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Jun 12, 2009
- SME Loans and Credit Guarantees in May 2009
- Bank LoansContinuing its upward trend since the beginning of the year, the month-on-month net increase in loans provided by the 18 domestic banks to small and medium-sized enterprises (SMEs) grew by KRW3.2 trillion from KRW434.5 trillion in April to KRW437.7 trillion in May.During the first five months of the year, the net increase in SME loans was KRW15.2 trillion, and KRW17.3 trillion when the actual support amount is added, including deposit-loan nettings.Fast Track ProgramDuring May, a total of KRW2.0 trillion was extended to 893 SMEs through the Fast Track program. Demand for loans through the program has been slowing since March due to improved financial conditions of SMEs following the liquidity injections.From October 13, 2008 to May 30, 2009, a total of 9,087 SMEs were extended KRW15.3 trillion in support, including 588 companies that received KRW4.0 trillion for losses stemming from KIKO contracts.Support through the Center of the SME Financial OmbudsmanDuring May, the Center of the SME Financial Ombudsman heard 232 cases and extended KRW66.9 billion in support. From September 11, 2008 to May 31, 2009, a total of 2,613 cases were heard of which 47.6% or 1,245 cases were merited with KRW990.7 billion in support from the banks.In particular, the six SME Financial Support Offices located in industrial parks counseled 551 cases and accepted 171 or 31.0% of the cases for support between February 23 and May 29.Guarantees Bank Loan Maturity Extensions Future SupportIn May, new guarantees more than tripled to KRW4.4 trillion from KRW1.5 trillion over the same period last year. But the uptrend in the applications for and issuance of guarantees, which shot up until March this year, started slowing in April.Maturity extensions have also been running smoothly with the average maturity extension of guarantees of KRW3.2 trillion and an average maturity extension rate of 94.3% in May.During the first five months of the year, there was KRW13.1 trillion in support for core
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May 15, 2009
- FSC Chairman, Dong-Soo Chin Meets Foreign Correspondents
- I. GreetingsDistinguished members of the Seoul Foreign Correspondents’ Club, and ladies and gentlemen,It’s great to be here with you and I thank you for coming.I also thank the Seoul Foreign Correspondents’ Club for helping us arrange today’s meeting and giving me a chance to speak to foreign correspondents about Korea’s policy response to the global financial crisis.It is my hope that today’s meeting will shed new light on recent market and policy developments in Korea and what you can expect going forward in terms of financial policy from the FSC.II. The Financial Crisis and Korea’s ResponsePolicymakers in the U.S. and other major countries have responded aggressively and forcefully to the global financial crisis.With many characterizing the crisis as the worst since the Great Depression, there was more than ample justification for bold policy measures.Korea’s policymakers acted in a similarly bold fashion to cushion the impact of the crisis on the financial system and the broad economy.In terms of financial policy, we had two broad goals to accomplish: safeguarding the financial markets and reinstating the financial sector as the patron for thereal economy.Safeguarding the Financial MarketsAs the financial crisis began to spread around the world, it became clear to us that we had to act swiftly on several fronts to avoid systemic risk, and maintain the stability of the financial markets.To stabilize the foreign currency market, the government provided external debt guarantees for domestic banks and signed currency swap arrangements with major countries.On the other hand, to bring back stability to the financial markets, interest rates were cut and the Bond Market Stabilization Fund was created to increase liquidity and help restore the flow of credit to the real sector.Steps were also taken to prevent market instability due to abrupt capital outflow from the short-term money market.Reinstating the Financial Sector as the Patron for the Real Eco
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May 15, 2009
- Opening of the Fn Hub Korea, Busan
- The opening ceremony of ‘Fn Hub Korea, Busan’ will be held on May 15, 2009 at 2p.m. Fn Hub Korea, Busan was established to support Busan (Munhyeon), designated as a specialized financial cluster on January 28, 2009, develop into a global financial center.More than 30 representatives from financial institutions and related agencies will be present to celebrate the opening of Fn Hub Korea, Busan, including the FSS Governor, Jong Chang Kim, the Mayor of Busan, Nam Sik Hur, members of the National Assembly, Byung Soo Suh, Jong Hoon Kim and Jin Bok Lee, the President of the Busan Metropolitan Council, Jong Mo Je, as well as the Chairman of the Foreign Banks Group, Michael Hellbeck.Fn Hub Korea, Busan will assist in the promotion of Busan as an attractive business destination for global financial companies as well as provide assistance to domestic financial companies planning overseas expansion. It will also provide one-stop services to support with regulatory approval processes and work to resolve any business difficulties and obstacles encountered by the financial companies to contribute to the growth and development of Busan into a financial center specializing in marine related finance* and derivatives.* For the development and the transaction of financial products related to the marine industry such as shipbuilding, marine transportation, and logistics.* Please refer to the attached PDF for details.
