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.
-
Jul 07, 2020
-
Jul 02, 2020
-
Jul 02, 2020
-
Jun 30, 2020
-
Jun 30, 2020
-
Jun 29, 2020
-
Jun 29, 2020
-
Jun 24, 2020
-
Jun 24, 2020
- FSC Changes Rules on Liquid Asset Requirements for Repo Transactions
- The FSC revised the regulations on financial investment business on June 24, laying out specific liquid asset requirements for the sellers of repurchase agreements.The FSC has been pursuing changes in regulations to improve the effectiveness and soundness of the repurchase agreement (repo) market. The revisions to the Enforcement Decree of the Financial Investment Services and Capital Markets Act in December last year introduced a legal basis to require repo sellers (borrowers) to hold liquid assets. The changes in regulations adopted today are a follow-up measure, establishing the specific scope of liquid assets as well as holding requirements.SCOPE OF LIQUID ASSETSLiquid assets include cash, savings accounts, certificates of deposit, liquid loan commitments, readily disposable deposits of securities companies, up to 30 percent of money market trust (MMT) and money market wrap (MMW), promissory notes, payment reserves of the Bank of Korea. Liquid assets in foreign currencies also qualify.LIQUID ASSET HOLDING REQUIREMENTSThe requirements for liquid asset holding for repo sellers (borrowers) will gradually increase in three stages as shown in the table below from up to one percent of the transaction amount in July to up to ten percent between August 2020 and April 2021, and then to up to twenty percent thereafter.The above changes in regulations will go into effect on July 1, 2020 along with the improved rules on minimum margin requirements for repo buyers (lenders).* Please refer to the attached PDF for details.
-
Jun 24, 2020
- FSC Identifies D-SIBs for 2021
- The FSC identified a total of ten bank holding companies and banks as domestic systemically important banks (D-SIBs) for 2021 as follows: Shinhan Financial Group, Hana Financial Group, KB Financial Group, Woori Financial Group, NH Financial Group, Shinhan Bank, Woori Bank, KEB Hana Bank, KB Kookmin Bank and NH Bank. Compared to the previous year, Jeju Bank from Shinhan Financial Group will be removed from the D-SIB list pursuant to the temporary easing of financial regulations announced on April 17, which excludes smaller sized regional banks from the D-SIB designation and relieves them from the duty of additional capital surcharge.Those identified as D-SIBs will be required to set aside an additional capital surcharge of 1% in 2021.* Please refer to the attached PDF for details.
-
Jun 23, 2020
-
Jun 23, 2020
-
Jun 22, 2020
-
Jun 19, 2020
- FSC Launches Working Capital Support Program for Suppliers & Subcontractors in Key Industries
- The government announced its plans to launch Working Capital Support Program (WCSP) using the key industry stabilization fund at the 7th Meeting of the Central Economic Response Headquarters on June 19.BACKGROUNDThe government and banks have increased the availability of financial support for businesses in corporate loans and maturity extensions to help them tide over the COVID-19 crisis. Despite an increase in the availability of financial support, access to financial support remains difficult for many suppliers and subcontractors with unfavorable credit histories. As these suppliers and subcontractors make up the core of the key industries’ ecosystem, it is essential to provide them with additional financial support to maintain competitiveness of these industries. Against this backdrop, the government will introduce the Working Capital Support Program (WCSP) financed by the key industry stabilization fund to extend working capital loans to suppliers and subcontractors.WORKING CAPITAL SUPPORT PROGRAM(SIZE) Up to KRW5 trillion in working capital loans(SUPPORT TARGET) Companies (a) established before May 1, 2020, (b) with SME or middle market enterprise standing, (c) in business sectors eligible to receive support from the key industry stabilization fund, (d) deemed as an essential player within the industry in terms of maintaining the industry competitiveness, protecting jobs and maintaining supply chains, and (e) expected to face shortages in working capital due to the pandemic-induced economic slowdown.(LENDING INSTITUTIONS) Eligible suppliers and subcontractors are able to apply for loans at one of the program participating banks.(LOAN SPECIFICS) Working capital loans (WCLs) (a) cannot be used to pay off debt from existing loans, (b) will be issued up to the amount necessary for the operation of business, or up to KRW100 billion (2 percent of the total amount available for WCSP) or 50 percent of annual sales revenue, (c) have two-year maturity, and (d) have int
-
Jun 19, 2020
-
Jun 18, 2020
- Vice Chairman Holds Meeting to Review Risks in Financial Sectors
- Vice Chairman Sohn Byungdoo held a meeting to review market conditions and risk factors in the financial industry on June 18 with experts from the public and private sectors.The following is a summary of Vice Chairman Sohn’s remarks.(END-OF-QUARTER-EFFECT IN JUNE) In March, the global spread of the COVID-19 infection, rising instability in financial markets and the end-of-quarter shortage in capital supply led to difficulties in the corporate bond and short-term money markets. In response, the government launched various financial support and liquidity injection measures, including a bond market stabilization fund and an SPV to purchase lower-rated corporate bonds and CP. As a result, the markets have begun to show signs of recovery with yield spreads growing at a slower rate.However, blue chip companies and non-blue chip companies face different conditions for issuing bonds. In June, a total of KRW68 trillion worth of corporate debt will be up for maturity (KRW12.2 trillion in corporate bonds and KRW55.5 trillion in CP and short-term debt). About 90 percent of them are high rated debt and will face not much obstacle in meeting debt obligation. The securities firms with margin call obligations related to equity-linked securities are maintaining foreign currency liquidity in case of global stock price fall. Thus, the liquidity problem is not a major concern.The government will temporarily ease the liquidity requirements of repo sellers to prevent a surge in cash demand at the end of June. The government will also provide support through policy banks’ corporate bond and CP purchase programs.(INVESTOR PROTECTION WITH DERIVATIVES PRODUCTS) With investors’ interest in derivatives products growing, the volumes of FX margin trading and CFD transaction by retail investors have increased significantly this year. For FX margin trading, the proportion of retail investors is very high at about 92 percent, despite the implementation of various measures, such as stricter ru
