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Jan 03, 2024
- FSC Plans to Work on Measures to Improve the Competitiveness of Publicly Offered Funds
- Vice Chairman Kim Soyoung of the Financial Services Commission presided over a meeting with officials from related authorities and an industry groupto discuss plans to improve the competitiveness of the publicly offered funds market on January 3. In his opening remarks, Vice Chairman Kim said that the government has never been more serious about making fundamental changes to our capital markets, and that this plan is also a part of the policy drive intended to resolve the issue of Korea discount, the persistent undervaluation of Korean companies in stock markets. In this regard, the proposed plan will focus on nine specific ways to bring about improvements regarding institutions, products and infrastructure, with aims to cut transaction costs, strengthen product marketability and boost transaction convenience. First, the proposed plan intends to bring about improvements from institutions by strengthening the credibility and accountability of fund managers, sellers and related businesses including the fund accounting and administration companies and various ratings companies. Currently, the sales remuneration structure for fund sellers is designed in a way that all fund sellers are paid with fund assets in a uniform way. To boost accountability and competition between fund sellers, the authorities will introduce a more reasonable seller remuneration system (fund class) under which fund sellers will be paid directly from investors with the possibility of having different fee rates for different sellers within the statutory limit of one percent. For these types (or classes) of funds, the seller fee remuneration system can be linked to the performance of funds to boost responsibility of fund sellers. Along this line, the proposed plan will bolster asset managers accountability by requiring them to more regularly conduct evaluations on alternative investment assets and to more accurately advertise fees for exchange-traded funds (ETFs). With increases in demand for more f
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Dec 27, 2023
- Stressed Debt Service Ratio Rules to Take Effect in 2024
- The Financial Services Commission announced that the stressed debt service ratio (DSR) rules will take effect in 2024 on all types of loans that have variable, mixed or periodically changing interest rate structures. The stressed DSR system imposes a certain level of additional stress rate when calculating the borrowers DSR as it takes into account the possibility of the borrower facing heavier repayment burdens in the future with increases in interest rates. The additional stress rate will be determined based on the comparison of interest rates between the five-year peak level and the present level (as of May and November of every year). However, to buffer against the possibility of overestimating or underestimating the risk associated with interest rate changes in times or both high and low interest rates, the additional stress rate will be decided between a minimum of 1.5 percent and a maximum of 3.0 percent. For loans with variable interest rates, an additional stress rate of the five-year peak rate minus the present rate will be applied. For loans with mixed interest rate structuresthose with a fixed interest rate for a certain period of time first and changed into a variable interest rate structure thereafterthe longer the period of fixed interest rate structure, the lower the level of additional stress rates. For instance, for 30-year loans, if the period of fixed interest rate is set between five to nine years, the additional stress rate will be applied at a 60 percent level. For the fixed rate terms of nine to fifteen years and fifteen to twenty-one years, the additional stress rate will be applied at a 40 percent level and a 20 percent level, respectively. For loans with periodically changing interest rate structures, additional stress rates will be applied at eased levels. For 30-year loans, if the period of interest rate change is five to nine years, the additional stress rate will be applied at a 30 percent level. For those with nine-to-fifteen-years an
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Dec 26, 2023
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Nov 23, 2023
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Nov 20, 2023
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Nov 16, 2023
- Authorities Discuss Stock Short Sale Reform Measures
- Vice Chairman Kim So-young of the Financial Services Commission attended a meeting on short selling reform measures which brought together authorities from the private sector, the ruling party of the National Assembly and the government on November 16. At the meeting, the authorities discussed a direction for making improvements to the short selling system. The reform measures discussed at todays meeting are not finalized measures for implementation but a set of proposals laying out a direction for further discussions and refinement at the National Assembly and with the public. Overall, the proposed measures are aimed at (a) leveling the playing field between institutional and retail investors, (b) preventing naked short sales in advance, (c) strengthening the detection and punishment of illegal short selling activities, and (d) expanding short sale disclosure. Stock Short Sale Reform Proposal I. Leveling the playing field Currently, the stock borrowing conditions for short selling remain unequal between institutional investors and retail investors, although the gap has been narrowed considerably through past reform measures for retail investors, extending the stock repayment period from 60 days previously to 90 days and lowering the margin requirement from 140 percent previously to 120 percent. However, the discrepancies in stock lending still exist and this has been raised as a problem of unleveled playing field for retail investors vis--vis institutional investors. As a way to resolve this problem, the authorities propose making the stock repayment period and margin requirement same for both institutional investors and retail investors. More specifically, first, the stock repayment period for institutional investorscurrently unrestricted and determined on a contract-by-contract basiswill be set as 90 days, same as that for retail investors. The Korea Securities Depository, which handles stock lending to institutional investors, should check the repayment period o
