Press Releases - Financial Services Commission

Press Releases

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Jun 30, 2011

Guidelines on Covered Bond Issuance

BACKGROUNDThe FSC/FSS set up guidelines on the issuance of covered bonds by banks, as one of follow-up measures to implement the Comprehensive Measures on Household Debt. The guidelines are intended to provide a framework for covered bond issuances, diversifying banks’ financing instruments and encouraging banks to offer more long-term and fixed-rate mortgage loans instead of short-term and floating-rate ones.KEY CONTENTS1. Definition of Covered BondsCovered bonds are a type of bonds backed by a cover pool of assets that the issuer provides as collateral. In the event of default, investors are guaranteed dual recourse to both the pool and the issuer.**The issuer is responsible for repaying the covered bonds and should offer investors a preferential claim to the cover pool.2. Requirements for Issuance of Covered Bonds(Issuers) Covered bond issuers must be banks with the BIS ratio over 10% (as of the end of the previous fiscal year) or securitization entities created by such banks.(Issuance volume/maturity) An issuer is not permitted to issue covered bonds in excess of 4% of the issuer’s total liability. Maturities of covered bonds range from one year to 30 years.3. Requirements for Cover Assets(Cover assets) A cover pool should be composed of mortgage loans that meet certain criteria* and mortgage-backed securities (MBS) issued by the Korea Housing Finance Corporation (KHFC). An issuer must maintain at least 5% of the total value of outstanding issuance as excess collateral.*prime mortgage loans; mortgages of more than 120% of the value of their property; loan-to-value (LTV) ratio of less than 70%; late payments of less than 60 days, etc.(Evaluation of asset eligibility) An issuer must evaluate eligibility of cover assets on a quarterly basis and provide investors with results of the evaluations. Disqualified assets in the pool should be replaced by qualified assets.(Long-term mortgage loans with fixed rates) An issuer must ensure that the cover pool is not compo
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May 19, 2011

Korea to Chair FSB T/F on EMDE Issues

BACKGROUNDThe G20 leaders at the Seoul Summit held in November 2010 agreed to put financial regulatory reform issues viewed from the perspectives of emerging countries on G20 agenda ,and asked the FSB, IMF and World Bank to submit a progress report prior to G20 Cannes Summit in November 2011.Recognizing that G20 discussions had been mainly focused on how to overcome financial crises in advanced countries, Korea proposed that financial issues relevant to emerging countries need to be more actively discussed at the G20 meetings.TASK FORCE FOR EMERGING MARKET AND DEVELOPING ECONOMIES (EMDES)Against this backdrop, the FSB created a task force to deal with EMDE-specific issues in March 2011. The T/F is to select financial regulatory issues from the perspectives of EMDEs and make relevant policy recommendations.Groups of technical experts will be created within the T/F to conduct in-depth reviews on specific issues.** management of capital flows and foreign exchange risks, prudential oversight on global financial institutions, supervisory cooperation between home and host countries, implementation of international standards, development of capital markets, etc.The T/F is composed of international organizations (IMF, World Bank, BCBS, IAIS, IOSCO, BIS, ECB); and FSB members (Korea, the U.S., Canada, Japan, China, India, Brazil, Indonesia, Mexico, Russia, Saudi Arabia, Spain, North Africa, Argentina, etc)Korea’s FSC was appointed as chair of the T/F in May 2011, and FSC Standing Commissioner Sangche Lee will be representing Korea and preside over discussions in the T/F.The T/F is scheduled to submit an interim report to FSB Plenary Meeting on July 19, 2011. The report will be circulated to FSB regional consultative groups for review by September, and the final report will be completed prior to G20 finance ministers’ meeting in October and G20 Summit in November.*Please read the attached file for details.
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May 17, 2011

