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Jun 08, 2023
- Authorities Hold 1st Meeting on Benchmark Rate and Short-term Money Market
- The Financial Services Commission held a meeting with the Bank of Korea, the Financial Supervisory Service and relevant industry groups and institutions to monitor how domestic financial institutions are preparing for a transition away from LIBOR (London interbank offered rate) and discuss issues surrounding the operation of domestic financial benchmark rates. In coordination with relevant institutions and financial companies, the government has been working to make a transition away from LIBOR, responding to the European Unions Benchmark Regulation (BMR) compliance and participating in the global benchmark rate reform efforts. The following is an overview of these efforts so far. First, all financial contracts based on non-USD LIBOR, which ceased to be published in 2022, were successfully converted, and financial contracts based on LIBOR, which will be discontinued from July 2023, are being converted to an alternative rate such as secured overnight financing rate (SOFR). As of the end of May 2023, about 95.3 percent of domestic financial institutions contracts have made this transition. Second, the government enacted the Act on the Management of Financial Benchmarks, which became effective in November 2020 and reflects international standards on benchmark rate reform, to strengthen credibility of domestic benchmark rates. In order to ensure a seamless utilization of domestic benchmark rates (Korea overnight financing repo rate and certificate of deposit rate) in the European Union, authorities have been working with EU counterparts to get an approval for congruity. Third, in February 2021, authorities selected the Korea Overnight Financing Repo Rate (KOFR) as Koreas new risk-free reference rate (RFR) and designated it as a critical benchmark rate under the Act on the Management of Financial Benchmarks. The KOFR is being published by the Korea Securities Depository (KSD) since November 2021. Currently, three-month KOFR futures and exchange traded funds (ETFs) have b
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Jun 08, 2023
- FSC Holds Meeting to Monitor Soft-landing of Maturity Extension and Payment Deferment Support
- FSC Vice Chairman Kim So-young presided over a meeting with the Financial Supervisory Service and relevant financial industry groups on June 8 to review current status of the efforts to soft-land the loan maturity extension and payment deferment program. The maturity extension and payment deferment program was introduced in the wake of the coronavirus pandemic to support SMEs and small merchants experiencing temporary liquidity problems. Since it was first launched in April 2020, the availability of support program was extended every six months. Currently, it is available under the measures to soft-land loan maturity extension and payment deferment for self-employed and SMEs, the fifth such six-month extension plan announced in September 2022.In accordance with the measures announced in last September, maturity extension is available for three years (until September 2025) and payment deferment is available until September 2028 according to individual payment plans submitted by borrowers. Specific terms of their payment plans (interest-only period, installment payment plan, etc.) are drawn up in consultation with each financial institution. Some of the key statistics of the maturity extension and payment deferment program as of the end of March 2023are as follows. Compared to the end of September 2022, the amount of loan balance and the number of borrowers receiving support declined by about KRW15 trillion and 46,000, respectively, as shown in the table below. This shows a smooth landing of the support program as borrowers are recovering payment capabilities due to improving business conditions, availability of low interest rate refinancing loans, debt adjustment support and so on. At the meeting, Vice Chairman Kim So-young said that authorities will work to ensure a soft-landing of the support program and continue to operate a help center at the FSS to make sure that borrowers can seek consultation on their payment plans, debt adjustment and the availability of othe
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Jun 08, 2023
- KRX Derivatives Market to Open 15 Minutes Early Starting from July 31
- Financial authorities announced that the derivatives market, which currently opens at the same hour as stock markets, will open fifteen minutes early at 8:45 am beginning on July 31. The Financial Services Commission, the Financial Supervisory Service and the Korea Exchange announced the plan at a seminar held on the topic of strengthening the global competitiveness of financial investment business on June 8. The need and the plan for early opening was discussed at the second such seminar held in April this year. At that time, FSC Vice Chairman Kim So-young said that the derivatives markets early opening will help ease price volatility in stock market at opening hours and improve global consistency. Since its launch in 1996, the opening hour for derivatives market has remained the same as the opening hour of stock markets. Prices determined in the derivatives market reflect various expectations from market participants about the future prices of underlying assets (price discovery function). However, unlike in overseas markets, Korea has the same opening hour for both the spot market and futures market, which has made it difficult for stock investors to discover prices of derivatives products during the early hours of stock trading sessions. Also, due to the same opening hour, price volatility has been high in stock market especially at the time of market opening (for about fifteen minutes) as adjustments needed to take place in the futures market prior to the stock market opening are directly reflected in stock prices. In this regard, to help ease stock markets early-hour price volatility, financial authorities and the KRX plan to move up the derivatives markets opening hour fifteen minutes from 9:00 am currently to 8:45 am in line with international standards. Thus, the normal trading hours will be extended by fifteen minutes (from 9:00~15:45 currently to 8:45~15:45) and the single-price auction hours will be reduced by fifteen minutes (from 8:30~9:00 currently to