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May 13, 2009
- SME Financial Support Results (April 2009)
- 1) Bank LoansDespite the economic slowdown, loans provided by 18 domestic banks to small and medium-sized enterprises (SMEs) increased to total KRW434.3 trillion as of end-April this year on the back of expanded guarantees and maturity extensions.For the first four months of 2009, the net increase in SME loans was KRW12.0 trillion from the end of last year. When adding the actual support amount, including SME bank deposit-loan nettings, which is to be reflected in MOU evaluations, the net increase amounted to KRW13.7 trillion.In April alone, the preliminary net increase in SME loans was KRW2.2 trillion won, lower than a monthly average of KRW3.0 – 3.7 trillion during the first three months of the year. The drop was largely attributed to NACF’s KRW900 billion policy fund coming due and sluggish overall demand for capital including slowed issuance of credit guarantees.More recently, conditions have also turned in favor of small and medium-sized companies, as witnessed with the Business Survey Index going up from 56 in January 2009 to 83 in April.2) Fast Track ProgramKeeping up with the high pace set in January this year, a total of KRW2.6 trillion was extended to 1,231 companies through the Fast Track program in April.Since the Fast Track program was initiated on October 13, 2008, a total of 8,194 companies have been extended KRW13.3 trillion in support, KRW3.8 trillion of which was provided to 583 companies that had incurred losses in KIKO and other currency option contracts.3) Guarantees Bank Loan Maturity ExtensionsIn April, there was KRW4.9 trillion in new guarantees, 3.1 times more than the KRW1.6 trillion issued during the same period last year. But as the number of applications for guarantees has fallen on month by 14.8% to 66,307 cases inApril, the pace of increase is slowing for both guarantee applications and their issues.Also last month, there was KRW3.6 trillion in maturity extensions with a 95% rollover rate.From January to April, KRW9.5 trillion was
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May 04, 2009
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Apr 09, 2009
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Apr 09, 2009
- Promotion of Government Bond ETFs
- As a follow up step to the Financial Investment Services Capital Markets Act launched in February this year, the Financial Services Commission has issued an initiative to promote Exchange Trade Funds, or ETFs, by allowing a broader scope of investment; currently, only equity-linked ETFs are being traded in the Korean market. Under the new initiative, a diversified array of products will be traded as in other advanced markets such as the U.S. and the E.U.: i.e. ETFs linked to bonds, commodities, gold and crude oil ETFs, inverse ETFs, leveraged ETF, etc., trading of which will be based on trading prices or index.For the government bond linked ETFs, the FSC will revise current regulations to adjust the required number of principle assets from minimum 10 items to 3 items.The FSC believes that such market-friendly steps will result in favorable market response particularly among small private investors and foreign investors, encouraging their active partaking in the government bond trading. This is expected to have positive impacts on the market by stimulating the government bond issuance and the overall trading markets.For the successful launch of new ETFs, the FSC will also revise ‘Financial Investment Act’ and ‘IPO Operation Code ’ of the Korea Stock Exchange by May or June this year.* Please refer to the attached PDF for details.
