Press Releases - Financial Services Commission

Press Releases

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Apr 15, 2021

FSC Chairman Holds Talks with Relevant Officials Ahead of Partial Resumption of Stock Short-selling

FSC Chairman Eun Sung-soo met with officials from relevant institutions and heads of securities companies on April 15 and held talks on the preparatory measures for partial resumption of stock short-selling on May 3,recent stock market trends and virus prevention measures taken by the financial investment industry. The following is a summary of Chairman Euns remarks. (KOSDAQ Surpassing 1,000 pts) KOSDAQ recently surpassed 1,000 points for the first time since September 2000. Throughout the years, the authorities have worked to improve the KOSDAQ market for venture capitals and startups by allowing lossmaking companies to be listed and introducing technology-based preferential listing system. As a result, KOSDAQ emerged as a distinct market for investors with many businesses with significant future growth potential being listed. The Korea Exchange, relevant institutions and the financial investment industry have put efforts to improve the investment infrastructure and seek out promising businesses. Through the Korean New Deal initiative and the government-wide effort to cultivate more innovative businesses, the government will work to support venture startups and innovative firms in KOSDAQ market to further strengthen our economy. (Ensuring Investor Trust in the Market) It is important to ensure that investors have confidence and trust about the fairness in the market. In order to root out illegal and unfair marketing or advising practices in stock markets, the government has been operating a response team since October 2020. The response team will continue to work to prevent inappropriate activities and improve regulations. Prior to the partial resumption of short-selling on May 3, the authorities will continue to work to resolve various concerns of investors. Out of the four regulatory improvement measures announced earlier, stronger penalties on illegal short-selling activities and improved rules for market makers have already become effective. The two remaining m
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Mar 30, 2021

New Regulations on Stock Short Selling to Take Effect from April 6

The government approved the revisions to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) during a cabinet meeting held on March 30. The amendments and the revised FSCMAwill take effect on April 6. (Penalty standards) The revised FSCMA created the imposition of penalty surcharges on illegal short sale activities. Specific amounts for monetary sanctions will be determined through comprehensive consideration of the total amount of short orders and profits gained from the illegal short sale activity. (Record keeping requirement on securities lending agreements) The revised FSCMA requires short sellers to keep their securities lending agreements for five years to be presented promptly to the relevant authorities upon request. As such, the Enforcement Decree will be revised to prescribe specific criteria to be maintained, including information on stock items, number of shares, transaction dates, counterparties, lending periods, fee rates, etc. It also requires the maintenance of transactions data stored in an electronic transaction processing platform or other format that is not susceptible for alteration. (Restriction on short sellers participation in capital increase) The revised FSCMA restricts short sellers from participating in a companys capital increase via issuing new shares once the company has made such a plan public, except in certain cases. As such, the Enforcement Decree will be revised to determine a specific time period wherein the short sellers participation in capital increase is restricted as well as specific cases for exception as specified below. If an investor has shorted a companys stocks during the restriction period, the investor cannot participate in the companys capital increase, except for the cases where the short selling is deemed to have no unjust effects on the issuing price as stated below. - Restriction Period: From one day after the disclosure of the companys capital increase plan until the dete
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Mar 25, 2021

FSC to Closely Monitor Market Situations and Gradually Roll Back Crisis Response Measures

Vice Chairman Doh Kyu-sang held the 37th financial risk assessment meeting via teleconference on March 25 and discussed the progress in the implementation of the COVID-19 financial support for small merchants and SMEs. The following is a summary of Vice Chairman Dohs remarks. (Pandemic Response Measures) In response to the COVID-19 pandemic, the government implemented a KRW175 trillion-plus emergency financial support package to provide support for small merchants and SMEs, stabilize financial markets and help businesses in key industries with liquidity shortages. Thanks to the active support shown by the financial institutions, markets quickly bounced back and financial difficulties experienced by small merchants and other vulnerable groups began to ease. On the Korean governments bold response to the crisis situation, the IMF in January this year released a positive assessment, and the OECDs recent growth forecast expects Korea to achieve a full recovery within this year. Bold and preemptive responses were effective given that the scale of policy response had to exceed market expectation at a time when extreme anxieties were spreading across markets. However, with signs of an economic recovery in the US, inflation expectations have been rising as well as the long-term bond yields. In this regard, the government will closely monitor market situations and work on preemptive management to prepare for a possible rate hike in domestic markets. In addition, there have been growing concerns about inappropriate trading activities in stock markets. There are active discussions going on in this regard at the National Assembly to strengthen penalties on unfair and inappropriate trading activities, such as price rigging. The government will closely cooperate with the relevant institutions to work on the prevention of inappropriate trading activities. (Maturity Extension Payment Deferral) Since April 1 of last year, all financial institutions made available maturity extensions
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Mar 15, 2021

