FSC promotes fintech and innovation in financial services. In order to encourage convergence and collaboration between finance and information technology, FSC launched the financial regulatory sandbox scheme in April 2019, through which more than one hundred ‘innovative financial services’ have been designated. The regulatory sandbox program allows fintechs and start-ups to test out their ideas without worrying about the regulatory impediments. In addition, Korea’s open banking system was fully launched in December 2019, opening up payment networks to both banks and fintechs through a joint network. By creating a financial data exchange platform, fostering MyData industry and opening up extensive sets of public financial data stored at major public institutions, FSC is also working to create an environment where big data and AI can play a larger role in finance. Policies intended to promote innovation also include providing tailored support to the Korean fintech firms to help them grow and scale up as global unicorns by easing regulations, expanding investment and providing assistance for overseas business expansion.
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May 26, 2019
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May 23, 2019
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May 16, 2019
- Regulatory Reforms to Promote Robo-Advisory Services
- The FSC reformed the「Financial Investment Business Regulation」to promote robo-advisory services:1. Robo-advisory firms will be allowed to manage funds and entrusted assets commissioned by asset management firms. (scheduled to be implemented from July 24, 2019)Under the current regulation, asset management firms are not allowed to commission their business of managing funds and entrusted assets to robo- advisory firms. The regulation was revised to allow asset managers to commission such business to robo-advisors on condition that the asset managers are responsible for investor protection.2. Individuals will be allowed to participate in Koscom’s robo-advisor testbed, which will accept applications from June 3, 2019.Currently, the testbed is open only to firms including fintech firms, not to individuals, given that only companies are allowed to provide robo-advisory services. Robo- advisors verified through the testbed are allowed to provide investment advisory and entrusted services. To commercialize robo-advisory services after they pass the test, individuals are required to register as an asset management firm or to form a partnership with asset management firms.3. Capital requirement was eased to make it easier for small fintech firms to provide non-face-to-face services via robo-advisors. (implemented from March 20, 2019)Previously, discretionary investment businesses were required to have additional capital of KRW4 billion besides the minimum capital of KRW1.5 billion to provide non-face-to-face services through robo-advisors. To facilitate the entry of small fintech firms in robo-advisory services, the capital requirement of additional KRW4 billion was abolished.4. Robo-advisors will be allowed direct management of fund assets. (scheduled to be implemented from July 24, 2019)Currently, robo-advisors are not allowed to directly manage fund assets, while they are allowed to manage entrusted assets. The regulation was revised to allow robo- advisors to manag
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May 15, 2019
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May 15, 2019
- Third Batch of Financial Service Providers Designated as 'Innovative Financial Services' for FSC's Regulatory Sandbox
- The FSC designated eight additional financial services as ‘innovative financial services’ to be accepted into financial regulatory sandbox, following the first and second batch of financial services announced on April 17 and May 2. As of May 15, 26 services are approved to be tested in the financial regulatory sandbox.The eight financial services will be submitted to Financial Innovation Evaluation Committee and FSC within June for evaluation.Overview of designated innovative financial services1. A loan brokerage service that provides loan products offered by different financial firms, and credit evaluation service using mobile phone usage record such as service enrollment period, roaming, and bill payment record using mobile phones. (Finnq)2. A 24-hour artificial intelligence (AI) based insurance consultation and sales service.(Persona System)3,4. A payment system using smart-phone-embedded NFC for merchants without fixed stores such as food trucks and street vendors that enables payment of products they sell without credit card payment device or POS terminal. (Paycoq, Korea NFC)5,6,7. A loan brokerage service that provides various loan conditions including fixed interest rates and loan limit of different loan products tailored to each consumer. (MiBank, Finmart, teamwink)8. A P2P money transfer service using QR codes. (BC Card)
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May 02, 2019
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Apr 17, 2019
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Apr 01, 2019
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Mar 28, 2019
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Mar 25, 2019
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Feb 25, 2019