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Nov 08, 2023
- Government and Related Authorities Hold Meeting on Household Debt Situation
- The Financial Services Commission held a meeting with officials from the relevant government ministries and organizations on November 8 and discussed the current household debt situation and various measures to ensure effective management. Regarding the October household loans data announced earlier today, the participants had a positive assessment about the slowing trend of mortgage loans, despite an overall increase in the size of household loans from the previous month. To continue to ensure a stable management of household loans, the authorities agreed on the need to strengthen relevant measures as follows. First, the authorities will bolster rules on debt service ratio (DSR) by closely reviewing the areas that are currently being exempted from DSR regulation and look into ways to gradually expand the application of DSR rule. The stressed DSR limit that is currently being reviewed for application on variable interest rate loans is expected to be announced in December this year with specific details. Second, the authorities will come up with stronger incentive structures that can reward banks to more actively and voluntarily introduce long-term, fixed interest rate mortgage loans by overhauling a relevant administrative guidance. The authorities will also seek to provide more incentives for covered bonds, which serve as a mechanism for banks to fund long-term, fixed rate loans. Third, the authorities will continue to keep close tabs on the trends of household loan growth across all financial sectors. Fourth, the authorities will work with financial sectors to come up with various ways to help reduce the burden of repayment and high interest rate for borrowers, for instance, by offering a temporary exemption from early repayment charges. At the meeting, FSC Secretary General Lee Se-hoon said that as it is difficult to achieve short-term results when it comes to containing household debt, the government will make efforts with a long-term perspective to build an inc
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Nov 05, 2023
- FSC Decides to Ban Stock Short Selling Until June 2024 and Seek Measures to Improve the System
- The Financial Services Commission held a meeting on November 5 where the authorities decided to ban all stock short selling in domestic markets (all KOSPI, KOSDAQ and KONEX listed items) effective from Monday, November 6, 2023 until the end of June 2024. With the continuation of high interest rate environment and stagnant growth in the global economy, coupled with geopolitical risks such as the armed conflict between Israel and Hamas, there are growing uncertainties for the Korean economy. In particular, during the second half of this year, stock market volatility in domestic stock markets has risen to much higher levels compared to other major markets overseas,which caused anxiety in the market. Despite a series of measures introduced in the past,recently, the authorities have discovered a number of illegal naked short selling practices conducted by foreign and institutional investors, raising concerns about the fair pricing function of domestic stock markets. Recently, a large-scale naked short selling case involving global investment banks was detected, and an investigation is currently taking place with discovery of additional unlawful activities. As such, the FSC finds that the situation with illegal short selling is very dire as it can erode the fair pricing function of the market and degrade confidence in the market. Therefore, considering the need to preemptively respond to the rising market uncertainties and address concerns about the potential weakening of the markets fair pricing function, and with the practice of illegal naked short selling taking place in a more routine way, the FSC decided to ban short selling on all domestic stock items until the end of June next year. Meanwhile, during the period of banning short selling, the government will work on proactive measures to improve the system in a way that will help to root out illegal short selling activities when short selling resumes thereafter. In this regard, first, the authorities will work on mea
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Sep 25, 2023
- Policy Funds to Supply Venture Capital in Strategic Areas
- The Financial Services Commission held the 4th consultative body meeting on policy finance support with the related government ministries, policy financial institutions and a young entrepreneurs foundation on September 25. The consultative body on policy finance support was created last year to ensure more close alignment between the governments industrial strategies and supply of policy funds. In the five key strategic areas, the authorities last year pledged to supply a total of KRW91 trillion in policy funds support for 2023. As of August 2023, policy financial institutions have supplied a total of KRW73.8 trillion of policy funds support in the five key strategic sectors, achieving 80.4 percent of the annual supply target and surpassing the initial supply plan of 66.7 percent by the month of August. Along with concerns about an economic slowdown emanating from China, FSC Vice Chairman Kim So-young said that it is possible that interest rates and oil prices may continue to stay high for a while. Thus, in close coordination with relevant ministries, Vice Chairman Kim said that the authorities will work to ensure effective supply of policy funds to businesses to prevent funding shortages. To help ensure a continuous supply of policy finance support in each industry, the authorities discussed ways to more closely implement various industrial policy programs overseen by relevant government ministries with appropriate budget planning. In this regard, Vice Chairman Kim said that in order to provide policy finance support to various industrial sectors on a continuing basis, it is crucial to have a closer linkage between the supply of policy finance and fiscal planning. The authorities also discussed ways to overhaul the operation of Growth Ladder Fund, a fund dedicated for SMEs and venture businesses whose 10-year investment period has ended in August. The new Growth Ladder Fund will focus on investing in underfunded areas such as deep tech and climate sectors where the
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Sep 05, 2023
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Aug 17, 2023
