Financial stability is a prerequisite to innovation and inclusive finance policies. FSC maintains close market monitoring for any signs of market volatility and works to ensure stability in the financial markets. There are risk factors originating from abroad and from within. FSC focuses on making our economy more resilient from external shocks, such as a disruption in the global supply chain, and supporting Korea’s material, component and equipment industries to help boost their global competitiveness. Internally, FSC is closely monitoring the trends in household debt and seeking reforms to corporate restructuring in order to prevent domestic risk factors from turning into systemic risks. Policies aimed at increasing financial stability also include enhancing fairness in the financial markets by introducing a comprehensive legal framework for the supervision of financial conglomerates, improving market discipline and promoting transparency in corporate disclosure and accounting practices.
Dec 06, 2023
- FSC and FSS Hold Meeting with Insurance Businesses
- Chairman Kim Joo-hyun of the Financial Services Commission met with the CEOs of major insurance businesses along with Governor Lee Bok-hyun of the Financial Supervisory Service on December 6 as part of a series of meetings scheduled with financial sectors to ensure close communication and mutual understanding with the industry. In his opening remarks, Chairman Kim first talked about the importance of corporate social responsibility among insurance businesses. As consumers are currently facing difficult financial situations due to high interest rates and inflation, Chairman Kim said that insurance businesses could place more efforts to help alleviate the difficulties experienced by their customers. Second, Chairman Kim talked about changes taking place in the insurance sector with the adoption of IFRS 17changes not only in accounting practices but also in their product development, asset and liability management and sales strategies. In this regard, Chairman Kim said that insurance businesses should work to ensure that these changing practices are not solely focused on boosting their financial performance, but instead, insurance companies should also work on building long-term trust with their customers. Lastly, Chairman Kim talked about the importance of finding new ways to ensure growth amid low birth and aging population and digital transformation. In this regard, Chairman Kim said that the government will provide support for innovation and growth of the insurance industry through regulatory improvements. At the meeting, insurance businesses and the industry groups shared the same view about the need to strengthen corporate social responsibility and said that the insurance sector will work to introduce specific measures after having an industry-wide coordination. * Please refer to the attached file for details.
Nov 29, 2023
- FSC Proposes Measures to Improve the Early Loan Repayment Charge System in the Banking Sector
- The Financial Services Commission announced a plan to improve the early loan repayment charge system in the banking sector on November 29 after having a series of consultation with banks between October and November. The proposed measures intend to make banks early repayment fees more reasonable and transparent for consumers. Currently, under the Act on the Protection of Financial Consumers, it is prohibited in principle for banks to impose early repayment charges on loans, although the law allows them to charge early repayment fees if the borrower make repayments within three years from the date of loan issuance. In this regard, banks charge early repayment fees to make up for the loss expected from interest profits and to compensate for relevant administrative costs. On average, the volume of early repayment fees received by banks amount to about KRW300 billion every year. However, there have been complaints about the fact that the banks early repayment fee system is being operated in a uniform way and that it fails to take into account the actual costs incurred by individual banks in a realistic way. For instance, the early repayment fee rates charged on home mortgage loans by five major banks are currently 1.4 percent for fixed interest rate loans and 1.2 percent for variable interest rate loans across the board. On the contrary, examples from overseas cases show that banks early repayment charges can be operated in various ways while taking into account the actual cost and particular operational needs of banks. Therefore, the authorities plan to revise the relevant supervisory rules and best practice guidelines and strengthen disclosures to make the current early repayment charge system more reasonable and transparent. First, a set of guidelines will be established to ensure that banks charge early repayment fees reflecting only the necessary costs actually incurred in the process of handling loan products. For instance, the guidelines will reflect the cost dif
Nov 27, 2023
- Authorities Meet with the Banking Sector and Hold Talks on Boosting Integrity, Social Responsibility and Innovation
- Chairman Kim Joo-hyun of the Financial Services Commission met with the heads of major banks along with Governor Lee Bok-hyun of the Financial Supervisory Service on November 27 as part of a series of meetings scheduled with financial sectors until the end of this year. In his opening remarks, Chairman Kim talked about boosting integrity, social responsibility and innovation in the banking sector, emphasizing that the public needs to be able to trust bank employees, believe that financial services from banks are available for them in times of difficulty, and see that banking services are adopting high-tech and innovative technologies. With regard to the revision bill of the Act on Corporate Governance of Financial Companies currently moving through the National Assemblys legislative process, Chairman Kim said that this revision will help to establish an awareness among bank employees about the need to attend to their business more ethically. On the issue of household debt, Chairman Kim said that, from the standpoint of ensuring a sustainable growth in the economy, the role of the banking sector is important to effectively manage household debt growth. The seventeen domestic banks attending the meeting today are planning to draw up specific measures to help reduce the interest payment burden of small businesses and the self-employed. The banking sector also pledged to make efforts to establish appropriate internal control practices expected from them in preparation for the implementation of the revised Act on Corporate Governance of Financial Companies. The FSC and the FSS plan to hold subsequent meetings with nonbank financial institutions to ensure close communication and mutual understanding with the industry. * Please refer to the attached file for details.
