Press Releases - Financial Services Commission

Press Releases

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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
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Feb 17, 2021

FSC Proposes Additional Rules Change on Virtual Asset Service Providers

The FSC announced a revision proposal for the supervisory regulation on virtual assets on February 17 as the revised Act on Reporting and Using Specified Financial Transaction Information is scheduled to go into effect on March 25, 2021.The revision proposal will be put up for public notice from February 18 until March 2 and will take effect from March 25. Key Revisions (On Virtual Assets) The revised supervisory regulation contains the following details on pricing, exemption for real-name accounts, requirements for virtual asset service providers (VASPs), etc. - Pricing of virtual assets in fiat money for the purpose of sales, exchange or transfer will be determined by the price displayed by VASPs at the time of sales, exchange or transfer. - VASPs whose service activities entail no exchange of virtual assets with fiat money will be exempted from the real-name account rule that requires them to maintain real-name accounts with financial institutions. - New business registration, change and renewal forms have been established for VASPs. - A VASP will be allowed to serve as a broker between its own customer and another VASPs client only if the other party is a qualified AML compliant VASP and that verifying information on the other partys client is possible. - An adjustment has been made to the suspicious transaction reporting form to include virtual assets. (On STR Requirement) The revised supervisory regulation stipulates that financial institutions should file suspicious transaction reports to the KoFIU within three business days from the time of detecting suspicious financial transactions for money laundering by their AML officers. * Please refer to the attached PDF for details.
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Feb 16, 2021

FSC Chairman Discusses Extending Loan Payment Deferment with Heads of Financial Holding Groups

FSC Chairman Eun Sung-soo held talks with the heads of the five financial holding groups on February 16 and discussed an extension of the availability of loan deferment of principal and interest payments currently set to expire at the end of March this year. In this regard, the participants agreed on the need to extend the availability of payment deferment for small merchants and SMEs for six more months considering the current COVID-19 situation, etc. Chairman Eun emphasized the importance of maintaining steady support for the real economy and stated that the financial authorities will work on an orderly rollback of the temporary support and deregulatory measures when conditions are permissible. During the meeting, Chairman Eun also talked about the leading role of finance in a post-pandemic era and shared key financial policy agendas for this year. *Please refer to the attached PDF for details.
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Feb 15, 2021

3rd Korea Fintech Week to be Held in May

The FSC announced its plans to hold the 2021 Korea Fintech Week from May 26 to 28 under the theme of fintech and sustainable financial innovation. The third annual global fintech expo will kick off its first day at Conrad Seoul with live streaming of onsite activities available online and then move on to exclusively virtual events for the second and third days. The offline to online (O2O) availability of diverse promotional, vocational, educational and networking programs and opportunities will help boost awareness on fintechs and accelerate financial innovation. Key Features (User Experience) More dynamic and engaging programs will be prepared for online visitors with real-time QAs and communication made possible. (Job Fair) Fintech job talks will be held to offer real-time QA opportunities to fintech job seekers. (Investment) More fundraising opportunities will be available for fintechs through IR and venture capital consulting programs. (Education) Online educational programs will be offered with certificates Registration Schedule Preliminary application for participating firms will be open from the third week of March and pre-registration will be available from the first week of May from the Korea Fintech Week website (www.fintechweek.or.kr/2021). Viewing is free for students and the general public. In November this year, the FSC plans to hold an additional global fintech expo offline if the coronavirus conditions are permissible. For more information, please contact the Fintech Center Korea via email at fintechweek@fintech.or.kr or by phone at +82.2.6375.1541. * Please refer to the attached PDF for details.
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Feb 15, 2021

