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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Sep 14, 2018
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Jun 27, 2018
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Jun 27, 2018
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Jun 18, 2018
- Draft Bill Proposed for Introduction of Regulatory Framework for Financial Benchmarks
- BACKGROUNDThe FSC proposed a draft bill to introduce a regulatory framework to financial benchmarks. The new legislation was enacted in response to global regulatory moves in which major countries including the UK, EU, Australia and Japan adopted IOSCO’s Principles for Financial Benchmarks into their benchmark regulations. The extra-territorial effect of the EU Benchmark Regulation (BMR), which requires third party country administrators to be authorized by either one of the following three ways – endorsement, recognition or equivalence, prompted the need for Korea to introduce a corresponding regulatory regime in compliance with international standards. Domestically, there is a need as well for Korea to create a new regulatory regime for improving the accuracy and credibility of financial benchmarks and better protect financial consumers.Against this backdrop, the draft bill is intended to:• empower the FSC to designate financial benchmarks recognized as having a significant impact on financial markets as “significant benchmarks” to be subject to the new regulatory and supervisory framework;• stipulate conduct requirements for setting, publishing and using “significant benchmarks”; and• provide legal grounds for the FSC to impose corrective orders or penalties against any activities that could harm the accuracy and credibility of “significant benchmarks.”The proposal, open for public comments from June 18 until July 30, will be submitted to the National Assembly in September 2018.KEY PROVISIONS► Definition of a “financial benchmark”A financial benchmark is defined as a reference index used to determine the amount of payable to a counterparty of a financial contract or the value of a financial instrument; or an index used to calculate such amount or value.► Designation of a “significant benchmark”The new legislation is to empower the FSC to designate financial benchmarks recognized as having a significant impact on financial markets
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Jan 23, 2018
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Jan 08, 2018
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Oct 24, 2017
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Sep 28, 2017
- Revision to the Act on External Audit of Stock Companies
- I. BackgroundThe Act on External Audit of Stock Companies (hereinafter referred as “the Act”) has gone through major improvements since the bill was enacted in 1981. Among them, the latest revision, passed by the National Assembly on September 28, 2017, is the most far-reaching reform of Korea’s accounting and audit practices, compared to a Korean version of the Sarbanes-Oxley Act. To deter a repeat of major accounting scandals in recent years, the revised bill contains fundamental changes in a wide range of issues, including external auditor independence, corporate accountability, and penalties against wrongful acts. Those changes will set higher standards for all stakeholders in their role, including companies, auditors and financial regulators, to further advance Korea’s accounting reform efforts. The revised bill will take effect November 1, 2018, one year after the date of its promulgation.II. Key ProvisionsCompanies, greater accountability and stronger internal control1. The scope of companies subject to external audit, currently limited to ‘stock companies’ under the Act, will be expanded to include ‘limited liability companies (LLCs).’* Specifics about companies subject to external audit and the scope of disclosure of audit reports will be delegated to the subordinate Enforcement Decree of the Act.2. The right to appoint an external auditor, currently exercised by the company’s management, will be transferred to internal audit organizations such as the ‘statutory auditor’ or the ‘audit committee.’3. Companies will be held more accountable for preparation of their financial statements.► A company shall not require an external auditor to prepare financial statements on its behalf.► If a company fails to submit financial statements to the external auditor and the Securities and Futures Commission (SFC) within the statutory deadline, six weeks before the general meeting of shareholders, the company’s representative director shall
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Aug 24, 2017
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Aug 02, 2017
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Jun 28, 2017
- FSC Identifies D-SIBs for 2018
- The FSC identified on June 28, 2017, four bank holding companies and one bank as domestic systemically important banks (D-SIBs) for 2018: Shinhan Financial Group, Hana Financial Group, KB Financial Group, NH Financial Group and Woori Bank.Under the D-SIB framework of the Basel Committee on Banking Supervision (BCBS), the D-SIB higher loss absorbency requirement is phased in by 0.25% per year from 2016 to 2019. Therefore, those identified as D-SIBs for 2018 are required to set aside an additional common equity capital of 0.75%, and the higher loss absorbency requirement will take effect on January 1, 2018.The BIS ratio for the identified D-SIBs at the end of March 2017 exceeds the minimum capital adequacy ratio1. Therefore, there is no actual burden at present for the identified D-SIBs to set aside additional capital.The FSC will identify D-SIBs every year in accordance with assessment criteria recommended by the BCBS.*Please read the attached file for details.
