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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
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Aug 20, 2013
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Jul 07, 2013
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Jun 14, 2013
- Revision to Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA)
- BACKGROUNDThe revised Financial Investment Services and Capital Markets Act (FSCMA) was promulgated in May 28, 2013, which includes vitalizing investment banking (IB) business, introducing alternative trading systems (ATSs), and amending the current regulatory framework of asset management businesses.In line with the revision to the FSCMA, the FSC plans to revise the Enforcement Decree of the FSCMA to stipulate specific terms on matters delegated by the Act and further improve the current capital markets system.KEY CONTENTS1. Stimulate investment banking (IB) business(Requirements to be registered as an IB) A securities firm will be required to hold equity capital worth KRW 3 trillion or more and have the mechanism of risk management and internal control.(Prime brokerage service) The scope of customers with whom IBs can provide prime brokerage service will be expanded to financial companies, pension funds, overseas hedge funds as well as Korea-based hedge funds stipulated in the revised Act.(Credit extension for companies) The Enforcement decree specifies the scope of credit extension that IBs can provide companies as loans, payment guarantee, and bill discount. It also details types of credit extension exempted from the rule which limits a total amount of credit extension by an IB not to exceed its equity capital.2. Improve capital market infrastructure(Introduction of ATS) To be registered as an ATS, a securities firm will be required to hold equity capital worth KRW 20 billion or more. The Enforcement Decree specifies types of products that can be traded through ATSs as stock certificates and depository receipts (DR).ATSs will be subject to the same rules applied to exchanges in regard with measures on market surveillance and market stabilization such as daily price limit or trading halt, while it will be granted greater autonomy and flexibility in regard with trading business.Securities firms, however, can execute customers’ orders as customers want if there w
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Feb 28, 2013
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Jul 09, 2012
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May 07, 2012
- Four Mutual Savings Banks Ordered to Suspend Operations
- In a provisional meeting held on May 6, 2012, the Financial Services Commission (FSC) ordered four mutual savings banks – Solomon, Korea, Mirae and Hanju – to halt operations for six months to improve their finances after determining them as “financial institutions in distress”.The order came as a result of the inspection by the Financial Supervisory Service (FSS) and a joint committee’s review on six mutual savings banks, which were ordered on September 18, 2011 to normalize their business operations within a grace period. The suspended four mutual savings banks were among the six.Background and ProgressThe government cleaned up nine troubled mutual savings banks – Samhwa, Busan, Daejeon, Busan II, Jungang Busan, Jeonju, Bohae, Domin, Kyongeun – in the first half of 2011 to resolve the mutual savings bank issue.For the seven weeks from July 5 to August 19, 2011, a management assessment taskforce consisting of the FSS and the Korea Deposit Insurance Corporation (KDIC) inspected 85 mutual savings banks’ management situations* in a preemptive move to remove uncertainty about mutual savings banks.* Out of 98 savings banks in operation as of end-June 2011, 13 savings banks were exempted from the inspection as they already went through inspections in the first half of 2011.On September 18, 2011, the FSC suspended business operations of seven mutual savings banks – Daeyeong, Ace, Prime, Parangsae, Jeil, Jeil II and Tomato – for six months, out of 13 mutual savings banks which had been determined as in distress subsequent to the inspection by the FSS and the review of their management improvement plans.The remaining six savings banks were given a grace period before being ordered to shut down their operations, consequent to the management assessment committee’s approval and a possibility of independent normalization.The FSS conducted inspections of the six savings banks to assess their progress on management improvement plans and additional distress f
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Jan 06, 2012
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Nov 18, 2011
- Lone Star Ordered To Sell Down Its Stake in Korea Exchange Bank
- I. Sale Order of Lone Star’s Excess Stake in KEBRULINGThe FSC decided to order Lone Star Fund IV (hereinafter “Lone Star”) to sell its stake in KEB that exceeds 10% of the total number of voting stocks within six months by May 18, 2012.** Article 16-4 of the Banking Act (5) Where a limit excess stockholder, etc. who has received an order under paragraph (3) fails to comply with the order, the FSC may order the limit excess stockholder, etc. to dispose of the stocks of a financial institution held by him in excess of the limit as set in Article 15(3)1 within a specified period of not more than six months.The sale order was made on ground that Lone Star failed to redress qualifications as a majority stakeholder in KEB within the deadline (October 28, 2011) set by the FSC, and the situation still remains unfixed.** Lone Star was ordered to redress its qualification as a majority stakeholder under the Banking Act that requires no record of punishment for violation of financial laws and regulations since it was ruled guilty of stock price manipulation and fined KRW 25billion.The FSC concluded that we should not delay our decision any longer, leaving the situation uncorrected.REASON FOR SETTING A SIX-MONTH PERIODThe FSC decided to give Lone Star a six-month period to reduce its stake in KEB, considering the number of stocks to be sold and precedent cases.Lone Star has to sell a total of 265 million shares (41.02%), the largest number of stocks that any shareholder was ever ordered to sell. We also took into our consideration fairness with a precedent case that a majority shareholder in an insurance company was given a six-month period to sell four million shares (41.4%).REASON FOR NOT SPECIFYING DETAILS OF THE SALEThe FSC decided not to specify details of the sale, considering the purpose of eligibility test for majority shareholders and reference cases home and abroad.The eligibility test for majority shareholders and the sale order of shares aim to eliminate unqua
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Sep 15, 2011