FSC to Provide Continued Support through Corporate Asset Purchase Program

The FSC announced that the corporate asset purchase program that was launched in July last year has provided KRW1.1 trillion in support to businesses facing temporary liquidity shortages amid the COVID-19 pandemic. The support provided through purchase of companies real estate assets amounted to KRW658.1 billion while the support extended via purchase of vessels from maritime shipping companies amounted to KRW417.1 billion. The corporate asset purchase program will seek to make available about KRW1 trillion in support for business asset sell-offs in 2021. The program will carry out demand surveys to search for companies in need of asset sell-offs and prioritize providing support to SMEs and middle market enterprises. * Please refer to the attached PDF for details.
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Mar 11, 2021

FSC Announces Revisions to the Supervisory Regulation on Insurance Business

The FSC announced revisions to the supervisory regulation on insurance business on March 11 to prepare for the implementation of the revised Insurance Business Act which is expected to take effect on June 9, 2021. The revised regulation will go into effect in the first half of this year. Key Revisions I. Disclosure Rules Regarding Litigation Information Currently, insurers are required to disclose information about the number of litigations on insurance claims and the rate of claims payments vis--vis litigations. In order to prevent insurers from misusing the litigation process against the underaged or financially vulnerable customers, the revised regulation will expand their disclosure requirements to include information about how many times they have convened litigation control committee meetings as well as their decisions. II. Insurance Coverage Period on Small-sum Short-term Insurance Policies As small-sum and short-term insurance products are still at an early stage of being introduced, their coverage period will be limited to one year to ensure consumer protection. III. External Evaluation on Policy Reserves Under the revised Enforcement Decree, insurance firms are required to have external actuaries approve the appropriateness of their policy reserves.In this regard, the result of external evaluation should be submitted to the Financial Supervisory Service, which may in turn request a re-evaluation. IV. Foreign Exchange Position Limit Currently, the foreign exchange position limit of insurance companies is set at twenty percent of the total adjusted capital. The revised regulation will increase this to thirty percent of the total adjusted capital as the foreign exchange position limit of insurance companies has remained low compared to other financial sectors, such as banks and financial investment businesses. * Please refer to the attached PDF for details.
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Mar 02, 2021

Plans to Boost Consumer Confidence and Promote Innovation in the Insurance Industry

The FSC announced a policy framework on insurance businesses on March 2, which aims to improve consumer confidence and promote innovation in the insurance industry. It details twelve key initiatives in four specific areas(a) working on improvements to the industry-wide structure of insurance business and boosting consumer confidence (b) enhancing the role of insurance as a social safety net, (c) promoting digital innovation and (d) making improvements to business management practices. This policy framework has been prepared based on expert opinions gathered from numerous committee and taskforce meetings, competitive assessments, suggestions from thinktanks and communication with market participants. As this framework sets forth a mid- to long-term direction of the insurance industry, specific implementation plans will be determined later. Key Measures I. Improving Industry-wide Structure and Boosting Consumer Confidence (a) Facilitating new players to enter the insurance market to promote competition and innovation - Allow market entrance of new types of insurance businesses specializing in small-sum and short-term insurance policies and those providing insurance services through online and digital channels - Introduce a more flexible licensing scheme for insurance businesses through which insurance companies are permitted to hold multiple subsidiaries specializing in same insurance categories (b) Revising rules to expand the availability of digital sales channels - Promote the use of digital, AI-based and contactless insurance sales channels - Expand innovative services by establishing standards on online platform services (c) Bolstering consumer protection throughout the subscription process - Tighten requirements on the sales process for risky products - Strengthen accountability of general agents (GAs) - Digitalize the damage claiming process and improve procedures on claim adjustment, medical advice, etc. II. Enhancing the Role of Insurance as a Social Safety N
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Feb 26, 2021