Nov 23, 2023
- Authorities Decide to Extend the Period of Operating Market Stabilization Programs and Eased Regulations
- Vice Chairman Kim So-young of the Financial Services Commission presided over a meeting with officials from the Financial Supervisory Service, Korea Development Bank, Korea Credit Guarantee Fund and other market experts on November 23 to check condition of the current bond and short-term money markets and discuss plans for various market stabilization programs and eased regulatory measures. Market stabilization programs At the meeting, the authorities decided to extend the period of operating the bond market and short-term money market stabilization programs, which began to operate since last year. Although the demand for these support programs this year has been considerably lower than the previous year, the authorities decided to extend the period of operation for one year for the programs that are set to expire soon. As such, the operation of the bond market stabilization fund and the corporate bond and CP (commercial paper) purchase program will be extended until the end of December 2024, and the availability of the PF-ABCP purchase program for PF-ABCPs issued by securities firms will be extended until the end of February 2025. The primary collateral bond obligation (P-CBO) support program run by the Korea Credit Guarantee Fund and intended to support bond market stabilization will continue to operate as planned until the end of 2024. Eased regulatory measures The authorities also discussed extending the period of operating eased financial regulatory measures which are set to expire at the end of this year. Although the current liquidity and soundness indicators show that financial institutions are capable of maintaining regulatory ratios without the support form eased regulations, considering the possibility of abrupt changes in market situations, the authorities decided to extend the availability of eased regulations until the end of June 2024. The eased regulatory measures subject to the period extension include the following. a) Banks: Temporary easing of li
Nov 21, 2023
- KoFIU Advises VASPs to Inform Customers about Business Closure One Month before Expected Termination Date
- The Korea Financial Intelligence Unit (KoFIU) issued recommendations for virtual asset service providers on November 21 that those expected to terminate their business operation should inform their customers about the business closure plan at least one month prior to the expected termination date. More specifically, when deciding to terminate their business operation, VASPs are first advised to establish an internal process to minimize potential damage or loss to virtual asset users, addressing issues such as the issuance of advance notice to their customers, provision of support for deposit/asset withdrawal, handling of user data and remaining user assets, etc. Second, when a business closure is in sight, VASPs are recommended to notify their business termination plan at least one month before the expected termination date communicated via website and to the users individually. After notifying, they should immediately halt signing up new users or accepting deposits. In addition, they should set up a plan and allow a sufficient timeframe (for instance, for at least three months) for their customers to withdraw deposits (in cash or virtual asset). Third, the VASPs facing business termination should handle their customers user data and other relevant data as required by related laws. Fourth, virtual asset users are advised to check the operating status of their service providers to avoid any loss or damage. If they find that their service providers are no longer in operation, they should check their assets in custody and seek immediate redemption. The KoFIU will closely monitor VASPs to ensure that their business termination does not cause damage to users and carry out site inspections when deemed necessary. The authorities will also thoroughly check whether the VASPs facing business termination are faithfully carrying out measures to ensure user protection. * Please refer to the attached file for details.
