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.
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Jun 10, 2024
- Authorities Introduce Guidelines for Determining When Non-fungible Tokens Qualify as Virtual Assets
- The Financial Services Commission introduced guidelines on non-fungible tokens (NFTs) on June 10 to provide clear standards and examples on determining when NFTs should be considered as virtual assets. Background A non-fungible tokens (NFT) is a digital token carrying a unique identifier, which makes it irreplaceable (non-fungible). NFTs are issued in limited quantities mostly for trading of digital content, such as videos or images. Due to this tendency, the number of owners for the same NFT is limited as well as the occurrence of secondary market trading, which makes NFTs less prone to large-scale user damages, to which virtual assets are often made vulnerable. In addition, from the perspective of promoting development of blockchain technology and seeking regulatory reforms to this end, NFTs qualify as an advanced digital asset. Against this backdrop, when the Act on the Protection of Virtual Asset Users becomes effective on July 19 this year, the FSC plans to exclude certain types of NFTs that meet qualified standards from the scope of virtual assets that will come under its legal purview. However, digital tokens that are presented in an NFT format but in effect qualify as virtual assets will be subject to this law. As this legislation on the protection of virtual asset users will enter enforcement this year for the very first time, the authorities have prepared a set of guidelines to provide clear standards for determining when and how NFTs are considered as virtual assets to help improve predictability and remove obstacles in the application of law. Regulations in Major Countries In major countries, the legal characteristics of NFTs are determined not based on their format or technology but depending on their content, or their practical characteristics. In the U.S., NFTs are scrutinized in the same way as for virtual assets to determine whether they qualify as a security and whether to apply securities regulations. In effect, in 2023, the Securities and Exchang
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Jun 07, 2024
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Jun 03, 2024
- FSC Proposes Rule Changes to Upgrade Regulations on Treasury Stocks of Listed Companies
- The Financial Services Commission issued a preliminary notice of proposed rule changes concerning treasury stocks of listed companies on June 3. This proposal is a follow-up to the previously introduced plan to upgrade rules on treasury stocks of listed companies, which was unveiled on January 30 this year. The reform proposal will bring about changes to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) and its subordinate regulations on the issuance and disclosure of securities, and it will be available for public comment from June 4 to July 16. The proposed rule changes are intended to (a) restrict allocation of new shares to treasury stocks when companies spin-off business units (also in mergers and acquisitions), (b) strengthen disclosure duties throughout the course of acquiring, holding, and disposing treasury stocks, and (c) close loopholes and remove regulatory arbitrage in the process of acquiring and disposing treasury stocks. First, allocating new shares to treasury stocks will be prohibited when companies spin-off their business units, which will help to better protect the rights and interests of general shareholders. When it comes to treasury stocks, currently, almost all shareholders rights, such as voting rights, dividend rights, and preemptive rights, are non-exercisable. However, due to the lack of clarity in statutory provision and court precedents, there have been cases where new shares were allocated in corporate spin-offs. This strategy was often used by companies to bolster control of largest shareholders, instead of making use of treasury stocks to boost shareholder value, which has been pointed out as a problem. Moreover, this has remained inconsistent from the perspective of global regulatory standards. Therefore, the Enforcement Decree of the FSCMA will be revised to restrict allocation of new shares to treasury stocks in corporate spin-offs of listed companies. Second, disclosure duties on treasury
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May 27, 2024
- Rule Changes Proposed to Bring About Improvements to the Convertible Bond Market
- The Financial Services Commission issued a preliminary notice of proposed rule changes regarding the issuance and disclosure of securities, which will be open for public comment from May 28 until June 11, 2024. The proposed rule changes deal with strengthening disclosure requirements on the issuance and circulation of convertible bonds (CBs), including bonds with warrants and (redeemable) convertible preference shares, and upgrading the rules and procedure on refixing convertible prices of CBs to make them more reasonable. First, the revised regulation will strengthen disclosure requirements on the issuance and circulation of CBs. Under the current regulation, when issuing CBs, companies are required to disclose information about the entity who shall exercise the call option. However, in most cases, companies provide only a vague statement of company or company-designated