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Oct 28, 2020
- Government to Closely Monitor Market Risks
- The FSC held the 27th financial risk assessment meeting via teleconference on October 28, chaired by Secretary General Kim Tae-hyun. During the meeting, officials discussed issues surrounding the US presidential election, recent trends in the corporate bond and CP markets, anticipated discontinuation of LIBOR and other market conditions.(RISK MONITORING) Market experts noted that the US presidential election, soaring global asset prices and the possibility of an interest rate hike and currency appreciation as potential external risks to the Korean economy. First, uncertainties surrounding the outcome of the US presidential election and the ensuing policy disparities on COVID-19 stimulus, tax policy and the recovery pace pose risks to the economy. Second, as asset prices have seen a steep rise, price volatility may pose another risk. Third, due to expectations of stimulus measures, interest rates have gone up in advanced economies, and depending on the movement of the dollar and yuan, there exist downside currency risks in the Korean economy.(CORPORATE BOND CP MARKETS) Despite the general recovery trend in corporate bond and CP markets due to the government’s market stabilization efforts, there still exist disparities between low-rated and blue chip companies as well as between the corporate bond market and short-term money markets. The continuous decline of the spread of low-rated corporate bonds since June is a positive sign. However, the pace of the decline has been slow compared to high-rated bonds with the volume of total issuance yet to reach the level seen in the previous year. On the other hand, the low-rated CP and short-term debt issuance amount has recovered to a comparable level from the previous year. The FSC will continue to closely monitor corporate bond and CP markets and take stabilization measures using an SPV when deemed necessary.(DISCONTINUATION OF LIBOR) With regard to the anticipated discontinuation of LIBOR from 2022, financial institutions
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Oct 27, 2020
- FSC Introduces New Rules on Financial Consumer Protection
- The FSC introduced a proposal of an enforcement decree to provide details of the newly enacted legislation on financial consumer protection (“the Act” hereinafter), which is scheduled to go into effect on March 25, 2021.1 The proposal will be available for public notice and comment for forty days from October 28 until December 6.KEY MEASURES(SCOPE OF APPLICATION) The Act stipulates that financial products offered by banks, insurance companies, financial investment firms, specialized credit finance companies and savings banks will become subject to the new law. The proposal includes financial products offered by the Credit Union, P2P lending firms and registered private lenders.(ENTRY REQUIREMENT) The proposal establishes business registration requirements for both loan sales agents and independent advisory service providers. For both categories, online service providers are required to install an algorithmic program designed to prevent conflicts of interest for consumers.(INTERNAL CONTROL REQUIREMENT) In principle, all financial service providers are required to have internal control standards on financial consumer protection with the exception of small firms with less than five regular employees. Financial service providers should regularly improve their internal control standards if and when indicated by the regulators. The internal control standards should include the current best practice guidelines on financial consumer protection.2(SALES REGULATIONS) This proposal specifies rules improvements and introduces additional regulations that are necessary for the implementation of the six major sales regulatory principles under the Act.(CONSUMER RIGHTS) The Act introduces new safeguards by guaranteeing consumers the right to withdraw subscription and terminate unfair agreements, while delegating the scope of application through an enforcement decree. In this regard, the right to withdraw subscription applies to all loan and guarantee products in principle and the
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Oct 21, 2020
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Oct 21, 2020
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Oct 20, 2020
- Vice Chairman Stresses Importance of Steady Financial Support for Small Businesses
