Press Releases - Financial Services Commission

Press Releases

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Apr 17, 2020

Financial Authorities to Temporarily Ease Regulations on Capital and Liquidity Requirements

FSC Vice Chairman Sohn Byungdoo held a meeting on April 17 via conference call to check the delivery of the government’s COVID-19 emergency support package and financial market stabilization measures.The following is a summary of Vice Chairman Sohn’s remarks:► STRONG COOPERATION: The FSC and the FSS along with all other relevant institutions will closely cooperate in working to prevent bankruptcies and job lossess. ► ENSURING SEAMLESS IMPLEMENTATION: For guaranteed loans, the guarantee institutions had different standards for offering deferments on the principal payment. Due to an improvement in the standards, this discrepancy has been removed.► EASING REGULATIONS: In order to make sure that financial institutions providing the COVID-19 emergency support package do not face liquidity shortages, the government will temporarily ease regulations on the capital and liquidity requirements, while also working to improve the performance assessment measures for public financial institutions.FINANCIAL SUPPORT PROVIDEDBetween February 7 and April 13, a total of KRW40.9 trillion (488,000 individual cases) in loans and guarantees as well as loan and guarantee extensions were provided to the SMEs, small merchants and self-employed business that have been hit by the spread of COVID-19.► FINANCING BY TYPE: KRW19.6 trillion (352,000 cases) in new loans and guarantees, KRW19.9 trillion (120,000 cases) in maturity extensions and deferred payments, and KRW1.4 trillion (16,000 cases) in export-import credit finance, discounted interest rates and late fees and deferment of interest payment► FINANCING BY TARGET: KRW19.4 trillion (424,000 cases) to small merchants, KRW17.1 trillion (64,000 cases) to SMEs and KRW4.5 trillion (594 cases) to middle market enterprises► FINANCING BY INDUSTRY: KRW5.6 trillion (56,000 cases) to wholesale businesses, KRW3.8 trillion (111,000 cases) to restaurant businesses and KRW3.6 trillion (82,000 cases) to retail businesses► FINANCING BY PRO
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Apr 08, 2020

Strengthening Support for Vulnerable Debtors

The government unveiled its plans to strengthen support for vulnerable debtors at the 4th Crisis Management Meeting held on April 8. The government will help set up a KRW2 trillion new facility at the Korea Asset Management Corporation, which will be used to purchase overdue debts and help alleviate debt burdens of vulnerable debtors.BACKGROUNDThe prolonging economic slowdown caused by the COVID-19 has led to unpaid leaves and loss of work opportunities for many individuals, which may contribute to an increasing number of cases where individuals are unable to service their debts. Against this backdrop, the government introduced the plans to help prevent vulnerable debtors from turning into delinquent debtors by expanding the eligibility of pre-workout programs by individual financial institutions, strengthening the debt adjustment support provided at the Credit Counseling Recovery Service and establishing a new facility for purchasing overdue personal debts.KEY MEASURESI. PRE-WORKOUT PROGRAM FOR DEBTORS WITHOUT MULTIPLE DEBTSFrom the end of April, vulnerable debtors whose income levels have fallen due to COVID-19, that have difficulties servicing household debts and are facing a risk of debt overdue may use pre-workout programs offered by individual financial institutions. A 6- to 12-month deferment of principal payment will be provided by all financial institutions until the end of this year. The pre-workout programs may be extended thereafter if deemed necessary.II. DEBT ADJUSTMENT PROGRAM FOR DEBTORS WITH MULTIPLE DEBTSFrom the end of April, multiple-debt holders whose income levels have fallen due to COVID-19, that have difficulties servicing debts and are facing a risk of debt overdue may use debt adjustment programs offered by the Credit Counseling Recovery Service. The CCRS’ debt adjustment programs offer up to one year of deferment of principal payment for at-risk debtors (including short-term debtors of less than three months) as well as debt reduction fo
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Apr 06, 2020

