Press Releases - Financial Services Commission

Press Releases

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Oct 24, 2022

Financial Authorities Hold Meeting to Respond to Bond and Money Market Situation

FSC Chairman Kim Joo-hyun presided over a meeting of senior FSC officials on October 23 right after the government-wide emergency meeting on macroeconomic and financial stability took place. At this meeting, Chairman Kim ordered authorities to promptly take follow-up actions to implement the support measures announced at the earlier emergency meeting. After the senior official meeting, FSC Standing Commissioner Kwon Dae-young held another meeting with the Financial Supervisory Service (FSS), financial industry groups, policy financial institutions and commercial financial institutions to check the recent situation of bond and money market and related risk factors in financial institutions. At the meeting, financial authorities explained that they will immediately activate the KRW50 trillion-plus liquidity of supportive measures announced at the government-wide emergency meeting. Authorities emphasized that the government, aiming to ensure market stability, will provide ample support by all means necessary. In addition, as restoration of market mechanisms is the key to overcome the current problematic situation, authorities said, market participants such as financial institutions and institutional investors also should step up their own efforts to facilitate recovery of the role of financial markets as intermediaries and accordingly to ensure a virtuous cycle. Moreover, authorities underscored the need for concerted efforts of both the government and the private sector. Application of all available means at their disposal and close communication between them should be in harmony to ensure market stability as the government alone has limited financial resources. Financial industry groups, in response to authorities request, also showed their commitment to strengthen efforts to stabilize financial markets and actively cooperate with the governments measures. * Please refer to the attached PDF for details.
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Oct 21, 2022

FSC Decides 6-Month Postponement in Rolling Back Regulatory LCR for Banks

The FSC held a meeting with the Financial Supervisory Service (FSS) and five major bankson October 20 to review financial market situation with a focus on the banking sectors capital raising and management and the atmosphere of financial markets including money market. At the meeting, financial authorities and participants from five major banks shared the recent view that volatility and uncertainty have expanded in money market. In order to actively respond to this situation, financial authorities decided to slow down the pace to reverse eased regulations during the pandemic. Following this, the date of regulatory rollback on banks LCR (liquidity coverage ratio) requirement will be postponed for six months. Moreover, financial authorities encouraged banks to step up efforts in helping to stabilize the corporate bond and CP (commercial paper) markets. * Under the current regulatory rollback plan, banks are allowed to maintain regulatory LCR of 92.5% until the end of December 2022. But a six-month postponement would allow them to maintain LCR requirement of 92.5% until the end of June 2023. Financial authorities will strengthen monitoring of financial markets in the future and seek timely implementation of necessary measures. * Please refer to the attached PDF for details.
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Oct 20, 2022

Scope of Data Categories for Financial MyData Service to be Expanded

The FSC announced a plan to expand available data on financial MyData service from the end of this year. The number of personal data categories will grow significantly from 492 to 720, which can cover most financial sectors including banks, insurers, card companies, financial investment firms and public financial institutions. A demand survey on MyData service providers in March 2022, which was conducted right after the launch of financial MyData service in last January, revealed additional data categories that need to be added. To insert these categories into MyData ecosystem, many data providers like financial industry groups, financial institutions and MyData service providers voluntarily organized MyData taskforce to discuss mutual development and cooperation. Between April and August this year, the taskforce held over 40 meetings and reached an expansion plan. MyData portal (www.mydatacenter.or.kr) will provide information on new service offerings and service improvement of MyData service providers, enabled by this expansion of data categories available. Achievement So Far (Penetration of MyData Service) Since the launch of financial MyData service on January 5 this year, financial MyData service has grown rapidly. The cumulative number of subscribers grew to about 54.8 million (in September 2022), increased about 3.9 times from about 14 million users in January. The volume of API (Application Programming Interface) transfers per day went up from 274 million at the end of January to about 384 million at the end of September. The number of MyData service providers also increased from 33 to 52 for now. (Enhanced Consumer Convenience) Financial MyData service made data ecosystem more consumer-oriented where financial consumers can quickly and conveniently access a variety of their personal data scattered around financial sphere with a single sign-on. As data sharing practice changes from indiscriminate data scraping to formal data transfer under consumer acknowled
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Oct 20, 2022

