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Apr 26, 2023
- Revised Rule to Require IPO Bookrunners to Check Payment Capability of Institutional Investors
- The FSC approved a revision bill of the regulation on financial investment businesses at its 8th regular meeting held on April 26. This revision bill is a follow-up to the measures to improve the soundness of the initial public offering (IPO) market announced in December last year and contains a measure to facilitate carbon emissions trading by securities companies along with other regulatory overhaul items. Requirement for IPO bookrunners First, when managing IPOs, the IPO bookrunner will be responsible for verifying institutional investors ability to pay for stocks before the allotment of shares takes place. In an IPO, the bookrunner performs a book building to check demands from institutional investors in order to determine an appropriate IPO price. The public offering price decided is then used to get subscription from retail investors. However, for certain high-demand items, the issue of fictitious subscription by institutional investors in excess of their payment capabilities and that of over-competition have been problematic. It has been pointed out that this practice of fictitious subscription has been hindering the price discovery function of the book building process, causing distortions in the IPO market. Thus, this revision is aimed at preventing the practice of fictitious subscription and strengthening the responsibility of IPO bookrunners throughout the book building process by introducing sanctions such as imposition of an administrative fine for unfair transaction activity when bookrunners fail to check institutional investors stock payment capabilities prior to allotting shares. This requirement will take effect from the securities registration reports for IPOs filed after July, after relevant rules change is completed by the industry association. With this revision bill, apart from the measures for allowing bookrunners to preliminarily review institutional investors demands and introducing the cornerstone investing system, all other follow-up items
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Apr 24, 2023
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Apr 24, 2023
- FSC and KAI Participate in First Meeting of Sustainability Standards Advisory Forum
- The FSC and the Korea Accounting Institute (KAI) participated in the first meeting of the Sustainability Standards Advisory Forum (SSAF), an official advisory body of the International Sustainability Standards Board (ISSB), on April 17 in Frankfurt, Germany. At the first meeting, members discussed the progress in the development of the IFRS S1 (general sustainability-related disclosure requirements) and S2 (climate-related disclosure requirements), future standards setting priorities and the connectivity and compatibility between the ISSBs sustainability disclosure standards and the International Accounting Standards Board (IASB)s accounting standards. In March last year, the ISSB published its draft IFRS S1 and S2 and collected feedback from around the world. For crucial issues raised in the comment process, the ISSB will go through a re-deliberation before announcing financial standards at the end of June this year. The International Organization of Securities Commission (IOSCO) is also expected to decide whether to endorse them when the final standards are made public. The SSAFs first meeting also dealt with the areas of future standard setting priorities. The ISSB has already identified four potential projectsbiodiversity, ecosystems and ecosystem services; human capital; human rights; and integration in reportingas future standard setting priorities. In May this year, the ISSB plans to announce its agenda priorities for the next two years and seek feedback. The SSAF meeting provides an important venue for Korea to directly engage with the ISSB and other countries and strengthen international cooperation on sustainability disclosure standards. The SSAF meeting is held four times annually and the next meeting is expected to be held in July. The FSC and the KAI plan to continue to actively participate in global discussions on sustainability disclosure standards. In the meantime, authorities will also work on developing ESG disclosure standards in Korea as the ESG
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Apr 20, 2023
- FSC Chairman Speaks about Measures to Boost Support for Startups and Venture Businesses
