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May 24, 2021
- Financial Authorities and Relevant Institutions Declare Support for TCFD and Its Recommendations
- The FSC along with thirteen other relevant institutions announced their official declaration of support for the Task Force on Climate-related Financial Disclosure and its recommendations on May 24. The declaration was followed by the green finance consultative bodys kick-off meeting chaired by Vice Chairman Doh Kyu-sang. Vice Chairmans Remarks Last year, the average temperature in Europe and Asia reached a record high in 111 years according to the Global Climate Report 2020 by the U.S. National Oceanic and Atmospheric Administration. Considering ripple effects of climate change on the stability of financial systems, the financial sector should preemptively take a responsible role in global issues such as the climate change. Recently, the EU has introduced green taxonomy which provides standards on support for green industries. The Biden administration in the U.S. has strengthened its climate leadership by rejoining the Paris Agreement and holding a Leaders Summit on Climate. The Korean government, too, declared the 2050 carbon net zero goals and enhanced its carbon reduction objectives while suspending state-backed financial institutions financing of overseas coal plants. With the K-New Deal initiative, the government has been expanding investments in green sectors as well. (Support for TCFD and its significance) The financial authorities plan to boost cooperation with the international society to more actively respond to climate change. Last week, the FSC and FSS applied for membership to the Network of Central Banks and Supervisors for Greening the Financial System. Today, the FSC and thirteen relevant institutions are here to announce official declaration support for the TCFD. The TCFD is a global consultative body created to promote climate-related financial disclosures. In 2017, the TCFD introduced its recommendations and more than 2,000 institutions from 78 countries across the globe have shown support for the TCFD and its recommendations. In Korea, a total of
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May 24, 2021
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May 21, 2021
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May 21, 2021
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May 20, 2021
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May 17, 2021
- FSC Announces Plan to Promote the Use of Digital and Contactless Insurance Sales Mechanisms
- The FSC announced a plan to improve rules on insurance business in order to promote the use of digital, AI-based and contactless insurance sales mechanisms as part of the broader aim to boost consumer confidence and promote innovation in the insurance industry. Insurance sales channels face structure changes amid an expansion of contactless services and digital technologies, increasing number of platform businesses entering the market and the growth of general agencies (GAs). To improve the effectiveness of consumer protection while removing some of the inefficiencies observed in the current insurance sales practices, the authorities have prepared the following plan for changing the rules on insurance sales mechanisms. Key Details A. Face-to-Face Sales - Previously, insurance agents and brokers were required to meet customers face-to-face at least once to explain coverage details. However, with the telemarketing safeguard measures in place, such as the requirements for recording and confirmation by insurers, sellers are allowed to provide explanations via telephone calls. (rule change completed on Mar 25, 2021) - When subscribing for an insurance coverage using a mobile phone, customers faced the inconvenience of having to put their signature multiple times throughout the process. This electronic signature requirement will be reduced down to only once at the beginning of the subscription process to improve convenience. (further improvements expected within May 2021) B. Telemarketing - With the use of the text-to-speech AI-based technology, insurance agents and brokers will no longer have to read the entire sales script that usually took about thirty minutes to finish. With the AI-based voicebot, the salesperson is able to instead focus on answering questions from the customer and providing supplemental information. (implementation expected in Q3 2021) - Previously, telemarketing and mobile sales mechanisms remained two distinct sales channels. However, a hybrid sale
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May 13, 2021
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May 12, 2021
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May 12, 2021
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May 11, 2021
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May 10, 2021
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May 10, 2021
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May 06, 2021
- Adjustments Made to the Corporate Bond and CP Purchase Program for Low-rated Companies
- The FSC and the state-backed financial institutions announced that they will bolster support for low-rated companies through the pandemic-related support measures already put in place last year, which include a special purpose vehicle (SPV) aimed at purchasing low-rated corporate bonds and CP, primary collateralized bond obligations (P-CBOs) and the corporate bond and CP refinancing support program. In response to the spread of market anxieties in the wake of the COVID-19 pandemic, the government launched the corporate bond and CP market support programs covering businesses with credit ratings ranging from AA or above to A to BB. As a result, the corporate bond and CP markets have been stable thus far. However, there have been rising concerns about credit downgrades, limited support available through P-CBOs and the redundancy in the utility of some of the programs. As such, the authorities will make following adjustments to the programs to bolster support for SMEs. Key Measures (Support for low-rated businesses) First, more flexible eligibility requirements will be applied to low-rated companies. For the so-called fallen angels whose credit rating has declined after the announcement was made on the governments plan to operate an SPV on April 22, 2020, the provision of support will continue to be available for BB rated companies. For companies facing the risk of credit downgrades, state-backed financial institutions will provide comprehensive consulting services on their management status, financial structure, etc. (Temporary expansion of P-CBO support) First, individual companies sales cap will be expanded for SMEs that have seen their sales drop fifty percent or more and for low-rated (BB ratings) SMEs. The current standard of measuring their sales performance that is based on the estimated sales expected for the upcoming year will be changed to an arithmetic mean from the past three years. The sales cap on low-rated SMEs will also be expanded based on their fields
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May 06, 2021
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May 06, 2021
- Financial Authorities to Improve Rules on the Suspension of Licensing Review Process
