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Mar 11, 2021
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Mar 11, 2021
- FSC Announces Revisions to the Enforcement Decree of the FSCMA
- The FSC announced a revision proposal for the Enforcement Decree of the Financial Investment Services and Capital Markets Act on March 11. The revision proposal contains measures to bring improvements to the Chinese wall regulation,ease reporting duties on consignment, set standards on financial investment businesses credit extension to overseas branches and restrict investors from placing multiple orders for IPO subscription. The revision proposal will be put up for public notice until April 20 and will go into effect on May 20, 2021. Key Revisions I. Chinese Wall Regulation The revision proposal promotes more autonomy and accountability of financial investment businesses with respect to their internal management of Chinese wall policies. It specifies the types of information subject to the Chinese wall regulation, requirements for internal control standards, etc. In this regard, material nonpublic information and information on their clients asset management status will be subject to the Chinese Wall regulation. Financial investment businesses will be required to maintain specific internal control standards with respect to the prevention of information sharing, specific methods for information barriers, exemptions, etc. An independent board-level position should oversee the management of the internal control standards and the relevant information will be subject to disclosure. II. Consignment Rules The revised Act allows in principle financial investment businesses to consign their work to third-party agents except for duties pertaining to internal control. In this regard, the revised Enforcement Decree specifies internal control duties as duties related to compliance, internal audit and inspection, risk management and credit risk analysis evaluation. Their reporting duty on consignment to the FSC will also be changed from seven days prior to the consignment to within two weeks after the consignment. III. Credit Extension to Overseas Branches Financial investment
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Mar 11, 2021
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Mar 10, 2021
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Mar 10, 2021
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Mar 09, 2021
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Mar 09, 2021
- Government Approves Revision Bill to Strengthen Investor Protection with PEFs
- The government approved a revision bill to the Enforcement Decree of the Financial Investment Services and Capital Markets Act during a cabinet meeting held on March 9 with an aim to strengthen investor protection in the private equity fund (PEF) market. The revision bill is a follow-up to the measures to improve the regulatory framework on private equity funds announced on April 27, 2020and is scheduled go into effect immediately after promulgation in mid-March. Key Provisions I. Close Loopholes to Prevent Evasion of Tougher Regulations Currently, the number of investors for a private equity fund is limited to up to forty-nine.When a feeder fund invests in a master fund and the amount of that investment makes up ten percent or more of the master fund, the number of investors from feeder fund is counted toward the number of investors of the master fund. Under the current scheme, when a number of feeder funds makes investments of less than ten percent each toward a master fund, the master fund can be operated as a PEFand not as a publicly traded fundeven when the actual number of investors exceeds the regulated threshold of less than fifty. To address this problem, the revised bill adds another provision to the current scheme, which requires that when a number of feeder funds from a single PEF management firm invests in a master fund and their total investment amount makes up thirty percent or more of the master fund, the number of investors in the feeder funds will be counted toward the total number of investors of the master fund. II. Strengthen Regulations on Unfair and Inappropriate Sales Activities Cross investing or circular investing between PEFs managed by the same entity exposes the problem of artificially inflating the volume of trust or the possibility of dual compensations. In addition, recent PEF mis-selling cases revealed coercive sales tactics in return for other monetary benefits, such as business investment or loan from the fund. The revision bill pr
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Mar 09, 2021
- Financial Authorities to Provide Continued Support and Prepare for Post-pandemic Economy
- Vice Chairman Doh Kyu-sang held the 36th financial risk assessment meeting via teleconference on March 9 and discussed the implementation of the COVID-19 financial support programs. The following is a summary of Vice Chairman Dohs remarks. (Financial Market Monitoring) With COVID-19 vaccines and a large-scale stimulus plan in the US, positive outlooks for economic recovery are spreading. However, expected inflation and interest rate hikes in overseas markets require close market monitoring as they may place cost burdens on domestic companies and households financing needs. As such, the authorities will closely monitor risks and prepare appropriate response when necessary. (COVID-19 Financial Support) Last week, financial institutions agreed to extend the availability of maturity extension and payment deferral programs for small merchants and SMEs until the end of September 2021. State-backed financial institutions also plan to offer an extension of loans and guarantees for middle market enterprises until September this year. The low interest rate lending support for small merchants will also be available for one more year. In order to help businesses prepare for a post-pandemic era, the government will extend the application period of the key industry stabilization fund, which is currently set to expire at the end of April this year, and find ways to make use of the fund to help businesses prepare for a post-pandemic era. In addition, the government will continue to provide support through the corporate asset purchase program.This year, on-site consulting services will also be made available to help businesses with their financing needs. (Mortgage Loans) The government has introduced diverse measures to manage household debt and stabilize the housing market. Current homeowners purchasing another house with mortgage loans in regulated areas are required to move into new home and sell their current properties within a specified time frame. In this regard, the financia
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Mar 08, 2021
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Mar 08, 2021
- KoFIU's Upgraded AML System Demonstrates Significant Improvements
- The FSC announced that the Korea Financial Intelligence Unit (KoFIU)s upgraded anti-money laundering system in operation since December 17 of last year has shown significant improvements in terms of its suspicious transaction data processing, data screening and analysis and information security. The KoFIU began to operate an upgraded AML system from December 17, 2020to improve efficiency in data processing in response to the increasing volume of reports the system handles. In this regard, the past two months of operation has shown that significant improvements were made as intended. First, the suspicious transaction report filing system has become more efficient. The number of financial institutions filing STRs to KoFIU through an exclusive security network has been expanded to 3,664 from 611 previously. As such, the STR filing rate via exclusive security network has almost tripled from thirty percent to eighty-eight percent, with the processing time per STR reduced by more than ten seconds. Second, the screening and analysis process has been made more efficient with the increased use of digitalization and automation in the work process. The volume of preemptive screening and analysis of suspicious transactions has increased thirty-five percent on average compared to 2019. Third, the system hardware which is located at the National Information Resources Service guarantees much stronger levels of security and stability in management. The application of the standard framework on e-government has ensured an efficient integration of electronic resources and has improved the systems daily processing performance by more than nine times compared to the previous system. In order to more effectively respond to the increasingly diverse and complex types of money laundering schemes, the authorities will continue to work on improvements to the AML system. * Please refer to the attached PDF for details.