FSC to Strengthen Inclusive Finance Measures

The FSC announced its plans to strengthen inclusive finance measures for this year on February 15. Key Measures A. Reduce Interest Payment Burdens on Lower Income Households (1) Work to improve the microfinancing options and encourage the private sector lenders to make more microloan opportunities available to low credit borrowers - Consider a wider reduction in interest rates for sunshine loan products and work to diversify microfinancing channels through different financial sectors - Provide incentives to financial institutions that have outstanding records in the provision of microloan products (2) Strengthen measures to root out illegal predatory lending and work to support victims B. Strengthen Targeted Support for Vulnerable Groups (1) Introduce a government-backed ultra-long term (40-year) home mortgage product for young adults and expand support to lower their rent costs (2) Diversify options for receiving reverse home mortgage payments and promote other financial products for those in and/or preparing for retirement (3) Allow a payment deferral of up to two years for those hit by COVID-19 before their debt adjustment payment obligations take effect (4) Work for the enactment of the new consumer credit bill (to be submitted to the National Assembly in H1 2021) to establish a fair system of debt adjustment between creditors and individual debtors C. Ensure Effective Implementation of the Financial Consumer Protection Act (1) Operate a taskforce to ensure a smooth implementation of the new Financial Consumer Protection Act (2) Set up an online bulletin board to announce a schedule of public information sessions and work to strengthen public awareness about the expected changes in rules * Please refer to the attached PDF for details.
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Feb 10, 2021

Household Loans, January 2021

The outstanding balance of household loansin all financial sectors rose KRW10.1 trillion from the previous month at the end of January 2021 (up 8.5% y-o-y). The household loan balance increased KRW7.6 trillion in the banking sector and KRW2.5 trillion in the non-banking sector. By type, mortgage loans rose KRW5.8 trillion in January, declining KRW0.9 trillion from the previous month (up KRW6.7 trillion y-o-y). In the banking sector, mortgage loans grew KRW5.0 trillion while mortgage lending by non-banks increased KRW0.8 trillion from the previous month. Other types of loans rose KRW4.3 trillion as demand for credit loans remained high. The financial authorities will closely monitor trends in credit loans while ensuring a seamless provision of lending support to businesses hit by social distancing measures. In the first quarter, the authorities will come up with a more effective household debt management plan focusing on individual DSR. * Please refer to the attached PDF for details.
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Feb 09, 2021

Digital Finance Meeting Discusses Ways to Improve Rules for Fintechs and Big Techs

Vice Chairman Doh Kyu-sang held the 6th consultative body meeting on digital finance via teleconference on February 9 to discuss ways to improve rules for both fintechs and big techs and to examine areas for further improvements in the financial regulatory sandbox program. The following is a summary of Vice Chairman Dohs remarks. (Rules on Fintechs and Big Techs) Since October last year, the FSC has held talks with both fintechs and big techs on ten different occasions. Through these meetings, industry officials have suggested a total of seventy-four areas where regulatory reforms are needed. On fifty-two of them, the FSC will immediate take actions to improve the rules. On eleven others that are considered as mid- to long-term projects and require coordination with other ministries or further considerations for their impact on financial consumers, the FSC will continue to seek ways to make improvements. On the remaining eleven areas where it is deemed to be difficult to seek immediate change at the moment, the authorities will continue to closely monitor the trends to make improvements when conditions become permissible. On regulatory reforms to promote fintech innovation, the FSC will pursue the following policies. First, the FSC will work to create an environment where new digital businesses can be quickly launched and flourish. As many fintechs and platform service providers have requested, the authorities will work to provide strong support for launching new and innovative financial services through platforms. To this end, the FSC will ensure the launch of new innovative financial services through the regulatory sandbox program while working for a prompt enactment of the relevant amendments to the Electronic Financial Transactions Act. To build a strong foundation for the MyData industry, the FSC will promptly work to provide medium- and small-sized fintechs with support for their API data standardization and build a one-stop integrated MyData authentication sy
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Feb 08, 2021

