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.
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Feb 26, 2021
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Feb 22, 2021
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Feb 22, 2021
- FSC to Strengthen Liquidity Management of Specialized Credit Finance Companies
- The FSC announced a set of measures aimed at strengthening the liquidity management of specialized credit finance companies on February 22. The measures include (a) establishing best practice guidelines, (b) strengthening disclosure requirements and (c) gradually reducing the maximum leverage on credit finance (non-credit card) businesses. Background Specialized credit finance businesses are lenders without deposit-taking functions.They usually finance their business through borrowings or the issuance of corporate bonds and asset-backed securities (ABS). In particular, their heavy reliance on debt finance, about 73.9 percent of their financing,creates a problem of risk transfer to financial institutions holding their corporate bonds, especially if credit finance companies face solvency problems. In this regard, there have been concerns about credit finance companies turning into a conduit of systemic risk in times of an unexpected economic shock such as COVID-19. Therefore, liquidity problems of credit finance businesses can pose a risk not only to the borrowers with mid-to-low credit backgrounds but also to the real economy as they may cause a drop in consumption and corporate facility investment. Key Measures I. Best Practice Guidelines on Liquidity Management The best practice guidelines on specialized credit finance companies liquidity management will be introduced for implementation beginning in April this year. - (Target) Bond issuing credit finance companies and those with more than KRW100 billion in total assets will be subject to the new guidelines. - (Role of Board and Management) Board of directors should oversee the establishment and operation of liquidity management strategies and the company management should prepare specific management process and criteria and regularly report to its board members. - (Liquidity Risk Indicators) Major liquidity risk indicators include corporate bond maturity distribution, liquid asset ratio, short-term debt ratio, etc.
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Feb 19, 2021
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Feb 18, 2021
- FSC Announces Rules Change to Improve the Recovery and Resolution Regimes of SIFIs
- The FSC announced a revision proposal for the Enforcement Decree of the Act on the Structural Improvement of the Financial Industry on February 18, which will be put up for public notice from February 19 to April 1, 2021. The revision proposal to the Enforcement Decree is a follow-up to the revised Act passed at the National Assembly in December last year which is aimed at strengthening the recovery and resolution regimes of the systemically important financial institutions (SIFIs) as recommended by the Financial Stability Board. The revisions are expected to help improve the preparedness and responsiveness of SIFIs in their crisis management. Key Revisions (Selection of SIFIs) The FSC should select SIFIs every year after considering their function, scale, ties to other financial institutions and influence on the domestic financial markets. In this regard, the selection of SIFIs will be confined to banks and bank holding companies. (Recovery and Resolution Plans) SIFIs will be required to prepare and submit their own recovery plans to the Financial Supervisory Service within three months from the day of being designated as a SIFI. The FSS will then immediately pass on their recovery plans to the Korea Deposit Insurance Corporation (KDIC) and be required to evaluate the recovery plans and file evaluation reports to the FSC within three months. At the same time, the KDIC will be required to draw up resolution plans and submit them to the FSC within six months. A deliberative body within the FSC will then decide on the final approval of both recovery and resolution plans within two months. In this regard, recovery plans should have been approved at a board meeting prior to being submitted and contain specific details about the role and responsibilities of board members and executives, major business areas, standards of determining crisis situations, specific crisis management measures, etc. The deliberative body within the FSC will be made up of an FSC commissioner (FS
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Feb 17, 2021
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Feb 16, 2021
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Feb 03, 2021
- FSC Announces Decision on Short-selling Ban
- FSC Chairman Eun Sung-soo held a press briefing on February 3 and announced the decision to extend the short-selling ban until May 2, 2021 and to allow a partial resumption of short-selling from May 3 on KOSPI 200 and KOSDAQ 150 stocks. Summary of Chairmans Remarks (FSCs Decision) The FSC has decided to extend the current short-selling ban until May 2 this year and allow a partial resumption from May 3 on KOSPI 200 and KOSDAQ 150 stocks. The partial resumption is intended to minimize the impact on markets, given these stocks have large market caps and liquidity so that the resumption of short-selling would have limited impact on stock prices. Meanwhile, the short-selling ban will remain on the rest of stocks (2,037 stock items) with further decisions on the resumption of short-selling on these stocks to be made later based on market conditions. The resumption date of May 3 has been decided to give the Korea Exchange (KRX) some time for system development and testing. With the revised Financial Investment Services and Capital Markets Act scheduled to go into effect on April 6 this year, with stronger penalty rules for illegal short-selling activities, there will be no issue of a legislative gap. Today, the FSC commissioners raised the same voice on the need to improve the short-selling system as there are investor demands for more transparency and fairness in the short-selling system. (Improving the Short-selling System) Prior to the May 3 partial resumption, the FSC will work on measures to improve the short-selling rules. First, The FSC will work to ensure the detection of and punishment on illegal short-selling activities. With the revised Financial Investment Services and Capital Markets Act, short-sellers will be required to keep their securities lending data for five years and the securities firms will be required to tighten monitoring of illegal short-selling activities. The securities firms are currently in the process of getting their systems ready according
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Feb 02, 2021
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Feb 01, 2021
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Jan 28, 2021
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Jan 26, 2021
- Financial Authorities to Work on Risk Management and Support Transition to First-mover Economy
- Vice Chairman Doh Kyu-sang held the 33rd financial risk assessment meeting via teleconference on January 26 to discuss key risk factors in 2021 and review the implementation of the COVID-19 lending support for SMEs and small merchants. The following is a summary of Vice Chairman Dohs remarks. (Risk Management) With the pandemic response measures put in place, the public and private sector debt increased throughout the world and asset prices have seen a rapid acceleration with abundant market liquidities. The accumulation of excessive debt may pose a risk to the economic recovery, and the financial authorities will continue to work on the management of the household and corporate debt. The FSC plans to introduce measures to more effectively manage household debt in the first quarter, which will focus on the application of DSR rules to individual borrowers. On corporate debt, the authorities will set up a monitoring system to check the status of corporate financing across different industries. Stock prices have gone up due to strong trading activities by retail investors. However, there are possibilities of a rising market volatility and the authorities will closely monitor the conditions in the stock markets. In addition, the authorities will work to strengthen the oversight of illegal and unfair trading activities including illegal short selling, while preparing tax incentives for longer-term stock investment. The FSC will also soon introduce measures to improve the competitiveness of the publicly offered funds to make the process more investor-oriented. (Channeling Funds to Productive Sectors) The authorities will work to ensure that the abundant market liquidities are flowing into productive sectors and toward the vulnerable groups in need. In this regard, the FSC will work on a seamless implementation of its policy on New Deal fund, which will be raised up to KRW4 trillion in 2021 with its first investment project hoped to be announced in March. In April, another
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Jan 25, 2021
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Jan 14, 2021
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Jan 13, 2021
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Jan 12, 2021
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Jan 12, 2021
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Dec 29, 2020
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Dec 24, 2020
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Dec 21, 2020