Press Releases - Financial Services Commission

Press Releases

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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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Mar 25, 2020

Financial Authorities and Associations Join Hands for Effective Provision of COVID-19 Support

The leaders of the FSC and the FSS along with the representatives of all financial sector associations and federations held a meeting on March 25, and signed a memorandum of agreement to effectively deliver the COVID-19 financial support package.The following are the key points of the agreement.Key Points► Banks will work to provide funding to SMEs and small merchants through super low interest loans (1.5%).► Banks will work to provide SMEs and small merchants with information about appropriate financing products.► Banks will provide active assistance to the regional credit guarantee institutions that are facing burdens of workloads in receiving and reviewing applications.► Credit guarantee institutions will closely cooperate with banks in ensuring prompt delivery of necessary funding to SMEs and small merchants.► Banks will work to ensure that the loan and guarantee extensions as well as the deferment of interest payments are seamlessly implemented beginning on April 1.► Banks will refrain from collecting debt from businesses that are facing temporary difficulties due to the COVID-19 outbreak.► Banks will contribute to the bond market stabilization fund and actively cooperate to raise the fund when deemed necessary afterwards.► Banks will actively cooperate to promptly launch a stock market stabilization fund.► The financial regulators will ease standards on sanctions for financial institutions’ handling of the COVID-19 financial support and actively support banks’ efforts to boost liquidity requirements.* Please refer to the attached PDF for details.
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Mar 24, 2020

Measures to Stabilize Financial Markets

The government unveiled the financial market stabilization measures on March 24 to help provide sufficient liquidity to businesses and deploy market stability tools to absorb shocks in the financial markets amid the spread of COVID-19.In order to address financing difficulties and help restore stability in the financial markets, the measures will increase the financing support package from KRW50 trillion to more than KRW100 trillion. This includes financing support through policy banks in the amount of KRW58.3 trillion and KRW41.8 trillion funds to help restore stability in the country’s bond market, stock market and short-term money markets.FINANCIAL MARKET CONDITIONSThe concern over a global economic slowdown due to the spread of COVID-19 has brought market volatility in the global financial markets, thus limiting corporate financing channels. From the beginning of March, stock prices in major economies plunged and the won-dollar exchange rate spiked due to a strong dollar.Amid rising uncertainties surrounding the COVID-19, market anxiety has expanded to the corporate bond market and short-term money markets.Unlike the past financial crises, the downturn in the financial markets today started from the real economy — an abrupt slowdown in consumption, production and investment, a breakdown in global supply chains, and a drop in global trade.Due to the decline in domestic demand, a contraction in the real economy and financial market anxieties, it remains difficult to accurately predict the ripple effects of the current economic slowdown caused by COVID-19. Thus, preemptive and bold responses are required to bring stability to the markets.KEY MEASURESI. FINANCING SUPPORT FOR BUSINESSES: KRW58.3 TRILLIONA total of KRW 29.2 trillion in financing support for SMEs and small merchants will be provided.► KRW12.0 trillion in emergency financing support for small merchants► KRW5.5 trillion in special guarantees for SMEs and small merchants► KRW3.0 trillion in full
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Mar 23, 2020

Financial Regulators and Banks Agree to Closely Cooperate on COVID-19 Financial Support

The FSC and the FSS along with the Korea Federation of Banks and its member institutions held a meeting on March 23, and signed a memorandum of agreement to closely cooperate in the provision of the COVID-19 financial support programs.The officials agreed that providing reliefs to the SMEs and small merchants hit by the COVID-19 outbreak is a priority for the real economy. They also agreed on the importance of effectively implementing the recently announced financial support package for SMEs and small merchants. The following are the key points of the agreement.Key Points► Banks will work to provide funding to SMEs and small merchants through super low interest loans (1.5%).► Banks will work to provide SMEs and small merchants with information about appropriate financing products.► Banks will provide active assistance to the regional credit guarantee institutions that are facing burdens of workloads in receiving and reviewing applications.► Credit guarantee institutions will closely cooperate with banks in ensuring prompt delivery of necessary funding to SMEs and small merchants.► Banks will work to ensure that the loan and guarantee extensions as well as the deferment of interest payments are seamlessly implemented beginning on April 1.► Banks will refrain from collecting debt from businesses that are facing temporary difficulties due to the COVID-19 outbreak.► Banks will contribute to the bond market stabilization fund and actively cooperate to raise the fund when deemed necessary afterwards.► Banks will actively cooperate to promptly launch a stock market stabilization fund.► The financial regulators will ease standards on sanctions for financial institutions’ handling of the COVID-19 financial support and actively support banks’ efforts to boost liquidity requirements.* Please refer to the attached PDF for details.
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Mar 20, 2020