FSC to Boost Support for Innovative Firms and Strengthen ESG Standards

The FSC held a financial development review committee meeting on February 4 and announced the direction of key policy areas and initiatives for this year including the government-wide support program to nurture more than one thousand innovative businesses and improving rules to strengthen ESG standards. Key Tasks A. Maintain Financial Support to Overcome COVID-19 (1) Ensure an effective implementation of the KRW175 trillion-plus financial support programs for businesses - Help relieve financial burdens of small merchants especially those hit by social gathering restrictions through a reduction in guarantee fees, etc. - Extend the operation of the working capital support program for suppliers and subcontractors in the key industries for three more monthsand extend the application deadline of the key industry stabilization fund (2) Create an on-site inspection and support team to closely communicate with small merchants and businesses on the ground to help address their needs - Introduce a measure to temporarily allow a deferral of business insolvency proceedings for small merchants undergoing a business closure with no overdue loan payments from February 15 to September 30, 2021 and require no repayment until the maturity date B. Manage Potential Risks Arising from the Pandemic Response (1) Work on long-term management of household debt to prevent it from over-burdening the economy - Prepare household debt management measures in the first quarter to promote lending based on individual borrowers debt service capacities and strengthen management over excessive levels of unsecured lending - Strengthen financing support for young adults and first-time homebuyers (2) Establish a corporate debt management system and pursue a dual-track management according to the different needs of businesses - Develop a database platform that tracks financial exposures of businesses in different industries - Provide adequate liquidity to those experiencing a temporary liquidity shortage t
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Feb 08, 2021

FSC Selects Another Fintech as Designated Agent to Provide Financial Services

The FSC selected Minds Lab as a designated fintech to provide financial services on behalf of Hyundai Marine Fire Insurance on February 5. Minds Lab will provide a one-stop automated loan processing service using artificial intelligence (AI) and voice recognition technologies. It will help reduce costs and save time while improving service standards. The FSC has made thirty-four such designations so far since May 2018. Application for the next round will be open from February 15 to April 30, 2021, with the results expected to be announced in July this year. * Please refer to the attached PDF for details.
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Feb 05, 2021

Rules Change Announced for Insurance Businesses Specializing in Small-sum and Short-term Policies

The FSC announced the revisions to the Enforcement Decree of the Insurance Business Act on February 4, setting entry requirements for the establishment of insurance businesses specializing in small-sum, short-term policies and introducing measures to improve the soundness of the insurance industry. The revisions will be put up for public notice for forty days until March 17, 2021. Key Revisions (Small-sum Shor-term Insurance Policies) The minimum capital requirement for setting up an insurance business specializing in small-sum, short-term insurance policies will be set at KRW2 billion. Small-sum, short-term insurance coverages will be allowed in all insurance coverage areas where applicable with a coverage term of one year, premiums of up to KRW50 million and the insurers annual gross premium revenues up to KRW50 billion. (Requirement for External Evaluation on Policy Reserves) Insurance businesses with total assets of KRW1 trillion or more will be required to have external actuaries approve the appropriateness of their policy reserves. This requirement will also be applied to the insurers with less than KRW1 trillion in total assets but whose policy coverage types are considered as essential for them to ensure the payout capabilities. The external actuaries will be entitled to a right to request relevant information from insurance companies. To guarantee impartiality, external evaluations from the same institution will not be allowed for four consecutive years. (Rules on Subsidiaries) The revisions will clearly indicate that insurers will be permitted to own MyData and health care-related businesses as subsidiaries. Expectation The authorities expect that the revisions will help promote the development of diverse types of small-sum, short-term insurance products for consumers according to their individual lifestyle, improve the soundness and competitiveness of insurance businesses and encourage insurers to boost investment and cooperation in new business areas, su
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Feb 04, 2021

New Deal Funds Worth KRW200 Billion Agreed for Future Car and Industrial Digitalization

FSC Chairman Eun Sung-soo visited Hyundai EV Stationin Seoul on February 4 and delivered congratulatory remarks at an MOU signing event for the promotion of investment cooperation in the areas of future car and industrial digitalization. MOU on Investment Cooperation The MOU highlights an agreement toward a mutual cooperation between the relevant industry entities, financial institutions and the New Deal fund operators (KDB and Korea Growth Investment Corp.) in creating KRW200 billion worth of feeder funds to be invested in the areas of future car and industrial digitalization. To this end, Hyundai Motor Group, the Korea Evaluation Institute of Industrial Technology (KEIT) and the Korea Institute for Advancement of Technology (KIAT) will collectively invest a total of KRW90 billion in New Deal funds in 2021. Over the next five years, the financial institutions will also make matching investments worth KRW1.1 trillion in New Deal funds. Summary of Chairmans Remarks Since the government first announced its plans to create the New Deal fund worth KRW20 trillion in September last year, a master fund was created on January 28 with fiscal investment in the amount of KRW510 billion. In January, fund managers submitted their applications with proposals in the amount of KRW9.7 trillion, which is well over three times the initial investment goal of KRW3 trillion for this year. Their proposals showed an appropriate distribution across all New Deal sectors and demonstrate the significance of digital and green industries in a post-pandemic era. The MOU signed today on investment cooperation between the relevant industry and financial officials is thus significant for the following reasons. First, in order to speed up the creation of New Deal funds, matching investments from the private sector are needed. With the MOU in place, we can expect to see a more speedy creation of feeder funds in the areas of future car and industrial digitalization. Second, in order to generate tangibl
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Feb 04, 2021

