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Aug 24, 2020
- Vice Chairman Discusses Preemptive Responses to Potential Risks amid Growing Uncertainty
- Vice Chairman Sohn Byungdoo presided over the 18th financial risk assessment meeting on August 24 to review market conditions and monitor the progress in implementing the COVID-19 financial support.The following is a summary of Vice Chairman Sohn’s remarks.(CURRENT MARKET SITUATION) The government’s effective response to Covid-19 and aggressive financial support have helped to maintain stability in financial markets. The KOSPI has recovered to pre-crisis levels, gaining 58.1 percent from its lowest in mid-March. Corporate bond and short-term money markets also have shown signs of overall recovery, although some low-rated companies still face difficulties in securing funds. However, the government should remain vigilant as the recent resurgence of Covid-19 cases heightens uncertainty in financial markets and the real economy. In response to the possibility of a protracted pandemic crisis, the government will closely monitor risk factors and take preemptive measures when necessary.(FINANCIAL MARKET MONITORING) With low interest rates, funds searching for higher returns have been increasingly flowing into stock and property markets, prompting a surge in asset prices. As the concentration of funds to certain assets along with growing debt could pose potential risks to financial markets, the government has been closely monitoring market activities.For the stock market to grow into a sustainable and attractive investment destination, the government needs to ensure the sound operation of the market and encourage more listings of promising companies. To this end, the government will come up with comprehensive measures for prevention, investigation and punishment to root out unfair transactions such as market manipulation, while improving regulations to help channel more funds into innovative businesses with long-term perspectives.(IMPLEMENTATION OF HOUSING MARKET MEASURES) The government has taken a series of measures to curb speculative demand in housing markets, while
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Aug 20, 2020
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Aug 19, 2020
- Vice Chairman Speaks about Importance of Maintaining Lending Support by Financial Institutions
- Vice Chairman Sohn Byungdoo presided over the 17th financial risk assessment meeting on August 19 to review market conditions and monitor the progress in implementing the COVID-19 financial support programs.The following is a summary of Vice Chairman Sohn’s remarks.(CURRENT PANDEMIC SITUATION) In response to the recent spike in the number of COVID-19 infections, the government has reinstated the level-2 social distancing measures today. Preventing further waves of infection remains the most urgent task. A successful economic turnaround achieved from earlier this year was made possible through effective K-quarantine measures. In order to maintain the recovery momentum, financial institutions should closely follow the enhanced K-quarantine guidelines within their workplace.(FINANCIAL RELIEF FOR TORRENTIAL RAIN VICTIMS) The longest recorded monsoon this year (54 days) has incurred heavy damages to households and businesses. The victims of torrential rains face extra hardship amid the pandemic-related economic disruptions. In order to help the businesses and households hit by heavy rains, the government will operate one-stop financial support centers throughout the affected regions and make prompt and targeted assistance available.(STRONG LENDING SUPPORT AMID PROTRACTED PANDEMIC SITUATION) As there are concerns about a protracted pandemic situation, the government will work to finalize its decisions on whether to extend the temporary relief measures, such as loan maturity extensions, deferral of interest payments and some of the temporary deregulatory measures, within August. In an economic downturn, individual financial institutions may become passive in lending. However, each institution’s “own actions can collectively influence the overall risk in the system,” as there is a danger of a fallacy of composition suggested by a BIS report in April. Thus, it is necessary to continue to encourage all financial institutions to support lending in order to maintain the
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Aug 13, 2020
- Green Finance Task Force Holds Kick-off Meeting
- Vice Chairman Sohn Byungdoo presided over a kick-off meeting of the green finance task force on August 13. The task force will work to establish a monitoring system for financial risks emanating from climate change, boost investment in green industries and consider the possibility of joining international networks on green finance.The following is a summary of Vice Chairman Sohn’s remarks.(GREEN SWAN) In January this year, the BIS introduced the concept of the ‘Green Swan,’ warning about the possibility of financial crisis caused by climate change. In the BIS report, the threat of climate change is characterized by unpredictability, severe ripple effects and extensive negative externalities. As such, major countries and international organizations have come to understand the threat of climate change to the financial sector. In July 2017, the FSB Task Force on Climate-related Financial Disclosures made recommendations to help companies disclose climate-related financial risks, and in December of the same year, the Network for Greening the Financial System was launched by central banks and regulators from major economies.(PROACTIVE MANAGEMENT) Climate change can threaten the stability of the financial system in many different ways. There are physical risks that financial institutions may face as physical damages caused by climate change can have ripple effects through insurance, loans and investment. In addition, there are transition risks that can have negative effects on the stability of the financial system as a transition to low carbon economy can lead to an abrupt fall of carbon intensive industries. In this regard, the government will strengthen its efforts to monitor and identify climate change risks to maintain stability in the financial system.Financial institutions should also consider taking into account the environmental, social and governance factors alongside the traditional risk factors such as credit or liquidity risks for their asset management.