entity in their disclosure filing, which makes it difficult for investors to clearly understand about the entity exercising the call option. To improve upon this situation and to help increase predictability for investors, the proposed rule change will require companies to file material information disclosures when designating an entity for exercising the call option or if the right to exercise the call option has been transferred to a third-party. In addition, the practice of converting CBs into stocks after acquiring CBs close to their maturities and reselling them to the largest shareholder has been identified as a concern for unfair trading activities in capital markets. Although the practice of reselling CBs prior to their maturities is in essence similar to issuing new CBs, there has been lack of sufficient information being provided in the market thus far. Therefore, to address this problem, the proposed rule change will require companies to file material information disclosures when acquiring CBs close to their maturities with detailed information, such as reason for acquisition, plans for
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May 21, 2024
- Authorities Meet to Discuss Progress and Plan for Temporarily Eased Financial Regulatory Measures
- The Financial Services Commission held a meeting with related authorities and industry associations to check progress and discuss further plans for the temporarily eased financial regulatory measures on May 21. At todays meeting, authorities reviewed the prudential management and liquidity situation in each sectorbanks, financial investment companies, specialized credit finance businesses, and savings banksand discussed further plans for extending the availability of eased regulatory measures that are scheduled to expire at the end of June this year. At the meeting, participants assessed that considering current market conditions showing signs of stability and financial sectors response capacity, financial companies are expected to be able to maintain regulatory ratios even with the termination of the eased regulatory measures. However, given the potential of growing uncertainties in the future, participants agreed that some of the eased regulatory measures need to be made available on an extended basis. In this regard, first, the authorities discussed the need to gradually roll back the easing of liquidity coverage ratio (LCR) in the banking sector, which was first introduced in April 2020 in the wake of the COVID-19 pandemic, by raising banks LCR requirement from the current level of 95 percent to 97.5 percent for the second half of 2024. Most banks are currently operating with their LCRs exceeding 100 percent. Although the level of bank bonds issuance has been rising somewhat, considering bond market conditions and expectations for future demand for funds, the recent rise in bank bonds issuance is not expected to have a significant impact on the flow of funds. The banks LCR requirement, in this regard, is scheduled to be raised by 2.5 percentage points every six months, while the authorities will need to review market conditions in the fourth quarter of 2024 to decide further plans from January 2025 and thereafter. Second, the authorities discussed and decided to
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May 13, 2024
- FSC and FSS Announce Measures to Seek an Orderly Soft-landing in the Real Estate Project Finance Market
- The Financial Services Commission and the Financial Supervisory Service announced measures to seek an orderly soft-landing in the real estate project finance market on May 13, expanding upon the series of previously introduced measures aimed at stabilizing the market. Background Since the second half of 2022, the government has been working to facilitate an orderly soft-landing in the real estate project finance market through various market stabilization programs designed to stabilize financial markets, such as the PF-ABCP (project finance asset-backed commercial paper) market and bond market, and by providing funding support to the development projects that are considered to be financially viable, while encouraging restructuring or liquidation of projects that are deemed to be unviable. Corporate bond spreads, which stood at 109 bps at the end of September 2022, rose quickly to 177.2 bps on December 1, 2022 due to market anxieties about PF-ABCPs. However, as the government and the private sector actively took steps to respond in a timely manner, by introducing the corporate bond market stabilization fund and the PF-ABCP purchase program, bond market conditions began to stabilize since after January 2023, and corporate bond spreads as of the end of April 2024 stood at 46.6 bps. Spreads on commercial paper (CP) also spiked to 240 bps on November 23, 2022, but have come down to the recent level of 68 bps, showing signs that financial market conditions have returned to stability. To facilitate funding of the development projects that are operating on solid financial grounds, the government introduced a project finance guarantee program worth KRW30 trillion in October 2022, from which about KRW18 trillion has been implemented thus far in support for projects making a transition from bridge loans to project finance loans. Along this line, in September 2023, various lending support programs were also introduced to assist construction companies via policy financial instit