FSC Chairman Meets with Bank Chiefs to Discuss Government's Financial Support Package

FSC Chairman Eun Sung-soo met with the Korea Federation of Banks chairman and the CEOs of major banks on March 20, and discussed ways to effectively and promptly deliver the government’s COVID-19 financial support to the businesses in need.Chairman Eun and the bank chiefs agreed on the importance of cooperation and coordination between the public and private sectors, and agreed on the following.► Provide necessary funding to small merchants at a super low interest rate (1.5%)► Provide assistance to the regional credit guarantee institutions burdened with heavy workloads► Work to ensure that maturity extensions and deferment of interest payments are provided by all financial sectors beginning on April 1► Participate in reinstating a KRW10 trillion bond market stabilization fund, which was set up in December 2008 in response to the global financial crisis, and actively cooperate to increase the fund if deemed necessary afterwards► Participate to set up a stock market stabilization fund► Advice local private banks to refrain from collecting debt from businesses that are recipients of the COVID-19 financial support from policy banks► Ensure that financial institutions and employees are granted immunity from sanctions or penalties related to their handling of the COVID-19 financial support, while supporting banks’ efforts to improve their capital adequacy ratio.* Please refer to the attached PDF for details.
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Mar 05, 2020

2020 Policy Roadmap for Capital Markets

The FSC unveiled its 2020 policy roadmap for capital markets on March 4, 2020, which aims to make capital markets play a more active role in financing innovative companies. The policy plans are mainly focused on (i) providing funds tailored to company’s growth cycle; (ii) stimulating the IPO markets; and (iii) securing a transparent and advanced infrastructure in capital markets.POLICY PLANSThe government will take steps to improve the capital markets infrastructure in order to help support businesses throughout their growth cycle.I. FINANCING TAILORED TO COMPANY’S GROWTH CYCLE (FOR START-UPS) ► CROWDFUNDING: Ease crowdfuding regulations to enable companies at the stage of launching beta service or sample products to raise funds via crowdfuding by allowing unlisted SMEs and companies that have been listed on KONEX for less than 3 years to use crowdfuding; expanding the amount of fundraisings through crowdfunding; and allowing crowdfunding platforms to provide business advisory and brokerage services for securities issued through equity crowdfunding. ► START-UP ACCELERATOR: Allow securities firms to operate as start-up accelerators which engage in selecting start-up entrepreneurs, providing seed investments and incubating programs.(FOR SCALE-UPS) ► BUSINESS DEVELOPMENT COMPANY: Introduce a business development company (BDC) , which is an investment vehicle that pools money from many investors, lists itself on the stock exchange and make investments in non-listed companies.► EASING RESTRICTIONS ON SECURITIES FIRMS: Ease regulatory restrictions on securities firms in financing SMEs by permitting a new type of debt financing called venture lending; clarifying the scope of corporate lending that securities firms are allowed to extend (e.g. MA, refinancing, lending to companies in debt restructuring, etc,); and adjusting capital requirements and leverage regulations on securities firms to expand their financing capability.► HIGH-YIELD CORPORATE BOND MARKET:
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Feb 28, 2020

Government Unveils Additional Financial Measures to Support Businesses amid COVID-19 Spread

The government unveiled additional financing support for SMEs and small merchants hit by the spread of COVID-19 on February 28, 2020, as a follow-up to the financing support announced on February 7.FINANCIAL SUPPORT PROVIDEDBetween February 7 and 26, a total of KRW379.6 billion in new loans and guarantees were provided by policy banks and KRW607.4 billion in loan and guarantee extensions to the SMEs, small merchants and self-employed business owners whose businesses have been hit by the spread of COVID-19.Local banks provided about KRW81 billion in new loans and KRW135.8 billion in maturity extensions and deferred payments. For small businesses, credit card companies also provided about KRW9.1 billion in discounted interest rates and late fees.ADDITIONAL MEASURESI. STRENGTHEN FINANCING SUPPORT BY POLICY BANKS► For Small merchants, financing options such as low-rate loans and guarantee support will be available through the Industrial Bank of Korea and regional credit guarantee funds.a) Increase the funds available for super low or prime rate loans at the IBK from KRW1.7 trillion to KRW4.2 trillion b) Increase the funds available for guarantee support at regional credit guarantee funds from KRW16.7 trillion to KRW17.2 trillion► SMEs experiencing temporary liquidity problems are eligible to receive financial support through primary collateralized bond obligations (P-CBO) and other government-backed financing programs aimed at supporting SMEs’ facility investments.a) Expand the issuance of P-CBOs from KRW1.7 trillion to KRW2.2 trillionb) Ensure seamless implementation of financing programs (KRW3 trillion for advancing the industrial structure KRW4.5 trillion for bolstering facility investments) aimed at supporting SMEsc) Frontload the fund implementation in H1 2020II. WORK TO RELIEVE FINANCIAL BURDENS OF SMES AND SMALL MERCHANTS► (Maturity extension) SMEs and small merchants having problems with financing their businesses due to the spread of COVID-19 will be el
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Dec 23, 2019