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Mar 20, 2009
- Bank Recapitalization Fund's Execution Blueprint
- The Bank Recapitalization Fund Oversight Committee has unveiled its third blueprint as to the basic guidelines for the first round of purchasing banks’ hybrid bonds and subordinate bonds scheduled at the end of March. The purchasing criteria will be determined based on the current and past interest rates, and the interest spread for those bonds.Also, the government evaluated the progress banks have made based on the Fund’s policy objectives and the progress of subject banks’ implementation of their MOU commitment, prerequisite to the government guarantee on their external debts.As for regional banks, to account for the considerable discrepancy in thier credit ratings as opposed to nation-wide banks, 30bp difference will be assumed.The Korea Exchange Bank has informed the FSC that it would not use its credit line for issuing hybrid bonds but would go ahead as planned with issuing subordinate bonds (KRW 250 billion).The first round of bond purchasing will be implemented at the end of March after receiving banks’ application to sell their bonds during the month.Based on the result of the market survey, it is expected that the first round will total approximately KRW 3.8 trillion for hybrid bonds and KRW 0.5 trillion for subordinate bonds.The fund will be operated via a “matching” method in which the fund amount will be set to match the amount in demand in accordance with the needs in supporting the real economic sectors, corporate restructuring, and foreign currency markets.By monitoring the progress the participating banks have made with their implementation of the MoU, those who have inadequately served their commitment to supporting the real economic sectors and other preconditions to the Fund, several countermeasures could be applied to them such as limiting their access amount and raising applicable interest rates.* Please refer to the attached PDF for details.
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Mar 18, 2009
- FSC Meets the Press and Investors in London
- Headed by the Vice Chairman, Dr. Rhee Chang Yong, the FSC delegates met with representatives from major British media and financial institutions in London on Friday, March 13, 2009.ParticipantsPress: The Economist, the Financial Times, Reuters, BBCFinancial Institutions: HSBC, Barclays Capital, Standard Chartered, Duetsche BankThe main mission of the seminar was, before the impending G-20 Summit meeting in London, to update its local press and financial communities on Korea’s current economic and financial positions by providing detailed data.This has provided opportunities to set up communication channel with influential media such as BBC, the Economist, the Financial Times, and Reuters.For clear communication on Korean economy and financial markets, the FSC has set up bi-weekly teleconferences with the media and foreign investors, and this fact was also delivered at the meetings. Key Points DiscussedThe FSC addressed major issues raised by the media and investors: foreign debt, liquidity in foreign currency, mortgage loans, impact of Eastern European market risks on Korea, and business prospects for Korean shipbuilding companies.The FSC delegates stressed the importance for advanced economies to stand firmly by the Free-Market Principles not regressing to trade protectionism. Also was emphasized the need for G-20 countries to have a portion of massive liquidity injection accessible to emerging market countries.Regarding Fitch’s Stress Test results, the FSC expressed its regret on behalf of the Korean government and bank industry, that the results based on extreme speculation on the banking sector were actually reported by the press.The FSC engaged in talks with the Bank of England and financial experts regarding policy efforts in both jurisdictions for crisis management.The FSC called for wider and fairer coverage of Korean economy, which is often surmised in a package with emerging economies in the Asian region.A view was shared among the participants that th
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Mar 13, 2009
- Fitch Ratings' Stress Test
- 1. Summary of Fitch Ratings’stress test on Korean banksGlobal credit rating agency, Fitch Ratings, announced the results of its stress test on Korean banks on Thursday, March 12th at around 22:00 (Seoul time).A summary of the stress test results is as follows:Under a stress scenario during the period from June 2008 through December 2010, Korean banks would see a decline in capitalization totaling KRW 42 trillion due to credit costs, losses on equity and debt securities holdings and asset growth through the inflation of foreign currency assets given the depreciation of the Korean won in the past year.The banks’ combined equity-to-assets ratio would decline from 6.4 percent in June 2008 to 4.0 percent in December 2010.The KRW 42 trillion reduction in capitalization would