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Mar 13, 2009
- Fitch Ratings' Stress Test
- 1. Summary of Fitch Ratings’stress test on Korean banksGlobal credit rating agency, Fitch Ratings, announced the results of its stress test on Korean banks on Thursday, March 12th at around 22:00 (Seoul time).A summary of the stress test results is as follows:Under a stress scenario during the period from June 2008 through December 2010, Korean banks would see a decline in capitalization totaling KRW 42 trillion due to credit costs, losses on equity and debt securities holdings and asset growth through the inflation of foreign currency assets given the depreciation of the Korean won in the past year.The banks’ combined equity-to-assets ratio would decline from 6.4 percent in June 2008 to 4.0 percent in December 2010.The KRW 42 trillion reduction in capitalization would require additional capital raisings by the banks, and such capital may have to come from the government. The government’s current KRW 20 trillion Bank Recapitalization Fund may not be sufficient, particularly to the extent it is used to buy subordinated debt and lower quality hybrid debt from the banks.2. Government’s response to the stress test resultsA. The results of the stress test are based on variables and assumptions (e.g. estimated loss rates on bonds and securities), which can be easily altered by future economic events. Therefore, the government finds it inappropriate for Fitch to release such speculative results on Korean banks when this could adversely impact their international credibility and financial soundness.B. Even if the worst possible scenario were to be materialized, in which the expected loss of 42 trillion won were to be taken into account and no new recapitalization were to be assumed, the tangible common equity (TCE) ratio of Korean banks would be 4.0 percent as of the end of 2010, which would be still higher than the current TCE ratios of major leading banks worldwide. The Bank for International Settlements (BIS) ratio would be 8.7 percent, still higher than th
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Mar 06, 2009
- FSC Article Published in AWSJ
- By Rhee ChangyoungSEOUL—South Korea, like all other advanced economies, has inevitably been affected by the financial-market turmoil seeping the globe. Yet the precise nature of these effects on our economy has too often been misunderstood. Some commentators claim that Korea is facing another major financial crisis similar to what it experienced during the Asian financial crisis. This is untrue, and it is important to set the record straight.The Korean economy is often inaccurately characterized as weak because of its external debt. It is true that Korea’s total external debt up for repayment within 2009 is $194 billion. But $39 billion of that amount is considered non-obligatory debt, such as foreign-exchange hedging and advanced payment receipts for ship orders that will clear off the books when the ships are delivered. Korea’s net external debt totals $155 billion, or 77% of Korea’s foreign reserves of $201.5 billion as of last month. The current roll-over ratio of foreign debt as of February is over 91%. Inother words, our banks and corporations are experiencing no problems repaying or refinancing their debts. Looking at the banking sector alone, out of total external debt of $171.7 billion as of the end of 2008, debt held by branches of foreign banks accounts for $72.3 billion, which does not affect the solvency of domestic banks. The actual amount of external debt held by domestic banks as of the end of 2008 is $99.4 billion—only half of Korea’s foreign reserves.Nonetheless, some market commentators have openly expressed their pessimism. Perhaps such pessimism might be traced back to Korea’s 1997 crisis and the fear that it may be repeated. Such a possibility, however, is slim. The Korean economy today is very different from what it was a decade ago.First, the corporate sector whose debts helped trigger the Asian financial crisis in Korea has been transformed, and is now sound and transparent. The ratio of corporate debt to equity, for instance,
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Feb 27, 2009
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Feb 27, 2009
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Feb 24, 2009
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Feb 16, 2009
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Feb 16, 2009
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Feb 09, 2009
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Feb 05, 2009
- Korea Economy Overview
- Ladies and gentlemen, I would like to welcome all of you and thank you for taking the time to be with us today.My presentation today largely consists of three parts.Firstly, I will give you a brief overview of Korea’s real economy and financial market and move on to talk about newly emerging risk factors in the Korean economy and their effect on the economy.Then, I will close by introducing how the Korean government is responding to the economic challenges.Now, let me start with the current status of the Korean economy and financial market.First of all, let me talk to you about the current status of Korea’s real economy.As some foreign investors are concerned, it is true that Korea’s real economy is fast deteriorating. Domestic demand is slowing down rapidly with 19.8 percent fall in December industrial output from a year earlier as well as 7.0 percent decline in consumer goods sales. Exports in December also fell by 17.9 percent year-on-year (by 29 percent according to the estimation for the period from Jan. 1 to Jan. 20).However, let me emphasize that such economic slowdown is not limited to Korea and is witnessed commonly around the world following the global financial crisis. The Korean economy is doing rather well compared to other Asian countries like Hong Kong, Taiwan and Singapore.If we compare December industrial output, Korea saw 19.8 percent fall while Taiwan and Singapore suffered 32.4 percent and 13.5 percent decline respectively. Even in terms of export, which is one of the main causes of concern, we see that Taiwan and Singapore have recorded greater fall than Korea with 41.9 percent and 20.8 percent decline respectively.Moreover, Korea is maintaining relatively low unemployment rate of 3.3 percent as of last December.However, things are looking better in the financial market. To our relief, the global financial market volatility has eased slightly, improving investor confidence and financial stability in Korea.The Korean stock market has recent