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Feb 11, 2019
- FSC to Propose a Bill on P2P Lending
- The FSC plans to propose a bill on peer-to-peer (P2P) lending to help the P2P sector grow into one of innovative fintech services and provide both investors and borrowers with better protection.Since P2P lending business in Korea kicked off, the sector has been regulated under flexible guidelines, instead of a legal framework. However, the sector has grown fast in recent years, with P2P lending surging to KRW 5 trillion as of the end of 2018, from KRW 600 billion in 2016. The sector’s rapid growth prompted the need for a legal framework to properly regulate the fast-growing sector and better protect investors and borrowers. Currently, five bills proposed by lawmakers are pending at the National Assembly.Against this backdrop, the FSC held a public hearing today jointly with the Financial Supervisory Service and the Korea Institute of Finance to discuss proposals for new legislation. At the hearing, FSC Chairman Choi Jongku laid out key principles that the new bill on P2P lending needs to pursue:i. It is desirable to establish a separate new legislation for P2P lending business, rather than trying to fit into other existing laws, given the sector’s distinctiveness and innovativeness.ii. New legislation will be designed to seek a right balance between the current market practice developed in the P2P lending sector and regulatory need to prevent risks such as excessive concentration to certain assets.iii. New bill will put emphasis on protection for investors and borrowers, with measures in place to prevent P2P platforms from conflict of interest and moral hazard.iv. New bill will consider scalability and flexibility in designing its regulatory framework, in response to fast-evolving developments in P2P lending market.v. New legislation needs to be backed by the sector’s self-efforts to enhance investor trust.Based on proposals under discussion so far, the FSC will propose a draft bill on P2P lending in March for further reviews and discussions at the National As
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Jan 30, 2019
- Korea Next Exchange (KONEX) to be Revitalized
- FSC Chairman Choi JongKu announced a plan for revitalizing KONEX at a meeting with young entrepreneurs and venture capital investors. The plan was intended to facilitate fundraising by SMEs venture companies; boost liquidity in the KONEX market; strengthen its role of nurturing SMEs venture companies to help them move to KOSDAQ; and enhance investors’ trust in the KONEX market.BACKGROUNDKONEX was launched in July 2013 as an exchange for SMEs too small to list on the KOSDAQ market. Since then, KONEX achieved a significant growth. Its market capitalization increased almost 13 folds, from KRW 0.5 trillion to KRW 6.3 trillion as of the end of 2018. Over the same period, the number of KONEX-listed companies also increased from 21 to 153. Its daily trading value increased 12 folds, from KRW 390million to KRW 48billion. Despite the growth in size, low liquidity and the lack of price discovery function prompted the need to reform the KONEX market. Against this backdrop, the FSC intends to revitalize the role of KONEX as a springboard for SMEs venture companies to grow further and a platform for venture capital investors to exit and re-invest.Key Changes1. FACILITATING FUNDRAISING THROUGH KONEX► KONEX-listed companies will be allowed to raise funds through crowdfunding, currently limited only to non-listed SMEs, and small public offerings, which will be newly introduced as part of capital market reforms.1► Regulations that cap discount rates on newly-issues shares will be eased for KONEX-listed companies:- (public offering) If an underwriter prices new shares based on demand forecast, new share offerings will be exempted from caps on discount rates.- (third-party allocation) new shares allocated to third-parties will be allowed to offer at a further discount exceeding the current cap of 10%.► External audit standards will be eased or tailored for KONEX-listed companies to reduce their regulatory burdens.1 For further details about ‘small public offerings’, refer
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Jan 21, 2019
- Follow-up Measures for Capital Market Reform
- FSC Chairman Choi JongKu announced follow-up measures for capital marketreform on his visit to a venture company in the Geomdan Industrial Complex, Incheon. As part of the capital market reform proposal1 announced last November, the follow- up measures include new schemes of introducing a specialized brokerage company to facilitate investment into unlisted securities of SMEs and venture companies; and expanding a pool of professional investors.I. SME-SPECIALIZED BROKERAGE COMPANY TO BE INTRODUCEDThe FSC will introduce a new category of brokerage companies specialized in capital raising business for SMEs venture companies.Scope of businessThe new type of brokerage firms will mainly engage in brokering transactions of private and unlisted securities. They will be also permitted to engage in a broader range of corporate financing for SMEs venture companies – e.g. advisory services for securities issuance and evaluation of corporate value in regard with MAs.However, given that the business involves high investment risks, they will only be allowed to professional investors.Entry requirementTo