Press Releases - Financial Services Commission

Press Releases

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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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Jun 23, 2020

Vice Chairman Stresses Importance of Balanced Approach to Support Real Economy Sectors

Vice Chairman Sohn Byungdoo presided over the 9th financial risk assessment meeting on June 23 to assess the financial market conditions and check the implementation status of the COVID-19 financial support.The following is a summary of Vice Chairman Sohn’s remarks.(INTERIM ASSESSMENT ON COVID-19 FINANCIAL SUPPORT) The first- and second-stage financial support programs for small merchants and SMEs provided timely financial support to the businesses in need. Out of the KRW135 trillion-plus package, about KRW54.2 trillion has been provided so far. For SMEs and middle market enterprises facing temporary setbacks in liquidity, policy banks have made available about KRW29.1 trillion worth of special loans and guarantees. The government’s market stabilizing measures, such as the bond market and stock market stabilization funds and the corporate bond and CP purchase program have provided backstops to the financial markets. Meanwhile, businesses with unfavorable credit backgrounds are unable to fully take advantage of the financial support being provided. In this regard, the government has been focusing on and will continue to work on filling the gaps by introducing measures specifically intended to help businesses with low credit records.(WELL-BALANCED POLICY APPROACH) With high levels of uncertainties in the global economy, it is necessary to pursue a well-balanced approach between maintaining the soundness of financial institutions and supporting the real economy. Although banks have been able to maintain their financial soundness, they need to boost their loss absorbing capacity through close monitoring and accumulation of loan-loss provisions in preparation for a prolonged pandemic situation.For securities firms, the government will adjust regulations on their short-term borrowing from call money market in response to market developments. To ease their liquidity shortage, the government temporarily raised the average monthly limit on call market loans by securities
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Jun 19, 2020

FSC Launches Working Capital Support Program for Suppliers & Subcontractors in Key Industries

The government announced its plans to launch Working Capital Support Program (WCSP) using the key industry stabilization fund at the 7th Meeting of the Central Economic Response Headquarters on June 19.BACKGROUNDThe government and banks have increased the availability of financial support for businesses in corporate loans and maturity extensions to help them tide over the COVID-19 crisis. Despite an increase in the availability of financial support, access to financial support remains difficult for many suppliers and subcontractors with unfavorable credit histories. As these suppliers and subcontractors make up the core of the key industries’ ecosystem, it is essential to provide them with additional financial support to maintain competitiveness of these industries. Against this backdrop, the government will introduce the Working Capital Support Program (WCSP) financed by the key industry stabilization fund to extend working capital loans to suppliers and subcontractors.WORKING CAPITAL SUPPORT PROGRAM(SIZE) Up to KRW5 trillion in working capital loans(SUPPORT TARGET) Companies (a) established before May 1, 2020, (b) with SME or middle market enterprise standing, (c) in business sectors eligible to receive support from the key industry stabilization fund, (d) deemed as an essential player within the industry in terms of maintaining the industry competitiveness, protecting jobs and maintaining supply chains, and (e) expected to face shortages in working capital due to the pandemic-induced economic slowdown.(LENDING INSTITUTIONS) Eligible suppliers and subcontractors are able to apply for loans at one of the program participating banks.(LOAN SPECIFICS) Working capital loans (WCLs) (a) cannot be used to pay off debt from existing loans, (b) will be issued up to the amount necessary for the operation of business, or up to KRW100 billion (2 percent of the total amount available for WCSP) or 50 percent of annual sales revenue, (c) have two-year maturity, and (d) have int
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Jun 18, 2020