FSC Chairman Orders Short-term Money Market Stabilization Measures

Financial authorities observe money market with careful attention to the recent increase in its volatility. In particular, authorities are closely watching instigating factors that contribute to market anxieties in the aftermath of the PF-ABCPincident in Gangwon-do, where the provincial government promised debt guarantee. In this regard, aiming to prevent those anxieties from spreading across financial markets, FSC Chairman Kim Joo-hyun urged authorities to strengthen market response efforts in need. To this end, authorities will make the bond market stabilization fund restart the purchase of corporate bonds and CPs (commercial papers) with KRW1.6 trillion of residual amount in it and prepare for making additional capital calls immediately. Authorities are also monitoring securities firms and specialized credit finance companies with a focus on their liquidity availability, and plan to actively provide liquidity support through the Korea Securities Finance Corporation. In addition, authorities would ease some liquidity requirement for financial institutions in such a way to postpone the normalization of banks regulatory LCR (liquidity coverage ratio). Along this line, if needed, authorities will promptly prepare and announce a financial support program to avoid the spread of fear related to the real estate development project financing market. * Please refer to the attached PDF for details.
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Oct 13, 2022

Household Loans, September 2022

In September 2022, the outstanding balance of household loansacross all financial sectors fell KRW1.3 trillion (m-o-m). It edged back lower again from the increased one of last month and sustains a stable level overall.Financial authorities will manage to keep the growth rate of household debt stable while making continuous efforts to alleviate financial burdens of low income households and non-speculative homebuyers. (Overall) Household loans across all financial sectors declined KRW1.3 trillion last month. The growth (y-o-y) was 0.6 percent which continued to slow since the second half of 2021. (By Type) Mortgage loans increased at a slower rate than the previous month and other types of loans fell at a faster rate, leading to an overall drop in household loans. - (Mortgage Loans) Mortgage loans rose KRW2.0 trillion in September, growing at a slower rate compared to the previous month (up KRW2.7 trillion), as group lending for new apartment subscription fell from KRW1.2 trillion to KRW0.5 trillion. - (Other Types of Loans) Other types of loans fell KRW3.3 trillion, declining significantly from the previous month (down KRW1.8 trillion), due to a drop in credit loans. (By Sector) Household loans edged back down in both the banking and nonbanking sectors. - (Banking Sector) Banks saw a drop of KRW1.2 trillion in household loans. Mortgage loans from banks grew KRW0.9 trillion,rising at a slower rate than the previous month (up KRW1.6 trillion), as jeonse loans and group lending for new apartment subscription went up KRW0.6 trillion and KRW0.5 trillion, respectively. Other types of loans from banks fell KRW2.1 trillion, declining at a faster rate than the previous month (down KRW1.3 trillion), as credit loans dropped KRW1.8 trillion. - (Nonbanking Sector) In September, nonbanks saw a drop of KRW0.1 trillion in household loans with increases in insurance companies (up KRW0.6 trillion) and savings banks (up KRW0.2 trillion) and declines in mutual finance (down KRW0.5 tri
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Oct 12, 2022

