Tech Corporation on June 15 in Seongnam-si and held talks on ways to provide effective assistance to the car and auto parts industries struggling with the pandemic-driven economic crisis.The following is a summary of Chairman Eun’s remarks.(GOVERNMENT’S RESPONSE TO PANDEMIC) The government has taken multipronged approaches to stabilize markets and provide businesses with financing assistance. The KRW175 trillion-plus financial support package consists of the bond market stabilization fund, P-CBO support for corporate bond markets, emergency loans and preferential guarantees. The KRW40 trillion key industry stabilization fund has been launched which will begin providing support in June. Also, a special purpose vehicle in the amount of KRW10 trillion will be ready for purchasing lower-rated corporate bonds and commercial paper as soon as the 3rd supplementary budget is passed at the National Assembly.Backed by these measures, about KRW42.5 trillion in SME loans has been issued between January and May 20 this year, which amounts to approximately 84 percent of total SME loans issued last year. Also, instability in the stock markets and corporate bond market has been largely subsided.(SUPPORT FOR AUTO INDUSTRY) The government has made available about KRW5 trillion worth of financial support to the auto industry since February. However, the entire industry is struggling with a sharp fall in exports and shortage of work due to the shock in the global supply chain and overseas factory shutdowns.In particular, SMEs and middle market enterprises are burdened with additional hardship as they face limited access to loans due to thin credit records.(FURTHER PLANS) In order to minimize the pandemic’s damaging effects on the auto industry, close cooperation should take place between the government, industry and financial institutions. While promoting ways to help businesses to boost credit standing on their own, the government wil
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Jun 11, 2020

Government Launches KRW2 Trillion-plus Program to Purchase Corporate Assets

The government announced its plans to launch a KRW2 trillion-plus program to purchase corporate assets at the 6th Meeting of the Central Economic Response Headquarters on June 11.BACKGROUNDIn order to provide liquidity and bolster financing options for businesses amid the pandemic, the government has made available KRW175 trillion-plus in financial support programs, from which about KRW52.6 trillion has been provided as of June 8.Aside from the government-backed financing programs, companies have been selling off their assets to boost liquidity. Asset sell-offs are an important strategy for corporate restructuring and improving company’s financial structure. For companies’ self-rescue efforts to be effective, asset sell-offs should take place at fair prices.To facilitate this, the government will set up a special purpose vehicle (SPV) at the Korea Asset Management Corporation (KAMCO) to purchase corporate assets at fair prices, stimulating private sector demand for corporate assets.KEY DETAILSA KRW2 trillion-plus SPV will be created through bond issuance from KAMCO with the possibility of expanding the fund size with participation from the privately managed funds. KAMCO will work to increase its funding capacity by making investments in assets with different term periods.The SPV will purchase assets held by all sized companies but will primarily invest in assets that are unlikely to attract sufficient demand in the market. An input from outside experts, such as accounting firms, will be used to help establish objective and balanced pricing standards.Based on the characteristics or types of assets and considering the future possibility of buybacks, the SPV will adopt different buying strategies—(a) buy and hold, (b) sale and leaseback, and (c) sale and call option agreement.The Corporate Structure Innovation Support Center run by KAMCO will function as a platform to promote information sharing and act as an intermediary between sellers and buyers. It will promo
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Jun 11, 2020

Financial Policy Tasks for H2 2020

FSC Chairman Eun Sung-soo held a press briefing on June 11 and laid out the government’s financial policy plans for the second half of 2020.FINANCIAL RESPONSE TO COVID-19 PANDEMICFor the most part of the first half 2020, the FSC has focused on the financial support measures in response to the COVID-19 pandemic. The FSC will continue to work on the provision of prompt support through the KRW175 trillion-plus financial assistance programs.(CURRENT STATUS OF RELIEF PROVISION) The key industry stabilization fund launched on May 28 will be operational and begin to provide supports in June. As of the end of May, about KRW1.2 trillion in P-CBOs has been issued in support of the corporate bond market, with the June issuance of more than KRW1 trillion in pending. The KRW10 trillion special purpose vehicle (SPV) will be launched to provide support for purchasing low-rated corporate bonds and commercial paper as soon as the 3rd supplementary budget is passed at the National Assembly.The government expects that each type of the aforementioned support program will complement the others and helps minimize loopholes in providing financial assistance to the businesses in need.(CORPORATE ASSET PURCHASE PROGRAM) The government introduced a KRW2 trillion corporate asset sales support program this morning, through which the Korea Asset Management Corporation (KAMCO) will purchase corporate assets at fair prices. The government will also work on additional measures to improve the financing support for SMEs.PROMOTING INNOVATION IN FINANCIAL SERVICESWith the COVID-19 pandemic, some of the key policy tasks put forward at the beginning of the year have been pushed back in terms of policy priority. During the second half, the FSC will redirect efforts at promoting innovation while also balancing the changes brought about by the pandemic.(TARGETED SUPPORT FOR 1,000 INNOVATIVE FIRMS) It is expected that the first 20 business areas will be selected within the next month by the relevant minist
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Jun 09, 2020