Privatization Plan for Woori Finance Holdings

BACKGROUNDThe Public Funds Oversight Committee has held the 34th Meeting today and decided to re-initiate the sale of the Korea Deposit Insurance Corporation’s 56.97% stake in Woori Finance Holdings.GENERAL PLANA. Upholding the three main principles for the saleThey are as follows: Maximizing the recovery of public funds; Speeding up the privatization process; and Contributing to the development of the domestic financial sector.B. Selling the group as a packageThe committee has come to a conclusion not to sell the group’s subsidiaries separately, instead put the group up for sale in its entirety with ten of its subsidiaries intact. This is to simplify the sales procedure and minimize uncertainties of the process.C. Setting the minimum bid of 30%To reaffirm government’s intention to sell the group’s controlling stake, the minimum bid acceptable on the Letter of Intent is set at 30% of the group’s total share.D. Cancelling the MOU held by KDICThe KDIC’s MOU governing the Woori Finance Holdings will be either cancelled or alleviated depending on the reduction of KDIC’s stake.SCHEDULEThe public notice of sale for the group will be announced on May 18, and LOIs will be accepted for six following weeks ending on June 29.*Please read the attached file for details.
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Apr 06, 2011

Korean Financial Market Update

1. Recent trends in the stock marketThe KOSPI index, which once fell to a low point of 1,923.30 on March 15 after the Japanese earthquake, has rebounded to a record-high of 2130.43 on April 5, renewing the highest point of 2,115.69 prior to the earthquake.The recent recovery in stock prices is mainly attributed to foreigners’ net buying based on their optimism that the Korean economy is relatively stable amid ongoing external uncertainties such as Japan’s earthquake and political turmoil in the Middle East.2. Foreign investors’ movement in Korean stock exchangeForeigners sold KRW 3.5 trillion in February, the biggest net sale by monthly basis since May 2010, but made net buying of KRW 1.2 trillion in March: notably, net buying of KRW 2.8 trillion after the Japanese earthquake.(By country)Starting this year, there has been a continued outflow of European funds (including the U.K), reflecting ongoing uncertainties in the European region. By contrasts inflows of funds from the U.S. and Asian region have been increasing since March.*As of March, the U.S made a net purchase of KRW 1.3 trillion, Singapore of KRW 0.7 trillion, China of KRW 0.2 trillion*Despite our concern of Japanese capital being pulled back, Japanese made a net purchase of KRW 155 billion instead(By fund-type)In February, all foreign investors except for Asian sovereign funds were net sellers. Starting March, however, the U.S. funds began to make net buying in large volume. Net buying by foreign investors was mostly made after Japan’s earthquake, and European investors (excluding European funds) also turned net buyers of Korean stocks.(By investment period)It has turned out more than half of foreign net buying made after the Japanese earthquake was made by short-term investors. (i.e. investment banks)*Short-term: IB with investment turnover ratio over 500%3. Grounds for foreign investors’ net buyingWithout wider spread of risk from the recent Japanese earthquake and the regional conflict in the
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Dec 02, 2010

FSC Chairman's Luncheon Speech - IGE-IMF Joint Conference

*Please read the attached file for details.
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Nov 24, 2010

Results of Emergency Economic Meeting after North Korea's Artillery Firing

Vice Minister of Strategy and Finance Yim Jong-yong called for an emergency economic meeting* on Wednesday, November 24, a day after North Korea’s attack on Yeonpyeong Island to discuss the attack s impact on domestic and overseas financial markets and policy responses to future developments.*attendees: Vice Minister of Strategy and Finance (chair), Vice Minister of Knowledge Economy, Vice Chairman of Fair Trade Commission, Vice Chairman of Financial Services Commission, Senior Deputy Governor of BOK, Senior Deputy Governor of Financial Supervisory ServiceMarket reactionsAs the news of North Korea’s artillery firing was first reported at around 2:58 pm, right before the market close at 3:00 pm, it did not have a substantial and immediate impact on the stock market. However, after-hour markets including the futures market rattled, showing growing volatility.Right after the outbreak of the incident, Korea’s CDS spreads and Non-Deliverable Forward (NDF) rates sharply soared, but over time there has been no further rise.Potential impactThe attack’s impact on financial markets and the real economy may vary with future developments of the incident; however, as long as the situation does not escalate further, the impact is expected to remain temporary as it did when faced with similar geopolitical risks.Considering Korea’s solid economic recovery, fiscal soundness, current account surplus, and large foreign exchange reserves, to which foreign investors give high credibility, the Korean economy has sufficient capacity to absorb external shocks.Market observers and credit rating agencies assess that the incident would not significantly affect Korea’s sovereign credit ratings. *Moody’s said that North Korea’s attack would not negatively affect Korea’s sovereign credit rating.*Fitch maintained Korea’s sovereign rating at A + with the “stable” outlook.*SP said that the incident would not undermine foreign investment in Korea and other indices affecting K
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Nov 01, 2010

