-
Sep 26, 2024
-
Aug 05, 2024
- FSC Chairman Holds Meeting and Emphasizes Importance of Comprehensive Efforts to Manage Debt Risks
- Chairman Kim Byoung Hwan of the Financial Services Commission held a meeting with macroeconomic and financial market experts on August 5 to review financial risks in four specific sectors, which include debt risks in the household, real estate project finance, and small business sectors, and the soundness of the nonbanking sector, and discussed ways to effectively manage these risks. The following is a summary of Chairman Kims remarks at the meeting. A Summary of Chairmans Remarks Current economic conditions at home and abroad appear to be reaching an inflection point, shown by recent monetary policy decisions in major economies, economic forecasts in the U.S., and domestic housing market situation. Against this backdrop, it is necessary to strengthen our efforts to examine and respond to market risks. While focusing our efforts to promptly and closely manage debt risks in four specific areas, which have been accumulated from the past, it is also essential to take steps to preemptively manage newly emerging risk factors. As there exist concerns about the weakening of the U.S. economy, major stock markets around the world have tumbled recently.Therefore, it is also necessary to maintain close monitoring over volatility in stock markets. The government is focused on working to bolster our stock markets resilience and establish a more credible and reliable market environment for investors by seeking structural improvements over a medium- to long-term. To this end, the government will continue to make efforts to ensure seamless implementation of the Corporate Value-up Program and short sale reform measures. Along the same lines, the government will continue to work on tax support measures that can help to boost investments in the domestic stock market. The relatively high levels of debt-to-GDP ratioand reliance on debt make domestic financial system vulnerable to external shocks. In order to ensure sustainable growth and make our economy more resilient and to guarantee
-
Jul 22, 2024
- Vice Chairman Visits London to Promote Capital Market Reform Programs and Strengthen Bilateral Cooperation
- Vice Chairman Kim Soyoung of the Financial Services Commission visited London, the United Kingdom (UK) from July 16 to 19 in an effort to promote Koreas capital market reform and corporate value-up programs to global investors and to strengthen financial cooperation between Korea and the UK. IR with Global Investors On July 17, Vice Chairman Kim held an investor relations event for global investors and provided key information about the progress of Koreas capital market reform initiatives aimed at boosting market accessibility, guaranteeing fairness and transparency in market transactions, and enhancing shareholder values. In this regard, Vice Chairman Kim provided detailed information about the opening up of the foreign exchange (FX) market, plans to introduce an alternative trading system (ATS), short sale reform measures, and the corporate value-up program. UK-Korea Financial Forum On July 17, Vice Chairman Kim also attended the UK-Korea Financial Forum and delivered a congratulatory speech. In his remarks, Vice Chairman Kim talked about the importance of maintaining strong cooperation with the UK to effectively respond to various challenges and opportunities presented by shifting global market environment, such as technological advance and climate change. Meeting with Lord Mayor of the City of London On July 18, Vice Chairman Kim held a meeting with Lord Mayor Michael Mainelli of the City of London and exchanged views on key issues surrounding major elections around the world this year and policies to promote global financial hubs in both countries. At the meeting, Vice Chairman Kim took time to explain Koreas key financial policies, such as open banking, establishing a loan transfer infrastructure to facilitate refinancing of personal loans at lower interest rates, introducing financial MyData service, adopting guidelines on ESG disclosure, and so on. Meeting with FTSE Russell Following the meeting with the Lord Mayor of the City of London, Vice Chairman Kim vi
-
Jul 03, 2024
- SFC Imposes Penalty Surcharges on Global Investment Banks for Violating Short Sale Regulations
- The Securities and Futures Commission, a sub-commission within the Financial Services Commission responsible for overseeing the securities and futures markets, held the thirteenth regular meeting on July 3 and decided to impose penalty surcharges amounting to KRW27.173 billion in total on two former Credit Suisse affiliated investment banks for violating short sale regulations under the Financial Investment Services and Capital Markets Act (FSCMA). The level of penalty surcharge imposed on each of the two former Credit Suisse affiliated entities is the largest (KRW16.94 billion on Credit Suisse AG) and the third largest (KRW10.23 billion on Credit Suisse Singapore Ltd.) ever since the penalty surcharge system began to be implemented on naked short sale activities in April 2021. In the case of Credit Suisse AG (currently UBS AG), from April 7, 2021 to June 9, 2022, the investment bank was found to have engaged in naked short sales in the amount of about KRW60.33 billion (162,365 shares on 20 stock items) without possessing these stocks at the time of placing short sale orders. In the case of Credit Suisse Singapore Ltd., from November 29, 2021 to June 9, 2022, the investment bank was found to have engaged in naked short sales in the amount of about KRW35.28 billion (401,195 shares on five stock items) without possessing these stocks at the time of placing short sale orders. In addition, prior to todays meeting, the SFC decided to impose administrative fines worth KRW284.2 million in total on four domestic financial investment businesses, two foreign financial investment businesses, and an individual investor for violating their net short position balance reporting and disclosure duties under the FSCMA. The financial authorities will continue to strictly deal with naked short selling and other unfair trading activities in capital market to promote soundness in market transactions. * Please refer to the attached PDF for details.