- The FSC and the Ministry of SMEs and Startups held a press briefing on their joint effort to boost support for startups and venture businesses on April 20. The following is a summary of FSC Chairman Kim Joo-hyuns opening remarks. FSC Chairmans Remarks The measures to support startups and venture businesses being announced today are focused on helping the industry escape the problem of death valley in terms of their financing needs, and the measures take into account opinions of key industry participants such as venture investors and startups. According to venture investors, the industry currently faces difficulties in attracting new investment due to liquidity shortage amid interest rate hikes and anxieties in financial markets. Also, the slowdown in IPO market activities has made it difficult for investors to collect their investments, which restricts opportunities for new investment. Against this backdrop, while reflecting the opinions and needs of the industry, the government has drawn up support measures that will help strengthen the role of policy financial institutions while having the private sector play the key role in this private-public joint effort. Support for venture investors First, to support venture capital to liquidate funds at maturity according to schedule to allow opportunities for new investment, authorities will set up a secondary fund worth KRW1 trillion through policy financial institutions this year. Second, to facilitate banks to provide more venture capital, the banks investment cap on venture funds will be raised from the current level of 0.5 percent of equity capital to 1% of equity capital. Third, additional funds will be injected to the KONEX scale-up fund to promote innovative startups to be listed on KONEX and enable them to make collection on investment. Support for startups First, to help ensure a continuous growth of early-stage startups that are not making any profits and deep tech startups for which it may take a long time befor
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Apr 17, 2023
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Apr 13, 2023
- FSC Introduces Measures to Improve the Process of Bank Branch Closure
- The FSC introduced a set of measures aimed at improving the process of banks branch closures at the 5th working group meeting of the taskforce on improving the management and operating practices of banks held on April 12. The key measures include strengthening the preliminary impact assessment process and expanding the scope of information provided to consumers. From now on, before a branch closure, banks should collect opinions from the branch customers and make decision prudently. When a branch closure is unavoidable, banks should arrange to have an alternative service provision channel beforehand through a joint office, small-scale office, makeshift office or teller partnership to make sure that the same level of service is provided to consumers as before. Key Details I. Strengthen the Preliminary Impact Assessment Process Under the common procedures established for banks branch closures, banks need to conduct a preliminary impact assessment prior to closing down a branch and establish an alternative service provision channel when a branch closure has been decided. However, with the number of bank branch closures going up steadily, there have been calls to strengthen the effectiveness of these common procedures. Therefore, taking examples from overseas cases,from now on, it will be necessary for banks to establish relevant procedures to collect opinions from the consumers using their branch and take consumer opinions into account to make an adjustment to their alternative service provision plan, perform an impact assessment again or reconsider the decision to close down the branch. When a considerable impact on consumers is expected, banks should continue to maintain their branch office in principle. However, if it is unavoidable to close down the branch, banks should ensure that consumers can continue to access financial services without much inconvenience after its closure by establishing an alternative service provision channel through a small-scale office, jo
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Apr 10, 2023
- Household Loans, March 2023
- In March 2023, the outstanding balance of household loansacross all financial sectors declined KRW5.0 trillion, showing a continuing trend of decline. Financial authorities will work to ensure a stable management of household debt and keep close tabs on potential risks that may be caused by high interest rates. (Overall) Household loans across all financial sectors fell KRW5.0 trillion in March 2023. The year-on-year change rate (down 1.4 percent) accelerated somewhat compared to a month ago (down 1.3 percent), showing a continuing trend of decline since the second half of last year. (By Type) Mortgage loans edged up from a decline in the previous month and other types of loans fell at a faster pace. - (Mortgage Loans) Mortgage loans rose KRW1.0 trillion with a grow in the banking sector (up KRW2.3 trillion) and a decline in the nonbanking sector (down KRW1.3 trillion). - (Other Types of Loans) Other types of loans fell KRW6.0 trillion, declining at a faster pace compared to the previous month (down KRW4.7 trillion), led by credit loans (down KRW3.2 trillion). (By Sector) Household loans edged down in both the banking and nonbanking sectors. -(Banking Sector) Household loans in the banking sector fell KRW0.7 trillion in March, declining at a slower pace compared to a month ago (down KRW2.7 trillion). Mortgage loans from banks grew KRW2.3 trillion as the volume of policy mortgage loans increased (up KRW7.4 trillion), but jeonse loans (down KRW2.3 trillion), group lending for new apartment subscription (down KRW0.9 trillion) and general individual mortgage loans (down KRW1.9 trillion) all declined. Other types of loans in the banking sector fell KRW2.9 trillion as credit loans went down KRW2.3 trillion. -(Nonbanking Sector) Nonbanks saw a drop of KRW4.4 trillion in household loans with a slight increase in insurance companies (up KRW0.4 trillion) and declines in mutual finance companies (down KRW4.0 trillion), specialized credit finance companies (down KRW0.4 trillion