Current Situation in Financial Markets and Government's Policies

WHAT ABOUT THE GOVERNMENT’S SUPPORT FOR LOW-GRADE CORPORATE BONDS AND COMMERCIAL PAPER NOT COVERED BY THE BOND MARKET STABILIZATION FUND?The bond market stabilization fund is aimed at supporting the issuance of investment-grade corporate bonds. If the Bank of Korea begins to offer lending support for non-bank financial institutions, it is expected to take some loads off the bond market stabilization fund, which may create some room for considering the purchase of certain types of low-grade corporate bonds as well.For low-grade corporate bonds and commercial paper, other financing support programs such as primary collateralized bond obligations (P-CBOs) are available through policy banks. It is the government’s policy to prevent bankruptcies due to a temporary liquidity shortage from COVID-19.PRIOR TO THE PROVISION OF FINANCING SUPPORT TO LARGE COMPANIES, WHAT SELF-RESCUE MEASURES SHOULD HAVE BEEN TAKEN?For businesses eligible to apply for the emergency support package, the government will make available financing support to all businesses regardless of their size or sector. However, the KRW100 trillion package cannot possibly cover all business financing demands.Unlike small merchants and SMEs, many large companies still remain capable of financing their businesses through market mechanisms. The corporate financing support programs in the past also required self-rescue efforts by large companies, including a requirement to pay a certain portion for refinancing their debt and to buy back a portion of securities in P-CBO programs.If it becomes necessary in the future, the government will draw up plans to further reduce the financing burdens for large companies.HOW DOES THE SUPPORT PACKAGE AFFECT THE SOUNDNESS OF THE FINANCIAL INSTITUTIONS?The soundness of the financial institutions remains strong currently. The banks’ BIS ratio and bad debt ratio improved compared with the previous crisis levels. In the process of the implementation of the emergency financial su
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Mar 27, 2020

Vice Chairman Emphasizes Importance of Effective Implementation of COVID-19 Financial Support

FSC Vice Chairman Sohn Byungdoo held a meeting on March 27 via conference call to examine the implementation of the government’s COVID-19 emergency support package and financial market stabilization measures.The following is a summary of Vice Chairman Sohn’s remarks:► FINANCING SUPPORT: Low-rate loans (1.5%) at local banks as well as maturity extensions on existing loans and deferment of interest payments will be available through all financial institutions beginning on April 1.► ON-SITE COMMUNICATION: Beginning on April 6, the FSC’s emergency financial situation room along with other relevant institutions will operate a regular on-site communication and inspection channel through conference calls or on-site visits in order to help resolve difficulties on the ground.► MARKET STABILIZATION FUNDS: On March 24, the size of the initial capital call has been decided at KRW3 trillion to launch a bond market stabilization fund, which will be expanded up to KRW20 trillion afterwards. The corporate bond purchase will start as early as April 2. A stock market stabilization fund in the amount of KRW760 billion was launched on March 25 by the Korea Exchange, the Korea Financial Investment Association, the Korea Securities Depository and the Korea Securities Finance Corp. In addition, KRW10 trillion more will be made available by the financial institutions in the private sector in the second week of April.► SHORT-TERM MONEY MARKETS: Between March 24 and 26, the Bank of Korea and the Korea Securities Finance Corp. made available approximately KRW3.5 trillion in short-term liquidity to the securities companies. On March 30, the policy banks will begin purchasing commercial paper, electronic short-term bonds and short-term credit bonds. A CP purchasing operation will be undertaken collectively by the Korea Development Bank and the Korea Credit Guarantee Fund.FINANCIAL SUPPORT PROVIDEDBetween February 7 and March 24, a total of KRW13.4 trillion (152,000 individual case
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Mar 24, 2020