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Mar 03, 2021
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Mar 02, 2021
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Mar 02, 2021
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Feb 26, 2021
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Feb 22, 2021
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Feb 22, 2021
- FSC Introduces Guidelines on MyData Services and Establishes MyData Support Center
- The FSC introduced guidelines on MyData services on February 22, which contain details about the consumers data privacy rights, scope of data transfers, operational procedures, obligations for service providers and so on, as MyData businesses will begin to offer their services using standardized API beginning on August 4, 2021. In addition, MyData support center has been set up at the Korea Credit Information Services to facilitate a seamless operation for both service providers and consumers. The center will provide support for quick resolution of conflicts and consumer complaints through MyData web portal. Guideline Details I. Scope of Data Provision The guidelines specify the types of consumer credit and financial data that can be provided through MyData services from a range of financial sectors, such as credit finance and financial investment businesses, insurance businesses, credit card companies, electronic financial services, etc. A further expansion on the types of consumer data available for MyData will be reviewed and decided in the future. II. Protection of Consumer Rights The guidelines contain measures to ensure that consumers are giving consent to data transfer with sufficient awareness of their data privacy rights through the use of easy-to-understand language and visual contents while allowing freedom of consent, denial, withdrawal, etc. To strengthen data protection, MyData businesses will be required to make their service cancellation process easy and completely remove consumer credit data from their platform when cancellation occurs. MyData firms will be prohibited from offering excessive rewards as sales pitch to prevent excessive competition in the industry. For the purpose of data security management, MyData firms will be subject a set of specific data security standards and the suitability and vulnerability tests. III. Data Transfer Process First, data subject files a data transfer request at a financial institution after choosing specific ty
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Feb 22, 2021
- FSC to Strengthen Liquidity Management of Specialized Credit Finance Companies
- The FSC announced a set of measures aimed at strengthening the liquidity management of specialized credit finance companies on February 22. The measures include (a) establishing best practice guidelines, (b) strengthening disclosure requirements and (c) gradually reducing the maximum leverage on credit finance (non-credit card) businesses. Background Specialized credit finance businesses are lenders without deposit-taking functions.They usually finance their business through borrowings or the issuance of corporate bonds and asset-backed securities (ABS). In particular, their heavy reliance on debt finance, about 73.9 percent of their financing,creates a problem of risk transfer to financial institutions holding their corporate bonds, especially if credit finance companies face solvency problems. In this regard, there have been concerns about credit finance companies turning into a conduit of systemic risk in times of an unexpected economic shock such as COVID-19. Therefore, liquidity problems of credit finance businesses can pose a risk not only to the borrowers with mid-to-low credit backgrounds but also to the real economy as they may cause a drop in consumption and corporate facility investment. Key Measures I. Best Practice Guidelines on Liquidity Management The best practice guidelines on specialized credit finance companies liquidity management will be introduced for implementation beginning in April this year. - (Target) Bond issuing credit finance companies and those with more than KRW100 billion in total assets will be subject to the new guidelines. - (Role of Board and Management) Board of directors should oversee the establishment and operation of liquidity management strategies and the company management should prepare specific management process and criteria and regularly report to its board members. - (Liquidity Risk Indicators) Major liquidity risk indicators include corporate bond maturity distribution, liquid asset ratio, short-term debt ratio, etc.
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Feb 19, 2021
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Feb 18, 2021
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Feb 18, 2021
- FSC Announces Rules Change to Improve the Recovery and Resolution Regimes of SIFIs
- The FSC announced a revision proposal for the Enforcement Decree of the Act on the Structural Improvement of the Financial Industry on February 18, which will be put up for public notice from February 19 to April 1, 2021. The revision proposal to the Enforcement Decree is a follow-up to the revised Act passed at the National Assembly in December last year which is aimed at strengthening the recovery and resolution regimes of the systemically important financial institutions (SIFIs) as recommended by the Financial Stability Board. The revisions are expected to help improve the preparedness and responsiveness of SIFIs in their crisis management. Key Revisions (Selection of SIFIs) The FSC should select SIFIs every year after considering their function, scale, ties to other financial institutions and influence on the domestic financial markets. In this regard, the selection of SIFIs will be confined to banks and bank holding companies. (Recovery and Resolution Plans) SIFIs will be required to prepare and submit their own recovery plans to the Financial Supervisory Service within three months from the day of being designated as a SIFI. The FSS will then immediately pass on their recovery plans to the Korea Deposit Insurance Corporation (KDIC) and be required to evaluate the recovery plans and file evaluation reports to the FSC within three months. At the same time, the KDIC will be required to draw up resolution plans and submit them to the FSC within six months. A deliberative body within the FSC will then decide on the final approval of both recovery and resolution plans within two months. In this regard, recovery plans should have been approved at a board meeting prior to being submitted and contain specific details about the role and responsibilities of board members and executives, major business areas, standards of determining crisis situations, specific crisis management measures, etc. The deliberative body within the FSC will be made up of an FSC commissioner (FS