KDIC Put Woori Shares Up For Sale

In accordance with the resolution of the Public Funds Oversight Committee, the Korea Deposit Insurance Corporation (KDIC) officially made an announcement on October 30 to initiate the sale process of its stake in Woori Finance Holdings.KDIC’s entire 56.97% stake in Woori and shares of its two local bank units, Kyoungnam Bank and Kwangju Bank, are put up for sale. Whether to sell Kyungnam Bank and Kwangju Bank separately from Woori’s sale will be determined after final bid, reviewing all proposals submitted by bidders.In order to participate in the bidding process, potential buyers would have to acquire at least 4% of Woori’s stake or through a merger. For Kyungnam Bank and Kwangju Bank, bidders would have to bid for 50% plus one share of the banks or a merger.The KDIC will receive Letters of Intent (LOIs) by 5pm on November 26, 2010 and shortlist final bidders by the end of this year.*Please read the attached file for details.
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Oct 27, 2010

FSC Chairman's Luncheon Speech - ADB-PIIE Conference

*Please read the attached file for details.
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Oct 18, 2010

FSC Vice Chairman's Keynote Speech - CIFF

*Please read the attached file for details.
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Oct 15, 2010

FSB Plenary Meeting and BCBS Meeting held in Seoul

The 6th Plenary Meeting of Financial Stability Board and the 137th Basel Committee on Banking Supervision Meeting will be held at COEX Convention Center in Seoul on October 20 and 19, respectively.The Financial Stability Board (FSB) was created in April 2009 as the successor to the Financial Stability Forum (FSF) by the Group of 20 in its London summit, which includes FSF members and 12 more countries such as Korea and BRICs. It coordinates financial regulatory and supervisory standards at the international level and Korea has participated since its inaugural meeting in June 2009.The Basel Committee on Banking Supervision (BCBS), established by the central bank Governors of the Group of Ten countries in December 1974, was broadened to include more members in 2009. It formulates broad supervisory standards and guidelines in banking supervision. Korea became a member in March 2009.FSB Plenary MeetingThe Plenary Meeting is aimed at discussing and coordinating opinions among member countries so that the task of financial reform assigned by heads of G20 could be completed in the summit held in Seoul.This meeting will bring together about 70 heads of national authorities responsible for financial policy and supervision and central banks from 24 countries and 12 international financial institutions including IMF, WB, OECD, BCBS, IOSCO, and IAIS.They will discuss reducing moral hazard of systematically importance financial institutions (SIFI), strengthening bank capital and liquidity regulation, reforming OTC derivatives market infrastructure, FSB Outreach program and reducing dependence on external credit ratings and other major financial reform agenda.FSB Outreach program is held with non-member financial authorities to provide information on FSB’s major financial reform agenda and encourage the implementation of the agenda as agreed in G20 Toronto summit.BCBS MeetingThe Basel Committee on Banking Supervision will meet to finalize issues related to its regulatory reform
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Oct 05, 2010