Measures to Stabilize Financial Markets

The government unveiled the financial market stabilization measures on March 24 to help provide sufficient liquidity to businesses and deploy market stability tools to absorb shocks in the financial markets amid the spread of COVID-19.In order to address financing difficulties and help restore stability in the financial markets, the measures will increase the financing support package from KRW50 trillion to more than KRW100 trillion. This includes financing support through policy banks in the amount of KRW58.3 trillion and KRW41.8 trillion funds to help restore stability in the country’s bond market, stock market and short-term money markets.FINANCIAL MARKET CONDITIONSThe concern over a global economic slowdown due to the spread of COVID-19 has brought market volatility in the global financial markets, thus limiting corporate financing channels. From the beginning of March, stock prices in major economies plunged and the won-dollar exchange rate spiked due to a strong dollar.Amid rising uncertainties surrounding the COVID-19, market anxiety has expanded to the corporate bond market and short-term money markets.Unlike the past financial crises, the downturn in the financial markets today started from the real economy — an abrupt slowdown in consumption, production and investment, a breakdown in global supply chains, and a drop in global trade.Due to the decline in domestic demand, a contraction in the real economy and financial market anxieties, it remains difficult to accurately predict the ripple effects of the current economic slowdown caused by COVID-19. Thus, preemptive and bold responses are required to bring stability to the markets.KEY MEASURESI. FINANCING SUPPORT FOR BUSINESSES: KRW58.3 TRILLIONA total of KRW 29.2 trillion in financing support for SMEs and small merchants will be provided.► KRW12.0 trillion in emergency financing support for small merchants► KRW5.5 trillion in special guarantees for SMEs and small merchants► KRW3.0 trillion in full
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Mar 13, 2020

Government Unveils Stock Market Stabilization Measures

The Financial Services Commission decided to impose a ban on stock short-selling in the KOSPI, KOSDAQ and KONEX markets for a period of six months from March 16 to September 15. During the six-month period, the current limits on stock buybacks will also be lifted for listed companies as shown below. The Korea Exchange may ease the rules upon approval from the FSC.In order to prevent excessive offsetting trading by stock companies, the minimum requirement for collateral coverage ratio for stock companies will be lifted.* Please refer to the attached PDF for details.
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Mar 10, 2020

Government Strengthens Short-selling Rules

The government will tighten regulations on stock short-selling for three months beginning on March 10 in response to the recent market volatility. While closely monitoring market developments, the government will continue to take appropriate measures based on contingency plans.MEASURES TO TIGHTEN SHORT-SELLING RULESIn March 2017, the government introduced the designation scheme for overheated short-selling stocks, which began to prohibit for the next trading day the short-selling of stocks with an abnormal increase in short-selling trading volume and a price falling rate.The government will lower the bar for designating such overheated short-selling stocks. In the KOSPI market, an issue will be designated as an overheated short-selling stock if it has a price falling rate of 5% or higher and a short-selling trading volume of 3 times above the average (currently 6 times above the average). In KOSDAQ, the standard for short-selling trading volume will be lowered from 5 times above the average to 2 times above the average.Stocks with price falling rate of 20% or more will be designated as overheated short-selling stocks if the increase in short-selling trading volume is 2 times and 1.5 times the average in the KOSPI and KOSDAQ market, respectively.The period of the short-selling ban on the designated stocks will be extended from one to 10 trading days (2 weeks).* Please refer to the attached PDF for details.
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Mar 03, 2020

