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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
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Jun 09, 2020
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Jun 02, 2020
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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
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May 20, 2020
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May 19, 2020
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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
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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
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Apr 20, 2020
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Apr 09, 2020
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Apr 06, 2020
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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