Vice Chairman Vows to Maintain Close Market Monitoring and Risk Management

FSC Vice Chairman Sohn Byungdoo held the 7th financial risk assessment meeting on June 9 to assess the financial market conditions and check the implementation status of the COVID-19 financial support.The following is a summary of Vice Chairman’s remarks.(CURRENT SITUATION) There are continuing signs of market stability with stock prices recovering to pre-COVID-19 levels and the yield spreads in corporate bond and CP markets stabilizing. In June, about KRW12 trillion of corporate bonds and KRW53 trillion of CP and short-term bonds are up for maturity. Given the recent improvement in the market conditions and that most of them have AA- or A1 rating, there will not be much difficulty for businesses to raise capital through issuing or refinancing bonds.For ‘fallen angel’ companies, various supports are available from the bond market stabilization fund, corporate bond takeover programs by policy banks and the special purpose vehicle aimed at purchasing corporate bonds and CP.Securities firms ran into liquidity problems in March-April in the process of fulfilling their purchase agreements for asset-backed commercial paper, but the problems large subsided in May with the easing of credit crunch in the short-term money markets.(SUPPORTING ECONOMIC RECOVERY) The Financial Stability Board stressed the important role of the financial sector in supporting the recovery efforts from the pandemic-induced economic crisis while suggesting regulatory flexibility to help facilitate banks’ lending function. In this regard, the FSC introduced in April its plans to temporarily ease financial regulations, including the early adoption of Basel III credit risk framework for banks and the easing of rules on banks’ liquidity coverage ratio. Among them, 21 measures have now gone into effect with nine others expected to go into effect in July.FINANCIAL SUPPORT PROVIDEDBetween February 7 and June 5, a total of KRW124.7 trillion (1.53 million cases) in loans and guarantees as well as l
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Jun 02, 2020

FSC to Work on Turning Crisis Situation into Opportunity for Digital Innovation

FSC Vice Chairman Sohn Byungdoo held the 6th financial risk assessment meeting on June 2 to review the current status of the COVID-19 financial support for businesses and households.The following is a summary of Vice Chairman’s remarks.(CURRENT SITUATION) The financial markets have largely stabilized due to the measures taken by the government. However, there still remain risk factors, and the government will continue to closely monitor markets while implementing its market stabilization measures. As decided on May 28 and 29, the government will promptly provide support to businesses through quick corporate bond underwriting program and issuance of P-CBOs, while providing liquidity to help businesses maintain their competitiveness. The government will also expedite the preparation for the effective operation of the key industry stabilization fund and special purpose vehicle to help most heavily affected industries as well as businesses with lower-rated bonds and CP.(COVID-19 SUPPORT) The provision of the second phase financial support for small merchants has been effective, as the availability of untact application system helped minimize bottleneck effects. The government will also closely monitor trends in individual debtors although the number of debtors with overdue payments of five to 89 days or more than 90 days has been in decline.(2020 KOREA FINTECH WEEK) Korea’s second global fintech expo held virtually from May 28 has provided opportunities to develop strategies on fintech and digital finance. Participation from more than 150 businesses showcasing their innovative products and services has helped to advance our ‘untact’ capabilities. The government will work to turn this pandemic-induced situation into an opportunity for digital innovation.FINANCIAL SUPPORT PROVIDEDAs of May 29, a total of KRW117.3 trillion (1.42 million cases) in loans and guarantees as well as loan and guarantee extensions were provided to the SMEs and small-scale businesses that
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May 26, 2020