2020 Policy Plans to Improve Competitiveness and Soundness of Financial Industry

The FSC announced its plans to improve the competitiveness and soundness of the financial industry on March 2, 2020. The plans focus on boosting the competitiveness of the financial industry, facilitating corporate financing, promoting corporate responsibilities to ensure consumer trust in the financial industry, and strengthening the management of financial soundness.KEY POLICY PLANS1. BOOSTING COMPETITIVENESS OF FINANCIAL INDUSTRYThe government will lower entry barriers to encourage innovative firms to enter the markets and work to modify regulations in business operation to create a more dynamic business environment.► SMALL LICENSES : Facilitate the entry of small-sized and specialized financial businesses in insurance, banking and credit lending sectors by subdividing their business license units and lowering their entry barriers.► INDUSTRY COMPETITIVENESS EVALUATION: Resume sectoral evaluation of competitiveness in banking, insurance and financial investment sectors, and apply the evaluation process for credit card and credit bureau businesses.Improve the effectiveness of the competitiveness evaluation from a consumer’s perspective by replacing the current sectoral evaluation system with a functional one.► PLATFORM BUSINESS: Review the boundaries in which financial companies can operate platform businesses and work to permit their operation of platform businesses.► DATA BUSINESS FOR CREDIT CARD COMPANIES (H1 2020): Revise the relevant enforcement decrees and regulations to permit credit card companies to operate MyData business and individual business credit bureau, and allow credit card companies to use anonymized or pseudonymized personal data for financial advising services► VENTURE INVESTMENT (Q1 2020): Modify regulations to promote financial companies’ investment in fintechs and other innovative venture start-ups to promote cross-sector convergence and collaboration, while working to provide tailored financing support through accelerator prog
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Feb 17, 2020

2020 Work Plan Focuses on Financial Innovation to Support Innovative Businesses

The Financial Services Commission along with other economic ministries presented the 2020 Work Plan on February 17, 2020. The FSC has outlined 10 key policy tasks for this year, which include a) redirecting capital flow toward SMEs and start-ups with innovative technologies and future growth potential, b) working on bold reforms in financial regulations while fostering convergence between new technologies and finance, and c) promoting inclusive finance and establishing a reliable financial safety net to support a comeback for those who have been discouraged by failed business attempts.The following are some of the key achievements so far in the areas of financial innovation.► Outstanding balance of movable asset lending by local banks doubled from KRW800 billion at the end of 2018 to KRW1.6 trillion by the end of 2019.► Outstanding balance of loans to SMEs by local banks increased from KRW610 trillion at the end of 2016 to KRW747 trillion by the end of 2019.► Number of newly listed companies on the KOSDAQ market rose from 82 to 108 between 2016 and 2019.2020 FINANCIAL POLICY TASKS1. REDIRECT CAPITAL FLOW TOWARD BUSINESSES FROM HOUSEHOLDS REAL ESTATES► Prevent capital concentration in the real estate market and introduce a new loan-to-deposit ratio which will encourage more corporate lending by financial companies.2. PROVIDE TARGETED SUPPORT TO 1,000 INNOVATIVE FIRMS► Select 1,000 innovative firms through a government-wide cooperation with other ministries and provide both financial and non-financial assistance in the amount of KRW40 trillion.3. ALLOW DIVERSE TYPES OF ASSETS TO BE USED AS COLLATERAL► Push for a revision of the Act on Security over Movable Property, Claims, etc. to introduce a lump-sum collateral system through which companies are able to collateralize a diverse set of assets including machinery, raw materials and inventory, and set up a movable collateral registry which will help collect collaterals and non-performing loans on behalf of f
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Dec 19, 2019

FSC Designates 9 More Financial Solutions as 'Innovative Financial Services'

The FSC designated nine additional financial solutions as ‘innovative financial services’ to be included in its regulatory sandbox program on December 18. The FSC has thus far designated a total of 77 ‘innovative financial services’ since the launching of financial regulatory sandbox in April this year.OVERVIEW OF NEWLY ADDED ‘INNOVATIVE FINANCIAL SERVICES’1. An over-the-counter bond trading platform providing retail investors with investment information about a variety of bonds, which will offer opportunities for small-amount investments and increase investor convenience (SK Securities)2. An automated stock lending borrowing transactions service, which is expected to contribute to the prevention of naked short-selling and failure to deliver securities (True Technologies)3. A customer oriented mobile appointment scheduling service using artificial intelligence, internet of things and big data, which provides information about the best time to set up an appointment at banks to avoid busy times while offering recommendations about financial products based on an analysis about customer’s consumption and investment patterns (NH Nonghyup Bank)4. A data analysis service using homomorphic encryption, which makes possible the coding of personal financial information stored in different financial institutions for analyzing purposes (Korea Credit Bureau)5. A digital real estate beneficiary distribution platform using a blockchain-based distributed ledger technology which offers retail investors an opportunity to make indirect investments in small-and medium-sized commercial real estate (Kasa Korea)6. A global money transfer brokerage service offering small-sum overseas remittance service providers an opportunity to easily find overseas partners, which is expected to ease consumer access and lower transaction costs (Hanpass)7. An online foreign stock gift card platform which allows small amount investment in shares of foreign stocks (Shinhan Investment)8 9. A sim
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Dec 12, 2019