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Apr 01, 2024
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Apr 01, 2024
- KRW11 Trillion-plus in Corporate Financing Support from the Banking Sector to be Provided to MMEs and SMEs
- The Financial Services Commission announced that corporate financing support programs for middle market enterprises (MMEs) and small and medium-sized enterprises (SMEs) will begin to be provided from the banking sector from April 1. This is a part of the total KRW76 trillion-plus corporate financing measures announced in last February, made available by close cooperation between policy financial institutions and five major commercial banks. First, the Korea Development Bank (KDB) and five major commercial banks will provide KRW6 trillion in low interest rate loans exclusively for MMEs that are attempting to enter into new growth sectors and expand their business operation. Qualified MMEs are eligible to receive up to KRW150 billion per business for facilities investment, funding for research and development, and operating costs with the benefit of 1%p reduction in interest rates. Qualified MMEs should meet the industry and/or production requirement specified by the common criteria for innovative growth, which lay out specific industry areas and products qualified for policy funding support for innovative growth. Second, the Industrial Bank of Korea (IBK) and five major commercial banks will provide about KRW5 trillion in interest support program for SMEs that are operating on a normal financial condition but are having difficulties with heavy interest burdens. In this regard, qualified SMEsthose with loans with interest rates of more than 5.0 percentare eligible to receive up to 5 percent reduction in interest rates for one year. When qualified SMEs apply for this interest support program with their lenders, their qualification will be verified by the lender, and they can choose to receive the interest reduction benefit for one year either immediately or from the time of refinancing. Third, the prompt liquidity support program made available for SMEs from the banking sector will be operated on an expanded basis. The liquidity support program was first introduced by
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Mar 27, 2024
- Government to Ensure Provision of Financial Support for Vulnerable Sectors
- The Financial Services Commission announced the governments plan to ensure provision of financial support intended to help improve conditions for vulnerable sectors on March 27. To reduce the financing burden of SMEs and small merchants and boost their operating conditions, the following measures have been prepared. First, for SMEs, KRW41.6 trillion in funding support will begin to be provided from April, and additional guarantee support (KRW1.7 trillion) for small merchants will also be sought after through coordination between related ministries. Second, banks will continue to work on making sure that their own interest refund programs for small merchants amounting to about KRW1.5 trillion are being implemented seamlessly. Interest refunds from nonbanks, amounting to about KRW300 billion, will begin to be paid out from the end of March. Borrowers with high interest rate loans (7% or higher interest rates) will have opportunities to switch to lower interest rate loans. In addition, the banking sector plans to make available KRW600 billion more in financing support for vulnerable groups from April. Banks will make contributions to relevant agencies in support for lower income households and small merchants. Third, there will be steady provision of support for small merchants to help them recover and regain footing through debt adjustment (New Start Fund) and credit recovery support. As of the end of February 2024, about 175,000 individuals have already benefited from this credit recovery support program, with their credit scores increased by an average of 102 points. To ensure stability in the housing market, the government will bolster support for project financed real estate development projects and actively seek to resolve difficulties of construction firms through a private-public joint effort. First, additional support in the form of loan guarantees amounting to a total of KRW9 trillion is newly planned for property developments under PF loans (KRW5 trillion) a
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Mar 27, 2024
- New Operating Rules on Virtual Asset Market Inspection to Ensure Strict Investigation and Punishment on Unfair Trades
- The Financial Services Commission issued a preliminary notice for the enactment of new operating rules on the inspection of virtual asset market being proposed for public comment from March 28 to May 7. The new operating rules will specifically deal with details of the procedures and methods regarding the examination and investigation of unfair trading activities in the virtual asset market. Pursuant to the Act on the Protection of Virtual Asset Users (the Act hereinafter), which is scheduled to go into effect from July 19 this year, unfair trading activities involving virtual assets, such as the use of material nonpublic information, price manipulation, and other fraudulent activities, are prohibited and subject to criminal punishment or penalty surcharge.Once the Act becomes effective, unfair trading activities (or