Vice Chairman Calls for Close Cooperation between Businesses, Creditors and Lending Institutions

FSC Vice Chairman Sohn Byungdoo held the 5th financial risk assessment meeting on May 26 to check the current status of the COVID-19 financial support for businesses and households. The following is a summary of Vice Chairman’s remarks.(LOW-RATE FINANCIAL SUPPORT FOR SMALL MERCHANTS) The government has made available KRW16.4 trillion in low interest rate financial support package for about 430,000 small merchants. Between May 18 and 22, about 31,442 applications were received by lending institutions.(EMERGENCY RELIEF PAYMENTS) As of May 25, about 94 percent of households applied for emergency relief payments. Swift processing of relief payments was made possible by strong cooperation between the public and private sectors.(SPV KEY INDUSTRY STABILIZATION FUND) The government will take prompt steps in preparation for establishing a special purpose vehicle intended to purchase low rated corporate bonds and CP, and for launching a key industry stabilization fund this week.In order to boost the effectiveness of these policies, close cooperation is essential between businesses, creditors and financial institutions.FINANCIAL SUPPORT PROVIDEDAs of May 22, a total of KRW107.8 trillion (1,327,000 individual cases) in loans and guarantees as well as loan and guarantee extensions were provided to the SMEs and small-scale businesses that have been hit by the COVID-19 pandemic.► FINANCING BY TYPE: KRW54.3 trillion (1,038,000 cases) in new loans and guarantees, KRW50.2 trillion (256,000 cases) in maturity extensions and deferred payments, KRW900 billion (7,000 cases) in deferment of interest payments, and KRW2.4 trillion (25,000 cases) in export-import credit finance and discounted interest rates and late fees► FINANCING BY INDUSTRY: KRW13.5 trillion (150,000 cases) to wholesale businesses, KRW8.7 trillion (273,000 cases) to restaurant businesses and KRW8.7 trillion (223,000 cases) to retail businesses► FINANCING BY PROVIDER: KRW59.1 trillion (824,000 cases) by policy bank
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May 20, 2020

Government Unveils Plans to Create SPV to Support Corporate Bond and CP Markets

The government announced on May 20 specific plans to create a special purpose vehicle (SPV) aimed at supporting the corporate bond and commercial paper markets.BACKGROUNDThe conditions surrounding the corporate bond market hit by COVID-19 have improved somewhat recently with the government setting up a bond market stabilization fund (KRW20 trillion) and providing support for the issuance of primary collateralized bond obligations (KRW6.7 trillion) and corporate bonds (KRW4.1 trillion). As a result, the total amount of newly issued blue-chip corporate bonds rebounded in April. However, the bond market still remains weak for lower rated corporate bonds with A or below ratings, and there is stronger preference for short-term bonds. Against this backdrop, the government announced on April 22 its plans for creating an SPV to purchase lower-rated corporate bonds and commercial paper.SPV MANAGEMENTThe government, the Bank of Korea and the Korea Development Bank will set up a KRW10 trillion SPV to help stabilize the corporate bond market, with the possibility of increasing its size up to KRW20 trillion.(FUNDING SOURCES) KRW1 trillion (10%) equity capital from KDB, KRW1 trillion (10%) in subordinated loans from KDB and KRW8 trillion (80%) in primary loans from BOK(PURCHASING TARGETS) AA to BB rated corporate bonds A1 to A3 rated CP and short-term debt with maturity of up to 3 yearsThe SPV purchasing program will mostly focus on A rated bonds but will also buy ‘fallen angels,’ junk-rated bonds which were downgraded from investment ratings due to Covid-19.Companies with their interest coverage ratio of 100% or less for two consecutive years will be precluded from the purchasing program.(PURCHASING LIMITS PRICES) In order to fulfill the purpose of market stabilization, purchasing limits will be established within 2 to 3 percent of the total fund available from the SPV purchasing program for each individual company and business sector.To encourage market-based capital raisin
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May 20, 2020