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Jun 05, 2023
- Foreign Investor Registration Requirement to be Abolished in Korea
- The government approved a revision bill of the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) abolishing the foreign investors registration requirement at a cabinet meeting held on June 5. The foreign investor registration system, which has been in place for about three decades since 1992, will be abolished starting from December 14 this year, six months after promulgation of the revised law which is expected to be on June 13. Under the foreign investor registration system, foreign investors had to register with the Financial Supervisory Service (FSS) prior to investing in locally listed securities (stocks, bonds, etc.). For foreign investors, opening an investment account at a securities firm was possible only after registering with the authority and being assigned a registration certificate (foreign investor ID). As this process can be time-consuming and requires much paperwork, this rule was pointed out as a significant barrier for foreign investors in investing in Korean stock markets. Moreover, this kind of registration requirement for foreign investors is not being implemented in major advanced economies such as the U.S. and Japan. Thus, from the perspective of making Korean regulations more consistent with global standards, global investors have made continuous calls for the need to change this rule. Introduced in 1992 to manage foreign investors maximum investment limit, the foreign investor registration system has been in place for the past three decades without much change despite the fact that the foreigners investment limit was abolished in 1998 in principle, leaving only 33 items under the authorities watch for foreigners total holding limit and two items for foreign individual holding limit out of some 2,500 listed companies currently. Once the revised Enforcement Decree of the FSCMA takes effect, foreign investors will be able to open investment accounts at securities firms without having to go through a prior
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Jun 01, 2023
- FSC Holds Meeting to Monitor Progress of Real Estate PF Market Normalization
- The Financial Services Commission held a meeting on June 1 to monitor progress in the normalization of the real estate project finance (PF) market along with officials from the Financial Supervisory Service, Creditors Coordination Committee, major financial holding groups and relevant policy financial institutions. As of the end of May 2023, a total of 30 real estate development projects have become subject to the assistance of the real estate PF lending institutions consortium agreement. Among them, business normalization is under way for 19 projects through provision of rollback on acceleration clause, new funds, deferment of interest payments and maturity extension. At the meeting, officials also went over the status of the support programs already announced and being provided by policy financial institutions such as business guarantees and policy finance support being offered by the Korea Housing Urban Guarantee Corporation (HUG) and Korea Housing Finance Corporation (HF), as well as KRW1 trillion worth of funds managed by Korea Asset Management Corporation (KAMCO). To support a seamless transition from short-term bridge loans to PF loans, the government already announced its plan to provide business guarantees worth KRW15 trillion through HUG and HF until the end of this year. As of May 30, the policy financial institutions provided a total of KRW6.01 trillion (KRW3.34 trillion by HF and KRW2.67 trillion by HUG) in support of the normalization of real estate projects. In addition, the special guarantee program set up to help alleviate anxieties in refinancing PF-ABCPs (asset backed commercial papers) provided a total of about KRW1.211 trillion (KRW0.12 trillion by HF and KRW1.914 trillion by HUG). To help ease the liquidity burden of regional real estate PF sites outside the Seoul metropolitan area and small- and medium-sized construction firms, the Korea Development Bank (KDB), Industrial Bank of Korea (IBK) and Korea Credit Guarantee Fund (KODIT) plan to prov
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May 31, 2023
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May 30, 2023
- Online One-stop Loan Transfer System Available
- The FSC announced that financial consumers will be able to make a switch from their existing credit loans to loans offering more favorable borrowing conditions using their smartphones without having to visit a branch office of financial institutions beginning on May 31. Establishing an online one-stop loan transfer system has been a key policy agenda of this administration to help alleviate peoples interest payment burdens and promote digital transformation in the financial sector and competition between banks. In this regard, the FSC has been closely working with the Financial Supervisory Service, the Korea Financial Telecommunications Clearings Institute, major financial companies and fintech businesses to launch an online one-stop loan transfer system. In particular, prior to its launch on May 31, authorities have closely looked into ways to improve user convenience and guarantee stability and security of the system. Beginning on May 31, consumers will be able to use their smartphone apps (MyData-enabled loan comparison platform app or major financial company apps) to