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Jun 21, 2017
- FSC Held Market Monitoring Meeting on Results of MSCI 2017 Market Classification Review
- FSC Vice Chairman Jeong Eun-bo held a meeting on June 21 with officials from relevant agencies to discuss the impact of the MSCI’s 2017 Market Classification Review and the government’s responses.INCLUSION OF CHINA A-SHARES INTO MSCI EMERGING MARKET INDEXIn its annual market review, MSCI decided to include China A-shares, 222 large-cap stocks of Chinese companies listed in either Shanghai or Shenzhen, into the MSCI Emerging Market (EM) Index.IMPACT ON KOREA’S FINANCIAL MARKETAs the inclusion of China A-shares increases China’s weighting in the MSCI Emerging Market Index, Korea’s weight in the same index is expected to decrease by 0.23 %p from its current 15.5%. Given the amount of funds tracking MSCI EM Index, which ranges between KRW 250 trillion (USD 230 billion) and KRW 1,900 trillion (USD 1.8 trillion), Korea may experience possible outflow of KRW 600 billion to KRW 4.3 trillion from the equity market.The FSC, however, sees MSCI’s decision will have a limited impact on the Korean stock market for the following reasons:▪ The change will be actually reflected in the MSCI EM Index in a year, from June 2018.▪ The amount of global funds investing in emerging markets continues to increase, recording a net inflow of USD 18.1 billion into emerging markets from April to May 2017.▪ Given that the Korean stock market attracted a net foreign capital inflow of KRW 9 trillionin the first five months this year alone, the amount of possible outflows (max. KRW 4.3 trillion) is not so significant.GOVERNMENT’S RESPONSESThe government will keep monitoring the impact of the MSCI’s decision to include China A-shares into its emerging market index on the Korean equity market. We will also continue our policy efforts to improve global competitiveness and attractiveness of our capital markets, and consultation with MSCI in regard with the inclusion of Korea on the list for potential reclassification to the MSCI Developed Market Index.* Please read the attached file
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Jun 14, 2017
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Mar 12, 2017
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Dec 29, 2016
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Dec 11, 2016
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Nov 24, 2016
- Follow-ups on the Household Debt Management Measures Announced on Aug.25
- The FSC announced follow-up measures on household debt management as the measures announced on August 25, 2016 started to show a sign of policy effects, particularly in slowing down the pace of household debt growth in the non-banking sector and collective lending. Since the August 25 measures took effect, collective lending for apartment buyers and non-residential mortgages from the mutual banking sector fell significantly. (i) The outstanding balance of collective loans remains on the rise as loans for middle payments for previously-signed contract were taken out. However, the amount of newly approved loans for middle payments to purchase an apartment sharply fell in October.(ii) The growth pace of household loans in the mutual banking sector started to slow down in November since the loan-to-value ratios on non-residential mortgages in the sector were tightened on October 31. The follow-up measures are aimed to extend tighter screening standards for loan approvals, to collective mortgages and loans from mutual finance institutions, which have been under less strict standards than bank mortgages. Guidelines for loan screening will be applied to such collective loans and mutual finance loans as well, under the principle that household debt should be borrowed within the borrower’s repayment ability and repaid in installments from the beginning.- For pre-sale of new apartments after January 1, 2017, home buyers’ collective loans to pay the remainder of the money will be subject to tighter screening standards, as currently applied to banks’ mortgages. - Mutual finance institutions will establish and implement their guidelines for screening loan applications in the first quarter of 2017. - The debt service ratio(DSR) will be used as a reference from early December whenfinancial institutions screen loan applications and assess borrowers’ repayment ability. * Please read attachedf file for details.
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Nov 22, 2016
- Measures for Improvement of Derivatives Markets
- The FSC announced a set of measures to make South Korea’s derivatives markets more advanced and sounder as this year marks the 20th anniversary of the establishment of derivatives markets in 1996. Key Points EXCHANGE-TRADED DERIVATIVES MARKETTo boost derivatives trading and enhance diversity of derivatives in the market, improvements will be made on both supply and demand sides. - Supply side: simplification of listing procedures, diversification of derivatives, adjustment of trading units for KOSPI200 futures and options - Demand side: flexible requirements for investors, introduction of the ‘omnibus account’ for foreign investors OVER-THE-COUNTER(OTC) DERIVATIVES MARKETRisk management system will be established with the introduction of global regulatory standards such as margin requirements for non-centrally cleared derivatives and electronic trading platforms. DERIVATIVE-LINKED SECURITIES MARKETThe FSC will strengthen risk management and investor protection, while pursuing more diversification of products to meet various investment needs. - For ELS DLS markets, stress tests will be conducted on regular basis to strengthen risk management of securities firms. To enhance transparency in fund management, assets of ELS issuance and management will be separately managed. - Investor protection will be strengthened in ELS DLS markets with the introduction of tougher “Know-your-Product Rule” and a “cooling-off period” for investors. - Development and listings of more derivatives-linked products will be promoted as alternatives to ELS products. Detailed Measures1. EXCHANGE-TRADED DERIVATIVES MARKET Supply Side(1) Simplification of listing procedures Listings of derivatives linked to new underlying assets, which currently requires the FSC’s approval, will be streamlined. Relevant rules will be revised to allow the KRX to decide on the listings of new derivative products, while the FSC will only approve the scope of the underlying assets. (2) Di
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Nov 10, 2016
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Nov 09, 2016