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Apr 10, 2023
- FSC Proposes Rules Change in the Enforcement Decree of the Banking Act
- The FSC gave advance notice on April 10 regarding rules change in the Enforcement Decree of the Banking Act, which will be put up for public comment until May 22. The revision bill establishes a specific standard for when a bank should get authorization from the FSC if it closes down or transfers or acquires a major part of its business operation. It also contains a regulatory modification in agreement with upstream legislation and a penalty clause for a specific type of violation. When Citibank Korea decided to draw back its retail banking operation in 2021, the FSC was not able to proceed with an authorization process since the Banking Act stipulates a banks closure of the entire part of its business as an area where the FSC could deliver authorization. For the closure of a part of the banks business operation, the FSC then saw it unlikely that it could give authorization under the purview of the Banking Act. Nonetheless, given the necessity to protect the rights and interests of consumers, the FSC then gave the order to Citibank Korea to draw up a detailed plan to minimize inconvenience to consumers, protect consumer rights and maintain sound market order and implement its plan faithfully as it was authorized to take such action as prescribed by the Financial Consumer Protection Act. In March 2023, the Banking Act was amended, however, to subject banks to get authorization from the FSC when they close down not only the entire part of their business but a major part of their business operation as well. The amended Banking Act then delegates the authority of determining what constitutes a major part to its Enforcement Decree. Thus, this partial revision proposal for the Enforcement Decree of the Banking Act specifies the major part of the banks business operation to be closed down as a part of business constituting 10/100 or more of the banks assets and total profits. Also, considering that the transfer of a part of a business is in essence same as the closure of a
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Apr 06, 2023
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Apr 03, 2023
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Apr 03, 2023
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Mar 29, 2023
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Mar 27, 2023
- Application of Temporarily Eased Financial Regulations to be Available until June 2023
- The FSC held a meeting with the FSS and financial industry associations on March 27 to check financial market conditions and the liquidity and soundness conditions of financial institutions and discussed extending the availability of temporarily eased financial regulations put in place since October last year. Temporary Market Stabilization Measures Expiration Schedule (Oct. 2022~) a) Banks: Postponement of normalization of liquidity coverage ratio (LCR) (92.5%, until end-June 2023), temporary easing of loan-to-deposit ratio (105%, until end-April 2023) b) Insurance companies: Temporary easing of cap on borrowing from retirement pension special accounts (until end-March 2023) c) Savings banks: Temporary easing of loan-to-deposit ratio (110%, until end-April 2023) d) Specialized credit finance businesses: Temporary easing of KRW-based currency liquidity ratio by 10%p (until end-March 2023), temporary easing of the creditable assets to real estate project finance exposure ratio by 10%p (until end-March 2023) e) Financial investment businesses: Postponement on downsizing (from 12% to 8%) the cap on the amount of bonds (issued by specialized credit finance businesses) that can be included when hedging risks associated with equity-linked securities (ELS) under management (until end-March 2023), easing of net capital ratio risk weight when purchasing project finance asset-backed commercial papers (PF-ABCPs) guaranteed by own company (until end-June 2023) f) Financial holding companies: Easing of cap on credit extension between their own subsidiaries (until end-June 2023) Extended Availability of Eased Regulations With regard to the temporary easing of financial regulations applied since October last year on banks, insurance companies, savings banks, specialized credit finance businesses and financial investment firms, considering that there are lingering uncertainties in financial markets at home and abroad, authorities decided to extend the availability of deregulatory m
