Press Releases - Financial Services Commission

Press Releases

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Aug 31, 2016

FSC Statement on Hanjin Shipping's Filing for Court Receivership

FSC Vice Chairman Jeong Eun-bo held a meeting on August 31 with officials from relevant agencies to discuss the possible government’s responses following Hanjin Shipping’s decision to file for court receivership. 1. Impact on financial market will be limited.Hanjin’s filing for court receivership will have only limited impact on financial markets as the event has been already reflected to a considerable extent in the process of restructuring. In the stock market, Hanjin Shipping accounts for 0.03%, worth KRW 401 billion, of Kospi’s market capitalization. Its share price has declined 53.8% from KRW 3,540 per share on January 2 to KRW 1,635 on August 29, 2016. The impact on corporate bond market will be limited as credit ratings of Hanjin Shipping and Korean Air Lines already factored in the event. 2. Impact on financial institutions and corporate bond investors will be limited as well. Creditor banks have set aside loan loss provisions against most of possible losses. The additional amount of loan loss provisions the banks need is estimated to be KRW 0.3 trillion as Hanjin Shipping files for court receivership. The outstanding issuance of corporate bonds has continuously decreased in the restructuring process so far from KRW 2.2 trillion at end-2013, KRW 1.7 trillion at end-2014, KRW 0.8 trillion at end-2015, to KRW 0.5 trillion at end-June, 2016. Most of issued bonds are held by institutional investors. 3. The government will promote acquisition of Hanjin Shipping’s healthy assets by Hyundai Merchant Marine in a bid to maintain competitiveness of the shipping industryIn response to the market concern over the shipping sector, one of Korea’s key industries, the government will make sure to maintain the shipping industry’s competitiveness. Hyundai Merchant Marine (HMM) would acquire Hanjin Shipping’s core assets such as ships, overseas sales network and key work forces to retain Hanjin Shipping’s competitiveness as much as possible. 4. The government
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Aug 22, 2016

Government Decides to Sell Its 30% Stake in Woori Bank to Multiple Buyers

The Public Fund Oversight Committee (PFOC) decided to sell the government’s 30% stake in Woori Bank to multiple buyers with an aim to close the deal by the end of this year. Since the PFOC announced its two-track approach in July 2015 , the government has been tapping demand for the both options. We found that it would be difficult to proceed with the plan of selling a controlling stake to a single buyer under the current market situation, while there is considerable potential demand for acquiring a smaller stake. As a result, the PFOC came to a conclusion that selling the government’s stake to multiple buyers in a smaller stake of 4 to 8% each is the best option to sell Woori Bank in a swift manner, while maximizing the recovery of public funds and contributing to further development of the financial industry. 1. (Shares for sale) 30% out of 48.09% owned by the Korea Deposit Insurance Corporation (KDIC) will be put up for sale2. (Minimum and maximum bidding volume) Minimum bidding volume is 4%, including the percentage of the shares bought in previously. The bidding volume cannot exceed 8%, excluding the previously-bought shares. However, under the Banking Act, non-financial companies must acquire FSC approval in order to buy a stake more than 4% and are not permitted to acquire a bank’s stake exceeding 10%.3. (Competitive auction) The bidding will proceed in competitive auction scheme. In principle, the shares will be sold to the highest bidders, however, the PFOC will take into account factors other than bidding price considering the winning shareholders’ potential influence on Woori Bank’s management. Further details of non-price factors will be decided by the PFOC.4. (Incentives for final bidders) A winning bidder who newly acquired more than 4% will be granted right to recommend one outside director. The PFOC will devise differentiated incentives for bidders depending on their bidding volume in order to encourage bidders to bid for a larger amount of
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Jun 15, 2016