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Jan 28, 2009
- Understanding Korean Economy (FAQs)
- Q1: How has Korea reacted to the economic difficulties so far?A: The Korean government has worked on expansionary liquidity supply of USD55 billion, tax reduction of USD35 billion, and increased fiscal expenditure of USD16 billion.The Korean government has taken preventive, decisive and sufficient policy measures to get out of the global economic turmoil. The measures mainly cover liquidity supply, FX market stabilization, and tax reduction and expansionary fiscal expenditure. To provide more liquidity in the market and lower interest rates, the Bank of Korea lowered a benchmark interest rate four times by 225bp from 5.25 percent to 3.00 percent. Also, the government has supplied the liquidity of KWR19,500 billion through RP purchases and credit limit raise for small- and medium- sized enterprises (SMEs).Foreign liquidity supply of USD55 billion will have been provided with USD37.6 billion already provided by the end of Dec. ’08. Currency swap arrangements with the US, Japan, and China, amounting to USD30 billion each, have been completed along with the IMF Short-term Liquidity Facility of USD22 billion fixed. The government guarantee on banks’ borrowing in foreign currencies will total USD100 billion.A total of USD35 billion tax reduction will have been implemented from ’08 to ’12 through an oil tax rebate and income/corporate tax reduction. Additional budgets of USD16 billion will have been allocated from ’08 to ’09, which are earmarked for overcoming economic difficulties including high energy prices.Deregulations to boost corporate investment, various job maintenance efforts such as promoting employment of female, the young and old, and social safety net reinforcement are among other measures the Korean government has taken.Q2: What are the key economic policies for 2009? A: The key economic polices for 2009 can be summarized as preparation for the future and job creation. The Korean government will take offensive measures to revitalize the economy a
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Jan 22, 2009
- YOIDO, SEOUL AND MUNHYEON, BUSAN AS INTERNATIONAL FINANCIAL CENTERS
- Summary of the Financial Center Promotion Committee MeetingOn January 21, 2009 the Financial Center Promotion Committee* meeting, chaired by the FSC Chairman, was held and deliberated the designation of international financial center(s). Based on the assessment report on five candidate cities,* prepared by the Evaluation Panel, the Committee members discussed what city or cities to be designated to serve as an international financial center in the region.*Financial Center Promotion Committee was convened on the basis of “Enforcement Decree of the Act on the Creation and Development of Financial Center.” The Committee has 25 members: 10 financial experts, 10 presidents of financial regulatory agencies, and 5 government officials (FSC and Ministry of Strategy and Finance).*Five candidate cities: Seoul (Yoido), Busan (Munhyeon, Bukhang), Incheon (Songdo), Gyeung-gi (Goyang), Jeju (Seoguipo)As a result of careful deliberation, the Committee has reached a consensus to designate Yoido, Seoul as the main Financial Center and Munhyeon, Busan as its specialized financial center. The decision will be submitted to the FSC Committee for its final approval.Detailed plans will be made to develop these two cities as financial centers within a first half of this year through consultation with the related government ministries and regional governments. To facilitate the process, the Financial Center Promotion Committee will form a subcommittee.Major ProgressesIn December 2007 the government enacted legislation called “Enforcement Decree of the Act on the Creation and Development of Financial Center” with an aim to designate and develop a region as an international financial center.* Selection process was set off by operative direction initiatives made in March 2008 and deliberation by the Promotion Committee (convened in June 2008). *According to the “Act on the Creation and Development of Financial Center” a financial center is defined as a region in which both domestic
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Jan 12, 2009
- IFSB-FSC/FSS to Host Seminar on Islamic Finance in Seoul
- The Islamic Financial Services Board (IFSB) and the Financial Services Commission/Financial Supervisory Service will jointly host the Seminar on Islamic Finance in Seoul from January 13 to 14, 2009, at the Sogong-dong Lotte Hotel. The FSC/FSS joined the IFSB as an Observer member onAugust 8, 2008, and through this seminar hope to develop a growing interest in Islamic finance.Five separate sessions, which include presentations and discussions, are scheduled during the two-day seminar. Among the topics to be discussed are potential legal and organizational issues for non-Islamic countries attempting to implement Islamic financial systems and their solutions, how to use Shari’ah in cooperation with the current regulatory system, recent developments in the Islamic bond market and issues related to credit rating, and challenges and opportunities for Korea.Approximately 300 participants from home and abroad, including 17 speakers, 14 from abroad, together with participants representing the government, financial institutions, and academic institutions, are expected to attend the seminar. Dr. Jun Kwang-Woo, Chairman of the FSC, will deliver the opening remarks of President Lee Myuang-Bak.The Seminar on Islamic Finance will provide an opportunity to participants to gain comprehensive and practical knowledge of Islamic finance while also offering the chance to network with Islamic finance regulators and financial experts.The IFSB is an international standard-setting organization that promotes and enhances the soundness and stability of the Islamic financial services industry. Founded in Kuala Lumpur, Malaysia on November, 2002, the IFSB, as of December, 2008, has 178 members from 34 countries.* Please refer to the attached PDF for details.