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Mar 23, 2023
- 4th Working Group Meeting Held on Improving Management, Operating Practices of Banks and Banking System
- The FSC and the FSS held the 4th working group meetingof the taskforce on improving the management and operating practices of banks and banking system on March 22, chaired by FSC Vice Chairman Kim So-young. Details of 4th Working Group Meeting Discussions First, participants discussed the recent progress and future plan for online deposit product brokerage service, which is aimed at enhancing consumer benefits and boosting competition in the banking sector. Financial authorities announced that the online deposit product brokerage service offered by nine companies that were selected as innovative financial service providers in November 2022 will be launched in June this year and that the authorities plan to provide support to ensure their seamless launch. Also, at the end of May, authorities plan to have another screening session for more than ten companies that submitted applications to be selected as innovative financial service providers to allow more diversity in the availability of relevant service platforms. Based on the result of pilot operation, authorities plan to consider whether to make online deposit product brokerage services official in 2024. In particular, when seeking to make it official, authorities plan to look into ways to include checking accounts as well as ways to expand the subscription limit within the boundaries in which excessive money moves can be avoided. In this regard, participants expressed high hopes for the benefits of online deposit brokerage services, particularly in connection with MyData services. A participant talked about the importance of ensuring fairness in algorithms to enable appropriate recommendation of deposit products, and that the service fee levels need to be set appropriately so as not to transfer deposit brokerage service fees to consumers. Another participant raised a concern about excessive money moves as consumers become more sensitive to interest rates, and said that there needs to be upper limits for subscripti
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Mar 20, 2023
- KoFIU Unveils H2 2022 Survey Result on Virtual Asset Service Providers
- The Korea Financial Intelligence Unit (KoFIU) conducted a survey on 36 registered virtual asset service providers (VASPs) in order to ascertain the current state of the domestic virtual asset market. Survey Overview (Respondents) 36 VASPs (27 exchange service providers and 9 other businesses) (Survey Method) Data collected from VASPs by paper surveys (Period Covered) July 1, 2022 to December 31, 2022 Key Survey Findings for H2 2022 The domestic market for virtual assets in H2 2022 was downsized significantly compared to that of H1 2022 in terms of market capitalization, trading volume, operating profits, etc.This seems to be caused by a contraction in the real economy due to interest rate and price hikes, as well as a decline in confidence following the Luna crash and the collapse of FTX. According to the survey, the amount of deposits in KRW and the number of users, which show potential investment demands in the future, both declined. Investment in the global top ten virtual assets, such as Bitcoin, handled by the KRW-based exchange service providers increased from 46 percent in H1 2022 to 57 percent in H2 2022 (up about 11 percentage points), which is greater than that in non-mainstream virtual assets. New listing of virtual assets also dropped significantly by about 72 percent compared to H1 2022, showing a tendency of VASPs conducting their operations more conservatively following the Terra-Luna crash. The newly analyzed items in the H2 2022 survey include the reason for suspending transaction (delisting of a virtual asset) and the VASPs compliance status with the travel rule.In H2 2022, the most prevalent reasons for delisting of virtual assets were in the order of project risk (50 percent), investor protection risk (22 percent) and market risk (22 percent). The amount of transactions between domestic VASPs that were subject to the travel rule amounted to KRW7.5 trillion, about 25 percent of all VASPs external transfer volume (KRW30.6 trillion) in H2 2022. The
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Mar 16, 2023
- Prudential Regulations on Banks to be Revamped for Improving Loss Absorbing Capacity