FSC and FSS Hold Joint Market Monitoring Meeting

The FSC held a market monitoring meeting jointly with the Financial Supervisory Service (FSS) on October 12, reviewed the impact of the Bank of Koreas recent interest rate hike (+50 bp) on financial markets and financial institutions, and discussed response strategies to mitigate risk. To ease volatility in stock markets, financial authorities agreed to ensure a timely reactivation of the stock market stabilization fund by promptly carrying out additional purchase agreements with institutional investors. While continuously watching market situations, authorities will spare no effort to prepare for a timely implementation of additional market stabilization measures in need. In addition, authorities shared the same view that institutional investors need to play a responsible role based on a mid- and long-term perspective to prevent the spread of anxiety in financial markets. Authorities also promised to make efforts to alleviate corporate financial difficulties amid interest rate hikes and to prevent an abrupt one-side movement of market interest rates. To this end, authorities plan to carry out the following. a) Strengthen support for businesses with low credit by expanding the corporate bond and CP (commercial paper) purchase capacity of policy financial institutions from current KRW6 trillion to KRW8 trillion. b) Actively respond to the recent vulnerabilities in bond markets such as real estate project financing and ABCP (asset-backed commercial paper) and bolster efforts to prevent liquidity crunch of healthy businesses. c) Take necessary steps depending on market situations to activate a backstop to reduce volatility in market interest rates. For example, restart purchase of corporate bonds and commercial papers with KRW1.6 trillion residual amount of the bond market stabilization fund. d) Actively prepare a liquidity injection mechanism to stabilize financial markets in close coordination with relevant institutions. Authorities also committed to reduce burdens o
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Oct 07, 2022

FSC to Overhaul Accounting Regs to Ease Burden on SMEs while Ensuring Accounting Transparency

The FSC prepared measures to overhaul the accounting regulations to make them more SME-friendly and to support SMEs better comply with the accounting and external audit regulations. The key measures include (a) exempting small-sized listed firms (less than KRW100 billion in asset) from external audit requirement for their internal accounting control systems, (b) launching and operating an accounting support center for SMEs at the Korea Exchange (KRX), (c) reducing the scope of large unlisted firms that are subject to the same accounting regulations in place for listed firms and (d) applying a simplified auditing standard for non-listed small firms. In line with the regulatory improvements, the FSC will also strengthen the responsibility of executive officers over internal control of accounting practices and raise incentives for whistleblowing on accounting frauds within a company. For this, disclosure on the internal accounting control system will be improved substantially and the reward amount for whistleblowers will be increased significantly (by three times). Background The accounting and external auditing regulations in Korea have been designed and developed with the focus on large listed companieswhere the need for investor protection is high. SMEs have been subject to similar accounting and external auditing regulations with the large companies despite their smaller scale in terms of the size of interested parties like investors. This has resulted in relatively higher compliance burden on SMEs. As such, it has been pointed out that there is more cost than benefit in applying the same accounting regulations to SMEs. Moreover, it should be taken into account that the accounting reform of 2018 imposes financial burdens more on SMEs which usually have relatively lower profitability. The government has listened to headaches of SMEs, discussed with experts and interested parties and reached the following proposals. An in-depth discussion followed at the 3rd financia
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Oct 05, 2022

New Start Fund Launched on October 4 to Support Rebound of Micro-enterprises and Self-employed

The FSC announced that New Start Fund, a bespoke debt adjustment program to help pandemic-hit micro-enterprises and self-employed business owners was launched on October 4. At the launching event, 19 financial industry groups and financial institutions signed a memorandum of understanding (MOU) for New Start Fund. From October 4, application for New Start Fund became available at 76 on-site nationwide locations and New Start Fund website. The MOU has been prepared after a series of consultation and communication between New Start Fund, Credit Counseling and Recovery Service (CCRS) and financial industry groups and institutions. It contains details about New Start Fund like eligibility, details of support, method of debt adjustment and its process, debt purchasing price, etc. Each financial industry group participating in the MOU signing event is currently at the final stage of collecting agreements from about 3,730 financial institutions expected to sign up for the partnership. FSC Chairman Kim Joo-hyun attended the New Start Fund launching event and thanked everyone who has contributed to the preparation. While stating that New Start Fund will help support the recovery of micro-enterprises and the self-employed and prevent social, economic and financial anxieties about insolvency risks, Chairman Kim urged authorities to ensure seamless operation of this new debt adjustment program. The pandemic-hit self-employed and micro-enterprises wishing to apply for debt adjustment can apply for New Start Fund by visiting one of the 76 on-site locationsfrom 9:00 am, October 4. Application is also available through an online platform. * Please refer to the attached PDF for details.
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Oct 05, 2022