Nov 20, 2023
- FSC and FSS Meet with Financial Holding Companies
- Chairman Kim Joo-hyun of the Financial Services Commission met with the heads of major financial holding companies along with Governor Lee Bok-hyun of the Financial Supervisory Service on November 20 and held talks on ways to help reduce the interest payment burden of small businesses and the self-employed. In his opening remarks, Chairman Kim talked about the challenges facing small businesses due to the abruptly increased interest payment burden within a short period of time. Due to high interest rates, Chairman Kim pointed out that financial institutions have been able to make high interest profits at levels unseen in the past, and that this means heavier payment burden on borrowers. Given this situation, Chairman Kim urged financial holding companies to come up with ways to help reduce the heightened burden of interest payments in the post-pandemic period inasmuch as their prudential management capacity allows. The eight major financial holding companies and the Korea Federation of Banks attending the meeting today decided to collectively expand their social responsibility by actively looking into ways to reduce the interest burden of small businesses and the self-employed. The financial holding companies and the banking sector are expected to engage in further discussions to come up with a specific support plan for announcement within this year. Beginning with todays meeting, the FSC and the FSS plan to hold subsequent meetings with each individual financial sector, such as the banking, financial investment and insurance sectors, to foster mutual understanding and engagement on a continuing basis. * Please refer to the attached file for details.
Nov 16, 2023
- Authorities Discuss Stock Short Sale Reform Measures
- Vice Chairman Kim So-young of the Financial Services Commission attended a meeting on short selling reform measures which brought together authorities from the private sector, the ruling party of the National Assembly and the government on November 16. At the meeting, the authorities discussed a direction for making improvements to the short selling system. The reform measures discussed at todays meeting are not finalized measures for implementation but a set of proposals laying out a direction for further discussions and refinement at the National Assembly and with the public. Overall, the proposed measures are aimed at (a) leveling the playing field between institutional and retail investors, (b) preventing naked short sales in advance, (c) strengthening the detection and punishment of illegal short selling activities, and (d) expanding short sale disclosure. Stock Short Sale Reform Proposal I. Leveling the playing field Currently, the stock borrowing conditions for short selling remain unequal between institutional investors and retail investors, although the gap has been narrowed considerably through past reform measures for retail investors, extending the stock repayment period from 60 days previously to 90 days and lowering the margin requirement from 140 percent previously to 120 percent. However, the discrepancies in stock lending still exist and this has been raised as a problem of unleveled playing field for retail investors vis--vis institutional investors. As a way to resolve this problem, the authorities propose making the stock repayment period and margin requirement same for both institutional investors and retail investors. More specifically, first, the stock repayment period for institutional investorscurrently unrestricted and determined on a contract-by-contract basiswill be set as 90 days, same as that for retail investors. The Korea Securities Depository, which handles stock lending to institutional investors, should check the repayment period o
Nov 08, 2023
- Government and Related Authorities Hold Meeting on Household Debt Situation
- The Financial Services Commission held a meeting with officials from the relevant government ministries and organizations on November 8 and discussed the current household debt situation and various measures to ensure effective management. Regarding the October household loans data announced earlier today, the participants had a positive assessment about the slowing trend of mortgage loans, despite an overall increase in the size of household loans from the previous month. To continue to ensure a stable management of household loans, the authorities agreed on the need to strengthen relevant measures as follows. First, the authorities will bolster rules on debt service ratio (DSR) by closely reviewing the areas that are currently being exempted from DSR regulation and look into ways to gradually expand the application of DSR rule. The stressed DSR limit that is currently being reviewed for application on variable interest rate loans is expected to be announced in December this year with specific details. Second, the authorities will come up with stronger incentive structures that can reward banks to more actively and voluntarily introduce long-term, fixed interest rate mortgage loans by overhauling a relevant administrative guidance. The authorities will also seek to provide more incentives for covered bonds, which serve as a mechanism for banks to fund long-term, fixed rate loans. Third, the authorities will continue to keep close tabs on the trends of household loan growth across all financial sectors. Fourth, the authorities will work with financial sectors to come up with various ways to help reduce the burden of repayment and high interest rate for borrowers, for instance, by offering a temporary exemption from early repayment charges. At the meeting, FSC Secretary General Lee Se-hoon said that as it is difficult to achieve short-term results when it comes to containing household debt, the government will make efforts with a long-term perspective to build an inc