FSC Announces Korea's Risk-free Reference Rate

Vice Chairman Doh Kyu-sang held the 35th financial risk assessment meeting and 3rd taskforce meeting on benchmark interest rate reform via teleconference on February 26. At the meeting, Vice Chairman Doh announced the authorities selection of the overnight repo rate of government bonds and monetary stabilization bonds as Koreas new risk-free reference rate (RFR). The following is a summary of Vice Chairman Dohs remarks. (Transition from LIBOR) The uncertainty surrounding the continuing availability of LIBOR beyond the end of 2021 requires financial institutions and businesses to be thoroughly prepared. In this regard, financial institutions and businesses are recommended to refrain from making new contracts based on LIBOR after the end of this year to minimize risks. For the current LIBOR-based contracts with maturities extending beyond the end of this year, fallback provisions should be added prior to the third quarter of this year. The financial authorities along with the relevant institutions have been operating a taskforce to prepare for the discontinuation of LIBOR under the auspices of the working group on reforming benchmark interest rate. The authorities will work for a seamless and systematic transition from LIBOR, ensure that financial institutions have adequate consumer protection measures in place and regularly monitor the financial institutions LIBOR exposures, response plans, etc. (Selection of RFR) The working group on benchmark interest rate reform has completed the selection of a RFR after a year and eight months of the selection process. After a series of discussions and votes by a market participants group,the working group has selected the overnight repo rate of government bonds and monetary stabilization bonds as the RFR. The repo markets abundant liquidity and its expandable use in derivatives markets were the main reasons for selection. After additional discussions on the calculation method of RFR, the Korea Securities Depository which current
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Feb 22, 2021

FSC to Strengthen Liquidity Management of Specialized Credit Finance Companies

The FSC announced a set of measures aimed at strengthening the liquidity management of specialized credit finance companies on February 22. The measures include (a) establishing best practice guidelines, (b) strengthening disclosure requirements and (c) gradually reducing the maximum leverage on credit finance (non-credit card) businesses. Background Specialized credit finance businesses are lenders without deposit-taking functions.They usually finance their business through borrowings or the issuance of corporate bonds and asset-backed securities (ABS). In particular, their heavy reliance on debt finance, about 73.9 percent of their financing,creates a problem of risk transfer to financial institutions holding their corporate bonds, especially if credit finance companies face solvency problems. In this regard, there have been concerns about credit finance companies turning into a conduit of systemic risk in times of an unexpected economic shock such as COVID-19. Therefore, liquidity problems of credit finance businesses can pose a risk not only to the borrowers with mid-to-low credit backgrounds but also to the real economy as they may cause a drop in consumption and corporate facility investment. Key Measures I. Best Practice Guidelines on Liquidity Management The best practice guidelines on specialized credit finance companies liquidity management will be introduced for implementation beginning in April this year. - (Target) Bond issuing credit finance companies and those with more than KRW100 billion in total assets will be subject to the new guidelines. - (Role of Board and Management) Board of directors should oversee the establishment and operation of liquidity management strategies and the company management should prepare specific management process and criteria and regularly report to its board members. - (Liquidity Risk Indicators) Major liquidity risk indicators include corporate bond maturity distribution, liquid asset ratio, short-term debt ratio, etc.
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Feb 08, 2021

FSC to Boost Support for Innovative Firms and Strengthen ESG Standards

The FSC held a financial development review committee meeting on February 4 and announced the direction of key policy areas and initiatives for this year including the government-wide support program to nurture more than one thousand innovative businesses and improving rules to strengthen ESG standards. Key Tasks A. Maintain Financial Support to Overcome COVID-19 (1) Ensure an effective implementation of the KRW175 trillion-plus financial support programs for businesses - Help relieve financial burdens of small merchants especially those hit by social gathering restrictions through a reduction in guarantee fees, etc. - Extend the operation of the working capital support program for suppliers and subcontractors in the key industries for three more monthsand extend the application deadline of the key industry stabilization fund (2) Create an on-site inspection and support team to closely communicate with small merchants and businesses on the ground to help address their needs - Introduce a measure to temporarily allow a deferral of business insolvency proceedings for small merchants undergoing a business closure with no overdue loan payments from February 15 to September 30, 2021 and require no repayment until the maturity date B. Manage Potential Risks Arising from the Pandemic Response (1) Work on long-term management of household debt to prevent it from over-burdening the economy - Prepare household debt management measures in the first quarter to promote lending based on individual borrowers debt service capacities and strengthen management over excessive levels of unsecured lending - Strengthen financing support for young adults and first-time homebuyers (2) Establish a corporate debt management system and pursue a dual-track management according to the different needs of businesses - Develop a database platform that tracks financial exposures of businesses in different industries - Provide adequate liquidity to those experiencing a temporary liquidity shortage t
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Feb 05, 2021

