Press Releases - Financial Services Commission

Press Releases

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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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Oct 28, 2020

Government to Closely Monitor Market Risks

The FSC held the 27th financial risk assessment meeting via teleconference on October 28, chaired by Secretary General Kim Tae-hyun. During the meeting, officials discussed issues surrounding the US presidential election, recent trends in the corporate bond and CP markets, anticipated discontinuation of LIBOR and other market conditions.(RISK MONITORING) Market experts noted that the US presidential election, soaring global asset prices and the possibility of an interest rate hike and currency appreciation as potential external risks to the Korean economy. First, uncertainties surrounding the outcome of the US presidential election and the ensuing policy disparities on COVID-19 stimulus, tax policy and the recovery pace pose risks to the economy. Second, as asset prices have seen a steep rise, price volatility may pose another risk. Third, due to expectations of stimulus measures, interest rates have gone up in advanced economies, and depending on the movement of the dollar and yuan, there exist downside currency risks in the Korean economy.(CORPORATE BOND CP MARKETS) Despite the general recovery trend in corporate bond and CP markets due to the government’s market stabilization efforts, there still exist disparities between low-rated and blue chip companies as well as between the corporate bond market and short-term money markets. The continuous decline of the spread of low-rated corporate bonds since June is a positive sign. However, the pace of the decline has been slow compared to high-rated bonds with the volume of total issuance yet to reach the level seen in the previous year. On the other hand, the low-rated CP and short-term debt issuance amount has recovered to a comparable level from the previous year. The FSC will continue to closely monitor corporate bond and CP markets and take stabilization measures using an SPV when deemed necessary.(DISCONTINUATION OF LIBOR) With regard to the anticipated discontinuation of LIBOR from 2022, financial institutions
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Oct 20, 2020

Vice Chairman Stresses Importance of Steady Financial Support for Small Businesses

Vice Chairman Sohn Byungdoo held the 26th financial risk assessment meeting via teleconference on October 20 to discuss the implementation status of the COVID-19 emergency financial support programs.The following is a summary of Vice Chairman Sohn’s remarks.(CURRENT ECONOMIC CONDITIONS) As some of the key economic indicators have shown signs of an improvement recently, the IMF revised up its global growth forecast from a 5.2 percent drop to 4.4 percent decline. The Korean economy also has been on a recovery path, as exports rebounded in September for the first time since the outbreak of the COVID-19. The recently adjusted social distancing rules and the government’s fiscal efforts are expected to help boost domestic demand. With a resurgence of COVID-19 being the biggest threat to economic recovery, financial institutions should closely adhere to the safety and preventive measures.(STEADY SUPPORT FOR SMALL MERCHANTS) The structural changes caused by the COVID-19 pandemic present both challenges and opportunities. Although there are positive effects, such as a transition toward a digital and green economy, heavier burdens may be placed on the vulnerable groups including small merchants as some expect to see a K-shaped recovery. Since the improvements to the second round of financial support program for small merchants became available on September 23, the provision of lending support to small merchants has continued to increase. As this program is backed by guarantees from the Korea Credit Guarantee Fund, it is essential that lending support is made available to small merchants with different credit backgrounds, including those with unfavorable credit history.With growing numbers of small merchants experiencing business closures, it is necessary to keep in place a policy that supports their comeback. Since last November, the FSC has made available a one-stop consulting program for self-employed small business owners who have experienced business closures due to t
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Oct 19, 2020