-
Jun 13, 2024
- Short Sale Ban Extended Until March 30, 2025
- The Financial Services Commission held an extraordinary session on June 13 and decided to extend the period of enforcing short sale ban currently set to expire at the end of this month until March 30, 2025. However, covered short selling by market makers and liquidity providers will continue to be allowed in the same way as before. On November 5, 2023, the FSC decided to ban short selling in domestic stock markets against the backdrop of growing market uncertainties and the uncovering of large-scale illegal short sale activities carried out by global investment banks, leading to concerns about disruption in fair pricing function and undermining trust in the capital market. Since then, the government and related authorities carried out investigations into the situation and found out cases of naked short sale activities amounting to some KRW211.2 billion. At the same time, the authorities have worked to seek fundamental solutions to overhaul the system to prevent illegal short sale activities. To this end, until the end of March 2025, the authorities plan to set up a completely electronic short sale processing system that can prevent naked short selling. First, the Financial Supervisory Service (FSS) will provide relevant guidelines to ensure that institutional investors can set up their own internal short position balance management system within this year. The Korea Exchange (KRX) plans to finish up developing the Naked Short-selling Detection System (NSDS) by the end of March 2025, which will function as a central monitoring system allowing authorities to compare and scrutinize the balance and over-the-counter (OTC) transactions information of institutional investors. The FSC expects that resuming short selling activities without the establishment of such electronic processing and monitoring systems risks the recurrence of illegal short sale activities in large scale. Therefore, to establish the electronic short sale processing and monitoring systems that can help
-
Jun 13, 2024
- Short Sale Reform Measures Introduced to Prevent Illegal Trading Activities and Protect Investors
- The Financial Services Commission announced the finalized version of short sale reform measures on June 13, which include plans to establish a completely electronic short sale processing system until March 2025, limit the length of stock repayment period for both institutional investors and retail investors to maximum 12 months, and strengthen the severity of penalties on illegal short sale activities when the amount of unfairly gained profits is KRW5 billion or more. In November 2023, the FSC decided to ban short selling in domestic stock markets (until the end of June 2024), because authorities became concerned about naked short selling activities taking place routinely, which could potentially disrupt domestic stock markets fair pricing function. Since then, public debates and discussions have taken place to make improvements to the short selling system, and the ruling party and the government held a consultative meeting to announce the finalized set of reform measures on June 13. Background On November 16, 2023, the FSC introduced its plan to seek short sale reform measures at the meeting held with representatives from the private sector, the ruling party of the National Assembly, and related authorities. The issue of developing an electronic short sale processing system, which was discussed multiple times previously, has been thoroughly dealt with in taskforce meetings jointly led by the Financial Supervisory Service (FSS) and the Korea Exchange (KRX). After having active communication with market participants, including foreign investors, the authorities have come up with a set of practical measures for developing an electronic short sale processing system. In addition, the authorities have had a series of meetings and discussions with experts, industry representatives, and the public to collect wide-ranging opinions on the overall stock short sale system before arriving at this finalized set of reform measures. Meanwhile, the authorities have continued to mak
-
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
-
May 09, 2024
- Authorities Introduce ATS Operation Plan to Promote Improvement in Capital Market Infrastructure
- The Financial Services Commission announced that Koreas first alternative trading system (ATS), Nextrade, will begin to operate in domestic market starting in the first half of next year. This will mark the operation of a multiple and competition-based stock trading system in Koreas capital market as in the case with those found in major overseas economies. Introducing an ATS has been a key part of the governments capital market reform initiative, and it is intended to make domestic capital market more accessible for investors with enhanced convenience for transactions. With the operation of an ATS, stock trading hours will be extended to twelve hours a day from 08:00 am to 08:00 pm. Also, as more order types will become available for investors with enhanced competition to help lower fees, transaction costs will be reduced and trading convenience improved for investors. Seminar on ATS Operation Plan The FSC held a seminar on the measures for operating ATS