FSC Finalizes Measures to Strengthen Investor Protection with High-risk Investment Products

FSC FINALIZES MEASURES TO STRENGTHEN INVESTOR PROTECTION WITH HIGH-RISK INVESTMENT PRODUCTSThe FSC announced a finalized plan to strengthen investor protection with high-risk investment products on December 12. Taking into account opinions from the financial industry, the finalized plan includes detailed measures and amendments to the original plan announced on November 14. SUPPLEMENTARY AMENDED MEASURESI. STANDARDS FOR ‘HIGHLY COMPLEX’ INVESTMENT PRODUCTS‘Highly complex’ investment products will be determined by the following criteria: (i) the complexity of structure in investment products, (ii) the amount of possible loss and (iii) whether investment products are listed or not. In the case that financial companies are unable to determine whether an investment product qualifies as ‘highly complex,’ they may request a decision by the Korea Financial Investment Association and the FSC.II. VALIDITY FOR CLASSIFICATION OF INVESTORS BY RISK APPETITEThe classification of investors by their risk appetite will be valid for 1-2 years, shorter than the previously announced 1-3 years, to ensure a more up-to-date classification.III. SCOPE OF UNFAIR SALES PRACTICEUnderestimating the riskiness of ‘highly complex’ investment products and selling them as mid-risk products will be classified as ‘unfair sales practice,’ which will face strict punishment.IV. CLARIFICATION OF BUSINESS SCOPE BETWEEN FUND MANAGERS AND SELLERS The scope of business between fund managers and sellers will be specified to determine whether a fund belongs to an OEM fund or not. A fund does not belong to an OEM fund if:(i) fund managers and sellers discuss investor demand and market trend without specifying investment targets or management methods;(ii) they exchange general information irrelevant to the establishment and management of funds; and(iii) they keep records of their discussion with relevant internal control V. LIMITED PERMISSION FOR BANKS TO SELL ‘HIGHLY COMPLEX’ INVESTMENT P
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Oct 18, 2019

FSC Tightens Regulation on Violation of Short-selling Rules

The FSC introduced a revised measure to strengthen regulation on the violation of short-selling rules on October 17.As a follow-up measure to improve the stock trading system, the proposed revision to the operational rules on capital market investigation establishes a new standard to impose penalties for illegal short-selling activities.Currently, illegal short-sellers are fined KRW 60 million multiplied by differential penalty ratio depending on the gravity of the consequence and the intent of such violations. The proposed revision raises the current imposition ratio by 5 to 15 percentage points.The government also established a regulatory basis to impose an additional penalty of up to 50 percent if the violation is found to have been involved in unfair transactions.The revision will take effect in the first quarter of 2020 following the notice period between October 17 and November 26.
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Sep 16, 2019