-
Jun 17, 2020
-
Jun 16, 2020
- Vice Chairman Underscores Support for Real Economy Sectors
- FSC Vice Chairman Sohn Byungdoo held the 8th financial risk assessment meeting on June 16 to assess the financial market conditions and check the implementation status of the COVID-19 financial support.The following is a summary of Vice Chairman’s remarks.(CURRENT SITUATION) Last week, the OECD released its forecasts for global economic growth based on the “single-hit” and “double-hit” scenarios of the spread of the infection. Compared to its announcement in March, the 2020 and 2021 forecasts were largely revised down. Meanwhile, the OECD indicated Korea as a “notable outlier” as the country’s effective quarantine measures and prompt financial assistance led to the slightest fall in the expected growth forecast.Despite signs of stability in the financial markets, the real economy sectors continue to struggle, with exports and employment showing continuous declines. This discrepancy exists because the sufficient level of liquidity in the markets cannot reach the businesses with unfavorable credit histories. As such, the government will work to reduce this discrepancy between the financial markets and the real economy sectors.(SUPPORT FOR SMES AND REAL ECONOMY SECTORS) From January to May, SME loans increased KRW48.6 trillion, and according to an FSS review, small-scale businesses and SMEs with lower credit backgrounds were also able to access loans.However, the government’s financial support is not being felt by many businesses. To address their needs, financial companies should utilize their know-hows in risk-pooling, capital raising and risk management to more readily assist the businesses struggling with liquidity problems.The government will continue to work on providing supports to the real economy sectors through a range of financial assistance programs including a lower-rated corporate bond and CP purchase program, a special loan guarantee program for auto industry, a corporate asset purchase program and an expansion of P-CBO issuance. The go
-
Jun 15, 2020
- FSC Chairman Vows Support for Auto Industry
- FSC Chairman Eun Sung-soo visited Korea Fuel-Tech Corporation on June 15 in Seongnam-si and held talks on ways to provide effective assistance to the car and auto parts industries struggling with the pandemic-driven economic crisis.The following is a summary of Chairman Eun’s remarks.(GOVERNMENT’S RESPONSE TO PANDEMIC) The government has taken multipronged approaches to stabilize markets and provide businesses with financing assistance. The KRW175 trillion-plus financial support package consists of the bond market stabilization fund, P-CBO support for corporate bond markets, emergency loans and preferential guarantees. The KRW40 trillion key industry stabilization fund has been launched which will begin providing support in June. Also, a special purpose vehicle in the amount of KRW10 trillion will be ready for purchasing lower-rated corporate bonds and commercial paper as soon as the 3rd supplementary budget is passed at the National Assembly.Backed by these measures, about KRW42.5 trillion in SME loans has been issued between January and May 20 this year, which amounts to approximately 84 percent of total SME loans issued last year. Also, instability in the stock markets and corporate bond market has been largely subsided.(SUPPORT FOR AUTO INDUSTRY) The government has made available about KRW5 trillion worth of financial support to the auto industry since February. However, the entire industry is struggling with a sharp fall in exports and shortage of work due to the shock in the global supply chain and overseas factory shutdowns.In particular, SMEs and middle market enterprises are burdened with additional hardship as they face limited access to loans due to thin credit records.(FURTHER PLANS) In order to minimize the pandemic’s damaging effects on the auto industry, close cooperation should take place between the government, industry and financial institutions. While promoting ways to help businesses to boost credit standing on their own, the government wil
-
Jun 11, 2020
- Government Launches KRW2 Trillion-plus Program to Purchase Corporate Assets
- The government announced its plans to launch a KRW2 trillion-plus program to purchase corporate assets at the 6th Meeting of the Central Economic Response Headquarters on June 11.BACKGROUNDIn order to provide liquidity and bolster financing options for businesses amid the pandemic, the government has made available KRW175 trillion-plus in financial support programs, from which about KRW52.6 trillion has been provided as of June 8.Aside from the government-backed financing programs, companies have been selling off their assets to boost liquidity. Asset sell-offs are an important strategy for corporate restructuring and improving company’s financial structure. For companies’ self-rescue efforts to be effective, asset sell-offs should take place at fair prices.To facilitate this, the government will set up a special purpose vehicle (SPV) at the Korea Asset Management Corporation (KAMCO) to purchase corporate assets at fair prices, stimulating private sector demand for corporate assets.KEY DETAILSA KRW2 trillion-plus SPV will be created through bond issuance from KAMCO with the possibility of expanding the fund size with participation from the privately managed funds. KAMCO will work to increase its funding capacity by making investments in assets with different term periods.The SPV will purchase assets held by all sized companies but will primarily invest in assets that are unlikely to attract sufficient demand in the market. An input from outside experts, such as accounting firms, will be used to help establish objective and balanced pricing standards.Based on the characteristics or types of assets and considering the future possibility of buybacks, the SPV will adopt different buying strategies—(a) buy and hold, (b) sale and leaseback, and (c) sale and call option agreement.The Corporate Structure Innovation Support Center run by KAMCO will function as a platform to promote information sharing and act as an intermediary between sellers and buyers. It will promo