Rules Change Announced for Insurance Businesses Specializing in Small-sum and Short-term Policies

The FSC announced the revisions to the Enforcement Decree of the Insurance Business Act on February 4, setting entry requirements for the establishment of insurance businesses specializing in small-sum, short-term policies and introducing measures to improve the soundness of the insurance industry. The revisions will be put up for public notice for forty days until March 17, 2021. Key Revisions (Small-sum Shor-term Insurance Policies) The minimum capital requirement for setting up an insurance business specializing in small-sum, short-term insurance policies will be set at KRW2 billion. Small-sum, short-term insurance coverages will be allowed in all insurance coverage areas where applicable with a coverage term of one year, premiums of up to KRW50 million and the insurers annual gross premium revenues up to KRW50 billion. (Requirement for External Evaluation on Policy Reserves) Insurance businesses with total assets of KRW1 trillion or more will be required to have external actuaries approve the appropriateness of their policy reserves. This requirement will also be applied to the insurers with less than KRW1 trillion in total assets but whose policy coverage types are considered as essential for them to ensure the payout capabilities. The external actuaries will be entitled to a right to request relevant information from insurance companies. To guarantee impartiality, external evaluations from the same institution will not be allowed for four consecutive years. (Rules on Subsidiaries) The revisions will clearly indicate that insurers will be permitted to own MyData and health care-related businesses as subsidiaries. Expectation The authorities expect that the revisions will help promote the development of diverse types of small-sum, short-term insurance products for consumers according to their individual lifestyle, improve the soundness and competitiveness of insurance businesses and encourage insurers to boost investment and cooperation in new business areas, su
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Feb 03, 2021

FSC Announces Decision on Short-selling Ban

FSC Chairman Eun Sung-soo held a press briefing on February 3 and announced the decision to extend the short-selling ban until May 2, 2021 and to allow a partial resumption of short-selling from May 3 on KOSPI 200 and KOSDAQ 150 stocks. Summary of Chairmans Remarks (FSCs Decision) The FSC has decided to extend the current short-selling ban until May 2 this year and allow a partial resumption from May 3 on KOSPI 200 and KOSDAQ 150 stocks. The partial resumption is intended to minimize the impact on markets, given these stocks have large market caps and liquidity so that the resumption of short-selling would have limited impact on stock prices. Meanwhile, the short-selling ban will remain on the rest of stocks (2,037 stock items) with further decisions on the resumption of short-selling on these stocks to be made later based on market conditions. The resumption date of May 3 has been decided to give the Korea Exchange (KRX) some time for system development and testing. With the revised Financial Investment Services and Capital Markets Act scheduled to go into effect on April 6 this year, with stronger penalty rules for illegal short-selling activities, there will be no issue of a legislative gap. Today, the FSC commissioners raised the same voice on the need to improve the short-selling system as there are investor demands for more transparency and fairness in the short-selling system. (Improving the Short-selling System) Prior to the May 3 partial resumption, the FSC will work on measures to improve the short-selling rules. First, The FSC will work to ensure the detection of and punishment on illegal short-selling activities. With the revised Financial Investment Services and Capital Markets Act, short-sellers will be required to keep their securities lending data for five years and the securities firms will be required to tighten monitoring of illegal short-selling activities. The securities firms are currently in the process of getting their systems ready according
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Jan 28, 2021

FSC Recommends Capital Management for Banks

The FSC announced its decision to recommend banks to temporarily limit dividends within twenty percent of their net profits until the end of June this year as it is deemed necessary to maintain banks loss absorbing capacity in response to the COVID-19 pandemic. Domestic banks have maintained strong financial soundness despite the pandemic situation. However, in order to be prepared for economic uncertainties, preemptive efforts are needed to boost the capital adequacy of banks. As such, the authorities decided to recommend banks to temporarily limit dividends within twenty percent of their net profits based on the results of the stress tests carried out on eight bank holding companies and six non-holding banks by the Financial Supervisory Service between October and December 2020. The stress tests were conducted on two distinct scenarios(a) a U-shaped long-term recovery and (b) an L-shaped long-term recession. In both scenarios, the capital ratios of all banks were shown to be above the minimum required level. However, in an L-shaped scenario, the capital buffer and D-SIB ratios of numerous banks felt short of the required levels. * Please refer to the attached PDF for details.
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Jan 26, 2021