Plans to Create Key Industry Stabilization Fund

The government announced detailed plans for the operation of the key industry stabilization fund on May 20.The initial plan for creating a KRW40 trillion key industry stabilization fund was announced on April 22 as business activities slowed down and the employment numbers began to fall amid the COVID-19 pandemic.With the National Assembly’s swift passage of the laws, the necessary legislative changes have been made to provide a legal ground for creating a stabilization fund.1KEY INDUSTRY STABILIZATION FUNDI. SUPPORT TARGETS(INDUSTRY REQUIREMENT) Industries designated by the enforcement decree of the Korea Development Bank Act to have significant effects on the domestic economy, the stability of the job market and the national security2(BUSINESS REQUIREMENT) (a) Enterprises having a significant impact on the national economy with total debts standing at KRW500 billion or more, and (b) businesses having a significant impact on the job market with total employees numbering 300 or moreFor qualified businesses, the fund operating council made up of private-sector experts will make decisions on the provision of support after consultation with the major creditor bank and assessment from the KDB.II. SIZE METHOD OF FUNDING SUPPORT(SIZE) In principle, the size of the support will be based on operating costs minus expected earnings based on sales forecast while excluding the amount needed for repayment of existing debt.(METHOD) Support for businesses will come in diverse ways—including liquidity support and capital injection —through issuing loans, taking over equity-linked securities, purchasing assets and providing guarantees.(FUNDING SOURCES) The KRW40 trillion stabilization fund will be created through bond issuance.III. CONDITIONS FOR SUPPORTIn order to receive support through the key industry stabilization fund, businesses will be required to retain jobs, share profits from business normalization and work to prevent moral hazard.(EMPLOYMENT) Businesses should main
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May 19, 2020

4th Financial Risk Assessment Meeting

FSC Vice Chairman Sohn Byungdoo held the 4th financial risk assessment meeting on May 19. At the meeting, Vice Chairman Sohn vowed to strengthen support for the corporate bond and commercial paper markets.The following is a summary of Vice Chairman Sohn’s remarks.(DOMESTIC FINANCIAL MARKETS) The financial markets are showing signs of stability due to prompt policy responses from the government. In order to ensure that the current market stabilizing effects can have a wider impact, the government will provide support for low-rated corporate bonds and commercial paper. The downgraded corporate bonds from AA- to A+ rating as of April 1 will also be eligible to receive support through the bond market stabilization fund. On May 29, nearly KRW1 trillion worth of P-CBOs will be issued to help COVID-19 hit enterprises. Beginning in June, credit finance business bonds with A+ or A- ratings will also be eligible for support through the bond market stabilization fund.(2ND PHASE FINANCIAL SUPPORT FOR SMALL MERCHANTS) The 2nd phase of financial support for small merchants is currently being provided by seven banks, and it will be available at more regional banks across the country as their systems become ready within June. The availability of untact application services for the support will help enhance our efforts at digital transformation and financial inclusiveness as we prepare for the post-COVID-19 era.(KEY INDUSTRY STABILIZATION FUND) The government will prepare for the prompt implementation of the fund and work to ensure that businesses are able to receive loans in June.The government will continue to closely monitor markets and take necessary measures to maintain stability in the markets.FINANCIAL SUPPORT PROVIDEDBetween February 7 and May 15, a total of KRW97.8 trillion (1,185,000 individual cases) in loans and guarantees as well as loan and guarantee extensions were provided to the SMEs and small-scale businesses that have been hit by the COVID-19 pandemic.► FINANC
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May 18, 2020

Vice Chairman Holds Meeting on Measures to Improve Asset-backed Securities Market

FSC Vice Chairman Sohn Byungdoo held a meeting with industry officials and experts on May 18 to discuss ways to improve the asset-backed securities market.The following is a summary of Vice Chairman Sohn’s remarks.(IMPORTANT ROLE OF ASSET-BACKED SECURITIES) The asset-backed security (ABS) provides businesses with a great means to raise funds and offers more favorable terms than credit-based financing. Businesses are able to treat securitized assets off-the-book for accounting purposes, which helps to improve their financial structure. The ABS allows businesses to securitize diverse assets including future assets and intellectual property rights to generate funds needed for now. In Korea, the enactment of the Asset-backed Securitization Act in 1998 contributed to clearing troubled assets and helped ride out the foreign exchange crisis. Since then, the ABS has been used as an innovative means to raise funds by enterprises and financial companies.(IDENTIFYING PROBLEMS) (a) With regard to risk management, the rapid expansion of the unregistered securities market can be a risk factor as it is difficult to identify the issuing entity, records of underlying assets and securitization structure. In particular, the real estate project financing asset-backed commercial paper (ABCP) poses problems for securities firms as they have to take the burden of refinancing risk due to a duration mismatch between fund raising and fund management. (b) The role of ABS in corporate financing has also been in decline. Over the years, the ABS market’s focus has been shifting toward transactions that follow interest margins. Due to the delayed reforms in the registered securities system, the current ABS market has been unable to fully accommodate diverse securitization demand in the market.(MEASURES FOR IMPROVEMENT) (a) To enhance risk management, the government will introduce the risk retention rule, requiring asset holders to possess about 5 percent of credit risk to prevent conflict of
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May 18, 2020

