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FSC works to ensure that finance plays a key role in developing innovative businesses and supporting the real economy, thereby fueling Korea’s more vibrant economic growth. Promoting advanced financial industry, stable financial markets, fair market order and reliable consumer protection are among FSC’s key policy agenda. Digital transformation and big data are increasingly playing larger roles in various aspects of financial services. In the era of 4th industrial revolution and digital economy, finance will help boost growth potential and create jobs as the government seeks to advance its Digital New Deal policy.

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Oct 10, 2008

Key Issues on Korean Economy

This document is prepared with the purpose to explain the following key issues on Korean economy.- External Debt- Foreign exchange reserve- Export- Current Account Balance- Korean Banks- FX Liquidity- Policy Responses 1. External Debt □ (Size) The ratio of external debt to GDP stands at 39% as of late 2007, which is lower than that of major developed economies1) and tolerable given the size of our economy.□ (Nature) Recent growth of external debt in Korea has risen as a counterpart to hedging activities undertaken by shipbuilders and overseas investors.ㅇ This is in stark contrast to massive foreign currency short-term borrowings induced for excessive investment by Korean Chaebols that led to the 1997 financial crisis.ㅇ As of June 2008, $152 billion out of $420 billion external debt are free of repayment burden, making the size of foreign debt with repayment burden reduced to $268 billion.ㅇ In addition, 22% of the total external debt (45% of short-term external debt) belongs to local branches of foreign banks, which makes it unfitting to be regarded as net external debt.ㅇ The IMF expressed that today's foreign debt increase in Korea not as risky as in the past. (08. 6.24, IMF Annual Consultation)1) the ratio of external debt to GDP as end of 2006 : UK(394%), Germany(144%), US(85%), Japan(35%) 2. Foreign exchange reserve□ (Size) Korea holds the 6th largest foreign exchange reserve in the world, which is deemed adequate.ㅇ The size is well beyond the IMF guideline, which is a global reference for the adequate size of FX reserve.2)ㅇ The IMF(Sep.4) and Fitch(July.16), a global credit rating agency, affirmed that Korea's reserve was sufficient.□ (Composition) Korea's reserve is composed of assets with low risk such as deposits, sovereign bonds, federal agency securities and supernational bonds.ㅇ As of September 2008, the total of $240 billion reserve can be cashed in immediately.2) IMF guideline for adequate FX reserve is a total of 3-month current pa
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Jul 29, 2008

FSC Releases Draft Amendment to the Act on External Audit of Stock Companies

The Financial Services Commission organized a joint private-public Task Force (from Apr. to June, 2008) composed of officials from the government/supervisory authority, business representatives and accounting experts to establish an advanced accounting system. The Task Force conducted a rigorous review of major issues relevant to Korea's accounting system and devised improvement measures. Based on the review and a public hearing held on June 4, the FSC drafted the Amendment to Act on the External Audit of Stock Companies and the Amendment to Certified Public Accountant Law.Opinions collected during the 20-day announcement period from July 29 to August 17 are to be reflected in the Amendments before submitting them to the upcoming regular National Assembly session after completing relevant procedures like deliberation by the Regulatory Reform Committee/the Ministry of Legislation and the vice ministerial- cabinet meeting. Announcement of the revised Enforcement Decree of the Act on External Audit of Stock Companies is scheduled in August.Key ChangesThe primary objective of the draft amendments is to bring about changes that will facilitate international convergence of accounting standards and efficiency in line with the full introduction of IFRS by: (i) relieving unlisted companies of the excessive accounting burden; (ii) build infrastructure including legislation for the adoption of IFRS, and (ii) improving supervisory system and reinforce expertise to boost accounting transparency.1. Revision of the Act on External Audit on Stock Companies- Changes in Title/Composition of Financial Statements and Consolidated Financial Statements (draft article 1-2)Change title/composition of financial statements to align with the IFRS, (as is) balance sheets, statements of income, statements of appropriations of retained earnings, statements of change in equity, statements of cash flows, (to be) statement of financial position, statement of comprehensive income, statement of chang
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Feb 14, 2008

FSS to Renew Focus on Corporate Disclosure Filings

The Financial Supervisory Service plans to take steps to strengthen the role ofunderwriters in public offerings and at the same time facilitate market discipline in the securities underwriting market. The FSS also plans to give a more balanced regulatory focus between periodic corporate filings and share issue-related filings.A number of regulatory steps have been taken in response to investor harm caused by certain abusive new share issue practices known as “third-party share issue” by publicly traded companies that increased noticeably since 2006.1 The measures included tougher disclosures and lock-up periods for shares acquired from these transactions. With further stepped-up regulatory scrutiny and fine-tuning, more companies are expected to opt for underwriter-led stock offerings going forward. As such, the FSS plans to put more emphasis on the review of the periodic corporate filings and encourage underwriters to assume greater responsibility for compliance with registration filings and other security issue-related disclosure filings.Emphasis on the role of underwritersA new set of best practice guidelines on underwriting execution, disclosure preparation, and verification procedures is currently in the works by a task force led by the securities industry. One key objective of the new guidelines is to instill the practice of rigorous checks and reviews by underwriters before registration statements and other disclosures are filed for regulatory review. The task force is expected to hold a workshop for securities underwriters and finalize the best practice guidelines in March this year.Regular evaluation of securities companies’ underwritingA scoring system along with periodic evaluation is planned for an objective appraisal of securities companies’ underwriting performance. Securities companies receiving high marks on the appraisal are to be put on fast track for accelerated regulatory review as a way to help them enhance their market reputation.Prepar
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Jan 09, 2008