The BOK-FSS Joint Inspection on Banks

The Bank of Korea (BOK) and the Financial Supervisory Service (FSS) will conduct a joint inspection for 14 working days from October 19 to November 5 on banks handling foreign currency.* Under Article 20 of the Foreign Exchange Transaction Act and Article 35 of its Enforcement Decree, the BOK and the FSS are authorized to jointly inspect financial institutions handling foreign currency.The inspection intends to examine progress being made since the Measures to Mitigate Volatility of Capital Flows were announced on June 13 and to ensure their effective enforcement. Given that the measures to limit banks’ FX forward positions* are scheduled to be fully implemented starting October 9 after a three-month grace period, the inspection will be particularly focused on banks’ FX forward positions such as non-deliverable forwards (NDFs) and forward transaction details. Considering these factors, the authorities will choose banks subject to the inspection.* The rules limit local banks’ FX forward positions to 50% of their equity capital at the end of the preceding month. Local branches of foreign banks operating in Korea are required to limit their forward positions to 250% of their capital. The ceilings may be adjusted depending on market conditions.Results of the inspection will be taken into account when the authorities enforce the measures and establish relevant policies. For banks found to be in breach of the rules, appropriate measures will be taken pursuant to relevant laws.Further inspections are being planned for banks exempted from the inspection this time. Major Checkpoints Banks’ FX forward positions- Changes in banks’ forward positions and details of forward transactions since new measures were introduced- Whether there was any diverted transaction by local branches of foreign bankse.g. local branches’ investment in the local bond market shifted to offshore headquarters- Changes in banks’ NDF positions, transaction details, and trading patterns, as w
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Sep 29, 2010

The 5th FSB Plenary Meeting Report

FSC Chairman Chin Dong-Soo attended the 5th FSB Plenary Meeting held in Paris on September 27. At the meeting held ahead of its next Plenary Meeting scheduled for October in Seoul and the G20 Summit in November, global financial regulators had in-depth discussions on the financial reform agenda mandated by the G20 leaders. Chairman Chin gathered support from FSB members to successfully hold the FSB Seoul Plenary Meeting in October and the G20 Seoul Summit in November.* Please refer to the FSB press release (Sept. 27, 2010) for details.1. Addressing systemically important financial institutionsThe FSB reviewed the development of policy appro ches for addressing the “too big to fail”problems associated with systemically important financial institutions (SIFIs). It will makerecommendations to G20 Leaders at the November ummit in Seoul covering the need forglobal SIFIs to have a higher loss absorption capacity; enabling the resolution of SIFIs without taxpayer solvency support; strengthening the intensity of SIFI supervision; and a peer review process to promote consistent national policies in this area.2. Implementing central clearing and trade reporting of OTC derivativesThe FSB reviewed recommendations developed by an FSB Working Group to achieve the G20’s objectives to improve transparency, mitigate systemic risk and protect against market abuse in the over-the-counter (OTC) derivatives market. The draft recommendations promote consistent implementation across jurisdictions of measures to increase standardization, central clearing and, where appropriate, exchange or electronic platform trading, and to have all OTC derivatives contracts reported to trade repositories. The report will be published at the time of the November G20 Summit in Seoul.3. Reducing reliance on CRA ratingsThe FSB reviewed principles being developed to reduce authorities’ and financial institutions’ reliance on credit rating agency (CRA) ratings. The goal of the principles is to reduce
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Sep 15, 2010

FSC Chairman's Speech - EIU Conference

*Please read the attached file for details.
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Sep 02, 2010

FSC Chairman's Speech - Korea-FSB Financial Reform Conference

*Please read the attached file for details.
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Aug 26, 2010

Measures to Support SMEs Hit by International Sanctions against Iran

In order to support local small-and medium-sized enterprises (SMEs) that suffered losses fromtheir business with Iran due to reinforced international sanctions against Iran, the Korean government has planned measures to support them.1. Providing policy funds for SMEsGovernment funds such as the SME Business Promotion Fund (SBP Fund) and a fast-track lending program will be utilized to support local SMEs trading with Iran.(1) For SMEs with large exposure to Iran, the government will provide emergency loans and defer repayment of principal for outstanding loans.In particular, for those who have a greater chance of recovery from the loss incurred by international sanctions against Iran, the government will offer emergency loans at a 3.7~5.4% interest rate for three years, up to KRW 500 million for one company. Companies who are undergoing corporate restructuring conducted by financial institutions or whose incurred loss exceeds KRW 100 million are qualified for emergency loans.For companies who experienced losses from their trade with Iran, the government will grant a one-and-half-year grace period for their existing debts while leaving their maturity period (5~8 years) unchanged.(2) For SMEs temporarily under liquidity crunch, the government will provide liquidity through a fast-track lending program. If companies trading with Iran apply for the fast-track lending, they will be granted special guarantees by the Korea Credit Guarantee Fund (KODIT) and the Korea Technology Finance Corporation (KTFC) on a preferential basis.**The KODIT and the KTFC will provide 65%~75% guarantees for newly extended loans, up to KRW one billion.The banking sector will also provide liquidity for SMEs by extending new loans or rolling over existing debts. The Korea Trade Insurance Corporation (KTIC) will also launch a liquidity support program for SMEs.(1) To ease liquidity constraints for SMEs, the KTIC is to speed up its review process to provide compensation as soon as possible when expo
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Jul 30, 2010