Financial Authorities to Work on Risk Management and Support Transition to First-mover Economy

Vice Chairman Doh Kyu-sang held the 33rd financial risk assessment meeting via teleconference on January 26 to discuss key risk factors in 2021 and review the implementation of the COVID-19 lending support for SMEs and small merchants. The following is a summary of Vice Chairman Dohs remarks. (Risk Management) With the pandemic response measures put in place, the public and private sector debt increased throughout the world and asset prices have seen a rapid acceleration with abundant market liquidities. The accumulation of excessive debt may pose a risk to the economic recovery, and the financial authorities will continue to work on the management of the household and corporate debt. The FSC plans to introduce measures to more effectively manage household debt in the first quarter, which will focus on the application of DSR rules to individual borrowers. On corporate debt, the authorities will set up a monitoring system to check the status of corporate financing across different industries. Stock prices have gone up due to strong trading activities by retail investors. However, there are possibilities of a rising market volatility and the authorities will closely monitor the conditions in the stock markets. In addition, the authorities will work to strengthen the oversight of illegal and unfair trading activities including illegal short selling, while preparing tax incentives for longer-term stock investment. The FSC will also soon introduce measures to improve the competitiveness of the publicly offered funds to make the process more investor-oriented. (Channeling Funds to Productive Sectors) The authorities will work to ensure that the abundant market liquidities are flowing into productive sectors and toward the vulnerable groups in need. In this regard, the FSC will work on a seamless implementation of its policy on New Deal fund, which will be raised up to KRW4 trillion in 2021 with its first investment project hoped to be announced in March. In April, another
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Jan 19, 2021

FSC Announces 2021 Work Plan

The FSC unveiled its work plan for 2021 on January 18, highlighting the four areas of policy tasks as follows(a) maintaining the COVID-19 financial support and managing potential risks, (b) supporting K-New Deal initiatives for a green and digital economy, (c) promoting financial innovation and digital finance and (d) strengthening financial consumer protection and support for vulnerable groups. KEY ACHIEVEMENTS IN 2017-2020 A. STEADY MAINTENANCE OF FINANCIAL STABILITY AMID COVID-19 PANDEMIC Over the past four years, the FSC has focused on maintaining stability in the financial system as its utmost policy priority. In the wake of the COVID-19 pandemic, the FSC responded by quickly drawing up and providing financial support packages worth KRW175 trillion-plus and worked to prevent the crisis from spreading further into the financial markets. B. SUCCESSFUL CHANNELING OF FUNDS TO PRODUCTIVE SECTORS The FSC has worked to expand the supply of capital into more productive sectors by introducing innovative ways to assess corporate credit and through revisions to the relevant capital markets rules. In addition, the public sector has provided equity-based funding sources via growth ladder fund and other government-backed financing channels. C. ACTIVE PROMOTION OF COMPETITION AND INNOVATION IN FINANCIAL INDUSTRY The FSC has granted new business licenses to internet-only banks, insurance firms and real estate trust companies based on an industry-level competition assessment. In order to promote and expand financial innovation, the FSC has also worked to establish the necessary infrastructures, including the regulatory sandbox, open banking and MyData in financial services. D. ENHANCED INCLUSIVENESS VIA MICROFINANCE SUPPORT AND CONSUMER PROTECTION The FSC has worked to reduce the interest payment burdens of lower income households by lowering the maximum interest rate that can be charged on loans from 24% to 20%. E. IMPROVED FAIRNESS BASED ON RULES AND PRINCIPLES The FSC has al
Jan 13, 2021

FSC Announces Revisions to Enforcement Decree as a Follow-up to Improve Rules on Short Selling

