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Jun 26, 2019
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May 30, 2019
- FSC Introduces Deregulatory Measures to Boost Korea's Derivatives Market
- The FSC introduced deregulatory measures to make Korea’s derivatives markets more vibrant and competitive. The reforms are intended to strengthen the derivative market’s role for risk hedging and price discovery, as part of the government’s broader efforts to vitalize capital markets and support the real economy.BackgroundKorea’s derivatives trading volume fell sharply from its peak in 2011 but recovered to an extent after 2015 with increased trading of index products.1 Since the introduction of tighter regulations to curb speculative trading in 2011, the derivatives market’s soundness improved with an increase in the number of longer-term open contracts for risk hedging.2By investors, foreigners accounted for 50.4% of derivatives trading in 2018, up from 25.7% in 2011. Over the same period, the share of institutional investors decreased from 48.7% to 36.1%; and retail investors from 25.6% to 13.5%. Excessive entry barriers act as obstacles to retail investors, while strict margin requirements hinder institutional investors’ participation.The derivatives market is disproportionately concentrated in KOSPI200-related products, making it difficult to serve investors’ demand for a variety of derivatives products.Reform Measures► Lower entry barriers for retail investors (Q4 2019/FSC, KRX) Minimum deposit requirement will be abolished for professional investors and eased for non-professional investors: (i) KRW 10million or more for futures and options trading; and (ii) KRW 20million or more for all derivatives trading. One hour of education and three hours of mock trading► Ease margin requirements for institutional investors (Q3 2019/FSC, KRX) Currently, institutional investors are required to deposit an extra margin, 10 % of credit risk limit, in addition to 100% of the volume exceeding the credit limit. The1 Average daily turnover (unit: trillion won): 66.3(2011), 47.9(2013), 37.2(2014), 41.2(2015).45.0(2018)2 KOSPI 200 Futures Open Interest (unit: 10
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Apr 24, 2019
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Jan 23, 2018
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Jun 21, 2017
- FSC Held Market Monitoring Meeting on Results of MSCI 2017 Market Classification Review
- FSC Vice Chairman Jeong Eun-bo held a meeting on June 21 with officials from relevant agencies to discuss the impact of the MSCI’s 2017 Market Classification Review and the government’s responses.INCLUSION OF CHINA A-SHARES INTO MSCI EMERGING MARKET INDEXIn its annual market review, MSCI decided to include China A-shares, 222 large-cap stocks of Chinese companies listed in either Shanghai or Shenzhen, into the MSCI Emerging Market (EM) Index.IMPACT ON KOREA’S FINANCIAL MARKETAs the inclusion of China A-shares increases China’s weighting in the MSCI Emerging Market Index, Korea’s weight in the same index is expected to decrease by 0.23 %p from its current 15.5%. Given the amount of funds tracking MSCI EM Index, which ranges between KRW 250 trillion (USD 230 billion) and KRW 1,900 trillion (USD 1.8 trillion), Korea may experience possible outflow of KRW 600 billion to KRW 4.3 trillion from the equity market.The FSC, however, sees MSCI’s decision will have a limited impact on the Korean stock market for the following reasons:▪ The change will be actually reflected in the MSCI EM Index in a year, from June 2018.▪ The amount of global funds investing in emerging markets continues to increase, recording a net inflow of USD 18.1 billion into emerging markets from April to May 2017.▪ Given that the Korean stock market attracted a net foreign capital inflow of KRW 9 trillionin the first five months this year alone, the amount of possible outflows (max. KRW 4.3 trillion) is not so significant.GOVERNMENT’S RESPONSESThe government will keep monitoring the impact of the MSCI’s decision to include China A-shares into its emerging market index on the Korean equity market. We will also continue our policy efforts to improve global competitiveness and attractiveness of our capital markets, and consultation with MSCI in regard with the inclusion of Korea on the list for potential reclassification to the MSCI Developed Market Index.* Please read the attached file
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Apr 03, 2017
- Korea's 1st Internet-only Bank Open for Service
- ‘K bank’, Korea’s first internet-only bank is officially launched on April 3 for service.At the opening ceremony, Financial Services Commission Chairman Yim Jong-Yong emphasized three significant meanings of the launch of K bank. First, K bank has already brought about a new wave of competition in the banking sector. Second, financial consumers will be able to enjoy numerous benefits including lower banking transaction cost, more convenient banking services, and easier access to loans compared to those provided by commercial banks. Third, more descent quality jobs will be created in the banking, IT, and fintech sectors.K bank will supply mid-interest rate loans worth KRW 500 billion for the next three years. It will start with providing retail banking services and its business scope will be widened to include mortgage loan, payment services, foreign exchange, and fund sales in time.K bank acquired preliminary approval for banking business in November 2015, and final approval in December 2016.*Please refer tothe attachedPDF for details.