- FSC Vice Chairman Holds Media Briefing on the Progress and Achievements of Capital Market Reform Agendas
- Vice Chairman Kim So-young of the Financial Services Commission held a media briefing on the progress and achievements of the governments capital market reform agendas on August 17. The following is a summary of Vice Chairman Kims remarks. I. Key Achievements This administration has been actively pursuing capital market reforms as a key part of the governments policy priority. In particular, the government has taken bold steps to resolve the problem of the so-called Korea discount by enhancing investor protections, removing outdated regulations and overhauling rules to foster innovation in the market. Despite the presence of difficult economic and financial conditions, there have been some favorable outcomes achieved thank to active cooperation between relevant institutions and industries. Restoring Investor Trust First, the government has prioritized in implementing a set of measures aimed at restoring investors trust in the capital market. In this regard, the governments policy focused on (a) strengthening the rights and interests of general shareholders, (b) bolstering response against fraudulent and unfair trading activities, and (c) ensuring order and fairness in the market. With regard to strengthening protections for general shareholders, we have put in place three layers of protection mechanisms at the end of last year to ensure that the rights and interests of general shareholders are thoroughly guaranteed in an IPO of a split-off subsidiary. Since the introduction of the measures, we have seen changes in corporate practices as more companies are drawing up shareholder protection plans on their own and communicating with shareholders to seek their consent. To protect general shareholders from unforeseen damages caused by insider transactions involving large shareholders or executive officers, we introduced a rule requiring corporate insiders to disclose their share trading plans before the expected trading date. To ensure that general shareholders can also
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Jul 27, 2023
- Authorities Propose Measures to Improve Special Listing Procedures for High-tech Companies
- The Financial Services Commission held a meeting with the relevant government ministries and private sector entities on July 27 and unveiled a plan to improve the special listing procedures for technology companies. The plan includes 14 specific reform items from the stage of listing application to listing review to post-listing management. First, in the listing application stage, a new super gap tech listing track will be created for high-tech and strategically critical technology companies, for instance in deep tech or deep science sectors. Among them, businesses that are market-tested for their growth potential will be allowed to have a tech assessment conducted only by a single entity. They need to be designated as national strategic technology companies or national advanced strategic technology companies as prescribed by the relevant laws, have market capitalization of KRW100 billion or more and have received investment of KRW10 billion or more in the past five years. In addition, a business eligible to apply for the super gap tech listing track will be allowed to seek a special tech listing track even when its largest investor is a middle market enterprise, considering wide adoption of open innovation business models based on collaboration between an SME and a middle market enterprise. However, the size of investment by a middle market enterprise will be limited to less than fifty percent to prevent potential problems regarding the ownership of the company. Also, the complex structure of the current special tech listing track will be made simpler and more reasonable. For instance, businesses with technological prowess will be able to apply through innovative technology track, while those with distinctive business models can apply through business model track. Second, in the listing review stage, a fast-track review process will be granted to those that have been turned down previously for reasons other than their technology or business viability. In this case,
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Jul 20, 2023
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Jun 27, 2023
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Jun 19, 2023
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Jun 08, 2023
- Authorities Hold 1st Meeting on Benchmark Rate and Short-term Money Market
- The Financial Services Commission held a meeting with the Bank of Korea, the Financial Supervisory Service and relevant industry groups and institutions to monitor how domestic financial institutions are preparing for a transition away from LIBOR (London interbank offered rate) and discuss issues surrounding the operation of domestic financial benchmark rates. In coordination with relevant institutions and financial companies, the government has been working to make a transition away from LIBOR, responding to the European Unions Benchmark Regulation (BMR) compliance and participating in the global benchmark rate reform efforts. The following is an overview of these efforts so far. First, all financial contracts based on non-USD LIBOR, which ceased to be published in 2022, were successfully converted, and financial contracts based on LIBOR, which will be discontinued from July 2023, are being converted to an alternative rate such as secured overnight financing rate (SOFR). As of the end of May 2023, about 95.3 percent of domestic financial institutions contracts have made this transition. Second, the government enacted the Act on the Management of Financial Benchmarks, which became effective in November 2020 and reflects international standards on benchmark rate reform, to strengthen credibility of domestic benchmark rates. In order to ensure a seamless utilization of domestic benchmark rates (Korea overnight financing repo rate and certificate of deposit rate) in the European Union, authorities have been working with EU counterparts to get an approval for congruity. Third, in February 2021, authorities selected the Korea Overnight Financing Repo Rate (KOFR) as Koreas new risk-free reference rate (RFR) and designated it as a critical benchmark rate under the Act on the Management of Financial Benchmarks. The KOFR is being published by the Korea Securities Depository (KSD) since November 2021. Currently, three-month KOFR futures and exchange traded funds (ETFs) have b