Privatization Plan for Woori Financial Group

The Public Funds Oversight Committee has held the 22nd Meeting today to finalize its plans to sell the remaining shares of Woori Financial Group (WFG) held by the Korea Deposit Insurance Corporation (KDIC), where a consensus has been reached that after successfully making two block sales, once in November 2009 and once in April 2010, totaling 16% of WFG, bringing the total amount of shares held by the KDIC down to a 50% level, an appropriate condition has been set to finalize the privatization of WFG.The privatization will be carried out with the three basic principles: maximizing recovery of injected public funds; making an early privatization; and contributing to sound and productive advancement of the financial industry.(1) Method of privatizationIn line with the three basic principles, the sale of WFG shares will be done through two steps of open competitive bidding process by domestic and foreign investors; first, by preliminary bidding; and second, by final bidding.(2) Simultaneous sale of WFG and regional banksBoth the shares of WFG and the shares of regional banks held by WFG (Kyungnam Bank and Kwangju Bank) will be sold separately but up for the bidding at the same time.Although the two regional banks are under WFG, it has been viewed as more effective to sell them separately due to them not having an integrated data processing network with WFG and with low level of synergy effect. Moreover, because their value would be greater when sold separately taking into account their regional focused businesses.However, the bidding will be carried out simultaneously to prevent any delay in the overall privatization process.The sale of regional banks will be for 50% plus ne share or done through a completemerger. And the actual amount of shares of WFG to be sold or whether it will be done through a merger will be determined and finalized with close discussions with the to-be- selected sales advisory firms. (3) Selection of sales advisory firmsConsidering the size and
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Jun 16, 2010

Conference on "The Global Financial Crisis and Microfinance: Challenges and International Cooperation"

The Financial Services Commission (FSC), the World Bank and the Korea DevelopmentInstitute (KDI) co-hosted an international conference on “the Global Financial Crisis andMicrocredit: Challenges and International Cooperation” on June 15.As the first-ever conference on microfinance jointly hosted by the Korean government and aninternational organization, it was attended by Kwon Hyuk-Se, the Vice Chairman of the FSC,Kim Seung-Yoo, the Chairman of the Smile Microcredit Bank, Tunc Uyanik, the SectorManger of the World Bank, and many distinguished guests. Participants had in-depthdiscussions on the impact of the global financial crisis on microfinance, each country’sresponse to the financial crisis, and initiatives to strengthen international cooperation. FSC’s Vice Chairman Kwon pointed out that the global financial crisis increased the numberof the poor and widened the gap between the rich and the poor, which could lead to a social conflict. Against this backdrop, he emphasized that microfinance serves as a social safety net for those who have no access to conventional financial services and an important means for overcoming the global financial crisis. Smile Microcredit project, the Korean model of microfinance, is led by the private sector withprivate donations and dormant savings as funding sources. In the wake of the global financialcrisis, fiscal conditions of many governments have been deteriorated. Vice Chairman Kwonsaid that under such circumstances, microfinance could be a viable option for each government to tackle economic polarization.The Korean government expects the conference to contribute to expanding microfinancebusinesses such as Smile Microcredit. Korea will bring the issue to the G20 summit meetingto urge that microfinance could play a key role in overcoming financial crises. 1. Diversify funding sources, including individuals’ contributions2. Cut operation costs by renting offices from public institutions as Smile Microcredit Bank’s bran
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Jun 03, 2010