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Aug 12, 2020
- FSC Chairman Meets with Heads of Financial Associations and Urges Close Cooperation
- FSC Chairman Eun Sung-soo met with heads of financial associations on August 12, and held talks on the progress of the COVID-19 emergency financial support, ways to promote big techs’ entrance into the financial services industry while ensuring a framework of fair competition and the role of finance in the government’s new deal initiative and the post-pandemic economy. The following is a summary of Chairman Eun’s remarks.The pandemic-induced economic shock was effectively minimized thanks to swift provision of relief programs including maturity extensions and deferral of interest payments by financial institutions. As there are concerns over a protracted pandemic crisis, financial institutions should work to bolster their loan loss provisions and the management of financial soundness.With regard to the big techs’ entrance into the financial services industry, the financial authorities plan to set up a public-private joint consultative body made up of the government, financial institutions, big tech companies along with academia and consumer experts to facilitate discussions on the issues related to fair competition, systemic risks and consumer protection.The post-pandemic era presents both opportunities and challenges, requiring coordinated actions from the financial industry. The government’s new deal initiative aims to transform the Korean economy from a fast follower to an innovative leader. In this regard, the role of the financial industry is crucial in achieving that goal.Financial institutions should be adequately informed about the relevant measures concerning the government’s housing market stabilization policy. The financial authorities will continue to keep a close eye on violations in lending practices to prevent market disturbances.Chairman Eun also expressed his gratitude to financial companies making contributions for victims of torrential rains and urged prompt implementation of financial support to the affected households and businesses,
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Aug 12, 2020
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Aug 11, 2020
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Aug 06, 2020
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Aug 05, 2020
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Jul 31, 2020
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Jul 30, 2020
- Plans to Improve Rules on Structured Products
- The FSC announced its plans to improve rules on retail structured products on July 30, with an aim to strengthen securities firms’ preparedness for market volatility, to encourage reduction in the size of the issuance as well as diversified investment for hedge assets and to bolster investor protection measures.BACKGROUNDThe market for retail structured products has grown significantly as the continuing trend of low interest rates made them an attractive alternative to bank savings. Although the structured products have provided relatively high yields and helped individuals to expand their assets, various risk factors began to surface. For securities firms, large volume of structured product issuance and management pose significant burdens on their financial soundness and liquidity. These burdens also may create shocks in the foreign exchange market and short-term money markets. In addition, both distributors and investors often espouse misperception that structured products are safe and non-risky products even though market volatility may rise depending on the performance of underlying assets. Therefore, it is necessary to draw up measures that will help minimize risks to securities firms, financial markets and investors.OVERVIEW OF STRUCTURED PRODUCTS(BALANCE) The outstanding balance of ELS, ELB, DLS and DLB issuance surged from about KRW22 trillion in 2010 to KRW108.6 trillion at the end of April 2020, maintaining an above KRW100 trillion level since 2016. About 60 percent of them are non-principal-protected structured products (ELS and DLS), accounting for KRW64.6 trillion. ELS and ELB (tracking stock indexes) account for 70 percent, or KRW75 trillion.(DISTRIBUTION) For ELS investment, retail investors made up about 98 percent, or KRW40.4 trillion at the end of March 2020. About 82 percent of all ELS issuance, or 88 percent of ELS issued to retail investors were distributed through banks.(RISK FOR SECURITIES FIRMS) Structured products make up increasingly larg
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Jul 30, 2020
- FSC Chairman Speaks about Innovation at Mapo Front 1 Opening Ceremony
- FSC Chairman Eun Sung-soo delivered congratulatory remarks at the opening ceremony of the Mapo Front 1, the government-backed start-up incubating facility on July 30. The following is a summary of Chairman Eun’s remarks.With the COVID-19 pandemic situation continuing for about six months, start-ups faced challenges amid continuing instability and uncertainty. However, as the country recovers from the pandemic-induced economic crisis, new opportunities will be provided to innovative start-ups. The government’s digital and green new deal initiative announced on July 14 aims to set the stage in that regard.In order to foster an ecosystem for innovative start-ups and to support innovative changes in our economic structure, it is necessary to establish a strong support system. The Mapo Front 1, which is the world’s largest start-up incubating facility, provides such a framework. The facility provides a comprehensive support package ranging from financial support to educational programs to living spaces to overseas business expansion opportunities, which has been made possible by participation and cooperation of both the public and private sectors, including the financial industry, international organizations, local governments and large companies.The Mapo Front 1 will be housing about 90 innovative start-ups this year with an aim to provide incubating programs to up to 2,700 start-ups over the next five years and create about 18,000 new jobs.In order to provide continuous support after the start-up stage, the government has made available a scale-up fund worth about KRW15 trillion over a five-year period (2018-2022).In addition, the government has announced its plans to provide targeted support to one thousand innovative firms over the next three years, through which selected start-ups will be able to receive a variety of funding opportunities.Through these and other support programs, the government will continue to work to create an environment in which innovative
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Jul 30, 2020
- Government Announces Plans to Provide Targeted Support to 1,000 Innovative Firms