search for loans offering better borrowing terms and make a switch from their existing credit loans issued by 53 financial institutions (19 banks, 18 savings banks, 7 credit card companies and 9 specialized credit finance businesses). The online one-stop loan transfer app service will be available during the banks operating hours from 9:00 am to 16:00 pm on business days. Consumers can use the loan transfer service for their existing credit loans of up to KRW1 billion issued by 53 financial companies. From the time of downloading a mobile app until completing the verification of result, the service usage time is estimated to be around fifteen minutes, which is significantly shorter than at least two business days it took for consumers to visit the branch office of two financial institutions previously. The loan conditions calculated for consumers will be based on the same lending standards (maximum
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May 30, 2023
- Authorities Plan to Overhaul Rules on CFD Trades while Restricting New Transactions for Three Months
- The Financial Services Commission held a meeting with the Financial Supervisory Service, the Korea Exchange and the Korea Financial Investment Association on May 26 and held discussions to finalize a set of measures intended to strengthen regulations on trading of contracts for difference (CFDs). The measures include (a) enhancing transparency in the provision of information on the actual type of CFD investors and investment balances by item, (b) closing loopholes to prevent regulatory arbitrage by including the amount of CFDs provided in the securities firms maximum credit extension limit, (c) requiring individual investors applying for the qualified professional investor status to go through an in-person (including video call) verification process, and (d) establishing a new investment requirement for over-the-counter (OTC) derivatives transactions such as trading of CFDs. Enhancing transparency in provision of relevant investment information To help investors make more rational decisions about their CFD investments, authorities will improve the system to ensure the provision of more appropriate investment information. Even though those making investments in CFDs are mostly individual retail investors (making up about 96.5 percent), currently, when securities firms submit stock transaction orders following retail investors CFD trading, the investor type is currently marked as institutional investor when orders are submitted by a domestic securities firm or as foreign investor when orders are submitted by a foreign securities firm. This has created the problem of misrepresenting the flow of investment funds into particular investment items by institutional and foreign investors. In order to prevent this sort of misunderstanding by market participants, for stock transactions resulting from CFD trading, actual investor type (e.g., individual investor) will be recorded. In addition, as in the case of credit loans, the total and item-by-item CFD balances will be disclo
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May 25, 2023
- FSC Decides to Activate CCyB Requirement for Banks and Bank Holding Groups from May 2024
- The FSC decided to increase the countercyclical capital buffer (CCyB) requirement for banks and bank holding groups to one percent beginning on May 2024 at the 10th regular meeting held on May 24. The decision is a follow-up measure for the plan to improve the prudential regulations in the banking sector discussed at the third working group meeting of the taskforce on improving the management and operating practices of banks and banking system held on March 15. CCyB is an additional capital buffer requirement (within zero to 2.5 percent of risk-weighted assets) which takes into account the effects of procyclicality following credit supply on the financial system and the real economy. Since its introduction for domestic banks in 2016, CCyB has remained at around zero percent. The FSCs decision to increase the CCyB requirement to one percent takes into account comprehensive factors. First, even though the growth of household credit slowed down amid interest rate hikes, credit growth has remained high in the corporate sector. When looking at both the major total credit-to-GDP gap indicator and the complementary total credit gap indicator, there are strong signs for activating CCyB. Moreover, at the end of 2022, domestic banks Tier 1 common equity ratio was 13.50 percent (12.57 percent when including bank holding groups), which was higher than the regulatory ratio of 7.0 to 8.0 percent but fell slightly compared to 13.99 percent at the end of 2021 due to interest rate hikes and sharp rises in currency exchange rates. Also, as domestic banks net income in 2022 rose to KRW18.5 trillion (up KRW1.6 trillion y-o-y), it is deemed that banks are capable of setting aside additional capital. The FSC decided that it is necessary to preemptively require banks to build up capital to improve their loss absorbing capacity against the backdrop of macroeconomic uncertainties at home and abroad, potential growth of financial risks and the possibility of actually accruing expected losses
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May 25, 2023
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May 23, 2023
- Authorities Hold Joint Conference and Pledge to Stamp Out Unfair Trading Activities in Capital Markets