- The FSC and the FSS discussed the plans for bolstering capital adequacy and loan loss reserve requirements in the banking sector to improve banks loss absorbing capacity, as part of the agenda at the 3rd working group meeting of the taskforce on improving the management and operating practices of banks and banking system held on March 15. Background The banking sector, whose soundness remained in good shape even in the pandemic situation, has faced with growing uncertainties since interest rates sharply increased and the won-dollar exchange rates surged in 2022. (Capital Adequacy) As of the end of September 2022, the CET1 (common equity tier 1) capital ratio stood at 12.26 percent, which is well above a minimum CET1 capital ratio requirement (7.0 to 8.0 percent), but is lowered than 12.99 percent at the end of 2021 due to the impact of losses on bond portfolio, etc. When compared to major economies,the capital adequacy remains relatively low, and banks recent moves to expand dividends are likely to lead to a further decline in their capital ratios in the future. (Asset Soundness) The delinquency rate on bank loans, which had fallen during the pandemic, is gradually edging upprimarily led by the household sector, due to recent increases in loan interest rates, etc. In order to ensure sufficient loss absorbing capacity of the banking sector in preparation for future uncertainties, authorities plan to improve prudential regulations on banks (capital adequacy and loan loss reserve requirements) for preemptive risk management. Measures to Revamp Prudential Regulations in Banking Sector I. Improvement of Capital Adequacy Requirement a) Imposition of Countercyclical Capital Buffer (CCyB) (As Is) CCyB was introduced in 2016 as part of the Basel III capital regulations but the level of CCyB remains zero percent until now. As the amount of credit rapidly increased from the second half of 2019, there were signals in which banks were supposed to accumulate CCyB. However, due to
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Mar 16, 2023
- 3rd Working Group Meeting Held on Improving Management, Operating Practices of Banks and Banking System
- The FSC and the FSS held the 3rd working group meetingof the taskforce on improving the management and operating practices of banks and banking system on March 15, chaired by FSC Vice Chairman Kim So-young. Details of 3rd Working Group Meeting Discussions First, participants discussed policy direction for prudential regulations on banks to improve their loss absorbing capacity. Financial authorities introduced their plans to ensure that banks have sufficient loss absorbing capacity in preparation for future uncertainties by bolstering prudential regulations. In this regard, authorities will consider imposing countercyclical capital buffer (CCyB) to enhance banks overall capital adequacy ratio and introducing stress capital buffer depending on each banks risk management status and stress test result. In addition, authorities are currently working on revising the regulations on supervision of banking business, which will authorize financial authorities to request banks to set aside special reserves for loan loss and conduct a regular inspection every year on banks models for forecasting estimated loss and demand improvements if the results are deemed insufficient. Regarding these measures for enhancing banks loss absorbing capacity, participants said that it is necessary to consider appropriateness not only in the amount of capital buffers but also in the timing and the pace of implementation. First, participants said that improving the effectiveness of CCyB accords with the recent developments in capital requirements and research direction. If prudential regulation is tightened in the banking sector, however, it may cause a balloon effect in which potential risks move to the non-banking sector. In this regard, participants emphasized the need for a balanced approach, which considers the soundness of the nonbank sector as well. They also stated that it is necessary to keep close tabs on the real estate market, given similarities between the credit cycle and the real e
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Mar 09, 2023
- 2nd Working Group Meeting Held on Improving Management, Operating Practices of Banks and Banking System
- The FSC and the FSS held the 2nd working group meetingof the taskforce on improving the management and operating practices of banks and banking system on March 8, chaired by FSC Vice Chairman Kim So-young. Details of 2nd Working Group Meeting Discussions First, participants got briefed on and discussed the current progress in the development of a single-stop online loan transfer infrastructure and authorities plan for its expanded application. Authorities reviewed the progress of construction of a credit loan transfer system which authorities aim to launch in May 2023. To facilitate competition in the financial industry, authorities will broaden the scope of participating institutions (financial institutions, loan comparison platforms, etc.), make its fees calculation system more reasonable, and expand its service availability to include not only credit loans but also home mortgage loans. In this regard, participants said that a reasonable fees calculation for using the interest rate comparison platform is needed, and that it is essential to watch out another oligopoly created by platform business operators. Second, participants held