Principles and Plans for Authorization of Financial Investment Businesses

Amendments to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) were passed at the vice ministerial meeting on June 3, 2010.Reflecting opinions gathered during the period of legislation notice, the following modifications were made to the first draft that had been previously announced:1. The original draft stipulated that applications for add-on business authorization shall be suspended for one to three years for financial investment institutions penalized with a warning or a higher punitive measure.However, accepting the opinion that the measure may be too harsh considering a warning is a minor penalty, the level will be raised to a suspension of business activities of branches and sales representative offices. The revised version specifies the level of punitive measures that affects authorization of financial investment institutions. 2. Modifications will be made after further discussions in regard with the current provision that applies same criteria for disqualification of both non-registered executives and registered executives.3. Given that some modifications were made to the original draft, the Governor of the Financial Supervisory Service (FSS) will continue to exercise the authority mandated by the FSC to penalize employees and executives of financial investment institutions. 4. The limit on bond funds to indirectly reinvest up to 40% of their assets in government bond ETFs will be raised to 100%.5. Executives and employees from foreign multi-financial service providers operating collective investment businesses (i.e. asset management) were prohibited from holding concurrent positions in domestic financial institutions. However, the blanket ban was revised so that only those engaged in collective investment business (both employees and executives) are prohibited from holding concurrent positions in domestic financial institutions.The amendments will go through the cabinet meeting’s approval next week to be enforce
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May 19, 2010

FSC Chairman's Speech - Korea Economic Forum

Ⅰ. GreetingsGood morning, ladies and gentlemen!I would like to begin with my thanks to Mr. Song Philho, CEO of JoongAng Ilbo, Mr. Lho Cholsoo, publisher of JoongAng Daily, and Mr. Chung Ki-young, president of Samsung Economic Research Institute, for inviting me to speak at today’s forum.I also wish to acknowledge and thank honorable ambassadors, business leaders, and members of the foreign press who are with us today.The global financial crisis, unprecedented in both scale and scope, now appears to have run its course.Troubling new developments in the euro-zone economies, however, remind us that there are still many post-crisis uncertainties we must contend with.So, once again, we must wonder where the euro-zone crisis is headed, and what impact, if any, it may have on Korea’s financial markets and the economy.And it is my hope that today’s forum will shed new light on some of the questions that are on everyone’s mind.This morning, I would like to use my time to outline major financial policy issues we confront and tasks that lie ahead.Ⅱ. Korea’s Financial Policy: Current Issues TasksThere is no question that the global financial crisis forced us to reflect on our past and take stock of what went wrong.The crisis was, in many ways, a heavy blow to our conventional wisdom: namely, a blind faith in market efficiency, innovation and risk-taking.Now, with the benefit of hindsight, the international community is working to introduce wide-ranging financial regulatory reform measures.I believe we must prepare wisely for what lies ahead and maintain our vigilance on changes that are unfolding in the global financial environment.For our part, we are going to formulate financial policies within the context of the new global financial order with a focus on enhancing Korea’s financial capabilities.Addressing Destabilizing FactorsFirst and foremost, we will continue to respond swiftly and preemptively to destabilizing market developments to put out the fire befor
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Mar 31, 2010

Issuance of Financial Investor Express Card

The Financial Services Commission (FSC) held a meeting on March 24 to discuss and approve the issuance of Financial Investor Express Card (FIEx Card). The FIEx Card is issued by the FSC and the Fn Hub Korea of the Financial Supervisory Service (FSS) under the cooperation of the Ministry of Justice to provide convenience for foreign financial investors’immigration procedures.As of March 15, 2010, thirty-two cards were issued to those who met the requirements, out of thirty-five applicants from twenty-two foreign financial institutions.As foreign financial investors with the FIEx Card will be able to use fast-track immigration lanes starting in April 1, immigration procedures for them are expected to become much more convenient. The FIEx Card is issued to deputy general managers or higher executives, holding a supervisory intra-company transfer (D-7) visa, of local branches of foreign financial institutions with an operating capital of KRW 7 billion or more. Foreign financial investors who meet the qualifications can apply for the card at any time at the Fn Hub Korea. (www.fnhubkorea.kr Tel: +82-2-3786-7153)* For more details on the FIEX Card, please refer to the FSC’s Press Release of January 13, 2010, “Introduction of Financial Investor Express Card.” *Please refer to the attached PDF for details.
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