- Vice Chairman Sohn Byungdoo held the 26th financial risk assessment meeting via teleconference on October 20 to discuss the implementation status of the COVID-19 emergency financial support programs.The following is a summary of Vice Chairman Sohn’s remarks.(CURRENT ECONOMIC CONDITIONS) As some of the key economic indicators have shown signs of an improvement recently, the IMF revised up its global growth forecast from a 5.2 percent drop to 4.4 percent decline. The Korean economy also has been on a recovery path, as exports rebounded in September for the first time since the outbreak of the COVID-19. The recently adjusted social distancing rules and the government’s fiscal efforts are expected to help boost domestic demand. With a resurgence of COVID-19 being the biggest threat to economic recovery, financial institutions should closely adhere to the safety and preventive measures.(STEADY SUPPORT FOR SMALL MERCHANTS) The structural changes caused by the COVID-19 pandemic present both challenges and opportunities. Although there are positive effects, such as a transition toward a digital and green economy, heavier burdens may be placed on the vulnerable groups including small merchants as some expect to see a K-shaped recovery. Since the improvements to the second round of financial support program for small merchants became available on September 23, the provision of lending support to small merchants has continued to increase. As this program is backed by guarantees from the Korea Credit Guarantee Fund, it is essential that lending support is made available to small merchants with different credit backgrounds, including those with unfavorable credit history.With growing numbers of small merchants experiencing business closures, it is necessary to keep in place a policy that supports their comeback. Since last November, the FSC has made available a one-stop consulting program for self-employed small business owners who have experienced business closures due to t
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Oct 19, 2020
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Oct 19, 2020
- FSC Holds Kick-off Meeting to Root Out Unlawful Trading Activities in Stock Markets
- Vice Chairman Sohn Byungdoo held a kick-off meeting of the task force on the prevention of unlawful and unfair trading activities in stock markets on October 19. The task force will operate until the end of March 2021 and regularly report its implementation status on a monthly basis.The following is a summary of Vice Chairman Sohn’s remarks.BACKGROUNDDue to the rapid spread of COVID-19 around the world, domestic stock markets plunged at the beginning of the year. However, stock prices quickly recovered to the pre-pandemic level backed by the strong fundamentals of the Korean economy, prompt implementation of the emergency financial support programs and the effective K-quarantine measures. Moreover, an upsurge in the trading volume by retail investors also contributed to the quick market recovery. The retail investors’ growing interest in stock investment is a positive sign. However, without a fair market order, investors’ trust in the market may crumble and the recent investment boom may end up as a short-lived one, preventing a further advancement of stock markets.With abundant market liquidities flowing into stock markets, it has become all the more necessary to pay attention to the growing concerns about illegal and/or unfair trading activities in the stock markets.POTENTIAL ISSUESThe recent trends in stock market activities reveal the following three potential problems. First, due to the rising market volatility, there are growing risks of unfair trading activities surrounding particular groups of stock items, such as COVID-19 and “untact” sectors. In addition, as the period of short-selling ban was extended until March 15, 2021, it has become necessary to closely monitor illegal short sale activities during this period, including naked short-selling. Second, unfair trading activities including price manipulation are being carried out in a more organized and complex manner. However, the current system from the detection to punishment stage takes a long
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Oct 15, 2020
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Oct 14, 2020
- Government Reviews Financial Policy Agenda for Post-pandemic Era
- Vice Chairman Sohn Byungdoo held the 25th financial risk assessment meeting via teleconference on October 14 and reviewed financial policy tasks for the post-pandemic era. The policy agenda focuses on four key areas—(a) supporting innovation-driven growth, (b) promoting digital finance, (c) expanding support for inclusive finance and (d) ensuring stability in the financial system.The following is a summary of Vice Chairman Sohn’s remarks.(NEED TO PREPARE FOR POST-PANDEMIC ERA) In response to the pandemic-induced economic shocks, the government has provided emergency financial support for small merchants and businesses. However, the disruption caused by COVID-19 may be just beginning. With global supply chains being reshuffled, contactless, medical, bio and green industries are becoming more prominent. This type of restructuring is also inevitable in the financial industry. There are also growing concerns about a deepening wealth gap between the haves and the have-nots. Potential risks in financial sectors, such as growing appetite for riskier and higher yield products as well as rising debt, have been accumulating. These are all the reasons that financial policies should account for the preparation of the post-COVID-19 era.(FINANCIAL POLICY AGENDA FOR POST-PANDEMIC ERA) The policy agenda announced on July 24 includes (a) supporting innovation-driven growth, (b) promoting digital finance, (c) expanding support for inclusive finance and (d) ensuring stability in the financial system. First, with regard to the first policy agenda, the government has been providing targeted financial support to innovative and promising businesses. Under the government-wide initiative to develop a thousand innovative firms, a total of thirty-two businesses have been selected with KRW211.1 billion in lending support being provided to sixteen of them. In November, more than 168 additional firms in the future car, biochemical and high-tech medical device industries are expected to be se