in-depth discussions on ways to promote competition between the banking and nonbanking sectors as an extension of the discussion held in the recent meeting.Firstly, the financial investment, insurance and specialized credit finance business sectors each made a presentation on more concrete description of competition that can be realized when payment settlement services are allowed for its sector, following improvements in consumer convenience and ways to solve the previously identified risks. Regarding these, participants said that it is necessary to look at the payment settlement infrastructure from the perspective of for the same function, same risk and same regulations apply. If nonbanks are allowed to provide payment settlement services, various positive benefits to the public are expected such as convenient use of diverse types of
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Mar 09, 2023
- Household Loans, February 2023
- In February 2023, the outstanding balance of household loansacross all financial sectors declined KRW5.4 trillion compared to last month (m-o-m). The year-on-year change rate also dropped at a greater level (down 1.3 percent) compared to last month (down 1.3 percent), which showed a continuing trend of decline. Financial authorities will closely monitor household debt situation to keep it at a stable level, while continuing to inspect whether there exist any risks to household debt caused by high interest rates. (Overall) Household loans across all financial sectors dropped KRW5.4 trillion in February 2023. The year-on-year change rate (down 1.3 percent) declined at a faster pace compared to the previous month (down 1.0 percent in January), showing a continuing trend of decline since the second half of last year. (By Type) Mortgage loans (m-o-m) dropped for two consecutive months, and other types of loans also continued to decline. - (Mortgage Loans) Mortgage loans fell KRW0.6 trillion as both the banking sector and the nonbanking sector saw a drop of KRW0.3 trillion each. - (Other Types of Loans) Other types of loans fell KRW4.8 trillion, led by credit loans (down KRW2.5 trillion), but the pace of decline was slower compared to the previous month (down KRW7.1 trillion in January). (By Sector) Household loans edged down in both the banking and nonbanking sectors. - (Banking Sector) Household loans in the banking sector declined KRW2.7 trillion in February. Regarding mortgage loans, banks saw a growth in policy mortgage loans (up KRW1.0 trillion) and general individual mortgage loans (up KRW0.7 trillion), but a drop in jeonse loans (down KRW2.5 trillion),which resulted in a decline of banks mortgage loans for the first time since relevant statistics began to be collected in 2015. Other types of loans from banks dropped KRW2.4 trillion, led by credit loans (down KRW1.9 trillion), but the pace of decline slowed compared to the previous month. - (Nonbanking Sector) Nonb
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Mar 08, 2023
- SFC Imposes Penalty Surcharge on Violation of Short Selling Regulation for First Time
- The Securities and Futures Commission (SFC), a sub-commission of the FSC responsible for the oversight of the securities and futures market, reached a decision on March 8 to impose penalty surcharges of KRW3.87 billion and KRW2.18 billion on company A and company B, respectively, for their naked short selling activities, which violate the regulations on short sales prescribed in Article 180(1) of the Financial Investment Services and Capital Markets Act (FSCMA). Previously, illegal short selling activities were handled with administrative fine or caution. This is the first instance where authorities are imposing penalty surcharge on entities who committed those activities. While closely cooperating with relevant institutions, authorities will continue to maintain effective market monitoring, detection and investigation system on violation of regulations against short sales, and continue to strictly penalize illegal activities. Summary of Violation and Details of Discussion a) Company A had recorded on its internal system some amount of ◇◇◇ stocks that are expected to be issued through a capital increase without consideration before they are actually issued, in order to assess the value of its funds. Then, perceiving the stock as those can be sold, the company submitted sell orders on 210,744 ordinary shares (KRW25.14 billion) of ◇◇◇, which the fund had no ownership of, within a certain period in 2021. This was in violation of the regulation that prohibits naked short selling. b) Company B had erroneously entered the information of the borrowed △△▽ stocks, the name of which is similar to that of △△△ stocks, into its balance management system. Then, based on this overstated balance, the company submitted sell orders on 27,374 ordinary shares (KRW7.329 billion) of △△▽ stocks (which the company actually had no ownership of) on a certain day in 2021. This was in violation of the regulation that prohibits naked short selling. As this is the f