Relief Conversion Loan Available for Mortgagors Owning Houses Worth KRW400 Million or Less

The FSC announced that mortgage holders owning only one house which is worth KRW400 million or less can apply for Relief Conversion Loan from Thursday, October 6 (The application period already started on September 15 for mortgage holders owning house worth KRW300 million or less). This preferential Relief Conversion Loan program which covers KRW25 trillion in total loan amount offers eligible mortgage holders to refinance their adjustable-rate or mixed-rate mortgages to those with long-term maturity, fixed interest rate and monthly principal payments. Application for Relief Conversion Loans will be accepted from October 6 to 17.Exact date will be allocated like the table below according to the last digit of birth year on applicants resident registration number (RRN). Depending on the type of the institution an applicant borrowed from, the institution receiving the application differs. When an original lender is Kookmin, Shinhan, Nonghyup, Woori, Hana Banks or Industrial Bank of Korea, the applicant should submit to the original lender. However, when an original issuing institution is other bank or nonbank financial institution, the application should be submitted to Korea Housing Finance Corporation. Applicants need to keep in mind the following factors before application. a) Check the type of benchmark rateyour mortgage uses and its adjustment periodas well as trends in benchmark rates to understand when your interest rate will be adjusted next and how much your benchmark rate will be increased during the interval. b) Decision to apply for Relief Conversion Loan should be made after comparing the expected interest rate of the forthcoming adjustment datenot your current interest ratewith the interest rate of Relief Conversion Loan. c) If interest rates fall in the future and then a borrower wishes to switch Relief Conversion Loan to another mortgage loan that offers a lower interest rate, a refinancing is possible without burden of an early termination fee. If the
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Sep 30, 2022

Measures to Soft Land Loan Maturity Extension and Payments Deferment for Self-employed and SMEs

The government and financial institutions decided to provide loan maturity extension for up to three more years and payments deferment for up to one more year for the borrowers currently using these programs.While providing sufficient time for the self-employed and SMEs to recover their repayment capabilities, authorities will ensure thorough protections for those who are unable to recover on their own with New Start Fund for the self-employed and a debt adjustment program for SMEs. During the extended period, loan forbearance programs will allow businesses to draw up their repayment plans tailored for individual situations in consultation with financial institutions. This will help ease the concern about financial institutions financial soundness and support soft landings for both borrowers and financial institutions. Overview Since April 2020, the financial authorities and financial institutions have made available loan maturity extension and principal or interest payments deferment for SMEs and small merchants experiencing temporary liquidity shortage from COVID-19. As businesses continued to incur damages from COVID-19, the maturity extension and payments deferment program has been extended six-month each for four times over the past two and a half years. Financial institutions have provided forbearance support for KRW362.4 trillion loan through this program till June 2022. As of the end of June 2022, 570,000 borrowers and KRW141 trillion loans are still under this support. Evaluation on Current Situation After COVID-19 business restrictions were completely lifted on April 18, business conditions for the self-employed and SMEs are gradually returning to normal. However, deterioration in economic and financial conditions such as rising interest rates, high price level and falling currency value delays a full recovery. Amid slow business recovery, there is a concern that the self-employed and SMEs may default on their debts if the loan maturity extension and payme
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Sep 29, 2022