Vice Chairman Holds Meeting to Review Risks in Financial Sectors

Vice Chairman Sohn Byungdoo held a meeting to review market conditions and risk factors in the financial industry on June 18 with experts from the public and private sectors.The following is a summary of Vice Chairman Sohn’s remarks.(END-OF-QUARTER-EFFECT IN JUNE) In March, the global spread of the COVID-19 infection, rising instability in financial markets and the end-of-quarter shortage in capital supply led to difficulties in the corporate bond and short-term money markets. In response, the government launched various financial support and liquidity injection measures, including a bond market stabilization fund and an SPV to purchase lower-rated corporate bonds and CP. As a result, the markets have begun to show signs of recovery with yield spreads growing at a slower rate.However, blue chip companies and non-blue chip companies face different conditions for issuing bonds. In June, a total of KRW68 trillion worth of corporate debt will be up for maturity (KRW12.2 trillion in corporate bonds and KRW55.5 trillion in CP and short-term debt). About 90 percent of them are high rated debt and will face not much obstacle in meeting debt obligation. The securities firms with margin call obligations related to equity-linked securities are maintaining foreign currency liquidity in case of global stock price fall. Thus, the liquidity problem is not a major concern.The government will temporarily ease the liquidity requirements of repo sellers to prevent a surge in cash demand at the end of June. The government will also provide support through policy banks’ corporate bond and CP purchase programs.(INVESTOR PROTECTION WITH DERIVATIVES PRODUCTS) With investors’ interest in derivatives products growing, the volumes of FX margin trading and CFD transaction by retail investors have increased significantly this year. For FX margin trading, the proportion of retail investors is very high at about 92 percent, despite the implementation of various measures, such as stricter ru
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Jun 15, 2020

FSC Chairman Vows Support for Auto Industry

FSC Chairman Eun Sung-soo visited Korea Fuel-Tech Corporation on June 15 in Seongnam-si and held talks on ways to provide effective assistance to the car and auto parts industries struggling with the pandemic-driven economic crisis.The following is a summary of Chairman Eun’s remarks.(GOVERNMENT’S RESPONSE TO PANDEMIC) The government has taken multipronged approaches to stabilize markets and provide businesses with financing assistance. The KRW175 trillion-plus financial support package consists of the bond market stabilization fund, P-CBO support for corporate bond markets, emergency loans and preferential guarantees. The KRW40 trillion key industry stabilization fund has been launched which will begin providing support in June. Also, a special purpose vehicle in the amount of KRW10 trillion will be ready for purchasing lower-rated corporate bonds and commercial paper as soon as the 3rd supplementary budget is passed at the National Assembly.Backed by these measures, about KRW42.5 trillion in SME loans has been issued between January and May 20 this year, which amounts to approximately 84 percent of total SME loans issued last year. Also, instability in the stock markets and corporate bond market has been largely subsided.(SUPPORT FOR AUTO INDUSTRY) The government has made available about KRW5 trillion worth of financial support to the auto industry since February. However, the entire industry is struggling with a sharp fall in exports and shortage of work due to the shock in the global supply chain and overseas factory shutdowns.In particular, SMEs and middle market enterprises are burdened with additional hardship as they face limited access to loans due to thin credit records.(FURTHER PLANS) In order to minimize the pandemic’s damaging effects on the auto industry, close cooperation should take place between the government, industry and financial institutions. While promoting ways to help businesses to boost credit standing on their own, the government wil
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Jun 09, 2020