FSC Statement on Results of MSCI 2016 Market Classification Review

FSC Vice Chairman Jeong Eun-bo held a meeting on June 15 with officials from relevant agencies to discuss the government’s responses, following MSCI’s announcement of 2016 Market Classification Review. In its annual market review, MSCI announced that “Korea will not be included on the list for a potential reclassification to Developed status as part of the 2017 Review”, citing the following reasons: “the recent changes announced by the Financial Services Commission in South Korea will not take effect until 2017 and the investment frictions related to the lack of convertibility of the Korean Won and restrictions imposed by the local stock exchange on the use of exchange data for the creation of financial products remain unaddressed.” The Korean government’s stance on the MSCI requirementsThere exist some gaps between the extent of improvements that the government could make under our economic and market circumstances and the level of MSCI’s requirements, making it difficult for Korea to be included in the MSCI’s developed market index in the near future. Convertibility of the Korean Won MSCI has been asking the Korean government to allow offshore trading of the Korean won to address the lack of convertibility of the Korean won. However, we consider that currency market stability is an issue of critical importance to Korea, a small and open economy which highly relies on international trade. The Korean government seeks the internationalization of the Korean won but will move gradually, taking possible impact of currency market volatility on the Korean economy into consideration. In particular, allowing offshore trading of the Korean won is an issue that we cannot address in the short term since it would involve fundamental changes to our current forex management system. Use of KRX price data MSCI demanded that KRX should abolish immediately the “anti-competitive” clauses that require a separate contract for the use of KRX data for the purpose of
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May 24, 2016

Test Operation of Omnibus Account

The FSC/FSS and relevant agencies will launch a test operation of ‘omnibus account’ starting from May 25 with four standing proxies, two securities firms and one global financial investment company. The test run is (i) to have foreign investors engage in devising detailed procedures; and (ii) to prevent technical errors in electronic and settlement system in advance of a full operation of the omnibus account system in 2017. The test operation will be proceeding in two stages: ▪ [stage 1] Mock Trading (May 25~Sept. 2016) Participants will process a whole procedure of order, settlement and ex-post reporting through a mock trading system to check detailed operation process and stability of electronic system. ▪ [stage 2] Real Trading (Sept. 2016~before an official operation scheduled in 2017) A limited number of participants including global investors who participated in mock trading will conduct real trading through an ‘omnibus account.’ The FSC/FSS will gather their suggestions in the process of the stage 2 and amend the system until the full operation in 2017. The FSC/FSS will reflect suggestions gathered from global investors in the process of the test operation into detailed procedures of the omnibus account system; and help more global investors participate in each stage of the test run. FREQUENTLY ASKED QUESTIONS ABOUT OMNIBUS ACCOUNT Test Operation of Omnibus Account1. Why are you conducting the test run through mock trading, not real trading? - Given the nature of an ‘omnibus account’ which enables a consolidated processing of trading orders and settlements from multiple investors, detailed settlement procedures may differ according to each financial institution. If the omnibus account were testes in real trading from the beginning, it might incur losses to investors accruing from settlement errors. - The test operation will be conducted through mock trading based on various scenarios to minimize any possibility of settlement errors. We are plan
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May 20, 2016

FSC Statement on HMM Negotiations

HMM and KDB are doing their best efforts to successfully conclude their negotiations with shipowners on charter rates. What matters is successful conclusion of the negotiations; therefore, the negotiations will be proceeding without being bound to a specific timeline. However, if the negotiations dragged on for so long, it would delay restructuring process of HMM. Therefore, we hope the negotiations will be concluded as soon as possible. In regard with prospect of the negotiation, the FSC is neither optimistic nor pessimistic. We are well aware that the negotiations are a complex and tough process; and that those involved are doing their best to reach a mutually desirable conclusion. If the negotiations failed, we regard that it would be practically difficult for HMM to get back on track. In this context, the negotiations now underway are very significant. If failed despite such efforts, there would be few options left for creditors to choose. The normalization of a business requires sharing of burdens among stakeholders. Adjusting charter rates to appropriate levels is essential for normalization of shipping companies; therefore, we look forward to consideration and cooperation from shipowners. * Please refer to the attached file for details.
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Mar 14, 2016

Introduction of Korea's Individual Savings Accounts (ISAs)