Nov 05, 2023
- FSC Decides to Ban Stock Short Selling Until June 2024 and Seek Measures to Improve the System
- The Financial Services Commission held a meeting on November 5 where the authorities decided to ban all stock short selling in domestic markets (all KOSPI, KOSDAQ and KONEX listed items) effective from Monday, November 6, 2023 until the end of June 2024. With the continuation of high interest rate environment and stagnant growth in the global economy, coupled with geopolitical risks such as the armed conflict between Israel and Hamas, there are growing uncertainties for the Korean economy. In particular, during the second half of this year, stock market volatility in domestic stock markets has risen to much higher levels compared to other major markets overseas,which caused anxiety in the market. Despite a series of measures introduced in the past,recently, the authorities have discovered a number of illegal naked short selling practices conducted by foreign and institutional investors, raising concerns about the fair pricing function of domestic stock markets. Recently, a large-scale naked short selling case involving global investment banks was detected, and an investigation is currently taking place with discovery of additional unlawful activities. As such, the FSC finds that the situation with illegal short selling is very dire as it can erode the fair pricing function of the market and degrade confidence in the market. Therefore, considering the need to preemptively respond to the rising market uncertainties and address concerns about the potential weakening of the markets fair pricing function, and with the practice of illegal naked short selling taking place in a more routine way, the FSC decided to ban short selling on all domestic stock items until the end of June next year. Meanwhile, during the period of banning short selling, the government will work on proactive measures to improve the system in a way that will help to root out illegal short selling activities when short selling resumes thereafter. In this regard, first, the authorities will work on mea
Nov 01, 2023
- FSC Approves Rules Change Intended to Boost Loss Absorbing Capacity of Banks
- The Financial Services Commission approved a partial revision bill of the supervisory regulation on banking business at the 19th regular meeting held on November 1. Under the revised rules, the financial regulators will be authorized to ask banks to set aside special reserve for credit loss. The revision also establishes a process of inspecting banks own estimated loss forecasting models. This is a follow-up to the previously announced plan to revamp prudential regulations in the banking sector. First, the rules change will establish a regulatory ground authorizing the financial regulators to ask banks to set aside additional loss reserve when their accumulated level of loan loss provision and loss reserve are deemed to be inadequate. With the lack of regulatory grounds allowing the authorities to make such a request from banks, the Financial Supervisory Service (FSS) had to seek cooperation from banks to bolster their loss provisioning on a voluntary basis so far. However, from now on, the FSC will have an authority to demand banks to set aside additional loss reserve when deemed necessary. Making an actual request from banks to bolster special loss reserve will be carried out through an FSCs formal deliberation process. Second, the rules change will establish a process whereby the authorities are able to inspect banks models for forecasting their estimated loss, so that the authorities can verify the appropriateness of loss provisions prepared by individual banks and have them prepare loss provisions at levels suitable to their estimated future losses. Currently, banks loss provisions are prepared based on their own estimated loss forecasting models. However, the banks own estimates raised concerns about the appropriateness of their estimated losses in the post-pandemic period as their loss calculation was based on the low interest rate environment where delinquency ratio also stayed low. Therefore, from now on, banks will carry out self-inspection on the appropri
Oct 31, 2023
- FSC Proposes Rules Change on the Maximum Level of Credit Extension Allowed for Foreign Subsidiaries
- The Financial Services Commission proposed a revision to the supervisory regulation on financial holding companies on October 31, which will be open for public comment from October 31 to November 10, as a follow-up to the previously announced plan to ease rules on overseas subsidiary ownership of financial companies. Under the current rule, financial companies within a holding group are allowed to extend credit to their own subsidiaries at the maximum level of 10 percent of equity capital to each individual subsidiary. The total sum of credit extended to subsidiaries should not exceed 20 percent of equity capital. However, for financial holding companies overseas subsidiaries, which often face challenges in raising funds at an early stage due to low credit background and lack of collateral, this rule on credit extension between financial companies within a holding group has placed restrictions on their ability to raise funds even from their domestic affiliates. Therefore, this revision proposal will increase the maximum level of credit extension allowed by a financial company to its foreign subsidiary within additional 10 percentage points from the current level for a period of maximum three years from the time the foreign subsidiary becomes a part of the holding group. This revision proposal will be available for public comment from October 31 to November 10 and go into effect from January 1, 2024 after a deliberation by the FSC. * Please refer to the attached file for details.