- The FSC held a joint conference on May 23 with the Financial Supervisory Service, the Korea Exchange and Seoul Southern District Prosecutors Office on the topic of stamping out unfair trading activities in capital markets. The conference was attended by experts from academia and research institutions. The heads of the FSC, FSS, KRX and the prosecutors office all agreed to boost inter-agency cooperation and expressed strong willingness to root out unfair trading activities in capital markets. The conference featured presentations on (a) ways to diversify sanctions on unfair trading activities, (b) measures to strengthen early detection mechanisms, (c) the KRXs handling of recent stock price manipulation cases and ways to improve in the future and (d) an overview on the current status of unfair trading activities in capital markets and how to handle from a judicial perspective. The following is a summary of FSC Chairman Kim Joo-hyuns opening remarks. Summary of FSC Chairmans Remarks In the wake of the recently uncovered unfair trading activities in our capital market and their damaging effects, relevant authorities have come together today to collectively seek measures to strengthen our response to fraudulent activities in capital markets. First, regarding the recent stock price manipulation cases, a joint investigation team made up of officials from the prosecutors office, the FSC and the FSS has already been set up, and it has been expanding its scope of investigation to all areas of suspicion. By thoroughly investigating and identifying illegal activities, authorities will make sure that those suspected of breaking laws are brought to justice. Second, authorities will promptly seek regulatory improvements in the current CFD (contract for difference) trading system on a separate track from the ongoing investigation. The improvement measures will include (a) providing more accurate investment information to investors, (b) resolving regulatory arbitrages vis--vis cred
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May 22, 2023
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May 18, 2023
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May 18, 2023
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May 17, 2023
- FSC Chairman Speaks about Opportunities and Challenges in Embracing AI in Financial Sector
- FSC Chairman Kim Joo-hyun attended a seminar on boosting the competitiveness of artificial intelligence (AI) in financial sectors hosted by Korea Credit Information Services on May 17 and delivered congratulatory remarks. At todays seminar, experts from both public and private sectors shared key trends of AI usage in financial sectors and discussed policy strategies to boost the competitiveness of the financial industry. The following is a summary of FSC Chairman Kims remarks. Summary of FSC Chairmans Remarks The development of hyper-scale, generative AI has recently put a new spotlight on the potential of AI. Investment in AI and its usage have been growing in diverse areas where AI can be put to use to help increase convenience for consumers and make financial companies core functions more efficient. At the same time, it is also crucial to consider ways to effectively respond to situations of AI failures or digital herding. Financial institutions are strongly encouraged to invest in AI and make use of the technology to enhance the global competitiveness of domestic financial businesses. The FSC has been working to embrace the use of AI in financial services and will continue to provide active support in this regard. So far, authorities have introduced a number of guidelines on AI, for example, on using and developing AI in financial sectors, verifying AI-based credit scoring models and ensuring security in AI-based financial services. Going forward, first, the FSC plans to establish a data library for AI in financial sectors and designate more data specializing institutions to facilitate big data analytics. Second, the FSC will work to improve the regulatory environment on financial data to promote an expansion of new AI-based services. Lastly, the FSC will set up a testbed for AI in financial sectors and prepare a guideline on explainable AI (XAI) with a goal to help increase confidence in AI-based financial services. The FSC will work to ensure that the specific
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May 16, 2023
- FSC Vice Chairman to Visit Central Asia to Support Overseas Expansion of Domestic Financial Companies
- FSC Vice Chairman Kim So-young will visit Uzbekistan and Kyrgyzstan from May 16 to 19 in order to help strengthen cooperation with the Central Asian countries and provide support for domestic financial institutions to expand their businesses overseas. In March this year, the FSC set up a new organization (Financial Industry Globalization Taskforce) charged with providing support for expansion of domestic financial institutions overseas business activities. The taskforce has held a series of seminars and talks with financial sectors to listen to their comments and suggestions. In this regard, Vice Chairman Kims visit to the Central Asian countries is a significant step forward to strengthen support for domestic financial companies overseas business activities. This year marks the 31st anniversary of diplomatic relations between Korea and the Central Asian countries. Last year, the 15th Korea-Central Asia Cooperation Forum was held and close relationship has been maintained between Korea and the region in a variety of areas ranging from health care, digitalization, tourism, environment and economic security. Recently, the trade volume between Korea and the region also grew more than twofold in the past four years. However, the degree of exchange and cooperation in financial sector has remained limited thus far. In this regard, FSC Vice Chairman Kims visit this time will serve as a turning point in boosting exchange and cooperation in financial sector. Central Asia has abundant mineral and energy resources with high potential for growth. As the five Central Asian countries are seeking to advance and digitalize their financial industries, the FSC expects that Korean financial companies will be able to make significant contributions as they are equipped with ample experience in developing digital infrastructures. In this regard, the visit to Central Asia this time will set a stepping stone for expanding opportunities in the future.