Korea’s Individual Savings Accounts (ISAs) were introduced on March 14, 2016, in which individuals can invest into various financial products such as savings, funds and derivative-linked securities. Previously, individuals had to open separate accounts for each financial product. The introduction of ISAs is expected to help individuals build an investment portfolio tailored to their risk appetite and investment purpose and manage their wealth more efficiently with the aid of asset management experts. ISA products are now on sale starting from March 14 through branches of 33 financial institutions – banks, securities firms and insurers. TYPES OF ISASThere are two types of ISAs: a trust-type product and a discretionary investment product. ▪ Trust-type ISAs The trust-type ISA is aimed at individuals who want to choose financial products to be included into their accounts on their own. Without the account holder’s direction, financial institutions cannot change the composition of investment portfolio. ▪ Discretionary ISAs The discretionary ISA is targeted for those who want to let asset managers manage their money. Financial institutions provide clients with model portfolios, considering their risk appetite and investment purpose. The client is then supposed to pick one of the model portfolios to let asset managers on behalf of them choose products to be included in the account. Without the account holder’s direction, financial institutions are allowed to rebalance assets within the account every quarter, evaluating profitability and safety of such assets. ※ Since only one ISA is allowed per person, individuals have to choose either a trust-type ISA or a discretionary ISA, considering which type of the ISAs is more suitable for themselves. WHAT PRODUCTS CAN BE INCLUDED IN ISAS▪ Savings products – savings and installment savings with banks and mutual savings banks; deposits with mutual financial institutions; and RPs▪ Investment products – public of
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Feb 01, 2016

'Omnibus Account' for Foreign Investors to be Introduced

The FSC announced its plan to introduce an ‘omnibus account’ in an effort to make it easier for foreign investors to trade locally-listed stocks in the Korean stock market. The newly-introduced ‘omnibus account’ system is expected to reduce transaction costs of global asset management companies and make foreign investors’ trading of locally-listed stocks through global securities firms more convenient. BACKGROUNDThere is a growing need for the current foreign investor registration system to improve in accordance with changes in investment environment and practice: - As Korean capital markets become mature, index-tracking passive funds are taking an increasing share of the Korean stock market. Such passive funds are sensitive to transaction costs as they frequently trade in many countries. - Global securities companies are increasingly using omnibus accounts to process multiple trading orders. - The current foreign investor registration system needs to become less rigid as foreign investment limits in Korean companies were abolished except for some public purpose companies(PPC). Against the backdrop, the FSC held meetings with various market participants to gather their opinions and came up with measures to make the foreign investor registration system more reasonable and flexible in accordance with global practice. The system will be improved based on the following three principles: - enabling convenient trading of foreign investors in the Korean stock market in accordance with global investment practice, - ensuring conformity with other relevant domestic rules such as Korean tax regime, and- maintaining monitoring of foreign capital in Korea’s FX and stock markets, which is one of the core functions of foreign investor registration system. CURRENT FOREIGN INVESTOR REGISTRATION SYSTEM1. OverviewForeign investors must register their personal information with the FSS before they can invest in locally-listed stocks. Upon registration, foreign investors are
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Oct 02, 2015

FSC Plans to Revise the KDIC-Woori Bank MOU

The FSC plans to revise an MOU signed with Woori Bank in 2000 in a bid to boost corporate value of Woori Bank and give the bank more autonomy in its management. We expect the revision to help assure market participants the government’s commitment to privatize Woori Bank and improve the bank’s corporate value to facilitate the sale. 1. Under the current MOU, the KDIC’s control is eased when its stake in Woori Bank falls below 50%. The revision will add a new requirement so that the KDIC’s control could be eased if accumulated recoupment of public funds exceeds 50% of the total injection of public funds into Woori Bank. * Woori Bank has recouped KRW 8.2 trillion, 64.2% of the total injection of public funds worth KRW 12.8 trillion as of end-September 2015. 2. The revision will specify conditions to terminate the MOU as the sale of the controlling stake in Woori Bank is open to both single buyer and multiple investors to form an oligopoly of shareholders. With the revision, the MOU could be terminated after approval by the Public Fund Oversight Committee (PFOC) in case that the KDIC no longer exercises effective control over the bank’s management – e.g. the controlling stake is sold to multiple investors to form an oligopoly of shareholders. 3. To give the bank more autonomy in generating profits, profitability will be evaluated by ROA and ROE, while factors such as the ratio of selling, general administrative expenses to adjusted operating income and adjusted operating income per capita will be removed. 4. To help the bank’s management work under a long-term plan, targets and evaluations under the MOU will be more focused on mid-to-long term ones.*Please refer tothe attachedPDF for details.
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Sep 04, 2015