Key Tasks in Financial Policy for 2020

The government introduced the 2020 Economic Policies on December 19, aimed at promoting innovation, restructuring the economy, pursuing inclusive growth and preparing the economy for the future. The Financial Services Commission will pursue the following key financial policies to support the government’s economic policies in 2020.KEY POLICY TASKSI. INCREASING FINANCIAL SUPPORT TO HELP THE ECONOMY REGAIN GROWTH MOMENTUM► Increasing funding for innovation-led growth drivers- Reform banks’ credit evaluation system to better evaluate corporate borrowers’ growth potential and technology(i) financing movable asset-based loans (including intellectual property) in the amount of KRW3 trillion by the end of 2020: introducing a lump-sum collateral system; providing incentives for banks; and establishing a new agency which purchases movable asset collateral or non-performing loans backed by movable assets to facilitate banks’ recovery of collateral(ii) introducing an integrated credit evaluation model starting with large banks to incorporate technology evaluation into banks’ credit evaluation system- Provide more than KRW10 trillion in facilities investment for SMEs as well as for major industries- Boost venture capital investments through capital markets by streamlining regulatory frameworks on private equity funds (PEFs) and easing net capital ratio (NCR) on securities firms investing in venture companies and SMEs.► Financing new and key industries- Support start-ups and scale-ups in high-tech and newly emerging industries(i) establishing the infrastructure to facilitate the use of financial and biohealth data in financial services (e.g. data exchange)(ii) increasing investment and incubating start-ups in 5G sectors(iii) providing government-backed loans and guarantees in the amount of KRW10 trillion in new growth sectors, such as system chips, biohealth and future car industries(iv) creating a Scale-up Fund worth KRW3.2 trillion to provide start-ups with growth
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Dec 19, 2019

FSC Designates 9 More Financial Solutions as 'Innovative Financial Services'

The FSC designated nine additional financial solutions as ‘innovative financial services’ to be included in its regulatory sandbox program on December 18. The FSC has thus far designated a total of 77 ‘innovative financial services’ since the launching of financial regulatory sandbox in April this year.OVERVIEW OF NEWLY ADDED ‘INNOVATIVE FINANCIAL SERVICES’1. An over-the-counter bond trading platform providing retail investors with investment information about a variety of bonds, which will offer opportunities for small-amount investments and increase investor convenience (SK Securities)2. An automated stock lending borrowing transactions service, which is expected to contribute to the prevention of naked short-selling and failure to deliver securities (True Technologies)3. A customer oriented mobile appointment scheduling service using artificial intelligence, internet of things and big data, which provides information about the best time to set up an appointment at banks to avoid busy times while offering recommendations about financial products based on an analysis about customer’s consumption and investment patterns (NH Nonghyup Bank)4. A data analysis service using homomorphic encryption, which makes possible the coding of personal financial information stored in different financial institutions for analyzing purposes (Korea Credit Bureau)5. A digital real estate beneficiary distribution platform using a blockchain-based distributed ledger technology which offers retail investors an opportunity to make indirect investments in small-and medium-sized commercial real estate (Kasa Korea)6. A global money transfer brokerage service offering small-sum overseas remittance service providers an opportunity to easily find overseas partners, which is expected to ease consumer access and lower transaction costs (Hanpass)7. An online foreign stock gift card platform which allows small amount investment in shares of foreign stocks (Shinhan Investment)8 9. A sim
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Dec 05, 2019

