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Dec 14, 2023
- FSC Provides Guideline on Underlying Assets for Fractional Investment Service Providers
- The Financial Services Commission introduced a guideline on the underlying asset requirement of trust beneficiary certificates when a designated innovative financial service provider under the financial regulatory sandbox program intends to provide fractional investment service through issuance of trust beneficiary certificates. The guideline has been prepared after having discussions with the innovative financial service selection committee (Nov. 28) and at FSCs regular meeting (Dec. 13). In principle, fractional investment service providers need to first consider making use of the traditionally available investment vehicles. However, when it is deemed to be not viable, by applying the principle of supplementarity, a regulatory exemption may be granted under the Special Act on Support for Financial Innovation to allow the issuance of trust beneficiary certificates as prescribed by the Financial Investment Services and Capital Markets Act (FSCMA). Those applying to assume fractional investment business under the regulatory sandbox program should first look into ways to do so by making use of the traditionally existing means of investment vehicles permitted under current laws. Moreover, they should consider that there needs to be a sufficient level of contribution to innovation and investor convenience in issuing trust beneficiary certificates. In this regard, the supplementarity principle will be applied in a flexible manner to allow testing of innovative financial services, if the applying entity has given adequate consideration about the supplementarity principle, and that if there is not much usage of traditional investment vehicles in the fractional investment market. The trust beneficiary certificates underlying asset requirements include the following. First, an objective valuation and assessment should be available. The issuer of trust beneficiary certificates should determine the issuing price and quantity after assessing the value of trust assets, and the i
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Dec 13, 2023
- Household Loans, November 2023
- The outstanding balance of household loans across all financial sectors increased KRW2.6 trillion in November 2023 (preliminary), showing a significant decline from the level of growth in the previous month (up KRW6.2 trillion). * Change (%, y-o-y): +2.6 (May 2023), +3.2 (Jun), +5.2 (Jul), +6.1 (Aug), +2.4 (Sep), +6.2 (Oct), +2.6 (Nov) (By Type) Home-backed mortgage loans rose KRW5.6 trillion, edging up slightly more than the previous month (up KRW5.2 trillion). Mortgage loans rose KRW5.7 trillion in the banking sector but fell KRW0.1 trillion in the nonbanking sector. Other types of loans dropped KRW3.0 trillion led by non-housing mortgage loans and savings secured loans in the mutual finance sector. (By Sector) Household loans grew at a slower rate in the banking sector and fell at a faster rate in the nonbanking sector compared to the previous month. Banks saw an increase of KRW5.4 trillion in household loans in November, which shows a slowdown from the June-September period (up KRW6.0 trillion to up KRW7.0 trillion), led mostly by policy mortgage loans and group lending for non-speculative homebuyers. Other types of loans fell KRW0.3 trillion, edging down from an increase of KRW1.0 trillion a month ago. Nonbanks saw a drop of KRW2.8 trillion in household loans, falling at a faster rate compared to the previous month (down KRW0.5 trillion), led by mutual finance unions (down KRW2.8 trillion), savings banks (down KRW0.1 trillion) and specialized credit finance businesses (down KRW0.01 trillion). Insurance companies saw a rise of KRW0.1 trillion in household loans. The declining pace of growth in household loans in November was caused by a slowdown in mortgage lending in the banking sector. However, the authorities will continue to closely monitor trends of household loans and ensure effective implementation of the household loan management measures, through introduction of a stressed debt service ratio (DSR) limit and so on. * Please refer to the attached file for
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Dec 13, 2023
- Investing in Domestic Capital Markets Made Easier for Foreign Investors
- The Financial Services Commission announced that a set of measures intended to enhance foreign investors access to domestic capital markets will take effect from December 14, 2023. The measures include the abolishment of foreign investors prior registration requirement, the easing of reporting duty for foreign securities firms in their use of omnibus account, and the expanded scope of foreign investors OTC transactions eligible for ex post reporting. Meanwhile, the mandatory English disclosure rule for listed companies will phase in from January 1, 2024. First, the foreign investor registration system, which mandated foreign investors to register with the Financial Supervisory Service (FSS) prior to making investment in domestic stock markets, will be abolished. As the revised Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) takes effect from tomorrow (December 14), foreign investors are able to open investment accounts in domestic capital markets either with a legal entity identifier (LEI, for corporate investors) or a passport number (for individual investors) without going through a prior registration process. Those that have already been assigned a foreign investor registration number can still use their identifier so as to help to minimize causing unnecessary inconvenience. Second, the use of omnibus account for foreign securities firms will be made more convenient. Although the omnibus account system has been available since 2017, it has never been utilized by foreign securities firms due to the heavy burden of reporting rule, which required them to instantly report each end-investors completed transactions at the moment of settlement (T+2). Starting from tomorrow, their reporting cycle will be eased to once every month. Under the revised rules on financial investment businesses, foreign securities firms will be required to reportas of the last day of every montheach end-investors transaction details to an omnibus account
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Dec 11, 2023
- FSC Proposes Rules on the Protection of Virtual Asset Users
