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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Feb 03, 2020
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Jan 28, 2020
- Government Bolsters Market Monitoring amid Coronavirus Outbreak
- FSC Vice Chairman Sohn Byungdoo convened a meeting on January 28, 2020 to assess the impact of the spread of coronavirus on the domestic and global financial markets. Amid rising concerns over economic and financial markets at home and abroad, the Korean government has put in place a response system, working on preventive measures and monitoring its impact on our economy.The following is a summary of Vice Chairman Sohn’s remarks:The financial markets in Korea remained stable until mid-January following the conclusion of the first phase deal between the US and China over their trade conflicts and due to eased tension in the Middle East. However, with the spread of the new coronavirus, volatility increased last week.Today, KOSPI fell 3.1 percent while the won-dollar exchange rate rose 0.7 percent (up 8.0 won).Based on our past experiences with the SARS (severe acute respiratory syndrome) outbreak in 2003, the avian influenza in 2009, and the Middle East respiratory syndrome (MERS) in 2015, the impact of the new coronavirus outbreak on domestic financial markets will depend on how extensive it spreads in Korea.The Korean financial markets may experience rising volatilities for a while due to increased appetite for risk-free assets.However, Korea’s external soundness remains solid as its foreign exchange reserves (USD408.8 billion by the end of 2019) and net foreign assets in debt instruments (USD479.8 billion by end of Q3 2019) increased to record high levels.In order to stabilize financial markets, the government should bolster the 24-hour market monitoring system and be prepared for any volatility. The government should also work to provide financial assistance to the industries that may be heavily affected by the epidemic, such as the tourism industry.* Please refer to the attached PDF for details.
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Jan 21, 2020
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Jan 20, 2020
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Jan 08, 2020
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Dec 16, 2019
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Dec 12, 2019
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Dec 05, 2019
- Measures to Improve Management of Risk Exposure in Project Finance
- The government introduced its plans to improve the management ofrisk exposure in real estate project finance on December 5.BackgroundProject financing in real estate is a financing mechanism based onthe business value of the project and the expected cash flows of the project inthe future. Due to the recent financial deepening and continuing low yields,project financing has increased significantly. Project financing provides an efficientway to finance real estate or infrastructure development projects.However, due to heavy reliance on the expected value of theproject, risk exposure is highly dependent on market conditions. Without propermanagement of risks, or in the case of a distortion of profits or risks, it maypose a threat to financial stability.Risk exposure in project financing has continued to increase especiallyin non-bank sectors since 2013. The prevalence of high-risk project financingloans, such as bridge loans, has dropped whereas the level of exposure bysecurities companies and specialized credit finance companies increased. Debtguarantees in project financing also increased as the burden of credit exposureshifted from construction companies to financial institutions.Recent TrendsAt the end of June 2019, the total amount of debt guarantees inproject financing stood at KRW28.1 trillion, out of which KRW26.2 trillion issuedby securities companies. The outstanding loan balance in project financing stoodat KRW71.8 trillion, rising on average 11.6 percent a year from KRW39.3trillion at the end of 2013. By the end of June 2019, both the default rate andthe sub-standard asset ratio continued to decline since 2013 from 13.0 percentto 1.9 percent and 16.9 percent to 3.0 percent, respectively, due to anincreased volume in project financing loans.Key MeasuresI. Improvingthe Soundness of Debt Guarantees in Project Financing► Establishing anupper ceiling on debt guaranteesUnder the current system,securities companies face no upper limits on issuing debt guarantees
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Nov 27, 2019
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Nov 18, 2019
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Nov 14, 2019
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Nov 08, 2019
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Oct 31, 2019
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Oct 18, 2019
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Sep 05, 2019
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Aug 08, 2019
- Implementation Plan for Margin Requirements for Non-centrally Cleared OTC Derivatives
- The FSC announced its adjusted schedule to implement initial margin requirements for non-centrally cleared derivative transactions in accordance with internationally- agreed standards:► Initial margin requirements for financial institutions with derivatives of KRW70 trillion or more will be implemented from September 1, 2020 as scheduled, while the implementation for those with derivatives of less than KRW70 trillion will be delayed until September 1, 2021.► The FSC will also propose a bill on margin requirements for non-centrally cleared OTC derivative transactions as the relevant guidelines by the Financial Supervisory Service (FSS) are due to expire in August 2020.Background Global discussionIn the aftermath of the global financial crisis of 2018, the G20 countries agreed to a series of reform proposals to enhance stability and transparency in OTC derivative markets.As part of such reform efforts, the Basel Committee on Banking Supervision (BCBS) and International Organization of Securities Commissions (IOSCO) published a final report on margin requirements for non-centrally cleared OTC derivatives in September 2013, aimed at reducing a systemic risk and promoting central clearing of OTC derivatives.In the detailed framework announced in March 2015, the BCBS and IOSCO set differential implementation schedules according to the amount of non-centrally cleared OTC derivatives in order to give enough time to prepare for the new regime of margin requirements.On July 23 this year, the BCBS and IOSCO announced a postponement of implementation of initial margin requirements for financial institutions with non- centrally cleared derivatives of less than €50 billion, originally scheduled to come into force in September 2020, until September 2021. The one-year postponement is intended to ease the impact of the new rules on smaller financial institutions and give financial supervisory authorities enough time to prepare for domestic implementation. Domestic progressKore
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Aug 06, 2019
- FSC Vice Chairman's Remarks on Domestic Financial Market Conditions
- FSC Vice Chairman Sohn Byungdoo held a meeting with financial investment experts on August 6th to review the current conditions of Korea’s stock markets and discuss measures to mitigate short-term shocks.Vice Chairman’s remarksCurrent condition of domestic and global financial marketsKorea’s financial markets experienced volatility yesterday due to multiple domestic and external factors. Such trend is not confined to Korea, however, as global financial markets fluctuated as well due to multiple reasons such as: expectations that the U.S.- China trade dispute would be prolonged; concerns on sluggish global growth; and uncertainties regarding the U.S. rate cut. Domestically, Japan’s trade measures, major exporters’ worsened profit, and MSCI rebalancing posed additional impact.Moreover, China’s yuan weakened pass the psychological threshold of 7 RMB against the dollar, resulting to an increased volatility in won-dollar exchange rate. Announcement that the U.S. labeled China as a currency manipulator deepened concerns that the bilateral trade dispute would spillover to currency issues, resulting to a sharp drop in major stock markets such as Japan (↓2.7%) and Australia(↓3.0%).Measures to stabilize domestic financial marketsWorsened investor sentiment due to increased uncertainties is analyzed to have resulted in such stock market volatility.However, Korea’s financial markets are maintaining solid fundamentals1 after overcoming the 2008 global financial crisis and financial market turmoil in 2016 resulting from Brexit uncertainties.Moreover, there has been no overshoot in Korea’s stock markets even in times of global liquidity expansion. Korea’s stock markets are tend to be undervalued despite that price book-value ratio(PBR)2 is relatively low compared to global stock markets.1 Foreign exchange reserve($billion): (’97)20.4, (’08)239.7, (July,’19) 403.1Short-term external debt(%): (’97)286.1, (’08)84.0, (Mar,’19) 31.6CDS(5 yrs, bp): (end
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Aug 03, 2019
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Jul 18, 2019
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Jun 26, 2019