Measures to Improve Management of Risk Exposure in Project Finance

The government introduced its plans to improve the management ofrisk exposure in real estate project finance on December 5.BackgroundProject financing in real estate is a financing mechanism based onthe business value of the project and the expected cash flows of the project inthe future. Due to the recent financial deepening and continuing low yields,project financing has increased significantly. Project financing provides an efficientway to finance real estate or infrastructure development projects.However, due to heavy reliance on the expected value of theproject, risk exposure is highly dependent on market conditions. Without propermanagement of risks, or in the case of a distortion of profits or risks, it maypose a threat to financial stability.Risk exposure in project financing has continued to increase especiallyin non-bank sectors since 2013. The prevalence of high-risk project financingloans, such as bridge loans, has dropped whereas the level of exposure bysecurities companies and specialized credit finance companies increased. Debtguarantees in project financing also increased as the burden of credit exposureshifted from construction companies to financial institutions.Recent TrendsAt the end of June 2019, the total amount of debt guarantees inproject financing stood at KRW28.1 trillion, out of which KRW26.2 trillion issuedby securities companies. The outstanding loan balance in project financing stoodat KRW71.8 trillion, rising on average 11.6 percent a year from KRW39.3trillion at the end of 2013. By the end of June 2019, both the default rate andthe sub-standard asset ratio continued to decline since 2013 from 13.0 percentto 1.9 percent and 16.9 percent to 3.0 percent, respectively, due to anincreased volume in project financing loans.Key MeasuresI. Improvingthe Soundness of Debt Guarantees in Project Financing► Establishing anupper ceiling on debt guaranteesUnder the current system,securities companies face no upper limits on issuing debt guarantees
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Nov 14, 2019

Measures to Strengthen Investor Protection with High-risk Investment Products

The Financial Services Commission and the Financial Supervisory Service unveiled measures to strengthen investor protection with high-risk financial investment products in light of the recent derivatives-linked funds (DLFs) mis-selling cases. The reform measures are aimed at enhancing consumer protection and maintaining stability in the financial system, without jeopardizing private equity funds’ critical function of supplying venture capital.BACKGROUNDThe recent DLFs mis-selling controversy was caused by financial institutions’ attempt to sell high-risk funds to retail investors in private offering to avoid stringent regulation on public offering; loopholes in investor protection measures; and insufficient internal controls by financial institutions.The DLFs structured to track the yield of Germany’s 10-year government bonds or the performance of constant maturity swap (CMS) rates of the U.S. or the U.K. were sold to retail investors by two local commercial banks with sales balance of KRW795 billion as of August 7 this year.The losses were mostly accrued in September and October with an average loss of 52.7 percent with KRW99.1 billion reaching maturity and KRW97.8 billion redeemed. By November 8, the sales balance of the derivatives remained at KRW587 billion.Due to a rise in the value of underlying assets, such as the German 10-year government bonds, the expected loss of the derivatives with future maturity dates will be lower.REFORM MEASURESI. STRENGTHEN CONSUMER PROTECTION► Tightening standards for deciding a public offering fundThe standards for determining features of a public offering fund will be tightened to prevent funds that should have been a public offering fund from being sold in the form of a private fund to avoid stricter regulations, which apply to public offering funds. If a fund’s profit and loss structure is equivalent to that of its underlying asset, the fund shall be sold as a public offering fund.► Strengthening regulatory regime
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Sep 16, 2019

Electronic Securities System Launched

Korea’s electronic securities system was launched on September 16, 2019.1 Under the new system, securities of listed stocks and bonds are required to be issued and circulated electronically.“It will open a new era for digitization of securities, making a historic transition to a paperless system in 45 years since the securities depository system was adopted in 1974,” FSC Chairman Eun Sung-soo said at an event celebrating the official launch of the electronic securities system.Korea’s stock and bond markets have been growing with the development of the Korean economy. The daily transaction of listed stocks amounts to KRW11 trillion, or1.4 billion shares, while the amount of bond trading is KRW8 trillion per day.2 The current securities depository system facilitated the circulation of securities, contributing to the growth of securities transaction and the development of Korea’s capital markets. However, the current system fell short of eliminating inefficiencies in the issuance of securities and the exercise of rights as it still requires the presence of physical securities.The Electronic Securities Act was established in 2016 to eliminate such inefficiencies and promote transparency in securities transaction. The electronic securities system will shorten procedures for the issuance of securities, making it easier for companies to raise funds in capital markets. It will also help investors exercise their rights, better informed of distribution of divided or capital increase. The electronic system will make it possible to build up big data on the issuance and circulation of securities, enabling fintech innovation using such data. Transparency in capital markets will be enhanced. Under the electronic securities system, information about the ownership and transfer of securities rights will be recorded electronically, which will eliminate risks of counterfeit or theft of securities or prevent tax evasion.Chairman Eun asked the Korea Securities Depository (KSD)
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Jul 18, 2019