FSC Introduces Improvements to Credit Recovery Support Programs

The FSC announced ways to improve the credit recovery support system on October 16. The improved measures are expected to go into effect in November this year.The FSC has been working to improve the personal debt adjustment program run by the Credit Counseling Recovery Service (CCRS) to help reduce excessive personal debt service burdens and support quick recovery. In this year, the government introduced loan deferment programs in March and April to help relieve debt burdens of vulnerable individuals hit by the COVID-19. In order to improve the credit recovery support system, the FSC prepared the following measures.a. CCRS’s up to one-year loan deferment program currently offered to those who have seen their income drop due to COVID-19 will be extended to include those who have been laid off and/or experienced business closure.b. The age limit for CCRS’s special debt adjustment program for the unemployed youth with overdue debts of three months or more will be increased from below 30 years old currently to 34 years old and below, while extending the deferment period from maximum four years to five years.c. Improvements will be introduced that will restrict creditor institutions from denying loan deferment on non-overdue loans or activate a trigger clause for events of default just because a debtor applies for a debt adjustment.d. Improvements will be made to allow creditor institutions to cancel account seizures upon debtors’ request when entering into a debt adjustment program.e. Special exemptions for vulnerable debtors will be applied to all basic income recipients and those with severe disabilities.f. The current six-month term restriction placed before a debtor can reapply for an individual workout will be shorten to three months to help with quick recovery.g. For the portion of the principal that has been repaid, the remission rate on interest will be increased from 80 percent to 90 percent to help reduce debt servicing burden of vulnerable debtors.h. Su
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Oct 19, 2020

FSC Holds Kick-off Meeting to Root Out Unlawful Trading Activities in Stock Markets

Vice Chairman Sohn Byungdoo held a kick-off meeting of the task force on the prevention of unlawful and unfair trading activities in stock markets on October 19. The task force will operate until the end of March 2021 and regularly report its implementation status on a monthly basis.The following is a summary of Vice Chairman Sohn’s remarks.BACKGROUNDDue to the rapid spread of COVID-19 around the world, domestic stock markets plunged at the beginning of the year. However, stock prices quickly recovered to the pre-pandemic level backed by the strong fundamentals of the Korean economy, prompt implementation of the emergency financial support programs and the effective K-quarantine measures. Moreover, an upsurge in the trading volume by retail investors also contributed to the quick market recovery. The retail investors’ growing interest in stock investment is a positive sign. However, without a fair market order, investors’ trust in the market may crumble and the recent investment boom may end up as a short-lived one, preventing a further advancement of stock markets.With abundant market liquidities flowing into stock markets, it has become all the more necessary to pay attention to the growing concerns about illegal and/or unfair trading activities in the stock markets.POTENTIAL ISSUESThe recent trends in stock market activities reveal the following three potential problems. First, due to the rising market volatility, there are growing risks of unfair trading activities surrounding particular groups of stock items, such as COVID-19 and “untact” sectors. In addition, as the period of short-selling ban was extended until March 15, 2021, it has become necessary to closely monitor illegal short sale activities during this period, including naked short-selling. Second, unfair trading activities including price manipulation are being carried out in a more organized and complex manner. However, the current system from the detection to punishment stage takes a long
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Oct 14, 2020

Government Reviews Financial Policy Agenda for Post-pandemic Era

Vice Chairman Sohn Byungdoo held the 25th financial risk assessment meeting via teleconference on October 14 and reviewed financial policy tasks for the post-pandemic era. The policy agenda focuses on four key areas—(a) supporting innovation-driven growth, (b) promoting digital finance, (c) expanding support for inclusive finance and (d) ensuring stability in the financial system.The following is a summary of Vice Chairman Sohn’s remarks.(NEED TO PREPARE FOR POST-PANDEMIC ERA) In response to the pandemic-induced economic shocks, the government has provided emergency financial support for small merchants and businesses. However, the disruption caused by COVID-19 may be just beginning. With global supply chains being reshuffled, contactless, medical, bio and green industries are becoming more prominent. This type of restructuring is also inevitable in the financial industry. There are also growing concerns about a deepening wealth gap between the haves and the have-nots. Potential risks in financial sectors, such as growing appetite for riskier and higher yield products as well as rising debt, have been accumulating. These are all the reasons that financial policies should account for the preparation of the post-COVID-19 era.(FINANCIAL POLICY AGENDA FOR POST-PANDEMIC ERA) The policy agenda announced on July 24 includes (a) supporting innovation-driven growth, (b) promoting digital finance, (c) expanding support for inclusive finance and (d) ensuring stability in the financial system. First, with regard to the first policy agenda, the government has been providing targeted financial support to innovative and promising businesses. Under the government-wide initiative to develop a thousand innovative firms, a total of thirty-two businesses have been selected with KRW211.1 billion in lending support being provided to sixteen of them. In November, more than 168 additional firms in the future car, biochemical and high-tech medical device industries are expected to be se
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Oct 07, 2020