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Mar 12, 2017
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Nov 22, 2016
- Measures for Improvement of Derivatives Markets
- The FSC announced a set of measures to make South Korea’s derivatives markets more advanced and sounder as this year marks the 20th anniversary of the establishment of derivatives markets in 1996. Key Points EXCHANGE-TRADED DERIVATIVES MARKETTo boost derivatives trading and enhance diversity of derivatives in the market, improvements will be made on both supply and demand sides. - Supply side: simplification of listing procedures, diversification of derivatives, adjustment of trading units for KOSPI200 futures and options - Demand side: flexible requirements for investors, introduction of the ‘omnibus account’ for foreign investors OVER-THE-COUNTER(OTC) DERIVATIVES MARKETRisk management system will be established with the introduction of global regulatory standards such as margin requirements for non-centrally cleared derivatives and electronic trading platforms. DERIVATIVE-LINKED SECURITIES MARKETThe FSC will strengthen risk management and investor protection, while pursuing more diversification of products to meet various investment needs. - For ELS DLS markets, stress tests will be conducted on regular basis to strengthen risk management of securities firms. To enhance transparency in fund management, assets of ELS issuance and management will be separately managed. - Investor protection will be strengthened in ELS DLS markets with the introduction of tougher “Know-your-Product Rule” and a “cooling-off period” for investors. - Development and listings of more derivatives-linked products will be promoted as alternatives to ELS products. Detailed Measures1. EXCHANGE-TRADED DERIVATIVES MARKET Supply Side(1) Simplification of listing procedures Listings of derivatives linked to new underlying assets, which currently requires the FSC’s approval, will be streamlined. Relevant rules will be revised to allow the KRX to decide on the listings of new derivative products, while the FSC will only approve the scope of the underlying assets. (2) Di
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Nov 09, 2016
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Nov 07, 2016
- FSC Holds Emergency Meeting on Financial Markets
- FSC Chairman Yim Jong-Yong convened an emergency meeting with top officials from the FSS and other relevant financial organizations to respond to recent uncertainties in financial markets at home and abroad. Followings are key messages from his opening remark: The Korean economy is now facing internal and external challenges with slump in exports; slow recovery in domestic consumption; and household and corporate debt risks. However, our economy has sound fiscal health and strong fundamentals to weather these challenges. The government maintains fiscal soundness with its debt-to-GDP ratio of 35.5% at the end of 2015, which is the 4th lowest among 31 OECD countries. South Korea has the world’s 7th largest foreign currency reserve. Its short-term external debt accounts for only 29% of the foreign currency reserve, as of the 2nd quarter of 2016, which is much lower than 74% at the end of 2008. The financial system is resilient enough in terms with capital adequacy and asset soundness of financial institutions. The government will stay alert to internal and external uncertainties and take bold and preemptive measures, if necessary, to prevent any of risk factors from spilling over into a wider financial system to threaten our economy. Starting from today, the FSC and the FSS go into an emergency operation mode with a 24-hour monitoring on financial markets, in a close cooperation with the Ministry of Strategy and Finance, and the Bank of Korea. If necessary, we will take market stabilizing measures in accordance with contingency plans in a timely manner. We will continue to respond to household and corporate debt risks in a preemptive manner. For household debt, the government will continue our effort to improve soundness of household debt by holding the principle of ‘debt should be borrowed within repayment ability and paid back in installments.’ We will also closely monitor and respond to rapid growth of household debt in non-banking sectors. For ong
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Aug 02, 2016
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Jun 24, 2016
- FSC Meeting on Financial Market Stability after UK's Decision to Leave the EU
- As it seems inevitable that the ‘Brexit’ decision would have short-term impact on financial market, financial authorities will respond in a swift and decisive manner to developments in financial markets. The government will monitor international and domestic financial market conditions around the clock while strengthening communication with global IBs and foreign media. The FSC/FSS will immediately form and operate a contingency response team led by the FSC Secretary General to strengthen monitoring and respond preemptively to possible volatility in financial markets. The government will also review its contingency plan to ensure that the detailed action plans are executed without any delay in case of abrupt financial market turmoil.In particular, the government will closely monitor domestic banks’ foreign currency liquidity conditions and make sure that they are well prepared to respond to market developments. The government views that the Korean economy is resilient enough to withstand possible impact of the Brexit decision on global financial market, given its strong economic fundamentals and financial soundness. * short-term external debt / total external debt: 43.1% (2009), 34.9% (2011), 26.4% (2013), 27.4%(2015) * short-term external debt / total foreign reserve: 52.0% (2009), 45.6% (2011), 32.3% (2013), 29.1% (2015) * current account surplus/ GDP: 3.7% (2009), 1.6% (2011), 6.2% (2013), 7.7% (2015) We ask investors not to overreact to temporary increase in financial market volatility and remain calm to future market developments from a mid-to long-term perspective with confidence in the Korean economy’s fundamentals. * Please read the attached file for details.