Financial Measures to Stamp Out Vishing Scams

The FSC introduced financial measures to stamp out vishing scams. The measures include the suspension of payment from the account exploited for fraud and the suspension of money transfer from accounts for first three days since joining open banking made through non-face-to-face process. Background In 2021, there were 30,900 cases of vishing scams. As the amount of monetary damages incurred to victims rose to about KRW774.4 billion,vishing scams pose a serious threat to the society. Since December 2021, the Office for Government Policy Coordination, the Prime Ministers Secretariat organized and has operated a government-wide joint taskforce to draw up government-wide policy responses to vishing scams and to pursue intensive crackdowns and investigations led by the National Police Agency and a special joint investigation team. After consultation with the ruling party and multi-ministry taskforce meetings, the government prepared a package of detailed response measures tailored for the telecommunications and financial sectors. The following are financial sector measures. Key Details of Financial Sector Measures I. Suspend Payment from an Account Exploited for Face-to-face Vishing Scams a) Revise some provision of the Special Act on the Prevention of Loss Caused by Telecommunications-based Financial Fraud and Refund for Loss (the Special Act hereinafter) to enable investigative authorities to immediately request suspension of payment from an account exploited for face-to-face vishing scam to financial institutions as soon as they make an arrest on the spot. II. Lower the Maximum Cash Deposit through ATMs without Card or Bankbook a) Lower the upper limit of cash deposit at ATMs (automatic teller machines) requiring no card or bankbookto KRW500,000 per transaction from the current level of KRW1 million per transaction. This is to prevent transfers of fraudulently obtained cash through cash deposit at ATMs. b) Limit the maximum daily amount withdrawable from the unlimited
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Sep 28, 2022

2022 Korea Fintech Week Opens

The 4th annual global fintech expo, 2022 Korea Fintech Week will be held for three days from September 28 to 30 for both on-site (Lotte Hotel Seoul) and online viewing. Fintech businesses and experts from at home and abroad participate. Welcoming Remarks by FSC Chairman FSC Chairman Kim Joo-hyun delivered welcoming remarks at the opening ceremony. He spoke about the economic, financial and regulatory environment surrounding the fintech ecosystem and the governments policy direction to promote fintech. The following is a summary of Chairman Kims remarks. Koreas fintech industry expanded its size significantly in terms of the number of businesses in operation. However, recent global fintech rankings show Koreas ranking dropped from 18th in 2019 to 26th in 2020. And currently, fintech firms are facing challenges from expanding platform-based big tech companies and financial institutions which accelerate digitalization. Fintech firms also experience difficulties in attracting investments amid tightening monetary policies around the world. Besides, there are continuing concerns about inflexible regulations in the financial sector. In response to rapidly changing conditions surrounding the fintech industry, the government will act in a more agile manner to support fintech businesses in four aspects. First, the government will improve the financial regulatory sandbox program to promote commercialization of fintech services in order to make fintech startups to utilize this program more actively. Second, the government will examine and strengthen the financial support infrastructure to facilitate investment and funding on fintech firms. Third, the government will work to expand regulatory flexibility for artificial intelligence (AI)-based services and the rules on cloud computing use and network separation. Fourth, through a fundamental reexamination of current regulations, the government will actively pursue digital regulatory reforms throughout the whole financial industry
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Sep 28, 2022

Measures to Strengthen Capacity to Respond to Unfair Trade Practices in Capital Markets

The FSC proposed new measures to improve the effectiveness of penalties on unfair trade practices in capital markets. The measures include (a) a ban on new transaction and account opening for investment products and (b) disbarment from serving as a board member of listed companies up to 10 years. These measures will help prevent flagrant and repeated unfair trade practices and establish a sound capital market order. Authorities will propose a revision bill of the Financial Investment Services and Capital Markets Act (FSCMA) and propel its passage at the National Assembly. In addition, the FSC will make efforts to pass another FSCMA revision bill to provide calculating method for unfair profits acquired by unlawful trades and to introduce penalty surcharges. Background In capital markets, unfair trade practices increasingly take diverse and complex forms. However, the measures to punish, block and prevent them remain somewhat ineffective. In particular, unfair trades on material nonpublic information by board members of listed companies (who in fact should have a high degree of integrity) happen frequently and recidivism by those who previously committed unfair trades proliferates. The majority of ordinary investors suffer financial losses and trust in our capital markets is damaged. In May 2022, the new administration announced improving the effectiveness of penalties on unfair trade practices as one of 120 national policy tasks to restore fairness and trust in capital markets. Then, the government has prepared detailed plans through policy seminars and expert meetings. Current Situation and Problems (Overview of Unfair Trade Practice Cases) In recent five years (2017-2021), the number of unfair trade practice cases handled by the Securities and Futures Commission (SFC) was 274 in total, which translates into 54.8 cases annually. In terms of violation type, use of material nonpublic information was most prevalent (43.4%), followed by unfair trading (29.6%), market p
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Sep 26, 2022