with the Korea Financial Investment Association, Korea Exchange (KRX), and Nextrade on May 9. As the preliminary approval for operating an ATS was granted to Nextrade in July 2023, the FSC and related organizations have since worked on the measures for ATS operation and plans for ensuring effective market oversight in a comprehensive and integrated manner. At todays seminar, the authorities unveiled the measures and held discussions with market participants. FSC Vice Chairman Kim Soyoung delivered congratulatory remarks at the beginning of the seminar and emphasized the importance of ensuring stability and fairness in market management. Vice Chairman Kim also asked participants to thoroughly prepare for the official launch of an ATS and to ensure that investors are kept posted with relevant information. In addition, Vice Chairman Kim said that the financial authorities will work to prepare guidelines and revise relevant rules and regulations necessary for the operation of an ATS. A New Stock Trading Experience With
-
Apr 30, 2024
- FSC to Promote Investment in Climate Technology Sector
- Chairman Kim Joo-hyun of the Financial Services Commission attended the technology fund agreement ceremony on April 30. This agreement ceremony is a second follow-up measure for expanded financial support measures for climate crisis response after its first follow-up measure the ceremony for the establishment of the Future Energy Fund, which supplies venture capital for the expansion of renewable energy facilities, including offshore wind power. The FSC plans to invest a total amount of KRW9 trillion in the climate technology sector through its various funds like Innovation Growth Fund and Growth Ladder Fund. Among those funds stands the Climate Technology Fund, which Industrial Bank of Korea and five major commercial banks are to commit a total of KRW1.05 trillion into its master fund by 2023, and invest KRW3 trillion in climate technology companies through private capital matching. The master fund is managed by Korea Growth Finance. Chairman Kim stated, Climate technology is both a means to achieve carbon neutrality and a future source of sustenance."He added, "The government and private sector together have come up with the plan for investing a total of KRW9 trillion in the climate technology sector by sector by 2030, including the Climate Technology Fund." Chairman Kim also emphasized that the Climate Technology Fund will be mandated to put a certain ratio of its investments into SMEs and venture companies possessing climate technology to ensure that funds are appropriately allocated. He also urged the Climate Technology Fund to actively seek out investment opportunities and serve as patient capital to support the growth of the climate technology sector, which faces significant uncertainties and challenges in achieving short-term results. The Climate Technology Fund plans to establish the master fund during the first half of the year, select the managers for the feeder funds, and complete the formation of these funds by early next year to commence investment. *
-
Apr 22, 2024
- Taskforce on ESG Finance Holds Meeting and Discusses Key Details of ESG Disclosure Standards
- The Financial Services Commission held the 4th taskforce meeting on ESG (environmental, social and governance) finance with related ministries, industry groups, investors, and experts on April 22 to have discussions on details of an open draft on domestic ESG disclosure standards. FSC Vice Chairman Kim Soyoung presided over the meeting and outlined basic principles and key details of the draft standards. A Summary of Vice Chairmans Remarks First, this open draft on domestic ESG disclosure standards is consistent with global standards as it amply takes into account cases from overseas. In this regard, the draft standards have been formulated to ensure interoperability with the ESG disclosure standards of other major countries to minimize the burden of redundant disclosure duties for domestic businesses. In addition, the draft standards will mandate climate-related disclosures first, while keeping the disclosure of information on other non-climate-related ESG elements on a voluntary basis. Second, the draft standards have been prepared to provide quality information to investors. Instead of simply requiring businesses to list up relevant data on climate risks and opportunities, the draft standards will actually promote behavioral change from businesses through a more systematic provision of information disclosures based on important categories, such as governance structure, strategy, risk management process, and so on. Third, the draft standards also take into account the needs of enterprises and ensure that there is no excessive burden placed on them. Considering domestic firms capabilities and level of preparedness, authorities will provide detailed guidelines and allow companies to disclose qualitative informationinstead of quantitative datafor certain types of indicators prone to a large degree of subjectivity in their measurement. This open draft on ESG disclosure standards also takes into consideration the need for our economy to address some of the newly emergi
-
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
-
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