FSC Holds 1st Taskforce Meeting to Promote Role of Insurers in Health Care-related Services

The FSC held the first taskforce meeting on promoting the role of insurance companies in providing health care-related services with the relevant ministry and industry officials on February 4. At the meeting, officials discussed major health care industry trends in overseas markets and the domestic health care market environment for insurance companies. To boost the effectiveness in operating the taskforce, the FSC will separately operate an advisory group and a working group to draw up and search for policy tasks. While working to accelerate a data convergence between the health care and financial industries, the taskforce will explore diverse areas to make improvements, such as expanding the use of digital health devices for insurance companies. * Please refer to the attached PDF for details.
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Feb 03, 2021

FSC Announces Decision on Short-selling Ban

FSC Chairman Eun Sung-soo held a press briefing on February 3 and announced the decision to extend the short-selling ban until May 2, 2021 and to allow a partial resumption of short-selling from May 3 on KOSPI 200 and KOSDAQ 150 stocks. Summary of Chairmans Remarks (FSCs Decision) The FSC has decided to extend the current short-selling ban until May 2 this year and allow a partial resumption from May 3 on KOSPI 200 and KOSDAQ 150 stocks. The partial resumption is intended to minimize the impact on markets, given these stocks have large market caps and liquidity so that the resumption of short-selling would have limited impact on stock prices. Meanwhile, the short-selling ban will remain on the rest of stocks (2,037 stock items) with further decisions on the resumption of short-selling on these stocks to be made later based on market conditions. The resumption date of May 3 has been decided to give the Korea Exchange (KRX) some time for system development and testing. With the revised Financial Investment Services and Capital Markets Act scheduled to go into effect on April 6 this year, with stronger penalty rules for illegal short-selling activities, there will be no issue of a legislative gap. Today, the FSC commissioners raised the same voice on the need to improve the short-selling system as there are investor demands for more transparency and fairness in the short-selling system. (Improving the Short-selling System) Prior to the May 3 partial resumption, the FSC will work on measures to improve the short-selling rules. First, The FSC will work to ensure the detection of and punishment on illegal short-selling activities. With the revised Financial Investment Services and Capital Markets Act, short-sellers will be required to keep their securities lending data for five years and the securities firms will be required to tighten monitoring of illegal short-selling activities. The securities firms are currently in the process of getting their systems ready according
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Feb 03, 2021

Financial Industry Policy Agenda to Focus on COVID-19 Recovery and Financial Stability

The FSCs Financial Industry Bureau announced its specific policy agenda for this year, which aims to support COVID-19 recovery and ensure financial stability while seeking innovation in the financial industry. The key policy tasks are the following(a) bolstering pandemic response and risk management, (b) improving the role of region-based and microfinance institutions, (c) strengthening the competitiveness of the financial industry and (d) facilitating digital innovation in the financial industry. Policy Tasks A. Pandemic Response and Risk Management (1) Prepare measures for a gradual rollback of the pandemic-related temporary financial support programs - (Maturity extension, etc.) Introduce plans for loan maturity extension and deferment of payments currently in place to cope with COVID-19 (Feb 2021) - (Temporary deregulatory measures) Review whether to extend the period of the temporary deregulatory measures put in place due to the COVID-19 pandemic - (Loss absorbing capacity) Require financial institutions to maintain a sufficient level of loss absorbing capacity through loan loss provisions and dividend limits (2) Strengthen risk management in the non-banking sector - (Credit finance companies) Introduce measures to more effectively manage liquidity risks - (Savings banks) Introduce capital buffers (+2%p) to boost their loss absorbing capacity in a preemptive way - (Mutual finance companies) Strengthen management on large loans (March 2021) (3) Prepare for the implementation of IFRS 17 - (Impact analysis) Conduct an impact analysis on insurance companies regarding the implementation of IFRS 17 and the new accounting standards (K-ICS) from 2023 (within 2021) - (Implementation capabilities) Ensure a seamless implementation of K-ICS through a gradual application and by allowing insurance companies capital expansion - (Law revision) Introduce revisions to the Insurance Business Act to prepare for the implementation of IFRS 17 from 2023 (H2 2021) B. Region-based and
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Feb 02, 2021