Measures to Improve ETF and ETN Markets

The FSC announced the measures to improve the exchange-traded fund (ETF) and exchange-traded note (ETN) markets on May 15, which seek to contain overheated investment demand and mitigate excessive concentration on particular investment products.The measures are aimed at (a) preventing indiscriminate investment behavior in ETF and ETN markets by requiring minimum deposits and mandatory online education for retail investors, (b) improving brokerage firms’ management of disparate ratios to minimize investor damages from speculative demand, and (c) creating an environment for the development of diverse investment products to break up excess demand on particular instruments.BACKGROUNDETFs and ETNs are exchange listed investment products structured to enable diversification of investment for retail investors in traditional investment assets, such as stocks and bonds, and to allow small-sum investing in a variety of alternative assets including foreign exchanges and commodities.The ETF market has grown as a major publicly offered fund market and ETNs have provided a niche market where ETF offering remained difficult. Recently, there has been excessive concentration toward leveraged ETFs and ETNs amid the COVID-19 pandemic-induced market volatility. After the collapse of international oil prices, investors flocked to major oil ETFs and ETNs with an expectation for a rebound in oil prices, thereby raising the potential for losses. Trend followers who lack information about the risk characteristics of these products also flocked to invest in oil ETFs and ETNs, artificially pushing up trading prices well above their intrinsic asset values. A series of investor alerts and cautions by securities companies, the Korea Exchange and the FSS as well as transaction suspensions have been issued, but they have yet to successfully curb the overheated demand. Thus, the financial authorities drew up measures to cool overheated investor demand and more effectively manage markets.RECENT IS
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May 12, 2020

Vice Chairman Urges Preventive Measures as Banks Ready to Accept Loan & Relief Payment Applications

FSC Vice Chairman Sohn Byungdoo held a financial risk assessment meeting on May 12, and discussed the second phase financial support program for small merchants and the preparations for emergency relief payments and key industry stabilization fund.The following is a summary of Vice Chairman Sohn’s remarks:(DOMESTIC FINANCIAL MARKETS) The financial markets show signs of stability. Liquidity shortages in the corporate bond market and the short-term money markets have subsided following the policy responses to purchase commercial paper and issue primary collateralized bond obligations. The government will closely monitor markets and take prompt measures when necessary.(2ND PHASE FINANCIAL SUPPORT FOR SMALL MERCHANTS) The government and the financial institutions will work to swiftly provide the 2nd phase financial support to small merchants beginning on May 18, which amounts to KRW10 trillion for about one million business owners. With 95 percent of loans guaranteed from the Korea Credit Guarantee Fund, the lending institutions will face reduced burdens.(EMERGENCY RELIEF PAYMENTS) On May 18, banks will begin accepting applications for the COVID-19 emergency relief payments for households. The relevant institutions, local branches and individuals should adhere to the preventive measures in order to prevent the spread of virus.(KEY INDUSTRY STABILIZATION FUND) The preparations to launch the key industry stabilization fund have been taking place. The designated key industries are vital to maintain the global competitiveness. This stabilization fund will help the key industry enterprises and their subcontractors weather the pandemic-caused hardship while protecting jobs for their employees.The government will work to overcome the pandemic-driven economic crisis while supporting businesses to retain jobs and maintain their global competitiveness.FINANCIAL SUPPORT PROVIDEDBetween February 7 and May 8, a total of KRW87.0 trillion (1,044,000 individual cases) in loans and gu
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May 06, 2020

FSC's Revision Proposal Designates 7 Key Industries for Key Industry Bailout Fund