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May 11, 2023
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May 08, 2023
- FSC Introduces Measures to Facilitate Corporate Merger and Acquisition Activities
- The FSC announced a set of measures aimed at facilitating corporate merger and acquisition activities on May 8. In the second half of this year, the FSC also plans to announce additional policy agenda items for facilitating corporate MA activities through coordination with the Ministry of Justice. Corporate MAs are an important mechanism to boost management efficiency and reorganize the structure of an enterprise. They also help to increase the overall productivity of an economy as well as its recovery from a downturn. However, the corporate MA market saw a significant decline recently due mainly to the worsening of macroeconomic conditions. Against this backdrop, the FSC prepared plans to (a) seek regulatory improvements on corporate MAs, (b) strengthen support for corporate restructuring through MAs, (c) support strategic MA activities in line with industrial restructuring demand, and (d) make domestic rules on corporate MAs more congruent with global standards. Key Details Seek regulatory improvements on corporate MAs to propel growth momentum Authorities plan to make improvements to some of the regulations that have been identified as unreasonable including those on public tender offer, corporate mergers and credit offering by investment banks. First, when making a public takeover bid, the burden of securing funds beforehand will be eased. A loan commitment from a trustworthy acquiring financial institution or an investment agreement from a limited partner will be recognized as an admissible document showing financial capability of a tender offeror. Second, in a spin-off or a post-spin-off merger, the process of converting CBs (convertible bonds) and BWs (bonds with warrants) will be streamlined as the electronic securities depository (Korea Securities Depository) will be allowed to get investor information directly from securities firms and process conversion of CBs and BWs electronically. Third, investment banks will be able to more actively offer credit to bu
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Apr 26, 2023
- Revised Rule to Require IPO Bookrunners to Check Payment Capability of Institutional Investors
- The FSC approved a revision bill of the regulation on financial investment businesses at its 8th regular meeting held on April 26. This revision bill is a follow-up to the measures to improve the soundness of the initial public offering (IPO) market announced in December last year and contains a measure to facilitate carbon emissions trading by securities companies along with other regulatory overhaul items. Requirement for IPO bookrunners First, when managing IPOs, the IPO bookrunner will be responsible for verifying institutional investors ability to pay for stocks before the allotment of shares takes place. In an IPO, the bookrunner performs a book building to check demands from institutional investors in order to determine an appropriate IPO price. The public offering price decided is then used to get subscription from retail investors. However, for certain high-demand items, the issue of fictitious subscription by institutional investors in excess of their payment capabilities and that of over-competition have been problematic. It has been pointed out that this practice of fictitious subscription has been hindering the price discovery function of the book building process, causing distortions in the IPO market. Thus, this revision is aimed at preventing the practice of fictitious subscription and strengthening the responsibility of IPO bookrunners throughout the book building process by introducing sanctions such as imposition of an administrative fine for unfair transaction activity when bookrunners fail to check institutional investors stock payment capabilities prior to allotting shares. This requirement will take effect from the securities registration reports for IPOs filed after July, after relevant rules change is completed by the industry association. With this revision bill, apart from the measures for allowing bookrunners to preliminarily review institutional investors demands and introducing the cornerstone investing system, all other follow-up items
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Apr 24, 2023