Vice Chairman Discusses Importance of Steady Financial Support for SMEs and Small Merchants

Vice Chairman Sohn Byungdoo held the 24th financial risk assessment meeting via teleconference on October 7 and discussed the implementation status of COVID-19 financial support programs and other market conditions.The following is a summary of Vice Chairman Sohn’s remarks.(COVID-19 FINANCIAL SUPPORT) The latest COVID-19 emergency support programs announced in September have been operating smoothly. The second round of emergency loan program for small merchants began to provide support on September 23, with its recently increased lending cap and broadened recipient base. Since the improvements became effective, some KRW350 billion worth of loans were issued within a week with interest rates also falling compared to earlier periods. More numbers of small merchants chose to apply via contactless channels, which helped avoid long lines at lending institutions and prevent the spread of the virus.The hardship experienced by SMEs amid a persistent pandemic underscores the importance of having a strong and tightly-woven financial support system to help address their liquidity shortages. In this regard, the government has improved existing programs according the needs of the SMEs and middle market enterprises, thus responding to changing market conditions in a more flexible way. In terms of the COVID-19 P-CBO support, the government has decided to increase lending caps for companies and lower underwriting ratios for subordinated debt. These changes will begin to be applied with P-CBO issuances in October. In addition, the government has significantly improved the lending support program specifically targeted at the pandemic-hit SMEs and middle market enterprises on September 24, doubling lending caps, offering better interest rates and extending the support period.(HOUSEHOLD LOANS) In September, the growth of household loans from five major banks declined compared to the previous month. In particular, credit loans fell by about a half due to effective management by banks.
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Sep 23, 2020

Vice Chairman Pledges to Stay Alert for Potential Risks in Financial Markets

Vice Chairman Sohn Byungdoo held the 22nd financial risk assessment meeting via teleconference on September 23 and discussed market conditions and issues concerning household loans, soundness of financial institutions and corporate credit situation with relevant authorities.The following is a summary of Vice Chairman Sohn’s remarks.(FINANCIAL MARKET CONDITIONS) The corporate bond and short-term money markets showing signs of liquidity crunch at the end of March have largely improved due to prompt market stabilization measures taken by the government. Market experts forecast that the current stability will continue throughout the end of September given sufficient liquidity in the market. However, as there are potential risks related to COVID-19, relevant authorities should continue to closely monitor markets. The financial authorities will work to prevent an end-of-quarter credit crunch through various market stabilization measures already put in place.With regard to stock market conditions, there are possibilities of rising volatility given uncertainties surrounding the US presidential election, US-China relations, etc. There are also concerns about a growing number of retail investors taking out loans to invest in stocks including in overseas stock markets where there may not be adequate information available to them. As such, retail investors should be well aware of the risks involved in overseas stock investment, and financial institutions should make sure that investor protection measures are closely being observed in this regard.(HOUSEHOLD LOANS) The recent spike in household loans was caused in part by rising demand for loans by those undergoing difficult situations. However, a recent trend reveals that high income earners with high credit scores are increasingly turning to credit-based loans. As such, lending institutions should closely review borrowers’ debt service capabilities and monitor concentration of excessive liquidity in property markets, etc.(S
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Sep 08, 2020

Vice Chairman Discusses COVID-19 Prevention in Financial Sector and Investment in K-New Deal