- The financial authorities introduced the measures to improve rules on the suspension of licensing review process for financial institutions. The measures are intended to increase predictability and minimize legal uncertainties for businesses. The rules on the suspension of licensing review process have been introduced to prevent the granting of license to legally disqualified entities that may be undergoing an investigation or lawsuit at the time of their licensing review process. Under the rules, financial authorities may decide to suspend the licensing review process (a) if the applicant is facing a criminal charge or under an investigation or inspection by a relevant authority and (b) if the lawsuit or the investigation or inspection is deemed to have significant impact on the licensing review process. However, there have been criticisms regarding the current system as it serves a contradictory purpose to the principle of presumption of innocence, leads to unnecessary breach of rights and interests on the part of the applicant, impedes the level of predictability for resumption of the review process and raises the issue of inconsistency in terms of the application of the rules across different sectors. As such, the FSC will carry out the following measures to make improvements to the current suspension of licensing review process. Key Measures First, the authorities will newly establish a guideline that provides a specific and detailed list of grounds and reasons for suspending a licensing review process. Second, for business entities whose licensing review process has been suspended, the authorities will reconsider every six months the possibility of resuming the licensing review process and whether to extend the suspension period. Third, the suspension of licensing review process, which is currently not applicable to insurance businesses, specialized credit finance companies and financial holding companies, will be applied across all financial sectors to enhanc
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May 03, 2021
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May 03, 2021
- Authorities Introduce Measures to Strengthen Oversight on Quasi-investment Advisory Businesses
- The financial authorities held the 3rd taskforce meeting on the prevention of unlawful and unfair trading activities in stock markets on April 30 and reviewed progress in the implementation of various measures. At the meeting, the authorities introduced and decided on the measures to strengthen management and supervision on the quasi-investment advisory businesses. The measures are aimed at (a) preventing quasi-investment advisory businesses from engaging in unauthorized business activities, (b) strengthening management from the time of their business registration to operation and exit and (c) bolstering detection of illegal activities using social media chatrooms, etc. Background A quasi-investment advisory business provides investment advisory services to an unspecified number of individuals. There are no particular entry requirements for these businesses as they are only required to register with the authority.With the goal of preventing damages to investors, the government has been working on regulatory improvements. Since September last year, the FSS has conducted inspections on 351 entities and detected a total of 54 cases where illegal activities are suspected. As the sales practice of quasi-investment advisory businesses has shifted to online spaces such as social media chatrooms and Youtube, the number of investor complaints being filed has also increased.Based on false or exaggerated promises of investment returns, investors are lured into paying high fees, inflicting financial damages to investors. As such, the financial authorities along with private sector experts have set up a taskforce and prepared the following measures to strengthen oversight on quasi-investment advisory businesses. Key Measures I. Root out unauthorized business activities - Strengthen public awareness on unlawful activities: The authorities will strengthen efforts to better inform investors about the typical types of illegal activities, including stock advisory social media chatroo
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Apr 29, 2021
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Apr 29, 2021
- Government Announces Household Debt Management Plan for 2021-2023
- The government announced the household debt management plan for 2021-2023 on April 29. The plan is aimed at (i) managing the growth rate of gross household debt at stable levels for the mid- to long-term and (ii) establishing lending practices based on individual borrowers repayment capability. Background Household debt growth remained stable from 2017 to 2019 as the government was able to implement a consistent policy for household debt management. However, due to expansionary fiscal and monetary policies put in place in response to the COVID-19 pandemic, the household debt growth rate accelerated in 2020.In this year, the growth rate has slowed down somewhat since the government announced a series of policy measures to tighten mortgage regulations and boost housing supply. However, the household debt level still remains high even though credit loans which was a dominant factor in the last years household debt growth in the second half appears to have come down to a stable level. Koreas household debt has been regarded as one of the potential sources of financial risk, given its relatively high ratio against GDP and fast pace of growth compared with major economies. However, the increase in private sector debt in response to COVID-19, which is a common phenomenon, has been inevitable to some extent. In addition, due to the governments efforts at improving the structural soundness of household debt, it is unlikely that household debt turns into a systemic risk in the short-term. Against this backdrop, the government intends to preemptively manage household debt from a macroprudential perspective to prevent it from turning into potential risk factors. Regulatory adjustments at a micro level are also needed to ensure that a tightening of mortgage regulations do not curtail first-time homebuyers access to mortgages. The current regulation of loan-to-value (LTV) ratio, uniformly applied across all homebuyers, has limited opportunities for first-time homebuyers. Moreover
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Apr 28, 2021
- Open Banking Services Available from Savings Banks
- The FSC announced the availability of open banking services from savings banks from April 29, 2021. From next month, credit card companies are also expected to join open banking services. Since its first launch in December 2019, open banking in Korea has become widespread with the cumulative number of subscription reaching about 76.6 million with more than 138.5 million accounts registered as of April 25, 2021. In order to promote further development of open banking, the FSCannouncedmeasures to expand participating institutions at the 3rd digital finance meeting held on October 21, 2020.As a result, about one hundred banks, fintechs, mutual finance companies and securities firms have joined and are providing open banking services as of April 25, 2021. From April 29, seventy-three savings banks will also begin to provide open banking services through their mobile apps or websites with six other savings banks expected to join as soon as they finish developing IT systems. With open banking becoming available from savings banks, open banking is now provided by all deposit-taking financial institutions. As such, it is expected to further enhance user experience and consumer convenience. In this regard, growing competition between financial institutions is also expected to contribute to their overall digital competitiveness. The FSC will continue to promote innovation in the financial industry and work to expand open banking to credit card companies from the end of May this year. * Please refer to the attached PDF for details.