Vice Chairman Vows to Maintain Close Market Monitoring and Risk Management

FSC Vice Chairman Sohn Byungdoo held the 7th financial risk assessment meeting on June 9 to assess the financial market conditions and check the implementation status of the COVID-19 financial support.The following is a summary of Vice Chairman’s remarks.(CURRENT SITUATION) There are continuing signs of market stability with stock prices recovering to pre-COVID-19 levels and the yield spreads in corporate bond and CP markets stabilizing. In June, about KRW12 trillion of corporate bonds and KRW53 trillion of CP and short-term bonds are up for maturity. Given the recent improvement in the market conditions and that most of them have AA- or A1 rating, there will not be much difficulty for businesses to raise capital through issuing or refinancing bonds.For ‘fallen angel’ companies, various supports are available from the bond market stabilization fund, corporate bond takeover programs by policy banks and the special purpose vehicle aimed at purchasing corporate bonds and CP.Securities firms ran into liquidity problems in March-April in the process of fulfilling their purchase agreements for asset-backed commercial paper, but the problems large subsided in May with the easing of credit crunch in the short-term money markets.(SUPPORTING ECONOMIC RECOVERY) The Financial Stability Board stressed the important role of the financial sector in supporting the recovery efforts from the pandemic-induced economic crisis while suggesting regulatory flexibility to help facilitate banks’ lending function. In this regard, the FSC introduced in April its plans to temporarily ease financial regulations, including the early adoption of Basel III credit risk framework for banks and the easing of rules on banks’ liquidity coverage ratio. Among them, 21 measures have now gone into effect with nine others expected to go into effect in July.FINANCIAL SUPPORT PROVIDEDBetween February 7 and June 5, a total of KRW124.7 trillion (1.53 million cases) in loans and guarantees as well as l
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May 27, 2020

2020 Online Korea Fintech Week

The 2nd Korea Fintech Week will be held virtually starting at 10 am on May 28. It is organized into five sessions, and the virtual exhibitions are open to everyone for viewing at free of charge via www.fintechweek.or.kr/2020. SCHEDULE(OPENING SESSION) Welcoming remarks by FSC Chairman Eun Sung-soo and congratulatory remarks by key dignitaries including Lord Mayor of the City of London William Russell and Standard Chartered CEO Bill Winters(SPECIAL SESSIONS) Presentations and seminars on ‘open innovation,’ showcasing major policy and industry trends at home and abroad► FSC: Fintech in Korea and digital transformation strategy in financial sectors► KFTC: Open banking in Korea► FSI: Financial data security in the 4th industrial revolution► VISA-Fintech Center Korea: Sharing successful collaboration lessons between global financial company and fintech► MAS: Future of fintech in post-COVID-19 era► Stone Chalk: Fintech trends in Australia► World Bank: Digital finance for crisis response and economic development – Role of the WB► KPMG: Korean fintech industry in 2020 policy trends► KOSCOM: Financial cloud computing and compliance in financial services► FSI: Security evaluation trends of cloud service providers in financial sectors► Regtech suptech showcases(VIRTUAL EXHIBITION HALLS) The six virtual exhibition halls are organized into a fintech ecosystem hall, a financial enterprise hall, a fintech start-up hall, a fintech scale-up hall, a big tech hall and a global enterprise hall, participated by about 150 entitiesTo help attract investment for the K-Growth fund, a major source of fintech investment operated by the Korea Growth Investment Corporation, a shortcut to fintech investors’ relations will be placed on top of the main page.(ONLINE JOB FAIR) HR managers from 35 financial companies and fintech firms will provide information about job openings, nature of work and qualities they look for in new hires. About a dozen companies have plans t
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May 20, 2020

Government Unveils Plans to Create SPV to Support Corporate Bond and CP Markets

The government announced on May 20 specific plans to create a special purpose vehicle (SPV) aimed at supporting the corporate bond and commercial paper markets.BACKGROUNDThe conditions surrounding the corporate bond market hit by COVID-19 have improved somewhat recently with the government setting up a bond market stabilization fund (KRW20 trillion) and providing support for the issuance of primary collateralized bond obligations (KRW6.7 trillion) and corporate bonds (KRW4.1 trillion). As a result, the total amount of newly issued blue-chip corporate bonds rebounded in April. However, the bond market still remains weak for lower rated corporate bonds with A or below ratings, and there is stronger preference for short-term bonds. Against this backdrop, the government announced on April 22 its plans for creating an SPV to purchase lower-rated corporate bonds and commercial paper.SPV MANAGEMENTThe government, the Bank of Korea and the Korea Development Bank will set up a KRW10 trillion SPV to help stabilize the corporate bond market, with the possibility of increasing its size up to KRW20 trillion.(FUNDING SOURCES) KRW1 trillion (10%) equity capital from KDB, KRW1 trillion (10%) in subordinated loans from KDB and KRW8 trillion (80%) in primary loans from BOK(PURCHASING TARGETS) AA to BB rated corporate bonds A1 to A3 rated CP and short-term debt with maturity of up to 3 yearsThe SPV purchasing program will mostly focus on A rated bonds but will also buy ‘fallen angels,’ junk-rated bonds which were downgraded from investment ratings due to Covid-19.Companies with their interest coverage ratio of 100% or less for two consecutive years will be precluded from the purchasing program.(PURCHASING LIMITS PRICES) In order to fulfill the purpose of market stabilization, purchasing limits will be established within 2 to 3 percent of the total fund available from the SPV purchasing program for each individual company and business sector.To encourage market-based capital raisin
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May 19, 2020