Vice Chairman Sohn Byungdoo presided over the 20th financial risk assessment meeting via teleconference on September 8, and discussed enhanced social distancing measures being implemented in the financial industry, the progress of the COVID-19 financial support and the newly introduced ‘Korean New Deal fund.’The following is a summary of Vice Chairman Sohn’s remarks.(COVID-19 PREVENTION) As the government decided to extend the period of enhanced social distancing rules for one more week, financial institutions should take all necessary measures to prevent the spread of COVID-19. Meanwhile, financial institutions should check their business continuity plans and ensure digital security and seamless operation of key functions in the financial system.(PROVISION OF STRONGER FINANCIAL SUPPORT) The heightened social distancing rules pose difficulties for many small merchants and SMEs. The government will continue to work on the provision of emergency lending support through its KRW175 trillion-plus pandemic relief programs. The government will work to improve the provision of the 2nd phase financial support program for small merchants by adjusting its lending cap. Financial institutions should also ensure a seamless provision of loan maturity extensions and deferment of interest payments for small merchants and SMEs in need. The government will also provide support for heavy rain and typhoon victims via one-stop financial support centers set up throughout affected regions.(MID- TO LONG-TERM PREPARATION) Aside from providing short-term financial reliefs to overcome the COVID-19 crisis, the government will also take forward-looking measures to manage risks in preparation for the future. Amid the pandemic economy, the volume of credit-based loans by households has increased significantly. As such, the government will continue to work on preemptive management of household debt. In this regard, the government has begun to look into the application of debt service ratio by
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Sep 01, 2020

Vice Chairman Stresses Importance of Both Virus Prevention and Effective Lending Support

Vice Chairman Sohn Byungdoo presided over the 19th financial risk assessment meeting via teleconference on September 1 to review market conditions and monitor the progress in implementing the COVID-19 financial support.The following is a summary of Vice Chairman Sohn’s remarks.(COVID-19 PREVENTION) The resurgence of COVID-19 poses risks to economic recovery as the enhanced social distancing rules put restrictions on economic activities. However, successful prevention is the most effective remedy for economic recovery. As such, the financial industry should focus on implementing preventive measures while continuing to maintain lending support for the businesses and households in need.Due to the stronger social distancing rules put in place until the end of this week, banks are operating on an hour shortened work hours and insurance companies are refraining from face-to-face sales practices. Despite these enhanced social distancing measures, financial institutions should ensure a continuity in service provision by following their own business continuity plans and through ‘untact’ channels. Financial infrastructures including trade and payment systems that are highly interconnected with each other need to be closely monitored to prevent a systemic risk. The government will work to improve the system of digital security in financial services to help financial companies more effectively respond to contingencies.(FINANCIAL SUPPORT) In response to the protracted pandemic situation, the government decided last week to extend the period of (i) the loan deferment of principal and interest payments, (ii) part of the temporary deregulatory measures and (iii) the ban on stock short sale. These measures are aimed at facilitating the financial sector to continue to maintain the role of supporting the real economy while preventing the spread of uncertainties in financial markets. The government’s emergency lending support for small merchants and for SMEs and middle market e
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Aug 27, 2020

Temporary Ban on Short Sale to be Extended for Six Months

The FSC announced its decision to extend the temporary ban on stock short sale for six months from September 16, 2020 to March 15, 2021, given market volatility amid concerns over a resurgence in COVID-19 cases. The lifting of share buyback limits for listed companies will also be extended during the six-month period.In the meantime, the FSC plans to draw up regulatory improvements to strengthen penalties on illegal short sale activities and improve the accessibility of retail investors to the short sale market.* Please refer to the attached PDF for details.
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Aug 27, 2020

