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Jun 24, 2016
- FSC Meeting on Financial Market Stability after UK's Decision to Leave the EU
- As it seems inevitable that the ‘Brexit’ decision would have short-term impact on financial market, financial authorities will respond in a swift and decisive manner to developments in financial markets. The government will monitor international and domestic financial market conditions around the clock while strengthening communication with global IBs and foreign media. The FSC/FSS will immediately form and operate a contingency response team led by the FSC Secretary General to strengthen monitoring and respond preemptively to possible volatility in financial markets. The government will also review its contingency plan to ensure that the detailed action plans are executed without any delay in case of abrupt financial market turmoil.In particular, the government will closely monitor domestic banks’ foreign currency liquidity conditions and make sure that they are well prepared to respond to market developments. The government views that the Korean economy is resilient enough to withstand possible impact of the Brexit decision on global financial market, given its strong economic fundamentals and financial soundness. * short-term external debt / total external debt: 43.1% (2009), 34.9% (2011), 26.4% (2013), 27.4%(2015) * short-term external debt / total foreign reserve: 52.0% (2009), 45.6% (2011), 32.3% (2013), 29.1% (2015) * current account surplus/ GDP: 3.7% (2009), 1.6% (2011), 6.2% (2013), 7.7% (2015) We ask investors not to overreact to temporary increase in financial market volatility and remain calm to future market developments from a mid-to long-term perspective with confidence in the Korean economy’s fundamentals. * Please read the attached file for details.
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Jun 16, 2016
- Foreign Currency Liquidity Coverage Ratio (LCR) Will Apply to Banks from 2017
- The FSC will introduce foreign currency liquidity coverage ratio (LCR) rule starting 2017, which requires commercial banks to hold 60% of their foreign exchange debt in high-quality liquid assets (HQLA) to withstand a 30-day net cash outflow in systemic risks. The FSC/FSS adopted the foreign currency LCR in 2015 as a guideline to monitor banks’ foreign exchange liquidity risks, in accordance with the Basel III recommendation. Since then, commercial banks have been advised to maintain the foreign currency LCR of at least 40% in 2015 and 50% in 2016. From next year, banks will be required to comply with the foreign currency LCR rule. - The foreign currency LCR rule will apply to all banks with the exception of:(i) commercial banks with foreign exchange debt of less than 5 % of their total debt and USD500 million or less in foreign exchange debt; (ii) Export-Import Bank of Korea (KEXIM); and (iii) branches of foreign banks operating in Korea. - The foreign currency LCR for commercial banks will be set at 60% in 2017, increased gradually to 70% in 2018 and 80% in 2019. * Specialized banks – IBK, Nonghyup Bank and Suhyup Bank – will be applied the foreigncurrency LCR of 40% in 2017, 60% in 2018 and 80% in 2019. * KDB will be subject to less stringent LCR requirement, given its special role as a state lender. (40% in 2017, 50% in 2018, 60% in 2019) - Banks will be required to calculate their foreign currency LCR each business day and maintain a monthly average of the ratios above the minimum requirement. - The ratio may be lowered by FSC approval for a temporary period of time in a crisis in order to prevent banks from reducing their foreign exchange liquidity provision. - Overlapping regulations – e.g. seven-day and one-month maturity mismatch ratio requirements, three-month foreign exchange liquidity requirement – will be abolished or replaced by the foreign currency LCR. For the next six months, the FSC will gather opinions from the banking sector about the p
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Jun 15, 2016
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May 24, 2016
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Feb 04, 2016
- FSC Convenes Meeting over Recent Developments in Global Financial Markets and Policy Response
- The FSC convened a meeting with the FSS and relevant research institutions to review policy implications of recent developments in global financial markets and discuss our policy responses. There are growing uncertainties in the global economy this year with a slowing Chinese economy and falling oil prices. The IMF cut its outlook for global economic growth in 2016 from 3.6% to 3.4%. As global economic conditions weighed on our economy, Korea’s exports dropped 18.5% in January compared with the previous month, raising concerns about the country’s economic slowdown. In response to such worries, the Korean government announced yesterday a stimulus plan including an injection of KRW 21trillion in the first quarter of this year through fiscal spending and policy financing in a bid to boost domestic demands and create more jobs. Global financial markets are also facing increasing volatility with Fed’s rate hike, China’s financial market turmoil and declining oil prices. The Fed’s rate increase last December has led to contraction in global liquidity, while accelerating capital outflows from emerging economies to advanced economies. Monetary policies among major central banks have become divergent as the BOJ cut its interest rates to minus 0.1 per cent last week, joining in the ECB’s move to negative interest rates. The ECB also hinted a possibility of further quantitative easing. Compared with major economies, Korea’s financial market stayed stable; however, volatility has recently increased to some extent in the local stock and currency markets. With increased volatility in global financial markets, foreigners’ selling of Korean stocks has continued from last June until early this year. Fluctuations in the currency market have also increased with the won-dollar exchange rate surging to 1,219.3 won yesterday, a record high since July 2010. There is no quick fix for current global market risks, which are likely to persist for a considerable period of this