The FSC announced revisions to the enforcement decree of the Korea Development Bank Act on May 6, which designate seven specific industries to be eligible for the key industry bailout fund and establish necessary provisions for the fund’s operation. KEY REVISIONS(DESIGNATION OF KEY INDUSTRIES) The Korea Development Bank Act broadly defines key industries as those considered crucial to the real economy, stability of the job market and national security, such as defense industry, industries barred from foreign investment, etc., and prescribes that the designation of specific industries be carried out by enforcement decree. Through this amendement, the airline, maritime shipping, machinery, automobile, shipbuilding, electric power and communications industries will be designated as key industries. The FSC may include additional sectors upon request from the relevant ministers if funding support is deemed necessary.(ISSUANCE OF BONDS) The revisions to the enforcement decree established the necessary rules including the issuance of bonds, subscription, etc.(VOTING RIGHT) The KDB may exercise its voting right only in the following two exceptional circumstances to preserve the fund’s assets—a) decisions involving significant stakes to the value of equities and b) when a company receiving the support undergoes structural adjustment.(FUND MANAGEMENT COUNCIL) The 7-member council will consist of members recommended by the relevant standing committees of the National Assembly, government ministries and the KDB.SCHEDULEThe revisions to the enforcement decree of the Korea Development Bank Act will be finalized at a cabinet meeting after an examination by the Ministry of Government Legislation.* Please refer to the attached PDF for details.
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Apr 29, 2020

Revised Law Paves Way To Create Bailout Fund for Key Industries

The revisions to the Korea Development Bank Act passed the National Assembly on April 29, establishing a legal foundation to launch a bailout fund to help key industries struggling from the COVID-19 pandemic.KEY PROVISIONS► SUPPORT TARGETS: Businesses within industries that are considered crucial to the real economy, stability of the job market and national security, such as defense industry, industries barred from foreign investment, industries crucial for emergency resources, key technology industries, essential public service providers, etc. ► FINANING FOR FUND: KRW40 trillion state-guaranteed bond issuance► CONDITIONS: Aid recipients shall be subject to following requirements—a) both the management and employees will work toward maintaining employment, b) aid-receiving businesses shall come up with own funding sources within a 20 percent of the amount of aid, and c) businesses shall work to improve management while refraining from diviend payouts, share buybacks and executive compensation.► MANAGEMENT: a) Aid will be provided through loans, payment guarantees and investments according to the specific needs of industries and businesses, b) The fund shall be managed by the Korea Development Bank for five years until December 31, 2025, and a council shall be established at the KDB to ensure professionality, accountability and transparency of the fund management.FURTHER PLANSThe revisions to the Korea Development Bank Act are extected to take effect in May. The government will work on the changes to the relevant rules and regulations and draw up specific standards for aid provision to ensure prompt delivery of support to the businesses in need.* Please refer to the attached PDF for details.
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Apr 22, 2020

Government Announces KRW40 Trillion Fund to Support Key Industries

The government introduced measures to establish a KRW40 trillion fund to support key industries and help businesses retain jobs on April 22. In addition, the government will help provide more liquidity to the businesses in need through a KRW35 trillion increase in the emergency financial support package.KEY PROVISIONSI. ESTABLISHING A KRW40 TRILLION+ STABILIZATION FUND FOR KEY INDUSTRIES► SIZE: A KRW40 trillion+ new stabilization fund will be established to support key industries, which will be operated by the Korea Development Bank. The fund will be raised by issuing state guaranteed fund bonds. In addition, private funds and special purpose vehicles will also contribute to the stabilization fund.► TARGET: The fund will support key industries that have significant impact on employment and the real economy, including airline, shipping, shipbuilding, auto, general machinery, electric power and communication industries.► CONDITION: (a) The autonomy in business management will be guaranteed in principle based on the condition of self-rescue efforts. (b) Businesses will be required to work on maintaining employment when receiving the support. (c) Businesses will be subject to limitations in executive compensation, dividend payouts, and share buybacks. (d) The support will be provided in a way that allows sharing of benefits from business normalization in the future.► OPERATION: (a) Support will be provided in diverse ways through loans, payment guarantees and investments according to specific industry and business needs. (b) Investment and credit extension to related funds and special purpose vehicles will be permitted to promote inputs from private sector funding channels and their know-hows. (c) A council will be set up to ensure professionality, accountability and transparency of the fund management.II. EXPANDING EMERGENCY FINANCIAL SUPPORT PACKAGE BY KRW35 TRILLION► FINANCING SUPPORT FOR SMALL MERCHANTS (KRW10 TRILLION): The 1st stage financing support mad
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Apr 22, 2020