Oct 19, 2023
- Revised Guidelines on Corporate Governance Disclosure
- I. Overview and Progress of the System Corporate governance disclosure was introduced to encourage listed companies to voluntarily enhance their corporate transparency. Companies are required to disclose their compliance with the core principles of corporate governance and explain* the reasons for non-compliance based on a Comply or Explain approach. * The guidelines present a generally recommended corporate governance structure, such as those in the G20/OECD Corporate Governance Principles, allowing companies the discretion to select a governance structure that suits them, while requiring them to provide explanations for non-compliance (10 core principles, 28 detailed principles). Corporate governance disclosure was voluntary when it was first introduced in Korea by the Korea Exchange (KRX) in 2017. In 2019, it became mandatory for KOSPI-listed companies with total assets of KRW2 trillion or more, and in 2022, the scope of companies subject to mandatory filing was expanded to KOSPI-listed companies with total assets of KRW1 trillion or more. * A review at the end of 2022 showed that the average compliance rate for key indicators among companies with assets of KRW2 trillion or more significantly improved from 63.5% in 2021 to 66.7% in 2022. This was evaluated as a positive contribution to enhancing corporate transparency. ** [Schedule] (2019) Total assets of KRW2 trillion or more (2022) KRW1 trillion or more (2024) KRW500 billion or more (2026) All KOSPI-listed companies In 2019, the KRX established the guidelines on corporate governance disclosure, providing core principles of corporate governance and detailed reporting standards to ensure that companies provide faithful and comparable information in their disclosures. The guidelines were revised in 2020 and 2022 to reflect market conditions. II. Background and Key Details of the Revision The revision of the guidelines incorporates feedback received during the implementation of corporate governance disclosure in li
Oct 18, 2023
- FSC Holds Meeting to Check Financial Market Situation
- The Financial Services Commission held a meeting with the Financial Supervisory Service and industry representatives on October 18 to review financial market situations, potential risk factors and ways to handle them, chaired by FSC Vice Chairman Kim So-young. At the meeting, the authorities shared the same view that there are ongoing risk factors in financial markets due to the possibility of continuing high interest rates caused by a prolonged policy tightening in the U.S. and uncertainties surrounding the Israel-Hamas conflict. Therefore, the FSC, the FSS and financial industry groups agreed to maintain strong communication and cooperation. Despite these downside external risks, Vice Chairman Kim said that the domestic financial market conditions appear to be stable and that it is very unlikely that market situation will abruptly turn unstable as in the previous year since there are less uncertainties about the interest rate expectation in major economies and the financial institutions liquidity and risk management conditions have been improved compared to a year ago. However, as it is always possible that an external shocksuch as the one caused by the Israel-Hamas warcan deepen market anxiety when combined with vulnerabilities in domestic markets, Vice Chairman Kim said that it is necessary to continue to proactively deal with the vulnerable areas in domestic financial markets. With regard to the uncertainties surrounding the Israel-Hamas conflict, Vice Chairman Kim urged financial institutions to stay vigilant and secure a sufficient level of foreign currency liquidity to be adequately prepared. At the meeting, the authorities also discussed ways to avert excessive money moves in the financial sectors in the final three months of the year as competition to win over more deposits toward the end of the year led to market instability last year. In this regard, from September this year, the FSC and the FSS held a series of meetings with the financial sectors to che
Oct 12, 2023
- FSC Undertakes Organizational Reshuffle to Bolster Financial Data Security
- The Financial Services Commission announced that an internal organizational adjustment creating a division (Cyber and Information Security Division) tasked with overseeing financial data security and information protection will take effect from October 13. Amid an accelerated pace of digital financial innovation taking place with the introduction of advanced technology such as artificial intelligence in financial services, diversification of payment methods and increased utilization of data, there are growing needs for the authorities to strengthen the function of data security and information protection. Thus, the FSC will reorganize the current Electronic Finance Division into Cyber and Information Security Division in order to bolster the management of risks related to financial data security and strengthen financial data protection. The Cyber and Information Security Division will be in charge of overseeing tasks related to electronic finance security, responding to electronic finance-related accidents, preventing fraudulent activities such as vishing, making policies on financial data privacy and protection of personal credit data, and establishing measures for ensuring stability and security in digital finance infrastructures. The task of managing and overseeing electronic financial businessesfor instance, granting approval and registrationthat was previously handled by the Electronic Finance Division will be transferred to and carried out by the Financial Data Policy Division. In seeking to promote digital financial innovation, the FSC expects that this organizational reshuffle creating the Cyber and Information Security Division will help the authorities to more effectively and thoroughly deal with the issues related to ensuring the system stability of digital finance and strengthening financial data protection. * Please refer to the attached file for details.