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Feb 02, 2016
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Feb 01, 2016
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Jan 07, 2016
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Dec 16, 2015
- FSC-FSS Meeting for Monitoring Financial Market Conditions
- The FSC and the FSS held a meeting to make sure that Korea’s financial markets are prepared for the impact of the Fed’s possible rate hike. RECENT TRENDS IN CAPITAL FLOWSThe expectation of a U.S. rate increase weighs on global stock markets. External risk factors prompt volatility in Korea’s financial market with foreigners’ net selling of stocks and investors’ appetite for safer assets. Kospi fell 3.0% in recent days(Dec.1~Dec.15), while the yield on 3-year government bonds dropped 5.2bp in the same period. However, the general market view is that capital outflows would not be expanded sharply, looking into characteristics and causes of recent outflows. In 2015, foreign investors sold an average of KRW 1.7 trillion per month in the stock market, which is less than the net selling of KRW 2.5 trillion per month for the past 10 months and less than the net selling of KRW 2.4 trillion per month in the following months of the so-called ‘taper tantrum’ (March~June 2013). Since September this year, oil producers like Saudi Arabia have been leading foreign net selling as their fiscal conditions deteriorate with falling oil prices. The net selling mode is hardly related to changes in foreign investors’ appetite to Korean stocks. US funds, which represent a largest share of Korea’s stock market(40%), continue to remain net buyers in November and December amid rising possibility of a U.S. interest rate increase. European funds sold a net KRW 10.2 trillion of Korean shares from June to September this year, but the pace of selling has slowed since then. STOCK MARKET The Korean stock market is expected to face turmoil in the short term after the Fed’s decision. However, many investment banks forecast that the Kospi will gradually bounce back to a level of 2,100 or beyond in 2016. Given strong fundamentals of the Korean economy, undervaluation of Korean stocks could appeal to investors once the Fed’s rate hike finally removes uncertainty. The FSC will closel
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Dec 09, 2015
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Oct 30, 2015
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Sep 07, 2015
- China's Economic Slowdown and Its Impact on Korea's Economy
- CHINA’S ‘NEW NORMAL’The IMF recently downgraded China’s economic growth forecast in 2015 and 2016 to 6.8% and 6.3% respectively, slower than the stable growth of 7% in three years since 2012. The growth rate of around 6% is still high, given the size of China’s GDP; however, the actual impact of such slowdown from 7% to 6% could be felt far more profound. China’s slowdown is attributed to excessive and inefficient investments by its massive economic stimulus plan. Inventory adjustments and deleveraging will weigh on China’s economy for a considerable period of time. It will be difficult to resolve oversupply in property market in a short period. To manage a soft landing of Chinese economy, the Chinese government set out a new economic model, so-called ‘Xin Chang Tai(新常態, new normal)’ since President Xi Jinping came to power in 2013. The new growth model is aimed to shift Chinese economy from export-driven rapid growth to consumption-led stable growth. It also includes structural reform, diversification of growth drivers and liberalization of financial markets. The effectiveness of the Chinese government’s stimulus plan to downward pressure is key to a soft landing of Chinese economy as it would take time for structural reform to achieve results. The Chinese government still has capability to prevent a hard landing of Chinese economy. However, emerging economies also need to be prepared in response to the spill-over effect of China’s new normal. IMPACT ON KOREA’S FINANCIAL MARKET There is a possibility that volatility might increase due to worries over China’s economic slowdown and potential spill-over effects of its structural reform. However, market participants view that it is unlikely for Chinese slowdown to cause a serious financial crisis. Since the 2008 global financial crisis, Korea’s economic fundamentals have been steadily improved. Its current surplus has grown to USD 89.2 billion in 2014 from USD 3.2 billion in 2008; its
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Sep 04, 2015
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Aug 25, 2015
- Opening Remarks by FSC Chairman at Market Monitoring Meeting over Current Stock Market Conditions