Vice Chairman Calls for Enhanced Monitoring of Corporate Bond Markets by FSB

FSC Vice Chairman Sohn Byungdoo participated in the Financial Stability Board’s steering committee meeting via conference call on April 21. At the meeting, the members agreed that the early signs of widespread anxieties in the financial markets have diminished due to policy responses from each country. Meanwhile, they raised concerns about the potential rise in solvency risk due to continuing uncertainty.At the meeting, Vice Chairman Sohn stated that the volatility in the financial markets appears to have stabilized in April. In order to prepare for the possibility of a further economic downturn, the FSB needs to strengthen monitoring of the corporate bond markets and derivatives markets.In addition, banks should implement more flexible lending rules on a par with the governments’ efforts at regulatory flexibility. However, lowering regulatory standards risks regulatory fragmentation across jurisdictions, which raises the possibility of regulatory arbitrage and threatens financial stability. In this regard, Vice Chairman Sohn suggested that the FSB and the international standard setting institutions should provide guidelines on the appropriate levels of regulatory flexibility.* Please refer to the attached PDF for details.
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Apr 20, 2020

Plans for Temporary Easing of Financial Regulations in Response to COVID-19

The financial authorities announced on April 17 a set of temporary deregulatory measures on financial institutions’ capital adequacy, liquidity and asset quality requirements to help boost their financing capacity amid the COVID-19 crisis. The deregulatory measures are expected to pave the way for financial institutions to play a more active role in providing support to the real economy.BACKGROUNDThe international society including the G20 and the Basel Committee on Banking Supervision recognized the need for a more flexible application of financial regulations in response to COVID-19. The adoption of the Basel III standards in the aftermath of the 2007-2008 financial crisis has boosted the stability of financial institutions in crisis situations. But it also had an effect of constraining their ability to flexibly respond to crisis situations. Against this backdrop, the Financial Stability Board recently made a recommendation for more flexible application of regulations.In response to COVID-19, the Korean government has made available more than KRW100 trillion in financing support via financial institutions. The financial institutions at the forefront of delivering this emergency support package to businesses have been requesting an easing of such regulations so that they can increase their financing capacity to help support the real economy.TEMPORARY EASING OF FINANCIAL REGULATIONSThe deregulatory measures will be based on the four key principles—necessity, temporariness, promptness and effectiveness.I. REGULATIONS ON CAPITAL ADEQUACY► CONTRIBUTION TO STOCK MARKET STABILIZATION FUND: Banks, securities companies and insuance companies that are making contributions to the stock market stabilization fund will see lower risk weights for the amount of contribution they make.(Banks) Under the current regulations, banks’ investment in funds that have listed stocks as underlying assets should be assigned a 300 percent risk weight in principle. However, banks will b
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Apr 09, 2020

Financial Authorities Work to Ensure Strong Support for Corporate Bond Issuance

FSC Vice Chairman Sohn Byungdoo held a meeting on April 9 via conference call to examine the implementation of the government’s COVID-19 emergency support package and financial market stabilization measures. At the meeting, Vice Chairman Sohn talked about P-CBOs and a prompt corporate bond underwriting program for businesses.The following is a summary of Vice Chairman Sohn’s remarks:► SANCTIONS EXEMPTION RULES: In mid-April, the government will revise the rules on exemption for sanctions on misconduct in financial services to make financial institutions’ internal sanctions rules more compatible with the government’s changed rules. ► EMERGENCY FINANCE SUPPORT BUREAU: A new taskforce body established at the FSC on April 6 is charged with monitoring and managing the implementation of the COVID-19 emergency support package and financial market stabilization measures. The Emergency Finance Support Bureau will work to resolve difficulties on the ground and improve the system. ► P-CBOS PROMPT UNDERWRITING OF CORPORATE BONDS: The bond market stabilization fund has been put into operation and additional support for corporate bonds will be ready soon through primary collateralized bond obligations (P-CBOs) and a prompt corporate bond underwriting program.For P-CBOs, about 20 middle market enterprises and large companies have requested support in the amount of approximately KRW700 billion so far. After reviewing applications received until April 14, corporate bond issueance in the amount of KRW500 billion will be supported at first through P-CBOs, which may be extended depending on market demand in the future.A prompt corporate bond underwriting program will also begin in as early as May after deciding the specific terms of agreement with the relevant institutions.► GLOBAL RESPONSE: The governments in other countries have demonstrated an unprecedented level of emergency responses in terms of the speed and the scope of policy implementation. The government will
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Apr 06, 2020