Oct 12, 2023
- Government and Related Authorities Hold Meeting on Household Debt
- The Financial Services Commission held a meeting to discuss the current household debt situation with officials from the relevant government ministries and organizations on October 12. In September (up KRW2.4 trillion), household debt growth decelerated significantly compared to the previous two months (up KRW5 trillion to KRW6 trillion). However, as the slowdown in the trend of household debt growth could have been affected by temporary and seasonal factors, such as a drop in credit loans due to inflows of Chuseok holiday bonuses and the end-quarter write-off of bad debt by specialized credit finance businesses, the authorities concluded that it is necessary to continue to monitor the trends for some time to determine whether the current slowdown can be seen as a sustained one. In the banking sector, both individual mortgage loans and policy mortgage loans expanded at notably slower rates backed by the household debt management measures taken by the financial authorities. The pace of decline in other types of loans also expanded. In particular, with borrowers repayment capabilities being reviewed more strictly, the amount of newly issued 50-year mortgage loans dropped from KRW4.8 trillion in August to KRW4.2 trillion in September. The authorities expect that the strengthened long-term mortgage lending measure will start to have fuller effect beginning in October. The nonbanking sector also saw a larger decline in household loans (down KRW0.8 trillion in August down KRW2.5 trillion in September) due to increases in market rates and inflows of holiday bonuses. The authorities had a favorable assessment about the latest household debt statistics, but shared the same view on the need to continue to closely manage the pace of household debt growth as it can be influenced by housing market and interest rate situations. Therefore, the financial authorities will promptly implement the household debt management measures (such as introducing a stressed DSR limit within this
Oct 05, 2023
- FSC Holds Meeting to Ensure Seamless Implementation of Financial Measures Intended to Boost Housing Supply
- The Financial Services Commission held a meeting with related government ministries, policy financial institutions and financial industry representatives on October 5 to check the implementation plan of the financial measures announced earlier on September 26 that are intended to boost housing supply. At the meeting, the authorities discussed (a) ways to expand the supply of project finance (PF) lending support by policy financial institutions, (b) the current situation in preparing the real estate PF market normalization fund and (c) establishing an oversight and management system to enhance the effectiveness of the measures. Expanding policy financial institutions supply of PF lending support The Korea Housing Finance Corporation (HF) and the Korea Housing Urban Guarantee Corporation (HUG) have each raised the size of PF guarantees available by KRW5 trillion for a total of KRW10 trillion in additional guarantee capacity. The policy financial institutions (Korea Development Bank, Industrial Bank of Korea and Korea Credit Guarantee Fund) will begin to supply KRW7.2 trillion or more from this month to ensure stability of real estate development projects and construction firms. In addition, Construction Guarantee (CG) is currently preparing to make available KRW6 trillion worth of guarantee support programs intended to help construction companies engaged in non-housing (non-apartment) development projects. Until the end of this year, the five major financial holding companies will continue to make available about KRW4 trillion in lending supports for the real estate development projects currently operating. Real estate PF market normalization fund At the meeting, the authorities went over the current situation in creating a real estate PF market normalization fund in the size of KRW2.2 trillion, which is intended to supply funds necessary for normalizing and restructuring of illiquid or at-risk projects. First, a matching fund raised by the Korea Asset Management Corp
Sep 26, 2023
- Government to Prepare Measures to Overhaul Rules on Mutual Financial Businesses
- The Financial Services Commission held the 3rd consultative body meeting on mutual financial businesses with related government ministries and mutual financial businesses on September 26. At the meeting, the authorities decided to draw up a joint plan to overhaul and update the current regulatory framework on mutual financial businesses in line with the growth of the sector and changes in their operating environment. The authorities also decided to set up and operate a daily monitoring system from mid-October to closely check the liquidity condition of mutual financial businesses. In terms of the size of total assets, between end-2013 and end-June 2023, the mutual finance industry has grown from KRW475 trillion to more than KRW1 quadrillion, with some entities growing to the level equivalent to a commercial financial institution within a region. In addition, the nature of their operation has shifted as loans extended to households by mutual financial businesses declined in recent years, while the volume of corporate lending from them has expanded significantly. Considering this growth and change in the operating environment of mutual financial businesses, the authorities exchanged views on the need to shore up rules on their prudential management and governance structure. Amid ongoing concerns about the soundness and liquidity conditions of the mutual finance industry, the authorities also shared views on the need to strengthen risk management in vulnerable areas while ensuring the provision of prompt liquidity support if needed. With regard to the application of key consumer safeguard measures guaranteed under the Financial Consumer Protection Act, for which most mutual financial businesses other than credit unions are exempted, the authorities talked about the need to introduce safeguard measures even before they are put into relevant laws. Lastly, the authorities went over the liquidity condition of mutual financial businesses. Although it is stable currently, th
Sep 25, 2023
- CD Rate as Critical Benchmark Rate to Take Effect from October 2
- The Financial Services Commission announced that the certificate of deposit (CD) rate as a critical benchmark rate under the Act on the Management of Financial Benchmarks will take effect from October 2. The disclosure of CD rates based on an updated calculation method will be available from October 4. In March 2021, the FSC selected the CD rate as a critical benchmark rate under the Act on the Management of Financial Benchmarks, and decided to designate Korea Financial Investment Association (KOFIA) as the administrator of critical benchmark rate in June 2023. Allowing a period of adjustment concerning the change in CD rate calculation method, the authorities granted a grace period of about three months. As the CD rate as a critical benchmark rate will take effect from October 2, financial institutions using CD rates will be required to provide explanation to investors about their use of critical benchmark rate for both new and renewal contracts. The KOFIA will begin to disclose CD rates using an updated calculation method starting from October 4. As this change in the critical benchmark rate takes place in the market, for the first six months, the financial authorities will focus on ensuring a seamless transition and adoption by financial institutions. * Please refer to the attached file for details.