suspicious transactions) involving virtual assets will be first (a) monitored by virtual asset service providers (VASPs), then the case will be (b) examined by the FSC and the FSS (Financial Supervisory Service) to bring a formal charge with the prosecutors office, which will then (c) investigate the case for (d) imposing a criminal punishment or penalty surcharge. In this regard, the new operating rules being proposed prescribe specific procedures and methods for each stage of the investigation process. First, upon finding a suspicious transaction activity, VASPs should take appropriate measures to protect users, by issuing a warning, fact-checking about the rumor and disclosing findings, restricting orders, suspending transactions, and so on. When it is suspected to have detected an unfair trading activity, VASPs should report the case to the FSC and the FSS. When there is enough corroborating evidence demonstrating that an unfair trading activity took place, or if a request has been received from an investigative authority about an ongoing investigation, VASPs should immediately report the case to the prosecutors office. Second, the FSC and the FSS a
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Mar 19, 2024
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Feb 28, 2024
- Rule Changes Proposed Regarding Insider Transactions under the FSCMA
- The Financial Services Commission issued a preliminary notice of rule changes being proposed concerning the ex-ante disclosure requirement for insider transactions under the Financial Investment Services and Capital Markets Act (FSCMA). With regard to the ex-ante disclosure requirement for insider transactions, the revision proposal specifies the entities that will be exempted from the disclosure duty, the volume and type of transactions that will be exempted from the disclosure duty, and the procedure and method for disclosure. First, the rule changes being proposed exempt pension funds and other financial investors that are expected to have higher levels of internal control standards and are unlikely to misuse material nonpublic informationsuch as collective investment vehicles, banks, insurance companies, specialized credit finance companies, financial investment businesses, venture capital firms, and the Korea SMEs and Startups Agencyfrom the duty to disclose their stock transaction plans in advance for insider transactions. Moreover, an exemption from the ex-ante disclosure duty will also be granted to foreign investors that are deemed to have an equivalent status to the above mentioned domestic financial investors to ensure more equal treatment of both domestic and foreign investors. Second, the rule changes being proposed grant an exemption if the volume of transactions in particular securities typesover the past six months is less than one percent of the total number of shares issued by the company within that particular year and if the total amount of transactions is less than KRW5 billion. Moreover, an exemption from the ex-ante disclosure duty will also be granted for transactions resulting from a statutory requirement, tender offers, or acquisitions or dispositions following corporate spin-offs or mergers. Third, the rule changes being proposed require that companies insider transaction plans specify the expected transaction price and volume as well as t
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Feb 26, 2024
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Feb 21, 2024
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Feb 20, 2024
- Authorities Hold Meeting on Household Debt Related Risks
- Vice Chairman Kim Soyoung of the Financial Services Commission presided over a meeting with relevant authorities and organizations on February 20 to discuss current household debt situation, related risks and future expectations. At the meeting, the authorities also went over the situation with policy mortgage loans and held talks on ways to improve the quantitative and qualitative structure of household debt. The preliminary data on household credit released by the Bank of Korea for the year of 2023 showed an increase of KRW18.8 trillion (up 1.0 percent) from the previous year. When compared to the ten-year (2013-2022) average growth of about KRW90 trillion a year in previous years, the current pace of growth appears to be on a very stable footing. At the meeting, participants expressed favorable views on the stable management over household credit. However, with expectations about interest rate cuts this year and a potential recovery in the housing market, authorities shared the same view on the need to more systematically manage the pace of growth. In this regard, Vice Chairman Kim said that the authorities will make efforts to ensure that the pace of household debt growth stays within the level of annual economic growth in 2024. Although there may be challenges along the way, such as rising demand for loans due to expectations for interest rate cuts and excessive competition between lenders, Vice Chairman Kim said that the authorities will work on the following measures. First, the authorities will continue to maintain close communication with all financial sectors. The Financial Supervisory Service will keep close tabs on how lenders are handling loans by their type and use, while requiring self-adjustment measures from the lenders deemed to be extending credit too rapidly. Second, the authorities will strictly manage the supply of policy mortgage loans to ensure the availability of housing loans to non-speculative homebuyers and renters, while taking appropria