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Jun 01, 2023
- FSC Holds Meeting to Monitor Progress of Real Estate PF Market Normalization
- The Financial Services Commission held a meeting on June 1 to monitor progress in the normalization of the real estate project finance (PF) market along with officials from the Financial Supervisory Service, Creditors Coordination Committee, major financial holding groups and relevant policy financial institutions. As of the end of May 2023, a total of 30 real estate development projects have become subject to the assistance of the real estate PF lending institutions consortium agreement. Among them, business normalization is under way for 19 projects through provision of rollback on acceleration clause, new funds, deferment of interest payments and maturity extension. At the meeting, officials also went over the status of the support programs already announced and being provided by policy financial institutions such as business guarantees and policy finance support being offered by the Korea Housing Urban Guarantee Corporation (HUG) and Korea Housing Finance Corporation (HF), as well as KRW1 trillion worth of funds managed by Korea Asset Management Corporation (KAMCO). To support a seamless transition from short-term bridge loans to PF loans, the government already announced its plan to provide business guarantees worth KRW15 trillion through HUG and HF until the end of this year. As of May 30, the policy financial institutions provided a total of KRW6.01 trillion (KRW3.34 trillion by HF and KRW2.67 trillion by HUG) in support of the normalization of real estate projects. In addition, the special guarantee program set up to help alleviate anxieties in refinancing PF-ABCPs (asset backed commercial papers) provided a total of about KRW1.211 trillion (KRW0.12 trillion by HF and KRW1.914 trillion by HUG). To help ease the liquidity burden of regional real estate PF sites outside the Seoul metropolitan area and small- and medium-sized construction firms, the Korea Development Bank (KDB), Industrial Bank of Korea (IBK) and Korea Credit Guarantee Fund (KODIT) plan to prov
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May 30, 2023
- Online One-stop Loan Transfer System Available
- The FSC announced that financial consumers will be able to make a switch from their existing credit loans to loans offering more favorable borrowing conditions using their smartphones without having to visit a branch office of financial institutions beginning on May 31. Establishing an online one-stop loan transfer system has been a key policy agenda of this administration to help alleviate peoples interest payment burdens and promote digital transformation in the financial sector and competition between banks. In this regard, the FSC has been closely working with the Financial Supervisory Service, the Korea Financial Telecommunications Clearings Institute, major financial companies and fintech businesses to launch an online one-stop loan transfer system. In particular, prior to its launch on May 31, authorities have closely looked into ways to improve user convenience and guarantee stability and security of the system. Beginning on May 31, consumers will be able to use their smartphone apps (MyData-enabled loan comparison platform app or major financial company apps) to search for loans offering better borrowing terms and make a switch from their existing credit loans issued by 53 financial institutions (19 banks, 18 savings banks, 7 credit card companies and 9 specialized credit finance businesses). The online one-stop loan transfer app service will be available during the banks operating hours from 9:00 am to 16:00 pm on business days. Consumers can use the loan transfer service for their existing credit loans of up to KRW1 billion issued by 53 financial companies. From the time of downloading a mobile app until completing the verification of result, the service usage time is estimated to be around fifteen minutes, which is significantly shorter than at least two business days it took for consumers to visit the branch office of two financial institutions previously. The loan conditions calculated for consumers will be based on the same lending standards (maximum
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May 30, 2023
- Authorities Plan to Overhaul Rules on CFD Trades while Restricting New Transactions for Three Months
- The Financial Services Commission held a meeting with the Financial Supervisory Service, the Korea Exchange and the Korea Financial Investment Association on May 26 and held discussions to finalize a set of measures intended to strengthen regulations on trading of contracts for difference (CFDs). The measures include (a) enhancing transparency in the provision of information on the actual type of CFD investors and investment balances by item, (b) closing loopholes to prevent regulatory arbitrage by including the amount of CFDs provided in the securities firms maximum credit extension limit, (c) requiring individual investors applying for the qualified professional investor status to go through an in-person (including video call) verification process, and (d) establishing a new investment requirement for over-the-counter (OTC) derivatives transactions such as trading of CFDs. Enhancing transparency in provision of relevant investment information To help investors make more rational decisions about their CFD investments, authorities will improve the system to ensure the provision of more appropriate investment information. Even though those making investments in CFDs are mostly individual retail investors (making up about 96.5 percent), currently, when securities firms submit stock transaction orders following retail investors CFD trading, the investor type is currently marked as institutional investor when orders are submitted by a domestic securities firm or as foreign investor when orders are submitted by a foreign securities firm. This has created the problem of misrepresenting the flow of investment funds into particular investment items by institutional and foreign investors. In order to prevent this sort of misunderstanding by market participants, for stock transactions resulting from CFD trading, actual investor type (e.g., individual investor) will be recorded. In addition, as in the case of credit loans, the total and item-by-item CFD balances will be disclo
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May 25, 2023