The FSC announced revisions to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) on January 13 as a follow-up measure to the government’s effort to strengthen penalties on illegal stock short sale activities. The amendments will be put up for public comments until February 2, 2021.KEY REVISIONS(A) RESTRICTION ON SHORT SELLERS’ PARTICIPATION IN CAPITAL INCREASEThe revised FSCMA restricts short sellers from participating in a company’s capital increase via issuing new shares once the company has made such a plan public, except in certain cases. As such, the Enforcement Decree will be revised to determine a specific time period wherein the short seller’s participation in capital increase is restricted as well as specific cases for exception as specified below. If an investor has shorted a company’s stocks during the restriction period, the investor cannot participate in the company’s capital increase, except for the cases where the short selling is deemed to have no unjust effects on the issuing price as stated below.(RESTRICTION PERIOD) From one day after the disclosure of the company’s capital increase plan until the determination of the issuing price(EXCEPTIONAL CASES) (i) Purchase of new shares exceeding the amount of short positions between the time of the last short sale and the determination of the issuing price, (ii) participation in capital increase by trading units within a firm that operates separate trading units pursuant to the standards specified by the FSC that have no records of short selling the company’s stocks and (iii) short selling for market making or liquidity provision purposes(B) MAINTENANCE OF SHORT SALE TRANSACTIONS DATAThe revised FSCMA requires short sellers to keep their securities lending agreements for five years to be presented promptly to the relevant authorities upon request. As such, the Enforcement Decree will be revised to prescribe specific criteria to be maintained, includ
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Dec 21, 2020

Plans to Improve Rules on Market Makers & Tighten Monitoring of Illegal Short Sale Trades

The FSC introduced measures to improve market maker rules and strengthen detection of illegal stock short-selling activities on December 21 with an aim of boosting accountability in the market and establishing an effective monitoring system for illegal short sale activities. BACKGROUND The National Assembly passed a revision bill to the Financial Investment Services and Capital Markets Act on December 9, which introduces stricter penalties on illegal short sale activities. Along the same line, the government has prepared the following measures to improve rules on market makers and to strengthen monitoring of illegal short sale activities in order to boost accountability and develop a more effective system for market supervision. KEY MEASURES I. IMPROVING RULES ON MARKET MAKERS Marker makers quote prices on both buy and sell sides to satisfy the market. The marker maker system was first introduced in the derivatives markets in 1999 and then in stock markets in 2005. Recently, however, there have been concerns about the possibility of the abuse of the system as the trade volume of market makers has grown significantly as well as their short sale orders. In this regard, the Korea Exchange has conducted inspections on market makers compliance with short sale regulations, covering their transactions data from January 2017 to June 2020, and has found a few suspicious cases of naked short selling and violation of the uptick rule. To address this problem, the following measures have been drawn up to help restore confidence in market makers and foster their market making function. a) Introduce restrictions on short sale trades - Ban market makers short selling of mini-KOSPI 200 futures and options (when acting in their capacity as market makers) - Discontinue the uptick rule exemption for market makers in stock markets to address the issue of unfairness - Develop an automated monitoring and detection system for naked short selling activities and violation of the uptick rule
Dec 09, 2020

Government to Tighten Penalties on Illegal Stock Short Sale

The FSC announced the passage of a revision bill to the Financial Investment Services and Capital Markets Act at a plenary session of the National Assembly on December 9. The revision bill focuses on regulating illegal short sale activities including naked short sale to improve the accountability of domestic stock markets. The revision bill contains the following provisions.KEY PROVISIONS(A) IMPOSE PENALTY SURCHARGE AND CRIMINAL PENALTY ON ILLEGAL SHORT SALECurrently, illegal short sale activities are punishable with minor fines. To strengthen punishment, penalty surcharges will be imposed up to the amount of short orders as well as criminal penalties of a minimum one year of imprisonment or a fine of more than three times and up to five times the avoided loss amount. The introduction of strict monetary sanctions and criminal penalties will help prevent intentional attempts at illegal short sale while preventing investor errors and mistakes.(B) REQUIRE SHORT SELLERS TO KEEP RECORDS OF LOAN AGREEMENTS FOR FIVE YEARSShort sellers need to keep their securities lending agreements for five years and promptly submit them to the financial authorities when requested. This will help improve transparency and help financial authorities to more readily identify illegal short sale activities.(C) RESTRICT SHORT SELLERS’ PARTICIPATION IN EQUITY FINANCINGShort sellers will be prohibited from participating in equity financing of companies whose stocks they have shorted once the companies’ plans for equity financing have been disclosed. A penalty surcharge of up to KRW500 million will be imposed on violation of this provision.(D) STRENGTHEN REGULATION ON SHORT SALE BANThe temporary provision in the current enforcement decree that allows the authorities to prohibit stock short sale if it is deemed necessary to ensure the safety of stock markets and guarantee fair prices will be made permanent through this revision to the Act.FURTHER PLANSOnce the revision to the Financial Investme
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Nov 26, 2020