Amended Securities Trading Regulations for Foreign Investors to Take Effect on Jan. 1, 2008

The Financial Supervisory Commission adopted on December 21 amendments to Regulation on Supervision of Securities Business that are specifically aimed at facilitating exchange and off-exchange securities trading and bond investment by foreign investors. The newly amended regulations, which will take effect January 1, 2008, are part of the ongoing effort by the FSC/FSS to continually improve Korea’s investment and regulatory climate for foreign investors. In addition to the newly amended regulations, the FSC/FSS plans to significantly simplify trading reporting requirements and further relax trading restrictions for foreign investors in the near future. Below is a summary of the newly amended regulations.Expanded off-exchange tradingTrading of securities by foreign investors is generally restricted to exchange-listed securities unless the transaction falls into one of the 16 exemptions currently provided for off-exchange trading.The newly amended trading rules expand the exemptions and allow off-exchange securities trading where (1) a foreign investor trades dual-listed shares—at Korea Exchange and an overseas exchange—through an overseas exchange; (2) a foreign fund manager transacts at a fair market price securities between different funds he or she manages; (3) a foreign investor transacts listed bonds with another foreign investor through an omnibus account of an international central securities depository (Euroclear and Clearstream). (Regulation on Supervision of Securities Business, amended §7-8)Exemption from custody under Korea Securities DepositoryUnder the current securities depository rule, a foreign securities depository that acquires securities of a Korean company listed in multiple exchanges overseas must place the securities under the custody of Korea Securities Depository (KSD).The amended rule exempts foreign securities depositories from the KSD custodian rule so that foreign securities depositories will no longer be required to place under th
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Apr 13, 2001

The Major Policy Objectives of FSC for 2001

1. Main Policy Direction The financial industry is increasingly shaping the back-bone of knowledge-based economy of the 21st century of global and digital age. Fully recognizing such trend, financial regulatory authorities have taken policy directions which are to ensure strengthening the financial industry for the stable and sound financial markets and future economic growth. Accordingly, the government has shifted its focus from government-led restructuring policies to market-oriented approaches for continuous restructuring financial markets. Further, financial institutions will be encouraged to be more actively engaged in “software” reform to strengthen profitability and competitiveness. 2. Continuous Financial and Corporate Restructuring Reform in the Financial Sector• Preventive Supervisory and Prompt Corrective Action Measures: The terms and conditions of Management Improvement Arrangement, which is to be signed between ailing financial institutions and authorities, will be intensified to prevent managerial risk before PCA is enforced. • Continuing Reduction of Bad Loans: By monitoring commercial banks’ progress, on quarterly basis, with their efforts to reduce the ratio of substandard and below to total loans to the targeted 5% or below by the end of this year• Bank Mergers Among Sound Banks: To be more globally competitive by achieving greater economies of scale and by creating universal banking system The merger trend has been set off by the financial holding company and the merger between Kookmin Bank and Housing Commercial Bank (HCB), and other banks are encouraged to follow suit. Reform in the Corporate Sector• Effective Credit Risk Evaluation: To activate the corporate credit risk assessment system in full scale, by which creditor banks can assess credit risk of each of their debtor companies for the prevention of further increase of ailing assets, and, when necessary, for the timely exit of non-viable companies from the market The monthly
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Sep 25, 2000

The 2nd Round Financial Restructuring Plan

The government announced 「the 2nd round restructuring plan」. The purpose of the plan is to get rid of any uncertainty about the governments financial restructuring plans and to boost market confidence in financial market by clear presentation of concrete step-by-step processes and timetable of financial restructuring.* Please refer to the attached file for details.
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Aug 03, 1998

Financial Sector Restructuring in Korea

Basic Principles ofFinancial Sector Restructuring■ Efficient use of public resources○Market-oriented restructuring○Burden-sharing with shareholders, employees and managerial staff■Complying to international standards■Sequential restructuring○Banks first○But NBFIs destabilizing the financial system shut down any time■Closely linked to corporate sector restructuring○Accelerate corporate restructuring through bank reform○Enhance transparency of corporate management○Facilitate exit of non-viable corporations■Strengthening financial supervision* Please refer to attached PDF for details.
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