KoFIU Unveils H1 2022 Survey Result on Virtual Asset Service Providers

The Korea Financial Intelligence Unit (KoFIU) conducted a survey on 35 registered virtual asset service providers (VASPs) in order to see the current state of the domestic virtual asset market. Survey Overview (Respondents) 35 VASPs (26 exchange service providers and 9 other businesses) (Survey Method) Collect data from VASPs by paper surveys (Period Covered) January 1, 2022 to June 30, 2022 Key Survey Findings for H1 2022 The domestic market for virtual assets in H1 2022 has been downsized significantly compared to that of H2 2021 in terms of market capitalization, trading volume, etc.This seems to be caused by a slowdown in economic activities following the crisis in Ukraine, interest rate hikes and decreasing liquidity as well as falling level of confidence in virtual assets in the wake of the Terra-Luna crash. Total sales profits gained by VASPs stood at KRW630.1 billion, a drop of 62 percent compared to KRW1.6 trillion in H2 2021. According to the survey, the number of virtual assets traded in domestic market was 1,371. When excluding duplicates on multiple exchanges, the number of virtual assets stood at 638, and among them, the number of stand-alone virtual assets listed and traded on a single exchange was 391 (or 61 percent). The proportion (% of market capitalization) of the global top ten virtual assets handled by the KRW-based exchange service providers increased from 41 percent to 47 percent, while the proportion (% of market capitalization) of stand-alone virtual assets increased from 84 percent to 86 percent for the coin-only exchange service providers. About 36 percent of stand-alone virtual assets (or 139 of them) were small-scale in their size with market capitalization of KRW100 million or less. For these small-scale virtual assets, users need to practice caution as they may be prone to abrupt price volatilityand liquidity shortage. As of the end of June 2022, the number of users eligible to trade in virtual assets stood at 6.9 million. The amount
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Sep 13, 2022

Ex-ante Disclosure Rule to be Introduced for Insider Transactions

The FSC announced a plan to introduce an ex-ante disclosure for stock transactions by company insiders (board members or principal shareholders) which have been subject to only the ex-post disclosure rule thus far. Insiders of listed companies who plan to sell or purchase shares issued by his/her own company within a given year will need to disclose the purpose, price and volume of trading as well as expected trading period at least 30 days before the expected trading date. For nondisclosure, disclosure of false information or failure to comply with the trading plan, authorities will prepare effective compliance measures depending on the severity of violation such as a criminal penalty, fine, administrative action, etc. Introducing ex-ante disclosure is expected to enhance information transparency and market predictability regarding insider stock trading, thereby helping to ease market volatility. Since this measure is a closely anticipated policy task of the new administration, the financial authorities will make efforts to promptly prepare and submit a revision proposal of the Capital Markets Act to the National Assembly. Background Large-scale stock offloading by insiders such as board members of listed firms, etc. causing abrupt fall in stock prices has continued to present a source of discontent for investors and a concern for the society.Some ordinary investors suspect that company insiderswho have the ease of access to undisclosed company informationhave been using that information to pocket personal profits while ordinary investors are burdened with losses. Faced with this problem, the FSC has strengthened safeguards for ordinary investors by improving the rule in March this year to restrict stock sales for six months (a lock-up period) from the time of company being listed even for shares that have been acquired by exercising stock option. However, this measure alone cannot regulate sales of stocks by insiders after the lock-up period (six months) and that
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Sep 08, 2022