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Oct 14, 2020
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Oct 13, 2020
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Oct 07, 2020
- Vice Chairman Discusses Importance of Steady Financial Support for SMEs and Small Merchants
- Vice Chairman Sohn Byungdoo held the 24th financial risk assessment meeting via teleconference on October 7 and discussed the implementation status of COVID-19 financial support programs and other market conditions.The following is a summary of Vice Chairman Sohn’s remarks.(COVID-19 FINANCIAL SUPPORT) The latest COVID-19 emergency support programs announced in September have been operating smoothly. The second round of emergency loan program for small merchants began to provide support on September 23, with its recently increased lending cap and broadened recipient base. Since the improvements became effective, some KRW350 billion worth of loans were issued within a week with interest rates also falling compared to earlier periods. More numbers of small merchants chose to apply via contactless channels, which helped avoid long lines at lending institutions and prevent the spread of the virus.The hardship experienced by SMEs amid a persistent pandemic underscores the importance of having a strong and tightly-woven financial support system to help address their liquidity shortages. In this regard, the government has improved existing programs according the needs of the SMEs and middle market enterprises, thus responding to changing market conditions in a more flexible way. In terms of the COVID-19 P-CBO support, the government has decided to increase lending caps for companies and lower underwriting ratios for subordinated debt. These changes will begin to be applied with P-CBO issuances in October. In addition, the government has significantly improved the lending support program specifically targeted at the pandemic-hit SMEs and middle market enterprises on September 24, doubling lending caps, offering better interest rates and extending the support period.(HOUSEHOLD LOANS) In September, the growth of household loans from five major banks declined compared to the previous month. In particular, credit loans fell by about a half due to effective management by banks.
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Oct 06, 2020
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Oct 05, 2020
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Oct 05, 2020
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Sep 24, 2020
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Sep 24, 2020
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Sep 24, 2020
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Sep 23, 2020
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Sep 23, 2020
- Vice Chairman Pledges to Stay Alert for Potential Risks in Financial Markets
- Vice Chairman Sohn Byungdoo held the 22nd financial risk assessment meeting via teleconference on September 23 and discussed market conditions and issues concerning household loans, soundness of financial institutions and corporate credit situation with relevant authorities.The following is a summary of Vice Chairman Sohn’s remarks.(FINANCIAL MARKET CONDITIONS) The corporate bond and short-term money markets showing signs of liquidity crunch at the end of March have largely improved due to prompt market stabilization measures taken by the government. Market experts forecast that the current stability will continue throughout the end of September given sufficient liquidity in the market. However, as there are potential risks related to COVID-19, relevant authorities should continue to closely monitor markets. The financial authorities will work to prevent an end-of-quarter credit crunch through various market stabilization measures already put in place.With regard to stock market conditions, there are possibilities of rising volatility given uncertainties surrounding the US presidential election, US-China relations, etc. There are also concerns about a growing number of retail investors taking out loans to invest in stocks including in overseas stock markets where there may not be adequate information available to them. As such, retail investors should be well aware of the risks involved in overseas stock investment, and financial institutions should make sure that investor protection measures are closely being observed in this regard.(HOUSEHOLD LOANS) The recent spike in household loans was caused in part by rising demand for loans by those undergoing difficult situations. However, a recent trend reveals that high income earners with high credit scores are increasingly turning to credit-based loans. As such, lending institutions should closely review borrowers’ debt service capabilities and monitor concentration of excessive liquidity in property markets, etc.(S