FSC Chairman Meets Foreign Banker Group

FSC Chairman Yim Jong-yong held a meeting this morning with the CEOs of foreign banks’ branches and representative offices in Korea to listen to their views and suggestions for improvement on Korea’s financial regulatory environment and help resolve difficulties in doing business in Korea.Prior to listening to suggestions made by foreign bankers, Chairman Yim pledged to lower entry barriers for foreign banks and introduce more flexibility in business licensing requirements for a foreign bank’s branch. For example, foreign banks have been recommended to open a representative office before they file an application for a business license to set up a branch. It is now up to foreign banks’ decision so that they are allowed to file an application for a business license to launch a local branch without opening a representative office. In practice, Indonesia’s BNI and China’s Guangda Bank have recently filed an application for launching its Korean branch respectively, which is now under review for regulatory approval. Currently, foreign banks are required to meet at least one of three requirements to start business in Korea in regard with credit ratings, asset levels and the number of foreign branches. In reviewing such requirements, the FSC will introduce more flexibility depending on the scope and nature of their business. As the FSC pushes forward its financial reform initiative to strengthen the financial sector’s competitiveness, we welcome views and suggestions from foreign financial institutions. The FSC will continue to improve Korea’s financial regulatory system in accordance with international standards. * Please refer to the attached PDFfor details.
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Aug 17, 2015

KRX Designated as Trade Repository

BackgroundIn the aftermath of the global financial crisis, G20 nations are introducing Trade Repository(TR) as an instrument to strengthen regulations on over-the-counter derivatives market. TR is a financial market infrastructure that collects, manages, and analyzes data related to OTC transactions.In line with such global trend, the FSC and FSS announced a plan to introduce TR in Korea on June 17, 2004 and have been engaging in relevant preparatory procedures.Introduction of TR in KoreaThe FSC, FSS, and financial experts formed a task force and conducted a thorough study related to TR from July to December, 2014. A special committee was formed in July 2015 to devise detailed qualification standards to be designated as TR based on the study results.On August 17, the Korea Exchange was finally designated as TR after going through a screening process on two bidders for TR - the KRX and Korea Securities Depository.Expected EffectsIntroduction of TR is expected to improve credibility and global competitiveness of Korea’s financial market infrastructure. It will also enhance financial transaction transparency and strengthen market monitoring capability as it enables more efficient management and analysis of data related to OTC derivatives transaction.*Please refer to the attachedPDF for details.
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Aug 07, 2015

Notice for Financial Customers upon Designation of Temporary Holiday on August 14

▪ All financial markets will be closed. Most financial institutions will be closed as well.▪ Financial customers with loans due August 14 can repay their loans on August 17 without overdue interest.In commemoration of the 70th anniversary of the Korean independence, August 14 is designated as temporary holiday. All financial markets including securities and bond markets will be closed. Most financial institutions will be closed as well.* Pleaserefer tothe attachedPDF for details.
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Jul 22, 2015

Revision to Regulation on Financial Institutions

The revision to「Regulation on Financial Institutions’ Outsourcing of Data Processing Business IT Facilities」will take effect upon its approval by the Financial Services Commission (FSC) on July 22, 2015. The revision includes shifting of the current ‘ex-ante’ regulations to ‘ex-post’ regulations to reduce financial institutions’ burden related with outsourcing of data processing business.*Please click the attached file for details.
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Jul 22, 2015

FSC Gives Preliminary Approval for Hana Bank-KEB Merger

The FSC held its 14th meeting and gave preliminary approval for the merger of Hana Bank and Korea Exchange Bank (KEB). As members of the executive board and governance structure of the new Hana-KEB bank have not been decided yet, eligibility of executives and appropriateness of governance structure will be reviewed in the final review process upon submission of request for official approval for the merger. * Please click the attached file for details.
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Jul 21, 2015