Electronic Securities System Launched

Korea’s electronic securities system was launched on September 16, 2019.1 Under the new system, securities of listed stocks and bonds are required to be issued and circulated electronically.“It will open a new era for digitization of securities, making a historic transition to a paperless system in 45 years since the securities depository system was adopted in 1974,” FSC Chairman Eun Sung-soo said at an event celebrating the official launch of the electronic securities system.Korea’s stock and bond markets have been growing with the development of the Korean economy. The daily transaction of listed stocks amounts to KRW11 trillion, or1.4 billion shares, while the amount of bond trading is KRW8 trillion per day.2 The current securities depository system facilitated the circulation of securities, contributing to the growth of securities transaction and the development of Korea’s capital markets. However, the current system fell short of eliminating inefficiencies in the issuance of securities and the exercise of rights as it still requires the presence of physical securities.The Electronic Securities Act was established in 2016 to eliminate such inefficiencies and promote transparency in securities transaction. The electronic securities system will shorten procedures for the issuance of securities, making it easier for companies to raise funds in capital markets. It will also help investors exercise their rights, better informed of distribution of divided or capital increase. The electronic system will make it possible to build up big data on the issuance and circulation of securities, enabling fintech innovation using such data. Transparency in capital markets will be enhanced. Under the electronic securities system, information about the ownership and transfer of securities rights will be recorded electronically, which will eliminate risks of counterfeit or theft of securities or prevent tax evasion.Chairman Eun asked the Korea Securities Depository (KSD)
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Aug 06, 2019

FSC Vice Chairman's Remarks on Domestic Financial Market Conditions

FSC Vice Chairman Sohn Byungdoo held a meeting with financial investment experts on August 6th to review the current conditions of Korea’s stock markets and discuss measures to mitigate short-term shocks.Vice Chairman’s remarksCurrent condition of domestic and global financial marketsKorea’s financial markets experienced volatility yesterday due to multiple domestic and external factors. Such trend is not confined to Korea, however, as global financial markets fluctuated as well due to multiple reasons such as: expectations that the U.S.- China trade dispute would be prolonged; concerns on sluggish global growth; and uncertainties regarding the U.S. rate cut. Domestically, Japan’s trade measures, major exporters’ worsened profit, and MSCI rebalancing posed additional impact.Moreover, China’s yuan weakened pass the psychological threshold of 7 RMB against the dollar, resulting to an increased volatility in won-dollar exchange rate. Announcement that the U.S. labeled China as a currency manipulator deepened concerns that the bilateral trade dispute would spillover to currency issues, resulting to a sharp drop in major stock markets such as Japan (↓2.7%) and Australia(↓3.0%).Measures to stabilize domestic financial marketsWorsened investor sentiment due to increased uncertainties is analyzed to have resulted in such stock market volatility.However, Korea’s financial markets are maintaining solid fundamentals1 after overcoming the 2008 global financial crisis and financial market turmoil in 2016 resulting from Brexit uncertainties.Moreover, there has been no overshoot in Korea’s stock markets even in times of global liquidity expansion. Korea’s stock markets are tend to be undervalued despite that price book-value ratio(PBR)2 is relatively low compared to global stock markets.1 Foreign exchange reserve($billion): (’97)20.4, (’08)239.7, (July,’19) 403.1Short-term external debt(%): (’97)286.1, (’08)84.0, (Mar,’19) 31.6CDS(5 yrs, bp): (end
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Jul 17, 2019

FSC to Resume Procedures to Approve Additional Digital Banks in Korea

The FSC announced its plan to resume a new round of procedures for granting preliminary approval for additional digital banks in Korea.Earlier this year, the FSC intended to approve one or two additional digital banks under the Special Act on Online-only Banks, which allows non-financial companies to own a 34% stake in an online-only bank. However, the FSC granted no preliminary approval to either of the two applicants – Kiwoom and Toss – in last May as both fell short of the evaluation committee’s standards.Against the backdrop, the FSC decided to resume a new round of procedures to live up to the purpose of the special legislation on online-only banks and continue a momentum of policy initiatives for Korea’s innovation-led growth.As initially announced, the number of new digital banks will be one or two, given the level of competition in the banking sector and the examples of other major economies.PROCEDURAL IMPROVEMENTSHowever, in order to ensure more effective evaluation, some operational changes will be made in procedures from application to operation of the evaluation committee.► The FSS will provide applicants with consultation over the whole process of application to help them better informed.► If necessary, the chairman of the evaluation committee will be attending FSC meetings to explain evaluation criteria so that FSC commissioners could have in- depth discussions and reviews on the committee’s evaluation results.► Applicants will be given enough opportunities to express their opinions during the evaluation committee’s evaluation process.SCHEDULE► Application period: 10th October ~15th October, 2019► Announcement of preliminary approval: within 60 days upon the date of application► Announcement of official approval: within one month upon the date of application for official approval
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Jun 26, 2019