-
Feb 27, 2024
- FSC Vice Chairman Holds Investor Relations in Singapore and Introduces the Corporate Value-up Program
- Vice Chairman Kim Soyoung of the Financial Services Commission held an investor relations event in Singapore with major institutional investors from Asia participating on February 27. During the dialogue, Vice Chairman Kim outlined the governments capital market reform initiatives with a particular attention on the recently announced Corporate Value-up Program, which have gained much interest from both domestic and overseas investors. The following is a summary of Vice Chairman Kims remarks. The Korean governments capital market reform measures have been focused on the following three areas. First, to establish a fair and transparent market order, the government has bolstered measures against unfair trading activities. A temporary ban on short-selling has been put in place to make trading conditions more equal for both retail and institutional investors and to build a completely electronic short-selling transaction system designed to prevent naked short-selling activities. Second, to make Koreas capital markets more accessible to investors, the authorities have already abolished the foreign investors registration requirement, mandated companies to file disclosures in English in phases, and eased the reporting requirement to facilitate the use of omnibus account. To help expand domestic investor base, the government has already decided to repeal the planned introduction of capital gains tax on financial investments and plans to expand tax benefits for individual savings accounts (ISAs). Third, to promote shareholder values in corporate management practices, the government has been consistently working on various measures aimed at protecting the rights of general shareholders. As a consequence, many large companies have now adopted the improved dividend payout procedure in which investors are able to make investment decisions while knowing how much they will receive in dividends. In addition, the Corporate Value-up Program, which was unveiled on February 26, is design
-
Feb 26, 2024
- Active Support to be Provided to Promote Voluntary Efforts of Listed Companies in Enhancing Their Value
- The Financial Services Commission held the first seminar on the Corporate Value-up Program for the advancement of the Korean stock market together with the Korea Exchange, other related institutions, and industry groups on February 26. At todays seminar, key details of the Corporate Value-up Program, which have been jointly prepared by related institutions, were introduced to facilitate discussions and collect opinions from various stakeholders. FSC Chairman Kim Joo-hyun delivered opening remarks outlining the governments reform initiatives to bring about fundamental changes in our capital markets. They include (a) establishing a fair and transparent market order, (b) improving accessibility to capital markets, and (c) strengthening protection for general shareholders. To build up a positive feedback loop in our capital markets where listed companies are able to get proper valuation for sound growth and investors are able to share the profit of that growth and reinvest in the Korean capital market, the government needs to support companies voluntary efforts to raise their value, the Chairman said. He added that the Corporate Value-up Program will be implemented continuously as a mid- to long-term project to support companies value enhancement efforts and promote management practices that place a priority on shareholder value. Key details of the Corporate Value-up Program are as follows. In order to actively support listed companies self-driven efforts to improve their corporate value, the government and relevant organizations set out a framework to implement the Corporate Value-up Program. The framework consists of three pillars: (a) supporting listed companies to prepare, implement and communicate their corporate value-up plans, (b) supporting investors in making informed evaluations and investments in companies that demonstrate outstanding improvements or high value, and (c) establishing a dedicated system to support the implementation of the Corporate Value-up Pr
-
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
-
Feb 15, 2024
- Government Unveils KRW76 Trillion Worth Corporate Financing Support Plans in Private-Public Joint Initiative
- Chairman Kim Joo-hyun of the Financial Services Commission presided over a meeting with the heads of five major commercial banks and policy financial institutions on February 15 and announced the governments plans to provide tailored funding support for enterprises. The FSC has held a series of meetings with businesses to listen to their challenges and difficulties in financing business operations. To make sure that the prepared measures can actually serve the needs of businesses, the FSC has actively collaborated with the Ministry of Economy and Finance, the Ministry of Trade, Industry and Energy and the Ministry of SMEs and Startups. The support measures being introduced today are also an outcome of active participation and contribution from policy financial institutions as well as from major commercial banks. In his opening remarks, FSC Chairman Kim Joo-hyun said that the