Statement on Privatization Plan for Woori Bank

The Public Fund Oversight Committee (PFOC), a deliberative body in charge of privatizing Woori Bank, held a meeting today to discuss how to push forward the privatization and decide on the new plan. 1. The PFOC decided to consider a new approach of selling 30% to 40% out of the government’s 48.07% stake to multiple buyers in smaller portions ranging from 4% to 10%, in addition to its previous plan of selling the controlling stake to a single buyer. After searching for potential buyers, we came to a conclusion that it is difficult to find a single buyer for the controlling stake, while there are multiple potential investors interested in a partial stake, who will form a group of major shareholders to control the board of directors. We expect the new option to draw more diverse market interests. The remaining stake, a maximum of 18.07%, will be open for smaller investors. 2. Woori Bank needs to continue to make efforts to further boost its corporate value in order to facilitate its privatization. 3. In the process of tapping potential buyers, we recognized that market participants are still concerned whether the government would continue to intervene in the bank’s management after the bank is privatized. In order to dispel such worries, the government will improve the implementation of the MOU with the bank even before the completion of the sale in order to ensure the bank’s autonomy in management. Upon the sale, the MOU will expire. We reaffirm that the government will never intervene in the bank’s management. 4. Given insufficient investors’ interest in Woori Bank, it is difficult to proceed with the sale process immediately. We will continue to make our efforts to make the market condition mature enough to attract sufficient demand for the bank. 5. The government has a strong commitment in pushing forward the sale of Woori Bank and will continue to make our utmost effort to privatize Woori Bank as early as possible. * Please refer to the attached PDF for
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Jun 09, 2015

Revision to Regulation on Financial Institutions' Outsourcing of Data Processing Business & IT Facilities

The FSC announced a 20-day notice (June 10~July 1) of revision to the Regulation on Financial Institutions’ Outsourcing of Data Processing Business IT Facilities. The revision intends to reduce financial institutions’ burden related with outsourcing of data processing business by shifting regulatory focus from the current ‘ex ante to ‘ex post’ regulations. Outsourcing their data processing, financial institutions are subject to obligations under relevant data protection laws and regulations to protect customers’ personal information. The revised draft will be reported to the Financial Regulatory Council to be held on June 18, reviewed by the Regulatory Reform Committee and finally approved by the FSC to be enforced. BACKGROUNDFinancial institutions outsource their data processing business for financial transaction information to cut cost and enhance efficiency. Korea established the Regulation on Financial Institutions’ Outsourcing of Data Processing Business IT Facilities in June 2013 to allow the outsourcing of such data processing business. Since then, there have been requests from financial institutions including foreign financial firms for further improvement in the relevant regulation in accordance with global standards. The FSC gathered opinions and suggestions from financial firms to come up with the revision to the regulation. KEY CONTENTS1. Streamline regulatory system The current regulation requires the outsourcing of data processing to be reported to the Financial Supervisory Service(FSS), while requiring the outsourcing of IT facilities to be approved by the Financial Services Commission(FSC).  With the revision, the requirement for approval in regard with IT facilities outsourcing will be abolished. Under the revised regulation, financial firms will be required to report the outsourcing of their data processing business to the FSS. 2. ‘Ex post’ reporting of data outsourcing Under the current regulation, financial institutions are r
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Mar 20, 2015

Business Guideline for Financial Market Infrastructures

1. BACKGROUNDAfter the global financial crisis in 2008, countries around the world strengthened financial regulation and supervision in order to prevent systemic risk in financial markets. The G20 countries agreed on stricter supervision on financial market infrastructures, mandatory clearing of over-the-counter(OTC) derivatives through a central counterparty(CCP) and mandatory reporting of transaction information to a trade repository(TR). To avoid regulatory arbitrage among different jurisdiction, the G20 endorsed the Principles for Financial Market Infrastructures(PFMIs)1 as international standards for payment, clearing and settlement systems.In line with such a global move, Korea bolstered supervision on financial market infrastructures and is now in the process of implementing international standards into domestic regulatory framework. We strengthened monitoring and investor protection in derivatives markets. Korea also introduced a CCP for clearing OTC derivatives(April 2013) and mandatory clearing of Korean won IRS through a CCP(June 2014).With the establishment of the ‘Business Guideline for Financial Market Infrastructures,’ the FSC intends to adopt the PFMIs as clear guiding principles in supervision of domestic financial market infrastructures.2. SUMMARY OF「BUSINESS GUIDELINE FOR FINANCIAL MARKET INFRASTRUCTURES」*Attached: Full Text of the Business Guideline for FMIsOVERVIEWThe Business Guideline for Financial Market Infrastructures(hereinafter ‘the Guideline’) is to provide specific standards that financial market infrastructures(hereinafter ‘FMIs’) should comply with in conducting business pursuant to the Financial Investment Business and Capital Markets Act and its subordinate regulations.Reflecting the PFMIs, the Guideline reorganized provisions related with financial market infrastructure, scattered throughout the Financial Investment Business and Capital Markets Act, into a systemic order.FMIS SUBJECT TO THE GUIDELINEThe Guideline sh
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Dec 04, 2014