FSC to Ease Listing Rules for Tech Start-ups & Scale-ups

The FSC approved amendment proposals by the KRX to ease listing regulations on Kospi and Kosdaq to facilitate IPOs of innovative tech start-ups and scale-ups.I. Listing review standards to be tailored to sector-specific factors (KOSDAQ)Despite a series of deregulatory measures to facilitate IPOs of innovative start-ups, standards for listing review are still mainly focused on current business and market status, making it difficult for tech start-ups with growth potential to list on KOSDAQ.Against this backdrop, differential standards for listing review will apply across sectors to better reflect sector-specific conditions, particularly high-tech and bio-tech sectors in the fourth industrial revolution. The focus of listing review will be on innovativeness and potential value of technology.(i) Industry 4.0 sectors► subject: 152 strategic items in 20 sectorsdesignated by the Ministry of SMEs Startups► qualitative review standards to be focused on innovativeness(ii) biotech sector► subject: bio-tech companies to be listed via special tracksbased on their technology innovativeness and growth potential► technology evaluation criteria to be further detailedII. Rules to designate administrative issues to be eased for biotech companies (KOSDAQ)Currently, bio-tech companies listed on KOSDAQ via a special track for tech companies are designated as administrative issues if such company’s total revenue is below KRW 3 billion in 5 years after listing. To meet such revenue requirement, biotech companies are often forced to reduce RD activities, consequently undercutting their growth potential.Against this backdrop, the revenue requirement will be eased for biotech companies suffering from temporary drop in revenue. Even if a biotech company’s revenue in the latest business year falls short of KRW3 billion, it will not be designated as an administrative issue if its total revenue in the recent three years is KRW9 billion or more.Biotech companies which qualify for cert
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May 30, 2019

FSC Introduces Deregulatory Measures to Boost Korea's Derivatives Market

The FSC introduced deregulatory measures to make Korea’s derivatives markets more vibrant and competitive. The reforms are intended to strengthen the derivative market’s role for risk hedging and price discovery, as part of the government’s broader efforts to vitalize capital markets and support the real economy.BackgroundKorea’s derivatives trading volume fell sharply from its peak in 2011 but recovered to an extent after 2015 with increased trading of index products.1 Since the introduction of tighter regulations to curb speculative trading in 2011, the derivatives market’s soundness improved with an increase in the number of longer-term open contracts for risk hedging.2By investors, foreigners accounted for 50.4% of derivatives trading in 2018, up from 25.7% in 2011. Over the same period, the share of institutional investors decreased from 48.7% to 36.1%; and retail investors from 25.6% to 13.5%. Excessive entry barriers act as obstacles to retail investors, while strict margin requirements hinder institutional investors’ participation.The derivatives market is disproportionately concentrated in KOSPI200-related products, making it difficult to serve investors’ demand for a variety of derivatives products.Reform Measures► Lower entry barriers for retail investors (Q4 2019/FSC, KRX) Minimum deposit requirement will be abolished for professional investors and eased for non-professional investors: (i) KRW 10million or more for futures and options trading; and (ii) KRW 20million or more for all derivatives trading. One hour of education and three hours of mock trading► Ease margin requirements for institutional investors (Q3 2019/FSC, KRX) Currently, institutional investors are required to deposit an extra margin, 10 % of credit risk limit, in addition to 100% of the volume exceeding the credit limit. The1 Average daily turnover (unit: trillion won): 66.3(2011), 47.9(2013), 37.2(2014), 41.2(2015).45.0(2018)2 KOSPI 200 Futures Open Interest (unit: 10
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May 26, 2019