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Jan 09, 2009
- Review of Financial Assistance to SMEs
- I. Review of Financial Assistance to SMEs in 20081. Banks Loans to SMEs(2008) Outstanding amount of loans to SMEs by 18 domestic banks increased by KRW 52.4trl. (from KRW 370trl in 2007 to KRW 422.2trl in 2008)(December 2008) With the year-end effect, the amount of SMEs loans decreased by KRW 1.8trl. However, when including special set-off between loans and deposits carried out to support SMEs (KRW 0.7trl), amortization and sell-off of bad debts (KRW 0.9trl), the actual amount of SME loans was decreased only by KRW 70.9bn.* With the year-end effect (settlement of financial statements at the end of the year, settlement of B2B transaction, etc.), SMEs loans tends to decrease usually in December.When comparing the average decrease amount of SME loans in December for the past 5 years (KRW -2.8trl) with the decreased amount in December last year (KRW -3.6trl), it is not so noticeable.2. Fast-Track (Special Assistance Program to Tackle Liquidity Problems of SMEs)KRW 2.8trl was provided to 1,672 companies through the Fast Track Program from October 13 to December 31, 2008.KRW 1.4trl was provided to 413 companies which experienced loss from currency option such as KIKO.Assistance through the Fast Track Program has been accelerated since last December; the number of assisted enterprises increased by 2.5 times.3. Issuance of P-CBOKRW 1trl of P-CBO was issued in 2008 to help solve financial difficulties of SMEs which could not issue corporate bond due to their poor credit rating.Corporate Bond Market Stabilization Fund underwrote the 3rd issuance, which benefited joined enterprises with lower issuing rate (from 8.4% to 6.6%) and lower additional rate. (from 50bp to 5bp)4. Consultation on SMEs' Financial DifficultiesSince the opening of the ｢Consultation Center for Financial Difficulties of SMEs｣, the accumulated number of consultation cases reached 1,060. (including the consultation carried in related organization of banks)Banks admitted 526 cases (49.6%) and provided KRW
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Dec 30, 2008
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Dec 24, 2008
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Dec 18, 2008
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Dec 08, 2008
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Dec 05, 2008
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Dec 04, 2008
- Fn Hub Korea to Support Employment of Overseas Financial Expert
- On December 4, 2008 Fn Hub Korea* launched a program, which supports theemployment of financial experts working in overseas financial companies, to helpincrease the competitiveness of the domestic financial industry.* Fn Hub Korea was established on September 9, 2008, under the Financial HubFormation and Development Act, to assist foreign financial firms already active orstarting a new business in Korea, to help domestic financial companies expandoverseas, and to improve the business environment related to financial business inKorea.The program supports the recruitment, by financial companies in Korea, of financialexperts working in overseas financial companies, such as investment banks.It aims to help meet the demand for capital market experts, the demand can be attributedto the upcoming February 2009 enactment of the Financial Investment Services Capital Market Act, while also bringing in the necessary human resources to transformKorea into a financial hub.Fn Hub Korea will create a database, after receiving the necessary employmentinformation from financial companies, while also developing a system where financialexperts, who wish to transfer or find employment in Korea, will be connected to theirpreferred workplace after uploading their employment requests to Fn Hub Korea’shomepage (www.fnhubkorea.kr).Please refer to the attached file “Overseas Financial Expert Employment SupportProcedure” for a detailed outline of the recruitment process.*Please refer to the attachedPDF for details.
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Nov 25, 2008