FSC to Work on Preventing Economic Shocks and Managing Financial Market Risks

Vice Chairman Doh Kyu-sang held the 30th financial risk assessment meeting via teleconference on November 26 to check the implementation of the COVID-19 emergency financial support programs. At the meeting, Vice Chairman Doh also discussed the current financial market conditions and potential risks, credit lending in the banking sector and the government’s plans to extend the period of support available for vulnerable debtors.The following is a summary of Vice Chairman Doh’s remarks.(CURRENT ECONOMIC CONDITIONS) In November, consumer confidence and business survey index rose while exports increased for a second consecutive month. KOSPI rose to a record high of 2,617.76 points on November 24 on strong foreign net buying. The corporate bond and short-term money markets also show signs of stability. The low-rated corporate bond and CP purchase program (SPV) launched in July helped to improve market conditions. While considering the past performance and market conditions, the FSC will decide in December whether to extend the operation of the SPV beyond its initial six-month period.(POTENTIAL MARKET RISKS) The Korean economy and domestic financial markets have shown speedy recovery from the pandemic due to the government’s aggressive stimulus programs and abundant liquidity supply. However, household loans have expanded more rapidly in that process. Amid an ultra-low rate environment, high-yield hunting in stock and real estate markets and more recently in cryptocurrencies may pose risks. The resurgence of COVID-19 infection cases throughout the world may hold back economic recovery and the uncertainty surrounding major economies’ stimulus measures also pose risks. Against this backdrop, the FSC will work to ensure an effective management of household debt and closely monitor the flow of capital into high-risk assets.(RECENT TRENDS IN CREDIT LENDING) Since the FSC announced the measures to curb credit lending on November 13, the growth of credit loans in the bank
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Nov 06, 2020

FSC Holds Meeting on Financial Market Conditions

FSC Chairman Eun Sung-soo held a meeting to review the effects of the US presidential election on financial markets at home and abroad on November 6. As there are possibilities of growing market volatilities in the financial markets in the wake of the US presidential election, the FSC will continue to stay alert and closely monitor market conditions.At the meeting, Chairman Eun stressed the importance of maintaining market stabilization efforts as well as legislative efforts to improve rules and regulations, such as strengthening sanctions on illegal stock short selling activities, allowing more short sale opportunities for retail investors and improving the current IPO system.Chairman Eun also discussed the importance of maintaining strict public health safety and preventive measures at individual financial institutions in order to ensure that the spread of COVID-19 does not pose risks to financial markets. To this end, Chairman Eun called for strong cooperation from the authorities in preventing the spread of the virus.* Please refer to the attached PDF for details.
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Nov 03, 2020

FSC to Work on COVID-19 Recovery, Cultivating Innovative Firms and Ensuring Market Stability

The FSC held the 28th financial risk assessment meeting via teleconference on November 3, chaired by Secretary General Kim Tae-hyun. During the meeting, officials discussed the progress in implementing the COVID-19 financial support including the small merchant support program and market stabilization measures.(CURRENT ECONOMIC AND MARKET SITUATION) Recent economic indicators suggest that the Korean economy is on a track to recovery. The economy grew 1.9 percent in the third quarter while industrial production, consumption and investment all increased in September. Consumer sentiment and the Business Survey Index rose in October as well. Domestic financial markets have also shown signs of stability. The volume of corporate bond, CP and short-term debt issuances has grown in September while credit spreads have been falling steadily, backed by the government’s efforts of launching the bond market stabilization fund and the SPV aimed at purchasing low-rated corporate bonds and CP. However, there still exist uncertainties surrounding the US presidential election and the scale of economic stimulus measures as well as concerns over a possible second wave of virus outbreaks. Thus, the government will closely monitor risk factors and take preemptive measures when necessary.(PROMOTING INNOVATION THROUGH STRONG FINANCING SUPPORT) Promoting the development of new technologies by innovative businesses is crucial to ensure a further progress in the post-pandemic era. The recently published banking sector technology assessment result for the first half of 2020 shows that the banking sector has been steadily working to improve their own technology capabilities and providing lending support to innovative businesses while serving as a conduit of the government’s emergency financial support programs. In addition, the best practice guidelines on sanctions exemptions for banks, established by the Korea Federation of Banks on October 26, provides more consistency in line with the ru
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