Bidding Results for Woori Bank Shares

The Public Fund Oversight Committee(PFOC) held its 103rd meeting on December 4 after receiving the bidding results for Woori Bank shares from the Korea Deposit Insurance Corporation(KDIC).(Minority shares) Out of the 23.76% stake on sale, the KDIC auctioned off 5.94% for KRW 453.1 billion, which offered higher price than the KDIC’s estimation. Successful bidders will be granted call options accounting for 50% of the winning bid. The sale process will be completed within next week after signing stock sale contracts.(Controlling shares) The bid ding procedure for the controlling stake, which needs at least two bidders to proceed, will be halted since only one bid had been received.The PFOC will continue to discuss and then decide when and how to resume sale of the remaining 48.06% stake.*Please refer tothe attachedPDF for details.
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Nov 18, 2014

Korea's Reunification & Financial Policy Tasks

1. Historical Implication of Korea’s Reunification2. Current Status of North Korea’s Economy3. Financial Policy Task Upon Economic Integration4. Measures to Support NK Development5. Plan to Build Financial System for Stable Economic Integration6. Plan to Reform Financial System for Macroeconomic Stability7. Conclusion* Please note that this material is to encourage constructive discussion among academia, policy banks and financial institutions about Korea's reunification. This is not the Korean government's official stance at the moment, which needs further discussion in the future.* Please refer to the attached PDF.
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Oct 27, 2014

The Sales Process for Minority Shares in Woori Bank

The sales process for minority shares in Woori Bank has started with a public announcement made on October 27, 2014.The Korea Deposit Insurance Corporation put its 18% stake in Woori Bank for auction.Bidders are allowed to make bids for minority shares of between 0.4% and 10%.As an incentive to draw more tenders, winning bidders will be given call options of 0.5 shares per share. The KDIC will keep possession of approximately 9% of its share to pay out the call options. Investors can exercise their call options anytime within three years after one year since the issuance.With public announcement on the sale on October 27, the bid will be closed on November 28.Successful bidders will be selected and announced within December.*Please refer to the attached PDF for details.
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Jul 15, 2014

Plan to Improve License System for Financial Investment Business

The FSC announced its plan to ease regulations on license system for financial investment business, which includes integrating business units for license, currently overly subdivided, and simplifying license process.KEY DIRECTION1. Improve License System for Financial Investment BusinessIn principle, financial investment businesses will be required to apply for a business license for only when it first enters the sector. The number of business units for regulatory approval will be cut from the current 42 to 13(see the table below). Once a financial institution is granted a regulatory approval for business(①~⑬), the company will be allowed to add new business within the same sector simply through add-on registration, without any additional procedure for approval.How business units for regulatory approval will change* Please refer tothe chartin the attached PDF. Regulations regarding majority shareholders will be also revised. - (Current) Person not allowed to participate in business management due to spinoff is classified as a “specially related person” under the Financial Investment Business and Capital Markets Act(FSCMA ), which unreasonably restricts such person from becoming a major shareholder. - (Revision) If the Fair Trade Commission confirms the person not participating in management due to spinoff, the person will not be classified as a “specially related person”. - (Current) A financial firm issued with sanctions equal to or stronger than institutional warning within the ‘recent three years’ is banned from becoming a largest shareholder of a financial investment company. - (Revision) For institutional warning, the period will be shortened to from the current three years to the recent one year.Other procedural regulations on license or registration will be eased or improved. - (Current) Under the current practice, a financial investment company issued with sanctions equal to or stronger than institutional warning is suspended from applying fo
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