facilitate the establishment of new specialized brokerage companies, the FSC will lower barriers to entry: newcomers will be allowed to enter the business with registration only, with the minimum capital of KRW500 million and professional workforce of two or more.Applicable regulation investor protectionThe FSC will reduce regulatory requirements, given their limited scope of business and limited impact in financial markets: they will be exempted from prudential regulations – e.g. NCR or leverage ratios; and will be allowed to submit their reports on management and financial performance on a quarterly, not monthly, basis. To protect investors, however, they will be required to have appropriate internal controls which prevent conflict of interest.ScheduleA proposal to amend the Financial Investment Services and Capital Market Act (FSCMA) will be submitted to the National Assembly
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Dec 24, 2018
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Oct 17, 2018
- Enforcement Decree of the Special Act on the Establishment and Operation of Online-only Bank
- The FSC enacted the「Enforcement Decree of the Special Act on the Establishment and Operation of Online-only Bank」(hereinafter referred to as ‘enforcement decree’). The special bill, scheduled to take effect on January 17, 2019, raised a ceiling of shareholdings by non-financial companies in an online-only bank from 10% to 34%. As delegated by the special act, the enforcement decree is to specify non-financial companies qualified for an exception to the ownership cap of 10% in an online-only bank. The enforcement decree is open for public comments from October 17 to November 26.KEY PROVISIONS► Non-financial companies qualified for an exception to the ceiling of 10% on shareholdings in an online-only bankConglomerates subject to cross-shareholding restrictions under the「Monopoly Regulation and Fair Trade Act」are not allowed to own a stake in an online-only bank in excess of 10%. However, the enforcement decree allows an exception to the 10% cap for a conglomerate whose assets of ICT business accounting for 50% or more of assets of the group’s non-financial business.► Exception to restriction on credit granting to same borrowerThe special bill limits credit granting by an online-only bank to the “same borrowers” to 20% of its equity capital, stricter than the restriction of 25% under the Banking Act. The enforcement decree provides that exceptions are allowed when such exceptions are deemed important for the national economy or would not affect the bank’s soundness.► Exception to restriction on transaction with large shareholdersThe special bill basically prohibits online-only banks from extending credit to large shareholders and acquiring stocks issued by large shareholders. The enforcement decree allows exceptions when credit granting or acquisition of stocks, originally irrelevant with large shareholders, later became transaction with large shareholders through MAs, exercise of rights to collateral, or transfer of business.► Exception to
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Sep 03, 2018
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Aug 07, 2018
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May 29, 2018
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May 23, 2018
- Plan to Facilitate the Use of Movable Assets as Collateral
- The FSC outlined its plan to make it easier for SMEs to borrow from banks, using their movable properties as collateral. On May 23, FSC Chairman Choi JongKu visited the Sihwa Industrial Complex, a cluster of SMEs in Gyunggi Province, to see a demonstration of how banks can utilize the Internet of Things (IoT) in tracking and monitoring movable assets offered as security – for example, factory machines. At a meeting with SME entrepreneurs on the site, Chairman Choi briefed on potential benefits of movables as collateral and FSC’s policy schemes to facilitate the use of movable assets as collateral.BENEFITS OF MOVABLE PROPERTIES AS COLLATERAL• Movable assets account for a large portion of SME’s assets so that they could serve as a useful funding source for start-ups and early-stage SMEs, which often lack immovable assets they can provide as collateral.• Movable assets grow along with the development of business, making it possible for start-ups and SMEs to use their movable property as collateral to get funds for growth capital.• A pool of movable assets, offered as a security, is less vulnerable to the volatility of business cycle and less likely to default in the event of an economic downturn.• Movable assets enable SMEs to borrow more loans at lower interest rates, compared to what they could have borrowed on credit.CURRENT PROBLEMS WITH MOVABLES AS COLLATERALDespite such benefits, movable assets have not been actively used as collateral. From a bank’s perspective, movable assets are considered to be a riskier security than immovable assets:• Movable property offered as security involves deprecation of value and difficulty of figuring out who is really entitled to the pledged asset.• They are also exposed to a risk of being damaged or lost, incurring extra expenses for monitoring and managing such collateral.• Markets in which movables offered as collateral can be traded are not sufficient enough to match supply and demand in such transaction,