- The Financial Services Commission (FSC) proposed detailed rules under the Act on the Protection of Virtual Asset Users (the Act hereinafter), which is scheduled to take effect on July 19, 2024. Aimed at protecting virtual asset users and establishing a sound order in virtual asset transactions, the Act defines the scope of virtual assets subject to the law and requires virtual asset service providers (VASPs) to safely manage and store their customers deposits and virtual assets. It also provides statutory grounds for sanctions including criminal penalty and fines to punish unfair trading activities using virtual assets. The proposal is intended to specify details that the Act delegates to its subordinate enforcement decree and supervisory regulation. First, the proposal specifies more types of tokens not covered by the Act. Under the Act, virtual assets are defined as electronic tokens with economic value which can be traded or transferred electronically. The Act excludes game money, electronic money, electronic stocks, electronic bills, electronic B/L and central bank digital currency (CBDC) from the coverage of the law. The proposal adds electronic bonds, mobile gift certificates, deposit tokens linked to CBDC, and non-fungible tokens (NFTs)to the list of excluded tokens. Second, the proposal prescribes what kind of financial institutions should be a custodian for VASP customers money and how customers funds should be managed. The Act requires VASPs to keep customers money separate from their own funds and deposit or trust them to a credible financial institution. Taking account of credibility, stability and current systems of operating deposit, the Enforcement Decree chose banks as a custodian institution for VASP customers money. Custodian banks are allowed to invest VASP customers deposit or trusted funds, kept separately from VASPs own funds, only in safe assets such as government bonds. VASPs are required to pay fees to their customers for using their deposit
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Dec 08, 2023
- Financial Company Executives to be Subject to Enhanced Internal Control Management Responsibilities
- The Financial Services Commission announced that a revision bill of the Act on Corporate Governance of Financial Companies was passed by the National Assembly on December 8. The revision requires financial companies to assign a responsibilities map for each executive officer in his or her line of work and revamps the ways in which executive members internal control management duties are examined. Under the current legal framework, which came into force in 2016, financial companies are required to establish their own internal control standards, but this has often been treated as a perfunctory and procedural matter, without the effect of bringing about real change from the employees or management. In this regard, the revised law aims to resolve this problem by clearly designating internal control responsibilities of executive members to ensure that all financial company executives treat internal control matters as their own responsibilities. First, the revision introduces a responsibilities map for all executive officers. This is not a uniform regulatory requirement imposed by the financial authorities. By having financial companies to set up and operate an internal control system on their own according to their own needs and circumstances and by having the responsibility of each executive officer clearly assigned, this measure aims to raise awareness and responsibility of executive officers about their internal control system. More specifically, CEOs of financial companies will need to prepare a responsibilities map showing how internal control responsibilities are shared and divided among their company executives, without having any redundancy or a vacuum, for confirmation by the board and submission to the authorities. In this regard, financial companies will also be required to verify the professional capacity, accountability and trustworthiness of their executive members. Submission of the responsibilities map will begin six months after the law takes effect star
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Dec 08, 2023
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Dec 07, 2023
- FSC Proposes Rules Change to Establish Reasonable Standards for Calculating Data Transfer Fees in MyData
- The Financial Services Commission issued a preliminary notice of rules change regarding the supervisory regulation on credit information businesses on December 7, with aims to continue to seek innovation in financial MyData services. The revision proposal has been prepared after having taskforce meetings and discussions with MyData service providers and data specializing institutions. First, to ensure a sustainable operating environment for MyData services, the revision proposal establishes reasonable standards for pricing data transfer costs. Since the onset of MyData services in January 2022, MyData service providers have been receiving and gathering information transferred from a variety of data providers, such as financial institutions, telecommunications service providers and payment gateways. In this regard, this revision proposal provides reasonable grounds for pricing the cost of transferring data for MyData service providers. More specifically, a standard cost approach will be used to calculate data transfer costs, and the standard cost will be calculated based on the costs required to set up and operate a relevant data transfer system. On a need-to-need basis, a cost discount can be provided to MyData service providers based on individual business circumstances. To ensure fairness and transparency, specific procedures for pricing data transfer costs will be determined by Korea Credit Information Services (KCIS), which will set up a consultative body made up of various stakeholders. The pricing standards will be applied from 2023 and payable in installments from 2024. The Korea Financial Telecommunications Clearings Institute (KFTC) will set up an integrated payment system for data providing entities and MyData service providers. Second, the revision proposal will allow data specializing institutions to provide consulting in the areas of data convergence and pseudonymization, especially to small- and medium-sized fintech businesses, which often lack profess
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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.
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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
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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.
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Nov 23, 2023
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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.