Government Approves Stronger Investor Protection on High-risk Investment Products

The government approved the revisions to the Enforcement Decree of the Financial Investment Services and Capital Markets Act at a cabinet meeting on February 2. As a follow-up to the measures to strengthen investor protection with high-risk investment products announced in December 2019, the approved revisions are intended to bolster investor protection by (a) specifying the criteria for determining highly complex investment products, (b) strengthening requirements on the recording and cooling-off period during the sales process of highly complex investment products, (c) newly establishing a legal ground to regulate sellers of OEM funds, (d) tightening regulations to close loopholes of publicly offered funds being sold in the form of a private fund and (e) raising the retail investors minimum investment threshold in hedge funds from KRW100 million to KRW300 million. The new regulations on OEM fund sellers, closing loopholes of publicly offered funds being sold as a private fund and the increased minimum investment threshold for retail investors will go into effect immediately after the promulgation. Meanwhile, the regulatory measures on highly complex investment products will take effect three months after the promulgation. * Please refer to the attached PDF for details.
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Feb 01, 2021

Government Makes Available KRW12.8 Trillion Extra Lending Support for Small Merchants and SMEs

The FSC announced the availability of additional lending assistance for small merchants and SMEs in the amount of KRW12.8 trillion ahead of the Lunar New Year holiday. Loans in the amount of KRW9.3 trillion (KRW3.85 trillion in new loans and KRW5.45 trillion in maturity extensions) will be provided to the small merchants and SMEs experiencing hardships with an additional interest rate reduction of up to 0.9 percentage points. Guarantees in the amount of KRW3.5 trillion (KRW0.7 trillion in new guarantees and KRW2.8 trillion in maturity extensions) will be available with special guarantees of up to KRW300 million each for the pandemic-hit businesses. The lending programs will be available from the Industrial Bank of Korea, Korea Development Bank and Korea Credit Guarantee Fund until February 26, 2021. * Please refer to the attached PDF for details.
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Feb 01, 2021

Securities Firms to Play Bigger Role in Corporate Financing and Venture Capital Market

The FSC decided on the measures to promote the role of securities firms in corporate financing and venture capital market on January 29. Background To help our economy continue to search for sustainable growth areas and create quality jobs, an innovation-based development is necessary. Amid an acceleration of digital transition and the spread of contactless services, promoting new industries based on technology and intangible assets, such as IT and bio health, should take place. The government has worked on regulatory improvements to boost the role of securities firms in corporate financing.As such, the number of securities firms with equity capital of KRW3 trillion or more increased from five in 2013 to eight in 2019, and their high value-added services such as investment banking has expanded. However, the securities firms role in providing venture capital to innovative SMEs has been lagging. Instead, offering investor credit exposure and providing debt guarantee on real estate project financing took up most of their business. As such, the following measures are intended to promote the securities firms role in providing venture capital to innovative SMEs. Key Measures A. Re-establishing the Role of Comprehensive Financial Investment Businesses Under the current system of comprehensive financial investment business entities, the total credit exposure offered to businesses rose from KRW0.4 trillion in 2013 to KRW14.3 trillion at the end of June 2020. Business loans to SMEs has taken up 51.7 percent (or KRW7.4 trillion), which indicates a significant rise. However, out of KRW7.4 trillion, SME loans excluding SPCs and real estate project financing stood at just KRW0.3 trillion, representing only 2.0 percent of the total credit exposure to businesses. As such, adjustments will be made to the rules on comprehensive financial investment business entities capital exposure limits to remove real estate-related credit offering from the currently allowed special capital exposu
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Feb 01, 2021