Asia Region Funds Passport to be Launched on May 27

The government approved the revisions to the enforcement decree of the Financial Investment Services and Capital Markets Act on May 19 in preparation for the implementation of the Asia Region Funds Passport (ARFP) on May 27.KEY PROVISIONSThe revisions establish the following provisions for the registration and operation of passport funds.► REGISTRATION FOR PASSPORT FUNDS: Publicly offered local funds with (a) at least USD500 million in assets under management and USD1 million or more in capital, and (b) at least two board members with 5 years or more of management experience in the financial sector can apply to be registered as passport funds.Registered passport funds will be operated through securities and short-term financial instruments, sales of derivatives and securities lending agreement.► REDEMPTION DELAY AUDIT RULES: (a) A redemption delay is allowed when the amount of redemption requests surpasses 10 percent of the fund’s net asset value, (b) Small size funds (total assets of KRW30 billion or less) will be subject to an audit without exception► SALE REGISTRATION OF FOREIGN PASSPORT FUNDS: Foreign passport funds registered at another member economy will be available for sale in Korea through a streamlined process. Foreign passport funds sold in Korea will be subject to the same rules, regulations and investor protections as the publicly offered local funds.SCHEDULEThe revisions will become effective on May 27. The guidelines from the Korea Financial Investment Association and information about the registration process and relevant forms will be distributed to help facilitate the use of ARFP.* Please refer to the attached PDF for details.
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May 12, 2020

Vice Chairman Urges Preventive Measures as Banks Ready to Accept Loan & Relief Payment Applications

FSC Vice Chairman Sohn Byungdoo held a financial risk assessment meeting on May 12, and discussed the second phase financial support program for small merchants and the preparations for emergency relief payments and key industry stabilization fund.The following is a summary of Vice Chairman Sohn’s remarks:(DOMESTIC FINANCIAL MARKETS) The financial markets show signs of stability. Liquidity shortages in the corporate bond market and the short-term money markets have subsided following the policy responses to purchase commercial paper and issue primary collateralized bond obligations. The government will closely monitor markets and take prompt measures when necessary.(2ND PHASE FINANCIAL SUPPORT FOR SMALL MERCHANTS) The government and the financial institutions will work to swiftly provide the 2nd phase financial support to small merchants beginning on May 18, which amounts to KRW10 trillion for about one million business owners. With 95 percent of loans guaranteed from the Korea Credit Guarantee Fund, the lending institutions will face reduced burdens.(EMERGENCY RELIEF PAYMENTS) On May 18, banks will begin accepting applications for the COVID-19 emergency relief payments for households. The relevant institutions, local branches and individuals should adhere to the preventive measures in order to prevent the spread of virus.(KEY INDUSTRY STABILIZATION FUND) The preparations to launch the key industry stabilization fund have been taking place. The designated key industries are vital to maintain the global competitiveness. This stabilization fund will help the key industry enterprises and their subcontractors weather the pandemic-caused hardship while protecting jobs for their employees.The government will work to overcome the pandemic-driven economic crisis while supporting businesses to retain jobs and maintain their global competitiveness.FINANCIAL SUPPORT PROVIDEDBetween February 7 and May 8, a total of KRW87.0 trillion (1,044,000 individual cases) in loans and gu
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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 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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