FSC Chairman Discusses Improving Rules for Retail Investors

FSC Chairman Eun Sung-soo met with the heads of the Korea Financial Investment Association and major securities firms on August 27 and held talks on the current market situation, temporary ban on stock short sale, improving rules for retail investors and channeling liquidity to the real economy sectors.(CURRENT MARKET SITUATION) With the recent resurgence in COVID-19 cases, volatility has increased in stock markets. However, compared to other major economies, the stock markets in Korea have shown a tendency of faster recovery. In the recovery process, retail investors have been strong net buyers. Overseas observers attributed this rapid recovery in Korea’s stock markets to successful pandemic response and market trust for the stability of the country’s macroeconomic conditions and corporate performances. In this regard, the six-month short sale ban put in place from March 16 until September 15 may have contributed in maintaining the stability of investor sentiment for retail investors.(TEMPORARY BAN ON SHORT SALE) The six-month temporary ban on stock short-selling is scheduled to expire on September 15. Public hearings and discussions on whether to extend the short sale ban revealed that the short sale system needs to be improved. In particular, there are legitimate concerns about the legality of short-selling activities involving institutional and foreign investors while the system is less accessible by retail investors. This suggests that the public demand for more transparency and fairness in opportunities also exists on the issue of stock short sale. Measures to strengthen sanctions and penalties on illegal short-selling activities are pending at the National Assembly. In addition, the government will reexamine the role of market makers while considering their side effects. The government also plans to look into ways to promote short sale for retail investors as it expands the horizon of opportunities.(IMPROVING RULES FOR RETAIL INVESTORS) To achieve a stabl
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Aug 24, 2020

Vice Chairman Discusses Preemptive Responses to Potential Risks amid Growing Uncertainty

Vice Chairman Sohn Byungdoo presided over the 18th financial risk assessment meeting on August 24 to review market conditions and monitor the progress in implementing the COVID-19 financial support.The following is a summary of Vice Chairman Sohn’s remarks.(CURRENT MARKET SITUATION) The government’s effective response to Covid-19 and aggressive financial support have helped to maintain stability in financial markets. The KOSPI has recovered to pre-crisis levels, gaining 58.1 percent from its lowest in mid-March. Corporate bond and short-term money markets also have shown signs of overall recovery, although some low-rated companies still face difficulties in securing funds. However, the government should remain vigilant as the recent resurgence of Covid-19 cases heightens uncertainty in financial markets and the real economy. In response to the possibility of a protracted pandemic crisis, the government will closely monitor risk factors and take preemptive measures when necessary.(FINANCIAL MARKET MONITORING) With low interest rates, funds searching for higher returns have been increasingly flowing into stock and property markets, prompting a surge in asset prices. As the concentration of funds to certain assets along with growing debt could pose potential risks to financial markets, the government has been closely monitoring market activities.For the stock market to grow into a sustainable and attractive investment destination, the government needs to ensure the sound operation of the market and encourage more listings of promising companies. To this end, the government will come up with comprehensive measures for prevention, investigation and punishment to root out unfair transactions such as market manipulation, while improving regulations to help channel more funds into innovative businesses with long-term perspectives.(IMPLEMENTATION OF HOUSING MARKET MEASURES) The government has taken a series of measures to curb speculative demand in housing markets, while
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Jul 30, 2020

Plans to Improve Rules on Structured Products

The FSC announced its plans to improve rules on retail structured products on July 30, with an aim to strengthen securities firms’ preparedness for market volatility, to encourage reduction in the size of the issuance as well as diversified investment for hedge assets and to bolster investor protection measures.BACKGROUNDThe market for retail structured products has grown significantly as the continuing trend of low interest rates made them an attractive alternative to bank savings. Although the structured products have provided relatively high yields and helped individuals to expand their assets, various risk factors began to surface. For securities firms, large volume of structured product issuance and management pose significant burdens on their financial soundness and liquidity. These burdens also may create shocks in the foreign exchange market and short-term money markets. In addition, both distributors and investors often espouse misperception that structured products are safe and non-risky products even though market volatility may rise depending on the performance of underlying assets. Therefore, it is necessary to draw up measures that will help minimize risks to securities firms, financial markets and investors.OVERVIEW OF STRUCTURED PRODUCTS(BALANCE) The outstanding balance of ELS, ELB, DLS and DLB issuance surged from about KRW22 trillion in 2010 to KRW108.6 trillion at the end of April 2020, maintaining an above KRW100 trillion level since 2016. About 60 percent of them are non-principal-protected structured products (ELS and DLS), accounting for KRW64.6 trillion. ELS and ELB (tracking stock indexes) account for 70 percent, or KRW75 trillion.(DISTRIBUTION) For ELS investment, retail investors made up about 98 percent, or KRW40.4 trillion at the end of March 2020. About 82 percent of all ELS issuance, or 88 percent of ELS issued to retail investors were distributed through banks.(RISK FOR SECURITIES FIRMS) Structured products make up increasingly larg
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Jul 24, 2020