Household Loans, August 2022

In August 2022, the outstanding balance of household loansacross all financial sectors rose KRW0.7 trillion, edging back up slightly from a decline in the previous month but maintaining a stable level overall.The financial authorities will continue to monitor the household debt growth to ensure that it is maintained at a stable level in order to help prevent it from posing risk to the economy. (Overall) Household loans across all financial sectors rose KRW0.7 trillion in August 2022. The growth rate (up 1.2%, y-o-y) has continued to slow down since the second half of 2021. (By Type) Mortgage loans grew at a slightly faster pace than the previous month and other types of loans fell at a slower rate, leading to an overall increase in the balance of household loans. - (Mortgage Loans) Mortgage-backed loans rose KRW2.8 trillion in August, edging up slightly faster than the previous month (up KRW2.5 trillion), as group lending for new apartment subscription increased. - (Other Types of Loans) Other types of loans dropped KRW2.1 trillion in August, edging down at a slower rate compared with the previous month (down KRW3.4 trillion), as credit loans and non-housing collateral loans declined. (By Sector) Household loans increased from the previous month in most sectors but showed a continuous trend of slowdown in the mutual finance sector (down KRW0.5 trillion) with a drop in nonmortgage loans. - (Banking Sector) Banks saw a rise of KRW0.3 trillion in household loans. Mortgage loans from banks grew KRW1.6 trillion,rising at a slower rate than the previous month (up KRW2.0 trillion), with group lending for new apartment subscription and jeonse loans going up KRW1.2 trillion and KRW0.9 trillion, respectively. Other types of loans fell KRW1.3 trillion, declining at a slower rate from a month ago (down KRW2.3 trillion), with credit loans edging down KRW0.9 trillion. - (Non-Banking Sector) In August, nonbanks saw an increase of KRW0.4 trillion in household loans, led by savings
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Sep 07, 2022

FSC Prepares Additional Measures to Improve Convertible Bond Market

The FSC announced additional measures for improving rules on the convertible bond market on September 7. As in the case with the convertible bonds (CBs) and bonds with warrants (BWs) issued by listed firms, the regulation on refixing and call option will also apply to (redeemable) convertible preference shares issued by listed companies. Background In October 2021, the FSC introduced a revisionto the regulation on the issuance of securities and disclosure to help prevent CBs from being used in unfair transactions in such cases where CBs are used expediently to increase the shareholding of largest shareholders. Moreover, the FSC introduced a supervisory guideline on the accounting practices of CB call options to help improve the transparency in CB market from an accounting perspective. However, in the process of pursuing regulatory improvements, a concern has been raised about the possibility of stronger regulation (on refixing, etc.) posing excessive restriction on companies fundraising activities.Therefore, the authorities have prepared additional measures for regulatory improvement after examining the trend of CB issuance since the revised regulation went into effect from December 1, 2021. Convertible Bond Market Trend (Issuance Amount) The monthly average CB issuance amount in the first quarter of this year was KRW579.0 billion, a drop of 36 percent compared to the same period last year (KRW904.6 billion)This is on a par with the declining trend of corporate bonds over the same period (down 29.2 percent y-o-y). However, when including the amount of CB issuance prior to the implementation of the revised regulation (KRW2.2 trillion, November 2021), the monthly average CB issuance amount appears to be on course for recovery after a temporary fluctuation. (Issuance Rate) With the expansion in liquidity amid COVID-19 response measures, the CB issuance rate went down slightly in 2020 but edged back up narrowly due to the effects of base rate hike, etc. (Refixing Propor
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Sep 05, 2022

Measures to Improve Protections for General Shareholders in IPO of Split off Subsidiary