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Feb 14, 2024
- Authorities Meet to Discuss ESG Disclosure Standards
- The Financial Services Commission held a meeting with officials from industry groups, investors, related organizations and private sector experts on February 14 to have a discussion on the preparation of domestic disclosure standards for environmental, social and governance (ESG) management. FSC Vice Chairman Kim Soyoung presided over the meeting and delivered opening remarks, outlining trends in global disclosure standards and direction for domestic ESG disclosure standards. The following is a summary of Vice Chairman Kims remarks. Global interest on ESG and sustainable growth has led to the strengthening of ESG policy and regulations in global capital markets. To facilitate domestic firms to more effectively respond to this, the government has been making efforts to support the sustainable growth of our economy and businesses. As a part of this, the FSC had introduced a general direction for pursuing ESG disclosure standards at a taskforce meeting held in October last year. Considering trends in major countries, authorities had agreed to adopt ESG disclosure standards from after 2026 and agreed to consider an exchange filing requirement and an application of a minimum level of sanctions during an early stage. Moreover, authorities had agreed on considering the adoption of climate-related disclosure standards first as there is an international consensus already established on this. ESG disclosure standards are aimed at making sure that information about corporate sustainability practices can be disseminated to investors in a more systematic way, thereby helping to resolve the problem of information asymmetry between companies and investors. Many firms have been filing sustainability reports on a voluntary basis, but the lack of common standards made them difficult for comparison. Therefore, the government has been working with related organizations, such as Korea Accounting Institute, in preparing ESG disclosure standards to be adopted by domestic stock companies.
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Feb 13, 2024
- FSC Proposes Rules Change Introducing Responsibilities Map to Bolster Internal Control of Financial Companies
- The Financial Services Commission issued a preliminary notice regarding a revision proposal for the enforcement decree of the Act on Corporate Governance of Financial Companies and its supervisory regulation on February 13. In December last year, a partial revision to the Act on Corporate Governance of Financial Companies (the Act hereinafter) was passed by the National Assembly, paving the way for financial companies to adopt responsibilities maps and have their executive officers manage internal control duties in their lines of work. As a follow-up to this, the revised enforcement decree and supervisory regulation being announced today specifically deal with the issues delegated by the Act, such as how to prepare for a responsibilities map and when and how to submit it, as well as details about the internal control oversight duty of chief executive officers. First, the revision proposal deals with specific details concerning how to write and submit responsibilities maps. A responsibilities map should be written with details about the scope of internal control responsibilities of each executive officer demonstrating a well-balanced division of responsibilities. Financial companies will be required to submit responsibilities statements, detailing each executive officers duties and responsibilities, as well as responsibilities diagrams, mapping out responsibilities of their executive officers in relation to one another in a visual manner. The responsibilities maps should be submitted to the financial authority within seven business days from the time of approval from their boards. The term responsibilities refers to the internal control and risk management duties relating to the business operations of a financial company. The business operations of a financial company are categorized into (a) the company-wide oversight functions, such as internal audit, compliance, and risk management, (b) the authorized sales and marketing related functions, such as lending and depo
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Feb 08, 2024
- FSC to Ensure Thorough Preparation for the Enforcement of the Act on the Protection of Virtual Asset Users