FSC Announces Plans to Improve Competitiveness of Publicly Traded Funds

The FSC unveiled specific plans to improve the competitiveness of the publicly traded fund market on January 29, with an aim to make the sales and management process more investor-oriented. The plans include (a) increasing the accountability and efficiency of fund management, (b) making the sales process more investor-oriented, (c) encouraging the introduction of diverse types of funds and (d) strengthening support for investors. BACKGROUND Publicly traded funds serve as an importance source of asset management for the general public, allowing small-sum investment and fit for medium risk/medium return appetite. They are also important as they provide capital to productive sectors and help to spread out the real estate-oriented household asset structure. However, the volume of publicly traded funds has stagnated recently as retail investors have become less inclined to invest in publicly traded funds due to the availability of private equity funds, equity-linked securities and other competitive products as well as the relatively low returns, cost burdens related to sellers compensations and fees, inappropriate fund management practices, etc. Meanwhile, amid a low interest rate environment and abundant market liquidity, the general publics interest in financial investment has grown, particularly in direct investing. Over the past 10 years, the volume of private equity funds grew 268.3 percent while that of publicly traded funds rose only 38.3 percent. Stock funds except exchange-traded funds (ETFs) fell 53.2 percent while ETFs and money market funds (MMFs) rose 759.0 percent and 57.3 percent, respectively. The stagnant development of the publicly traded fund market can be attributable to (a) the subpar performance of fund management in generating returns, (b) the declining trust on fund sellers, (c) the lack of diversification in the types of funds and (d) the lack of adequate support for investors. Against this backdrop, the authorities will seek following strategies
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Jan 28, 2021

FSC Announces Specific Plans for Financial Innovation and Digital Finance

The FSC announced a detailed work plan for financial innovation and digital finance on January 28, which aims to spur the growth of fintechs, promote the spread of online-based financial services and build financial infrastructures necessary for digital innovation. Background The government has been working to promote digital finance and innovation in financial services through a variety of policies. The Special Act on Support for Financial Innovation went into effect in April 2019, which introduced a financial regulatory sandbox program. The Fintech Center Korea was established in January 2018 to provide comprehensive support for fintech startups. In an effort to promote a digital transformation in the financial industry, the fintech investment guidelines were introduced in October 2019 and more innovative types of businesses such as MyPayment came into being. In December 2019, open banking service was introduced, and in January 2020, the revisions to the Credit Information Use and Protection Act were finalized which will promote the use of data and the growth of MyData industry. In order to strengthen data security and ensure safety in payment systems, enhanced security measures were introduced in the wake of the COVID-19 pandemic. Against this backdrop, the FSC will work on the following to further promote innovation and digital transformation in the financial industry. Key Policy Tasks A. Advancement of Fintech Industry (1) Introduce a digital sandbox through which fintech startups can have opportunities to virtually test their new business ideas (from Jun-Aug 2021) (2) Establish a comprehensive fintech support system by working on a legislation focused on nurturing fintechs (within 2021), further improving the management of the regulatory sandbox program (Jan 2021) and expanding financial support through state-backed financial institutions and private sector investments (Q1 2021) (3) Work to boost the organizational capabilities of the relevant divisions and ag
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Jan 28, 2021

FSC Recommends Capital Management for Banks

The FSC announced its decision to recommend banks to temporarily limit dividends within twenty percent of their net profits until the end of June this year as it is deemed necessary to maintain banks loss absorbing capacity in response to the COVID-19 pandemic. Domestic banks have maintained strong financial soundness despite the pandemic situation. However, in order to be prepared for economic uncertainties, preemptive efforts are needed to boost the capital adequacy of banks. As such, the authorities decided to recommend banks to temporarily limit dividends within twenty percent of their net profits based on the results of the stress tests carried out on eight bank holding companies and six non-holding banks by the Financial Supervisory Service between October and December 2020. The stress tests were conducted on two distinct scenarios(a) a U-shaped long-term recovery and (b) an L-shaped long-term recession. In both scenarios, the capital ratios of all banks were shown to be above the minimum required level. However, in an L-shaped scenario, the capital buffer and D-SIB ratios of numerous banks felt short of the required levels. * Please refer to the attached PDF for details.
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