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Nov 20, 2023
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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
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Nov 13, 2023
- Campaign to Return KRW17.9 Trillion in Unclaimed Financial Assets Begins
- The Financial Services Commission announced that a campaign to return unclaimed or dormant financial assets worth about KRW17.9 trillion to financial consumers will begin on November 13 for six weeks until December 22 with participation from all financial sectors. Unclaimed financial assets, such as dormant financial accounts, inactive financial accounts (for more than 3 years) and card points (cash back rewards, etc.), amounted to KRW1.6 trillion, KRW13.6 trillion and KRW2.6 trillion, respectively, for a total of KRW17.9 trillion as of the end of June 2023. In this year, the number of financial institutions participating in the campaign has been expanded as the mutual finance sector will also join the joint campaign effort. In addition, this year, consumers will be able to see if there are any remaining balances on their securities investment accounts alongside other types of unclaimed financial assets from checking and savings accounts, insurance benefits or card points. Access to unclaimed financial assets is available on the internet (fine.fss.or.kr) or on the Account Info mobile app. The financial authorities will continue to upgrade the dormant financial account management system to help consumers to more easily and conveniently search and claim their dormant assets. * Please refer to the attached file for details.
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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
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Nov 08, 2023
- Household Loans, October 2023
- The outstanding balance of household loans across all financial sectors increased KRW6.3 trillion in October 2023 (preliminary), rising at a faster rate compared to the previous month. * Change (%, y-o-y): +0.1 (Apr 2023), +2.6 (May), +3.2 (Jun), +5.2 (Jul), +6.1 (Aug), +2.4 (Sep), +6.3 (Oct) (By Type) Mortgage loans grew at a somewhat slower rate while other types of loans expanded at a faster pace. Home-backed mortgage loans rose KRW5.2 trillion as nonbanks saw a drop of KRW0.6 trillion and the pace of growth in the banking sector also declined from KRW6.1 trillion a month ago to KRW5.8 trillion. Other types of loans rose KRW1.1 trillion with a low base effect from the previous month (down KRW3.3 trillion). (By Sector) Household loans expanded more rapidly in the banking sector while the pace of decline in the nonbanking sector slowed from a month ago. Banks saw an increase of KRW6.8 trillion of household loans in October, going up from KRW4.8 trillion a month ago. Mortgage loans went up KRW5.8 trillion in the banking sector, mainly led by policy mortgage loans. Other types of loans rose KRW1.0 trillion in the banking sector with credit loans edging up KRW1.2 trillion from a drop of KRW1.3 trillion in the previous month due to seasonal factors such as moving season and demand for IPO subscription. In the nonbanking sector, household loans dropped KRW0.5 trillion overall, showing a slowing pace of decline from the previous month (down KRW2.5 trillion). Specialized credit finance businesses (up KRW0.7 trillion), insurance companies (up KRW0.4 trillion) and savings banks (up KRW0.1 trillion) saw household loans going up, while mutual finance businesses continued to see a decline (down KRW1.7 trillion). Although the accelerated pace of household loan growth in October appears to be caused by a low base effect from a month ago, the financial authorities will continue to closely monitor trends and ensure close management of the growth level. Meanwhile, the authorities p
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Nov 06, 2023
- FSC Selects 10 Outstanding Fintech Firms for 'K-Fintech 30'
- The Financial Services Commission announced on November 6 that the authorities have selected 10 innovative fintech businesses as the first batch of the K-Fintech 30 program, which aims to provide comprehensive funding and consulting support to a total of 30 outstanding fintech firms selected until 2025. For this round, the selected fintech businesses are Moin, Village Baby, SentBe, CTech, Akros Technologies, Aizen Global, Aims, Fount, Fin2B and Hanpass. At this round of selection for ten businesses, a total of 52 promising fintech firms competed to secure a spot, and the selection results have been drawn from a thorough review on the innovativeness and growth potential of their business models assessed by an expert committee. On average, the selected fintech firms were found to be in operation for 6.6 years, had annual earnings of about KRW5.55 billion, employed 57.1 persons and secured KRW18.0 billion in investment (as of July 2023). The selected fintech businesses will be able to benefit from a series of scale-up assistance programs, including various policy funding support opportunities, relevant financing services offered by individual financial companies, greater opportunities to secure investments and pitch their business ideas through IR events, fintech-focused counseling and support for overseas business expansion. More specifically, they will be eligible to receive various preferential lending benefits offered by policy financial institutions, such as reductions in interest rates and guarantee fees. Individual financial companies are also planning to provide support packages linked with their own fintech lab programs. The Korea Growth Investment Corporation and D-Camp will provide assistance to match innovative fintech businesses with investors and help them with IR opportunities. Lastly, the 10 selected fintech firms can also take advantage of other supports made available, such as consulting support for those applying for the financial sandbox program, as
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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
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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