- The Financial Services Commission announced that the Act on the Protection of Virtual Asset Users (the Act hereinafter) will take effect from July 19, 2024. This law was enacted on July 18, 2023 with aims to protect the users of virtual assets and maintain an order in the market. The Act largely deals with (a) protection of assets held by users of virtual assets, (b) prohibition of unfair trading activities in the virtual asset market, and (c) supervision and sanctions authority over virtual asset service providers (VASPs) and related market activities. To provide specific details delegated by the Act, the FSC had prepared an enforcement decree and a supervisory regulation and sought public comment between December 11, 2023 and January 22, 2024. Major details of the current legislative framework on the protection of virtual asset users are as follows. First, VASPs have the duty to safely keep deposits and virtual assets owned by users. Banks have been selected as the sole financial institutions eligible to carry out the handling and custody of user deposits. To ensure safe protection of users assets, VASPs need to keep more than a certain level of users assets in cold wallets (minimum 80 percent of virtual assets economic value). To be prepared for incidents of hacking or computer failure, VASPs need to have a liability insurance or set aside a reserve to be able to meet demands for compensation. In transactions involving virtual assets, the acts of using undisclosed material information, manipulating market prices, and engaging in unfair trading activities are all prohibited and punishable by either a criminal penalty or a penalty surcharge. A criminal sentence of minimum one year of imprisonment or a fine of more than three times and up to five times the amount of unfairly gained profits can be imposed. Violators may face up to a life sentence depending on the amount of unfairly gained profits (if more than KRW5 billion). Imposing a penalty surcharge at double the
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Feb 06, 2024
- FSC Holds Meeting and Announces Plans to Upgrade Rules on Corporate Mergers and Acquisitions
- Vice Chairman Kim Soyoung of the Financial Services Commission presided over a meeting with officials from related organizations and industry groups on February 6 and announced plans to improve rules on corporate mergers and acquisitions (MAs). The measures are aimed at strengthening protection for investors, which will also help to boost regulatory consistency with global standards. At the meeting, Vice Chairman Kim delivered opening remarks, outlining some of the problems observed in the market and policy proposals to address them. The following is a summary of Vice Chairman Kims remarks. Corporate MAs are important mechanisms to promote growth and innovation in a company and boost dynamism in an economy. Securing a competitive edge through MAs has become ever more important when considering recent economic conditions, such as interest rate hikes and global economic slowdown. Meanwhile, MAs are important corporate decisions which can significantly influence the governance structure and share value of a company, and thus are also very important from the perspective of guaranteeing the protection of rights for general shareholders. For this, authorities have worked to ensure that companies get consent from their shareholders when pursuing MAs and to provide sufficient protections for dissenting shareholders. However, in corporate MAs, there continues to be the problem of general shareholders being sidelined, with their voices not being heard enough. In this regard, there have been concerns about the lack of sufficient information available on the reasons for undertaking MAs and their processes as well as important decision-making by boards of directors. At the same time, there have been also complaints about the rigidity in rules concerning the method of calculating merger prices, which have not been able to take into account the corporate restructuring demands of companies in a more autonomous way. To address these issues, in May last year, the FSC announced a set
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Feb 05, 2024
- FSC and MOIS Sign MOU to Bolster Prudential Supervision on MG Community Credit Cooperatives
- The Financial Services Commission announced that it has signed a memorandum of understanding (MOU) with the Ministry of the Interior and Safety (MOIS) to strengthen cooperation between the two organizations to bolster supervision over MG Community Credit Cooperatives (MGCCC) on February 5. In the wake of large-scale deposit outflows that took place at MGCCC last year, the FSC and the MOIS came to agree on the need to expand the role of financial authorities in carrying out prudential supervision over MGCCC. Shortly thereafter, in December last year, the Financial Supervisory Service (FSS) and the Korea Deposit Insurance Corporation (KDIC) each set up an internal organization tasked with supervising MGCCC. In this regard, todays agreement lays out rules and principles needed to build a stronger cooperative supervisory network between the two organizations. Key details of the agreement are as follows. First, regarding the rules and procedures, the MOIS will decide on MGCCCs prudential management standard in consultation with the FSC and on a par with the prudential standards observed by other types of mutual financial businesses. Second, regarding information sharing, the FSC will be able to regularly and frequently receive information needed to ensure prudential supervision over MGCCC from the MOIS. Third, regarding inspection and post-inspection measure, the MOIS and the FSC will mutually consult with each other in establishing a plan for inspection and deciding on a post-inspection measure. At the MOU signing event, FSC Chairman Kim Joo-hyun pledged to actively cooperate with the MOIS and urged related authorities to make sure a seamless operation of the joint inspection units. The government expects that this agreement will serve as a first step in helping to bolster prudential supervision on MGCCC. * Please refer to the attached PDF for details.