require additional capital raisings by the banks, and such capital may have to come from the government. The government’s current KRW 20 trillion Bank Recapitalization Fund may not be sufficient, particularly to the extent it is used to buy subordinated debt and lower quality hybrid debt from the banks.2. Government’s response to the stress test resultsA. The results of the stress test are based on variables and assumptions (e.g. estimated loss rates on bonds and securities), which can be easily altered by future economic events. Therefore, the government finds it inappropriate for Fitch to release such speculative results on Korean banks when this could adversely impact their international credibility and financial soundness.B. Even if the worst possible scenario were to be materialized, in which the expected loss of 42 trillion won were to be taken into account and no new recapitalization were to be assumed, the tangible common equity (TCE) ratio of Korean banks would be 4.0 percent as of the end of 2010, which would be still higher than the current TCE ratios of major leading banks worldwide. The Bank for International Settlements (BIS) ratio would be 8.7 percent, still higher than th
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Mar 06, 2009
- FSC Article Published in AWSJ
- By Rhee ChangyoungSEOUL—South Korea, like all other advanced economies, has inevitably been affected by the financial-market turmoil seeping the globe. Yet the precise nature of these effects on our economy has too often been misunderstood. Some commentators claim that Korea is facing another major financial crisis similar to what it experienced during the Asian financial crisis. This is untrue, and it is important to set the record straight.The Korean economy is often inaccurately characterized as weak because of its external debt. It is true that Korea’s total external debt up for repayment within 2009 is $194 billion. But $39 billion of that amount is considered non-obligatory debt, such as foreign-exchange hedging and advanced payment receipts for ship orders that will clear off the books when the ships are delivered. Korea’s net external debt totals $155 billion, or 77% of Korea’s foreign reserves of $201.5 billion as of last month. The current roll-over ratio of foreign debt as of February is over 91%. Inother words, our banks and corporations are experiencing no problems repaying or refinancing their debts. Looking at the banking sector alone, out of total external debt of $171.7 billion as of the end of 2008, debt held by branches of foreign banks accounts for $72.3 billion, which does not affect the solvency of domestic banks. The actual amount of external debt held by domestic banks as of the end of 2008 is $99.4 billion—only half of Korea’s foreign reserves.Nonetheless, some market commentators have openly expressed their pessimism. Perhaps such pessimism might be traced back to Korea’s 1997 crisis and the fear that it may be repeated. Such a possibility, however, is slim. The Korean economy today is very different from what it was a decade ago.First, the corporate sector whose debts helped trigger the Asian financial crisis in Korea has been transformed, and is now sound and transparent. The ratio of corporate debt to equity, for instance,
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Feb 27, 2009
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Feb 27, 2009
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Feb 24, 2009
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Feb 16, 2009
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Feb 16, 2009
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Feb 09, 2009
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Feb 05, 2009
- Korea Economy Overview
- Ladies and gentlemen, I would like to welcome all of you and thank you for taking the time to be with us today.My presentation today largely consists of three parts.Firstly, I will give you a brief overview of Korea’s real economy and financial market and move on to talk about newly emerging risk factors in the Korean economy and their effect on the economy.Then, I will close by introducing how the Korean government is responding to the economic challenges.Now, let me start with the current status of the Korean economy and financial market.First of all, let me talk to you about the current status of Korea’s real economy.As some foreign investors are concerned, it is true that Korea’s real economy is fast deteriorating. Domestic demand is slowing down rapidly with 19.8 percent fall in December industrial output from a year earlier as well as 7.0 percent decline in consumer goods sales. Exports in December also fell by 17.9 percent year-on-year (by 29 percent according to the estimation for the period from Jan. 1 to Jan. 20).However, let me emphasize that such economic slowdown is not limited to Korea and is witnessed commonly around the world following the global financial crisis. The Korean economy