FSC Chairman's Remarks on Financial Market Conditions amid Concerns over Japan's Export Curbs

FSC Chairman Choi Jong-ku briefed the press on recent financial market conditions amid rising concerns over any possible effect of Japan’s export curbs on Korea’s financial market. The briefing came as some local media reports voiced concerns that Japan’s export restrictions may escalate into retaliatory measures in the financial sector.Chairman Choi reaffirmed that even if such a scenario became a reality, albeit highly unlikely, the effect would be limited, citing the following reasons:(i) Japan does not represent a significant share of foreign capital in Korea’s financial market.- Japan accounts for 2.3% (KRW13 trillion) and 1.3% (KRW1.6 trillion) of foreign capital in Korea’s equity and bond markets respectively, as of end-June 2019.(ii) Korean banks are maintaining good credit standings so that they are capable of financing from other alternative sources in international financial markets.- Korean banks’ borrowings from Japan amount to USD9.26 billion (KRW10.6 trillion), which accounts for 6.6% of total foreign currency borrowings (as of end-June 2019).- Korean banks’ FX liquidity coverage ratio (LCR) is 111.2% as of June 2019, well above the minimum regulatory requirement of 80%.- Foreign currency surplus amounts to USD29.2 billion, which is higher than the amount of foreign currency borrowings (USD25.5 billion) maturing in three months.(iii) Korea’s foreign currency amounts to USD402 billion, which is the 9th biggest in the world (as of May 2019).The government will keep closely monitoring ongoing situations and remain vigilant with contingency plans in place against any possible scenario
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Jun 18, 2019

Electronic Securities System to be Introduced

Securities certificates of listed stocks and bonds will be issued electronically only, not in physical form, starting from September 16, 2019.Korea will introduce an electronic securities system as the 「 Act on Electronic Registration of Stocks, Bonds, etc.」(hereinafter referred to as ‘Electronic Securities Act’) and its subordinate decree will take effect on September 16.Under the new system, securities certificates of listed stocks and bonds are required to be recorded on an electronic register, allowing investors to acquire, transfer and exercise subsequent rights electronically. Most of securities, except those that have effect only in written form (e.g. commercial papers), will be subject to mandatory electronic registration. Once registered electronically, securities issued in physical form shall not have effect. Unlisted stocks, not subject to mandatory electronic registration, may be registered electronically upon the issuer’s application.The Korea Securities Depository (KSD) will act as an electronic registry under the Electronic Securities Act, ensuring a smooth transition to the paperless system. It will be in charge of electronic registration of securities, management of rights to electronically registered securities, operation of relevant IT infrastructure, and disclosure of issuance of electronic securities, etc.The introduction of electronic securities system is expected to save cost of issuing securities, reduce risks in securities circulation, and enhance transparency in corporate governance and securities transaction.
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Apr 13, 2017

New Approach to Corporate Restructuring

FSC Chairman had a meeting with CEOs of commercial banks on April 13 to set out a new approach to corporate restructuring. The new approach was outlined to complement the existing framework of corporate restructuring; and to shift its focus to more market-based restructuring schemes, in which capital market players including private equity funds (PEFs) play a bigger role in corporate restructuring.I. BACKGROUNDThe existing system led by creditor banks has limits as companies today, which used to heavily rely on bank loans, are increasingly using capital markets for fundraising via issuance of corporate bonds or commercial papers (CPs). Such a change made the process of adjusting the interests of creditors more complex and difficult. Against this backdrop, the FSC outlined a new approach to corporate restructuring aimed at improving the current restructuring system led by creditor banks and stimulating capital market-based restructuring schemes through PEFs.II. NEW APPROACH TO CORPORATE RESTRUCTURING1. Credit Risk Evaluation System To Be Improved▪ Banks will be required to revise their credit risk evaluation models and procedures withinthe second half of this year to make more accurate and rational evaluations so that they could sort out troubled companies to be put under restructuring in a timely manner.▪ For companies under a workout program led by creditor banks, banks will have to adoptstricter evaluation standards to decide whether to continue the workout program or not. If the workout program proved inefficient, the company undergoing the workout would swiftly turn to alternative schemes such as a buyout plan led by PEFs or court receivership including the newly-introduced ‘Pre-packaged Plan’ (or ‘P-Plan’).▪ For those who have been under workout program for more than three years, an extensionof the workout period will be permitted only in exceptional circumstances after a thorough evaluation by an external auditor.2. Market-based Restructuring Sch
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