future of Korean economy depends on the competitiveness of our enterprises, and that to boost our industrial competitiveness through new initiatives to ensure a continuous growth amid uncertain business environment, it is essential to have finance play an active role. In this regard, Chairman Kim stressed that it is necessary to have (a) a large-scale investment support for high-tech industries, (b) a targeted investment support for middle market enterprises, and (c) assistance programs made available for businesses undergoing challenging situations due high interest rates and so on. The corporate financing support plans being unveiled today consist of the following three key measures. First, authorities have prepared strategic financing support plans worth KRW26 trillion-plus for high-tech enterprises. A supply chain stabilization fund will be created to help businesses seeking to diversify imports, develop alternative technologies, and secure raw materials from overseas. The Korea Development Bank (KDB) will provide KRW15 trillion in financing support to the five major strategic sectorssuch as
-
Jan 17, 2024
-
Jan 03, 2024
- FSC Plans to Work on Measures to Improve the Competitiveness of Publicly Offered Funds
- Vice Chairman Kim Soyoung of the Financial Services Commission presided over a meeting with officials from related authorities and an industry groupto discuss plans to improve the competitiveness of the publicly offered funds market on January 3. In his opening remarks, Vice Chairman Kim said that the government has never been more serious about making fundamental changes to our capital markets, and that this plan is also a part of the policy drive intended to resolve the issue of Korea discount, the persistent undervaluation of Korean companies in stock markets. In this regard, the proposed plan will focus on nine specific ways to bring about improvements regarding institutions, products and infrastructure, with aims to cut transaction costs, strengthen product marketability and boost transaction convenience. First, the proposed plan intends to bring about improvements from institutions by strengthening the credibility and accountability of fund managers, sellers and related businesses including the fund accounting and administration companies and various ratings companies. Currently, the sales remuneration structure for fund sellers is designed in a way that all fund sellers are paid with fund assets in a uniform way. To boost accountability and competition between fund sellers, the authorities will introduce a more reasonable seller remuneration system (fund class) under which fund sellers will be paid directly from investors with the possibility of having different fee rates for different sellers within the statutory limit of one percent. For these types (or classes) of funds, the seller fee remuneration system can be linked to the performance of funds to boost responsibility of fund sellers. Along this line, the proposed plan will bolster asset managers accountability by requiring them to more regularly conduct evaluations on alternative investment assets and to more accurately advertise fees for exchange-traded funds (ETFs). With increases in demand for more f
-
Dec 27, 2023
- Stressed Debt Service Ratio Rules to Take Effect in 2024
- The Financial Services Commission announced that the stressed debt service ratio (DSR) rules will take effect in 2024 on all types of loans that have variable, mixed or periodically changing interest rate structures. The stressed DSR system imposes a certain level of additional stress rate when calculating the borrowers DSR as it takes into account the possibility of the borrower facing heavier repayment burdens in the future with increases in interest rates. The additional stress rate will be determined based on the comparison of interest rates between the five-year peak level and the present level (as of May and November of every year). However, to buffer against the possibility of overestimating or underestimating the risk associated with interest rate changes in times or both high and low interest rates, the additional stress rate will be decided between a minimum of 1.5 percent and a maximum of 3.0 percent. For loans with variable interest rates, an additional stress rate of the five-year peak rate minus the present rate will be applied. For loans with mixed interest rate structuresthose with a fixed interest rate for a certain period of time first and changed into a variable interest rate structure thereafterthe longer the period of fixed interest rate structure, the lower the level of additional stress rates. For instance, for 30-year loans, if the period of fixed interest rate is set between five to nine years, the additional stress rate will be applied at a 60 percent level. For the fixed rate terms of nine to fifteen years and fifteen to twenty-one years, the additional stress rate will be applied at a 40 percent level and a 20 percent level, respectively. For loans with periodically changing interest rate structures, additional stress rates will be applied at eased levels. For 30-year loans, if the period of interest rate change is five to nine years, the additional stress rate will be applied at a 30 percent level. For those with nine-to-fifteen-years an
-
Dec 26, 2023