The FSC introduced a plan to improve the rights and interests of general shareholders in IPOs of split off subsidiaries in order to help restore fairness and trust in the capital markets and strengthen investor protections. Background With some companies recently deciding to split off rapidly growing portions of their business and went ahead with IPO of split off subsidiaries within a short period of time, the issue of general shareholders incurring losses has become problematic as their shareholder rights are stripped away and stock prices for the parent company tend to decline. Unlike in a spin off, shareholders of the parent company in a split off are not allocated with stocks of a split off subsidiary and therefore they have no shareholder rights over the split off company. There is also a study suggesting that the valuation of the high growth split off business section is not necessarily reflected in the valuation of parent company stocks. Especially, the fact that the rights of general investors who have been opposed to the split off decision are not adequately protected has presented an ongoing problem which has also been closely related to the so-called Korea discount phenomenon. As an equity interest, a stocks worth largely consists of a right to participate in the decision making process and a right to make a claim on present and future profits. However, in a capital market where these two principles are not properly observed, it will be difficult for investors to have high levels of confidence. Therefore, as one of the key policy tasks of the new administration for restoring fairness and trust in capital markets, the financial authorities have prepared the following measures to improve the rights and interests of general shareholders in IPO of split off subsidiaries after months of engaging in discussions with experts and relevant stakeholders. Key Details I. Strengthen Disclosure Companies planning to carry out a split off of their business should disclo
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Sep 01, 2022

FSC Holds 4th Financial Risk Taskforce Meeting

FSC Vice Chairman Kim So-young held the 4th financial risk taskforce meetingon August 31 jointly with other relevant institutions.The 4th taskforce meeting discussed the following two agenda(a) measures for improving the loss absorbing capacity of financial sectors in response to financial market uncertainties and (b) detailed implementation plans of various market stabilization measures which had been deployed in past financial crises. Summary of Vice Chairmans Remarks In his opening remarks, Vice Chairman Kim assessed that volatility in financial markets has increased due to concerns about the prospect of the Feds aggressive monetary tightening, Europes economic recession, and potential economic slowdown in China, etc. Given the increased uncertainty in financial markets such as rising debt servicing burden of borrowers and a potential collapse in major asset prices, Vice Chairman Kim emphasized that it is necessary to strengthen monitoring of risk factors in the financial sector and prepare response measures preemptively. In order to proactively respond to the accumulated risks such as an increase in lending to vulnerable borrowers and real estate project finance (PF) loans, Vice Chairman Kim stated that the financial authorities will examine the level of loan loss provisions of banks and nonbanks to make sure that they have sufficient capacity to absorb potential losses. He said that the authorities are planning to (a) raise the loan loss provision coverage ratio for the nonbank sector such as savings banks, mutual finance companies and specialized credit finance businesses and (b) introduce a regulatory ground to allow the finical authorities to require banks to set aside additional special loan loss reserves. In particular, for the nonbank sector whose assets have been rapidly increased, Vice Chairman Kim said that the authorities will ensure that they hold a sufficient level of capital while bolstering risk management. In addition, considering the close-knit
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Aug 29, 2022

New Start Fund for Small Merchants and Self-employed Business Owners Hit by Covid-19 To Be Launched

A debt adjustment program, called New Start Fund, for small merchants and self-employed business owners hit by the Covid-19 crisis will be launched in October.The New Start Fund is intended to ease their debt payment burden as they are struggling to repay their debt since they suffered unavoidable losses while cooperating with the governments quarantine measures such as social distancing policy and restrictions to business operations. Background Over the past two and a half years, self-employed business owners and small merchants have suffered inescapable damages in the process of cooperating with the governments preventive measures, such as restrictions on business operation, in response to the COVID-19 crisis. As their businesses slowed down and financial conditions deteriorated, small businesses turned to debt and the size of their loans have grown significantly with increased burdens for principal and interest payments. Major institutions including the Bank of Korea evaluate the size of potential insolvency of self-employed business owners to be about 5 to 8 percent of their total loans. With the availability of COVID-19 support measures such as the loss compensation support, funding support through fiscal spending and the loan maturity extension and payment deferment program, the vulnerability of their debt situation had not surfaced yet. However, there are possibilities that their insolvency potential may build up and expand if there is another wave of COVID-19 or a worsening of the economic or financial conditions due to high levels of interest rates, prices and USD-to-KRW exchange rates. Against this backdrop, the FSC has prepared a debt adjustment program (called New Start Fund) to help prevent an expansion in the insolvency potential of the pandemic-hit small businesses and to provide a chance of credit recovery and restart for debtors who have already turned insolvent. The debt adjustment program will help lower excessive payment burdens (high interest ra
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