is doing rather well compared to other Asian countries like Hong Kong, Taiwan and Singapore.If we compare December industrial output, Korea saw 19.8 percent fall while Taiwan and Singapore suffered 32.4 percent and 13.5 percent decline respectively. Even in terms of export, which is one of the main causes of concern, we see that Taiwan and Singapore have recorded greater fall than Korea with 41.9 percent and 20.8 percent decline respectively.Moreover, Korea is maintaining relatively low unemployment rate of 3.3 percent as of last December.However, things are looking better in the financial market. To our relief, the global financial market volatility has eased slightly, improving investor confidence and financial stability in Korea.The Korean stock market has recent
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Jan 28, 2009
- Understanding Korean Economy (FAQs)
- Q1: How has Korea reacted to the economic difficulties so far?A: The Korean government has worked on expansionary liquidity supply of USD55 billion, tax reduction of USD35 billion, and increased fiscal expenditure of USD16 billion.The Korean government has taken preventive, decisive and sufficient policy measures to get out of the global economic turmoil. The measures mainly cover liquidity supply, FX market stabilization, and tax reduction and expansionary fiscal expenditure. To provide more liquidity in the market and lower interest rates, the Bank of Korea lowered a benchmark interest rate four times by 225bp from 5.25 percent to 3.00 percent. Also, the government has supplied the liquidity of KWR19,500 billion through RP purchases and credit limit raise for small- and medium- sized enterprises (SMEs).Foreign liquidity supply of USD55 billion will have been provided with USD37.6 billion already provided by the end of Dec. ’08. Currency swap arrangements with the US, Japan, and China, amounting to USD30 billion each, have been completed along with the IMF Short-term Liquidity Facility of USD22 billion fixed. The government guarantee on banks’ borrowing in foreign currencies will total USD100 billion.A total of USD35 billion tax reduction will have been implemented from ’08 to ’12 through an oil tax rebate and income/corporate tax reduction. Additional budgets of USD16 billion will have been allocated from ’08 to ’09, which are earmarked for overcoming economic difficulties including high energy prices.Deregulations to boost corporate investment, various job maintenance efforts such as promoting employment of female, the young and old, and social safety net reinforcement are among other measures the Korean government has taken.Q2: What are the key economic policies for 2009? A: The key economic polices for 2009 can be summarized as preparation for the future and job creation. The Korean government will take offensive measures to revitalize the economy a
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Jan 22, 2009
- YOIDO, SEOUL AND MUNHYEON, BUSAN AS INTERNATIONAL FINANCIAL CENTERS
- Summary of the Financial Center Promotion Committee MeetingOn January 21, 2009 the Financial Center Promotion Committee* meeting, chaired by the FSC Chairman, was held and deliberated the designation of international financial center(s). Based on the assessment report on five candidate cities,* prepared by the Evaluation Panel, the Committee members discussed what city or cities to be designated to serve as an international financial center in the region.*Financial Center Promotion Committee was convened on the basis of “Enforcement Decree of the Act on the Creation and Development of Financial Center.” The Committee has 25 members: 10 financial experts, 10 presidents of financial regulatory agencies, and 5 government officials (FSC and Ministry of Strategy and Finance).*Five candidate cities: Seoul (Yoido), Busan (Munhyeon, Bukhang), Incheon (Songdo), Gyeung-gi (Goyang), Jeju (Seoguipo)As a result of careful deliberation, the Committee has reached a consensus to designate Yoido, Seoul as the main Financial Center and Munhyeon, Busan as its specialized financial center. The decision will be submitted to the FSC Committee for its final approval.Detailed plans will be made to develop these two cities as financial centers within a first half of this year through consultation with the related government ministries and regional governments. To facilitate the process, the Financial Center Promotion Committee will form a subcommittee.Major ProgressesIn December 2007 the government enacted legislation called “Enforcement Decree of the Act on the Creation and Development of Financial Center” with an aim to designate and develop a region as an international financial center.* Selection process was set off by operative direction initiatives made in March 2008 and deliberation by the Promotion Committee (convened in June 2008). *According to the “Act on the Creation and Development of Financial Center” a financial center is defined as a region in which both domestic