Current Situation in Financial Markets and Government's Policies

WHAT ABOUT THE GOVERNMENT’S SUPPORT FOR LOW-GRADE CORPORATE BONDS AND COMMERCIAL PAPER NOT COVERED BY THE BOND MARKET STABILIZATION FUND?The bond market stabilization fund is aimed at supporting the issuance of investment-grade corporate bonds. If the Bank of Korea begins to offer lending support for non-bank financial institutions, it is expected to take some loads off the bond market stabilization fund, which may create some room for considering the purchase of certain types of low-grade corporate bonds as well.For low-grade corporate bonds and commercial paper, other financing support programs such as primary collateralized bond obligations (P-CBOs) are available through policy banks. It is the government’s policy to prevent bankruptcies due to a temporary liquidity shortage from COVID-19.PRIOR TO THE PROVISION OF FINANCING SUPPORT TO LARGE COMPANIES, WHAT SELF-RESCUE MEASURES SHOULD HAVE BEEN TAKEN?For businesses eligible to apply for the emergency support package, the government will make available financing support to all businesses regardless of their size or sector. However, the KRW100 trillion package cannot possibly cover all business financing demands.Unlike small merchants and SMEs, many large companies still remain capable of financing their businesses through market mechanisms. The corporate financing support programs in the past also required self-rescue efforts by large companies, including a requirement to pay a certain portion for refinancing their debt and to buy back a portion of securities in P-CBO programs.If it becomes necessary in the future, the government will draw up plans to further reduce the financing burdens for large companies.HOW DOES THE SUPPORT PACKAGE AFFECT THE SOUNDNESS OF THE FINANCIAL INSTITUTIONS?The soundness of the financial institutions remains strong currently. The banks’ BIS ratio and bad debt ratio improved compared with the previous crisis levels. In the process of the implementation of the emergency financial su
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Mar 27, 2020

Vice Chairman Emphasizes Importance of Effective Implementation of COVID-19 Financial Support

FSC Vice Chairman Sohn Byungdoo held a meeting on March 27 via conference call to examine the implementation of the government’s COVID-19 emergency support package and financial market stabilization measures.The following is a summary of Vice Chairman Sohn’s remarks:► FINANCING SUPPORT: Low-rate loans (1.5%) at local banks as well as maturity extensions on existing loans and deferment of interest payments will be available through all financial institutions beginning on April 1.► ON-SITE COMMUNICATION: Beginning on April 6, the FSC’s emergency financial situation room along with other relevant institutions will operate a regular on-site communication and inspection channel through conference calls or on-site visits in order to help resolve difficulties on the ground.► MARKET STABILIZATION FUNDS: On March 24, the size of the initial capital call has been decided at KRW3 trillion to launch a bond market stabilization fund, which will be expanded up to KRW20 trillion afterwards. The corporate bond purchase will start as early as April 2. A stock market stabilization fund in the amount of KRW760 billion was launched on March 25 by the Korea Exchange, the Korea Financial Investment Association, the Korea Securities Depository and the Korea Securities Finance Corp. In addition, KRW10 trillion more will be made available by the financial institutions in the private sector in the second week of April.► SHORT-TERM MONEY MARKETS: Between March 24 and 26, the Bank of Korea and the Korea Securities Finance Corp. made available approximately KRW3.5 trillion in short-term liquidity to the securities companies. On March 30, the policy banks will begin purchasing commercial paper, electronic short-term bonds and short-term credit bonds. A CP purchasing operation will be undertaken collectively by the Korea Development Bank and the Korea Credit Guarantee Fund.FINANCIAL SUPPORT PROVIDEDBetween February 7 and March 24, a total of KRW13.4 trillion (152,000 individual case
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