Sep 25, 2023
- Online Loan Transfer Service to be Available for Housing Loans
- The Financial Services Commission announced that the online loan transfer service will be available for mortgage loans for apartments and jeonseloans for all housing types, allowing borrowers to compare different rates online and make a switch to the one offering lower interest rates. From May 31, 2023, the online loan transfer systems service availability has been expanded to include individual credit loans. As of September 15, a total of 67,384 transfers have been made with the volume of loans reaching more than KRW1.58 trillion. On average, applicants received interest rate cuts of 1.5 percentage points, and their total annual saving in interest payments is estimated to be more than KRW30 billion. The borrowers who switched loans saw their credit scores increase, and there has been more competition between financial companies in lowering interest rates. Based on these favorable outcomes, the authorities plan to expand the service availability to include home-backed mortgage loans for apartments and jeonse loans for all housing types. Previously, the process of switching a mortgage loan or a jeonse loan was ridden with inconveniences, as there were no sufficient loan comparison platforms and due to the hassle of having to visit multiple financial institutions. To help remove these inconveniences, the authorities will develop an online loan transfer infrastructure for housing loans joined by about 19 loan comparison platforms and some 32 financial companies. Relevant information sharing between financial companies will take place to ensure a seamless loan transfer experience for consumers. The loan transfer infrastructure for housing loans is expected to be set up by the end of 2023 and open to public in stages beginning in January 2024. The authorities expect that this will bring about more choices for financial consumers and open up new opportunities for financial companies and fintech businesses. * Please refer to the attached file for details.
Sep 25, 2023
- Policy Funds to Supply Venture Capital in Strategic Areas
- The Financial Services Commission held the 4th consultative body meeting on policy finance support with the related government ministries, policy financial institutions and a young entrepreneurs foundation on September 25. The consultative body on policy finance support was created last year to ensure more close alignment between the governments industrial strategies and supply of policy funds. In the five key strategic areas, the authorities last year pledged to supply a total of KRW91 trillion in policy funds support for 2023. As of August 2023, policy financial institutions have supplied a total of KRW73.8 trillion of policy funds support in the five key strategic sectors, achieving 80.4 percent of the annual supply target and surpassing the initial supply plan of 66.7 percent by the month of August. Along with concerns about an economic slowdown emanating from China, FSC Vice Chairman Kim So-young said that it is possible that interest rates and oil prices may continue to stay high for a while. Thus, in close coordination with relevant ministries, Vice Chairman Kim said that the authorities will work to ensure effective supply of policy funds to businesses to prevent funding shortages. To help ensure a continuous supply of policy finance support in each industry, the authorities discussed ways to more closely implement various industrial policy programs overseen by relevant government ministries with appropriate budget planning. In this regard, Vice Chairman Kim said that in order to provide policy finance support to various industrial sectors on a continuing basis, it is crucial to have a closer linkage between the supply of policy finance and fiscal planning. The authorities also discussed ways to overhaul the operation of Growth Ladder Fund, a fund dedicated for SMEs and venture businesses whose 10-year investment period has ended in August. The new Growth Ladder Fund will focus on investing in underfunded areas such as deep tech and climate sectors where the