- The FSC Chairman Yim Jong-yong convened a meeting with the FSS, KRX, and KCIF at 7 a.m. on August 25 to monitor global and domestic financial market conditions and to discuss measures to weather through the current market turmoil. *Please find in the following the summary of the Chairman’s opening remarks at today’s meeting. ***********Korea’s stock market is undergoing tough times with heightening concerns over external factors such as China’s stock market plunge, the Chinese yuan devaluation and the prospect of Fed’s rate hike. The KOSPI has sharply fallen to a year-low of 1,829.81 on August 24 from the year’s high of 2,173.41 on April 23 2015, as global stock markets tumble. Foreign investors turned net sellers since June this year. Korea’s stock market, however, fell less than other major markets in the Asia region. Stock prices in Korea dropped 13.5% compared to the end of May this year, while 30.4% in China, 22.5% in Hong Kong and 23.6% in Taiwan. The amount of net sales by foreigners in Korean stock market is relatively small. Foreign investors sold 0.36% of market capitalization in Korean stock market from June to August, while 0.51% in Taiwan, 0.49% in Thailand, 0.51% in Malaysia over the same period. These are evidence that market participants home and abroad see Korea’s market fundamentals sound. As external uncertainties seem to continue for some time, I would like to ask relevant institutions to join our efforts and take actions to reduce volatility in Korea’s capital markets. To this end, we need to continue our efforts to restore market confidence and keep foreign investors informed accurately about Korea’s economy and financial sector. In the longer term, it is important to make Korea’s capital markets robust enough to withstand external shocks by pushing ahead structural reforms and strengthening competitiveness of our capital markets. I would like to ask heads of relevant institutions here today to join our efforts on the foll
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Aug 21, 2015
- FSC Holds Meeting over Recent Global Financial Market Condition & Its Impact on Korea's Stock Market
- The FSC held a meeting with the FSS, KRX, and KCIF at 8 a.m. on August 21 to discuss recent global financial market condition and its impact on Korea’s stock market.GLOBAL FINANCIAL MARKET CONDITIONGlobal stock markets recently went down with heightening global risk factors such as China’s stumbling stock market, its currency devaluation and speculation about the Fed’s rate hike. - Stock markets in major economies mostly went on a downward trend since June this year. Emerging markets slumped further compared to advanced ones. - Global stock funds are flowing into advanced market out of emerging markets amid growing uncertainty over global financial condition. IMPACT ON KOREA’S STOCK MARKETVolatility in Korean stock market has increased recently as foreign investors began to sell and stock prices stumbled with growing external uncertainty. - Foreign investors have turned net sellers of KRW 4.3 trillion KOSPI shares since June this year as external uncertainties heightened.- The KOSPI and KOSDAQ indexes have slumped recently. * KOSPI: 1,916(end-2014) → 2,173(April 23, 2015) → 1,915(August 20, 2015) KOSDAQ: 543(end-2014) → 783(July 20, 2015) → 657 (August 20, 2015) Recent adjustments in stock market prices are seen largely due to external factors such as diminishing global market confidence, rather than domestic market factors. - While foreign investors are selling shares in most of Asian stock markets, the amount of net sales by foreigners in Korean stock market is relatively small.- Korea’s stock market indexes did not fall sharply, compared to those of Asia’s major markets. Market fundamentals in Korea are sound, and global financial markets remain stable in comparison to previous market turmoil in 2011 and 2013. We see market participants do not have to react excessively to recent market developments. - Korean stock prices are relatively undervalued. Korea’s foreign exchange reserves stood at USD 374.7 billion, the world’s sixth largest as o
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Jun 09, 2015
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Mar 17, 2015
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Aug 26, 2014
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Jul 10, 2014
- FSC Announced Its Plan for Financial Regulatory Reform
- BACKGROUNDThe FSC announced its plan for financial regulatory reform to create new opportunities and growth drivers for Korea’s financial industry and economy.The global financial industry stands at a crossroads between decline in growth and another takeoff in the aftermath of the global financial crisis. Korea’s financial industry also has difficulties in seeking for clear vision, developing new profit models, and restoring public trust in the financial sector. The financial sector is now called for reinventing itself to support the real economy, to generate high-added value, and to bring more satisfactory services to financial consumers.The FSC identified both statutory and implicit regulations which constrained the growth of the financial industry. Since March 2014, we held dozens of meetings with stakeholders – e.g. financial institutions, consumers, etc. – and conducted a survey of stakeholders to get their views on existing regulations and recommendations for improvement. We also conducted a series of reviews on a total of 3,100 financial regulations, 1,700 regulations of which were shortlisted for further reviews. Out of them, 700 regulations were finally chosen to be reformed.KEY DIRECTION FOR FINANCIAL REGULATORY REFORM1. Build a financial regulatory system for ‘better regulation’A two-track approach will be taken for financial regulatory system: 1) a rule-based approach for regulations needed to maintain systemic stability, protect financial consumers, and ensure personal data security; and 2) a principle-based approach for regulations on approving financial institution s’ entrance into business, sales channel and business operation.2. Strengthen support for the real economy and reduce financial consumers’ inconvenienceRegulations on corporate lending, guarantee, and listing will be improved to facilitate the technology credit bureau(TCB) system. For financial consumers, excessive document requirement will be eased to enhance access to fina
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Jun 19, 2014