Results of Evaluation for Preliminary Approval for Additional Online-only Bank Licenses

The FSC rejected applications filed by ‘Kiwoom Bank’ and ‘Toss Bank’ for preliminary approval for online-only bank licenses as the two applicants1 both fell short of the standards for online-only banks by an evaluation committee.The evaluation committee composes of independent experts concluded that Kiwoom Bank lacked innovativeness and feasibility in its business plan, while Toss Bank had issues concerning its financing ability to raise capital. The evaluation committee, therefore, recommended disapproval of the two bidders.Based on the recommendation by the evaluation committee and the evaluation result submitted by the FSS, the FSC decided not to allow both ‘Kiwoom Bank’ and ‘Toss Bank’ preliminary approval for online-only bank licenses.The FSC plans to resume its procedure in the third quarter to receive new applications for online-only bank licenses.
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Apr 24, 2019

Government Proposes Measures to Improve Corporate Practices of Annual General Meetings

The Financial Services Commission (FSC) and the Ministry of Justice (MOJ) jointly proposed comprehensive measures to improve corporate practices of annual general meetings (AGMs) in an attempt to encourage the participation and engagement of shareholders.BackgroundAGMs serve as a company’s highest decision-making body. However, the current practices in many companies – e.g. concentration of AGMs on specific dates1 and fast-paced proceedings2 – discourage shareholders’ participation, making AGMs a mere formality. Shareholders’ active participation in AGMs has become all the more important recently with the abolition of ‘shadow voting’ system3 and growing public attention to the role of institutional investors as shareholders.Against this backdrop, the proposed measures are intended to help companies boost participation of shareholders in AGMs and equip shareholders with more information to better exercise their voting rights.Measures proposed1. Companies to reach out to shareholders by e-mailWith shareholders’ home addresses alone, companies have difficulty in contacting shareholders to notify the convocation of AGMs and encourage participation. To enable companies to reach out to their shareholders by e-mail, the FSC will allow listed companies to receive their shareholders’ e-mail addresses from securities firms.2. Companies to be allowed to grant incentives to participantsUnder the Commercial Act,4 it is unclear whether companies are allowed to provide shareholders with a ‘small gift’ as an incentive for participation in AGMs. To clarifythis matter, the MOJ will provide an authoritative interpretation: For the purpose of increasing voting turnouts or securing quorums at AGMs, companies are allowed to grant participants a benefit at a level that does not breach social norms.3. Convenience of electronic voting to be enhancedThe current requirement of the accredited certificate of authentication causes inconvenience to shareholders in electronic
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Apr 17, 2019

First Batch of Financial Service Providers Designated as 'Innovative Financial Services' for FSC's Regulatory Sandbox

The FSC announced the first batch of financial service providers accepted into its financial regulatory sandbox. Among 19 applications shortlisted for priority review, nine firms were first allowed to test their innovative services and products in the regulatory sandbox. For the remaining 10 applications, the FSC will soon decide whether to accept them into the regulatory sandbox at its meeting scheduled for May 2, 2019.Overview of services accepted into financial regulatory sandbox1. Convenient, low-cost financial services combined with mobile communication services (KB Kookmin Bank)2. Stock lending platform based on blockchain technology offering stock lending and borrowing services for individual investors (Directional)34. ‘On-off traveler’s insurance’ for frequent repurchasers to buy traveler’s insurance policy without verification or additional explanation on the product (NH Property and Casualty Insurance / Rainist)5. Credit card based money transfer service using PayFan application (Shinhan Card)6. Credit card payment service using QR codes for unregistered small stores such as street vendors (BC Card)7. Credit assessment using Shinhan Card’s affiliate merchant data such as sales record (Shinhan Card)8. Online easy payment service using mobile text message verification (Payple)9. P2P finance service for local residents to invest in new renewable energy generation businesses (Root Energy)
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