FSC Announces Financial Policy Direction for Post-pandemic Era

Vice Chairman Sohn Byungdoo presided over a meeting of the financial development review committee on July 24, and discussed the government’s financial policy direction for the post-pandemic era.The following is a summary of Vice Chairman Sohn’s remarks.(EXPECTED CHANGES CHALLENGES OF POST-PANDEMIC ERA) Unlike the previous financial crises, the COVID-19 pandemic has brought not only short-term economic shocks but also fundamental changes to the structure of our economy and society. The whole economy and industries are experiencing changes caused by disruptions in the global value chain and the rapid spread of contactless services and digital transformation. The financial industry is also experiencing changes with the spread of big data and AI in the industry and the emergence of big tech companies as financial service providers. Sharp increases in the share prices of bio-health or internet firms in recent months indicate that the market may be already preparing for a post-pandemic era.Considering the strength of our real economy, IT infrastructure and soft power, this may serve as a huge opening of opportunities for the Korean economy and financial industry. The past economic crises led to deepening economic polarization. If the current shock to the economy and job market continues to pose risks to the vulnerable groups, the deepening of the so-called ‘corona divide’ may turn into a wider risk.In the recovery process, it is necessary to watch out for the accumulation of risk factors due to the continuing trend of low interest rates and liquidity expansion. It is also necessary to closely monitor market instability due to preference for high-yield, high-risk investment products and risks in the non-banking sector.(FINANCIAL POLICY DIRECTION FOR POST-PANDEMIC ERA) The government’s financial policy for the second half of this year will focus on the following. First, it will be geared toward supporting the steady growth of the real economy and innovative firms.
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Jun 25, 2020

Personal Debt Purchase Program to Begin June 29

Vice Chairman Sohn Byungdoo attended the launching of the Korea Asset Management Corporation’s personal debt purchase program on June 25 and spoke about the importance of inclusive finance.KAMCO, lending institutions and other relevant institutions signed a memorandum of agreement. Under the agreement, lending institutions may sell non-collateralized delinquent personal debt to KAMCO, which in turn will take over individual debt and help debtors with debt adjustment plans.KAMCO’s personal debt purchase program begins on June 29 for the initial duration of one year with the possibility of extending thereafter.The following is a summary of Vice Chairman Sohn’s remarks.With the government’s KRW175 trillion-plus financial support programs have helped to ease problems of market instability and liquidity shortage. However, widening income gap in the society needs to be closely watched. Job losses and business closures have created extra burdens for many individuals, while asset prices are also showing signs of instability in the property and stock markets. The delinquency rate in household debt has not increased, but the rising trend in household debt needs to be watched carefully.The agreement signed by KAMCO and financial institutions today is aimed at providing assistance to the most vulnerable debtors. The government introduced on April 29 a deferment of loan repayment program for individual debtors who are incapable of servicing debt due to the pandemic-related reasons. For delinquent debtors, KAMCO will take over individual debt from lending institutions and help with debt adjustment. To help establish a more appropriate relationship between lending institutions and debtors, the government will work on introducing a bill aimed at protecting debtors’ rights and preventing excessive debt collection methods.* Please refer to the attached PDF for details.
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