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Jun 16, 2016
- Foreign Currency Liquidity Coverage Ratio (LCR) Will Apply to Banks from 2017
- The FSC will introduce foreign currency liquidity coverage ratio (LCR) rule starting 2017, which requires commercial banks to hold 60% of their foreign exchange debt in high-quality liquid assets (HQLA) to withstand a 30-day net cash outflow in systemic risks. The FSC/FSS adopted the foreign currency LCR in 2015 as a guideline to monitor banks’ foreign exchange liquidity risks, in accordance with the Basel III recommendation. Since then, commercial banks have been advised to maintain the foreign currency LCR of at least 40% in 2015 and 50% in 2016. From next year, banks will be required to comply with the foreign currency LCR rule. - The foreign currency LCR rule will apply to all banks with the exception of:(i) commercial banks with foreign exchange debt of less than 5 % of their total debt and USD500 million or less in foreign exchange debt; (ii) Export-Import Bank of Korea (KEXIM); and (iii) branches of foreign banks operating in Korea. - The foreign currency LCR for commercial banks will be set at 60% in 2017, increased gradually to 70% in 2018 and 80% in 2019. * Specialized banks – IBK, Nonghyup Bank and Suhyup Bank – will be applied the foreigncurrency LCR of 40% in 2017, 60% in 2018 and 80% in 2019. * KDB will be subject to less stringent LCR requirement, given its special role as a state lender. (40% in 2017, 50% in 2018, 60% in 2019) - Banks will be required to calculate their foreign currency LCR each business day and maintain a monthly average of the ratios above the minimum requirement. - The ratio may be lowered by FSC approval for a temporary period of time in a crisis in order to prevent banks from reducing their foreign exchange liquidity provision. - Overlapping regulations – e.g. seven-day and one-month maturity mismatch ratio requirements, three-month foreign exchange liquidity requirement – will be abolished or replaced by the foreign currency LCR. For the next six months, the FSC will gather opinions from the banking sector about the p
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Jun 15, 2016
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May 24, 2016
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Feb 04, 2016
- FSC Convenes Meeting over Recent Developments in Global Financial Markets and Policy Response
- The FSC convened a meeting with the FSS and relevant research institutions to review policy implications of recent developments in global financial markets and discuss our policy responses. There are growing uncertainties in the global economy this year with a slowing Chinese economy and falling oil prices. The IMF cut its outlook for global economic growth in 2016 from 3.6% to 3.4%. As global economic conditions weighed on our economy, Korea’s exports dropped 18.5% in January compared with the previous month, raising concerns about the country’s economic slowdown. In response to such worries, the Korean government announced yesterday a stimulus plan including an injection of KRW 21trillion in the first quarter of this year through fiscal spending and policy financing in a bid to boost domestic demands and create more jobs. Global financial markets are also facing increasing volatility with Fed’s rate hike, China’s financial market turmoil and declining oil prices. The Fed’s rate increase last December has led to contraction in global liquidity, while accelerating capital outflows from emerging economies to advanced economies. Monetary policies among major central banks have become divergent as the BOJ cut its interest rates to minus 0.1 per cent last week, joining in the ECB’s move to negative interest rates. The ECB also hinted a possibility of further quantitative easing. Compared with major economies, Korea’s financial market stayed stable; however, volatility has recently increased to some extent in the local stock and currency markets. With increased volatility in global financial markets, foreigners’ selling of Korean stocks has continued from last June until early this year. Fluctuations in the currency market have also increased with the won-dollar exchange rate surging to 1,219.3 won yesterday, a record high since July 2010. There is no quick fix for current global market risks, which are likely to persist for a considerable period of this
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Feb 02, 2016
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Feb 01, 2016
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Jan 07, 2016
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Dec 16, 2015
- FSC-FSS Meeting for Monitoring Financial Market Conditions
- The FSC and the FSS held a meeting to make sure that Korea’s financial markets are prepared for the impact of the Fed’s possible rate hike. RECENT TRENDS IN CAPITAL FLOWSThe expectation of a U.S. rate increase weighs on global stock markets. External risk factors prompt volatility in Korea’s financial market with foreigners’ net selling of stocks and investors’ appetite for safer assets. Kospi fell 3.0% in recent days(Dec.1~Dec.15), while the yield on 3-year government bonds dropped 5.2bp in the same period. However, the general market view is that capital outflows would not be expanded sharply, looking into characteristics and causes of recent outflows. In 2015, foreign investors sold an average of KRW 1.7 trillion per month in the stock market, which is less than the net selling of KRW 2.5 trillion per month for the past 10 months and less than the net selling of KRW 2.4 trillion per month in the following months of the so-called ‘taper tantrum’ (March~June 2013). Since September this year, oil producers like Saudi Arabia have been leading foreign net selling as their fiscal conditions deteriorate with falling oil prices. The net selling mode is hardly related to changes in foreign investors’ appetite to Korean stocks. US funds, which represent a largest share of Korea’s stock market(40%), continue to remain net buyers in November and December amid rising possibility of a U.S. interest rate increase. European funds sold a net KRW 10.2 trillion of Korean shares from June to September this year, but the pace of selling has slowed since then. STOCK MARKET The Korean stock market is expected to face turmoil in the short term after the Fed’s decision. However, many investment banks forecast that the Kospi will gradually bounce back to a level of 2,100 or beyond in 2016. Given strong fundamentals of the Korean economy, undervaluation of Korean stocks could appeal to investors once the Fed’s rate hike finally removes uncertainty. The FSC will closel