- The government announced its plans to designate a thousand innovative firms over the next three years and provide targeted financial support at the 12th Meeting of the Central Economic Response Headquarters held on July 30.BACKGROUNDWith the 4th industrial revolution and a protracted pandemic situation, rapid changes are taking place in different industries, including the rapid development of ‘untact’ services and digital transformation. In order to provide sufficient financial support to facilitate the growth of more innovative businesses, close cooperation is essential between the financial sector and different industries. It is also important to establish a cooperative framework through which sufficient investments from both the public and private sectors are made available to innovative firms.Against this backdrop, the government has drawn up plans to more systematically provide financial support to innovative businesses by promoting close cooperation between the financial sector and enterprises.KEY MEASURESI. SELECT 1,000 INNOVATIVE FIRMS IN DIVERSE INDUSTRIESThe government aims to select one thousand innovative firms throughout different industries, such as the digital and green new deal industries, future car, bio health, system semiconductor, materials, parts and equipment industries, as well as those planning to transform their businesses fit for new industries and those that are reshoring back to the country.So far, 32 innovative firms have been selected with the goal of designating 200 business entities by the end of this year. The government plans to select 200-plus innovative firms in every six-month period until the end of 2022.II. PROVIDE FINANCIAL SUPPORT TO SELECTED FIRMSFor those selected as ‘innovative businesses,’ the government will work to provide financial support even for those with less favorable financial records, based on their innovativeness and technological prowess.Diverse financial support programs will be made available depend
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Jul 29, 2020
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Jul 28, 2020
- FSC Issues Administrative Guidance on Private Equity Funds
- The FSC announced administrative guidance on July 28, which is aimed at strengthening the supervisory role of private equity fund sellers and trustees against fund management companies and providing specific guidelines to facilitate more systematic and effective self-inspection of private equity funds. (INVESTOR PROTECTION MEASURES) Fund sellers will be required to check details of investment information package as well as fund management, and will be required to suspend sales when redemption delays occur.Trustees will be required to check whether fund management companies are engaged in any unlawful or unfair sales practices.Cross trading of funds from the same entity and coercive sales practices will be prohibited.(SELF-INSPECTION) The guidance on self-inspection lays out specific requirements for fund sellers, managers, trustees and administrators. Site-inspection should be carried out through consultation and cooperation between fund sellers, managers, trustees and administrators, and the method of inspection should be determined through a consultative body.All private equity funds in operation as of May 31, 2020 will be subject to self-inspection. The self-inspection team will look into whether asset statements of administrators and trustees are in accordance with each other’s, whether assets do actually exist and the appropriateness of investment information, collective investment rules and fund management. Close cooperation is advised from participating institutions which will be subject to the rule of confidentiality.The administrative guidance is expected to go into effect on August 12. The FSC will work to improve the regulatory framework on private equity funds and make sure that inspections are carried out properly.* Please refer to the attached PDF for details.
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Jul 28, 2020
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Jul 28, 2020
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Jul 27, 2020
- FSC Announces Plans to Promote Digital Finance
- The FSC unveiled its plans to promote digital finance on July 24, focusing on improving regulations for the industry, ensuring strong protection for digital finance users, building foundations and infrastructure to facilitate large volumes of digital financial transactions and strengthening data security to ensure stability in the financial system.BACKGROUNDDigital finance as a major ‘untact’ industry has grown significantly with the development of simple payment and money transfer services, authentication technologies and platform businesses. With the introduction of new technologies and the expanded use of e-commerce and telecommuting, digital transformation of the financial industry has been accelerated. The convergence of digital finance with ICT sectors and platform businesses will not only lead the transformation toward a digital economy but also help enhance financial inclusiveness.Recognizing the significance of digital finance, major economies have made changes to their regulatory framework to promote competition and innovation. Meanwhile, the Electronic Financial Transactions Act in Korea has not seen major updates since it was first enacted in 2006. As such, the current regulatory framework cannot fully accommodate the changes taking place in the financial industry which pose the following obstacles—a) relatively high entrance barriers for innovative electronic financial business entities, b) lack of strong user protection measures to guarantee safety in digital transactions and earn consumer trust, c) need for new infrastructure fit for new financial environment, and d) need to ensure financial data security.With the revisions to the Electronic Financial Transactions Act, the FSC will boost both convenience and safety of digital finance users, promote innovation and competition in the financial industry, and contribute to the government’s digital new deal initiative.KEY POLICY AGENDAI. PROMOTE GROWTH OF INNOVATIVE DIGITAL FINANCE PLAYERS (INDUSTR
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Jul 24, 2020
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Jul 23, 2020
- FSC Adds 4 More 'Innovative Financial Services' to Regulatory Sandbox
- The FSC added four more ‘innovative financial services’ to the regulatory sandbox on July 23, bringing the total number of designated services to 110 since the sandbox program was first launched on April 1, 2019.In order to support digital transformation and promote the government’s new deal initiative, during the second half of this year, the FSC will begin to accept applications on a rolling basis with a particular focus given to new technologies such as big data, AI, digital authentication, payment, data security, etc. Interested firms may apply online throughout the year. OVERVIEW OF NEWLY ADDED ‘INNOVATIVE FINANCIAL SERVICES’1. An intellectual property rights based investment and fund raising mechanism that allows SMEs to raise funds with IP rights through trust companies and recruit investors through a crowdfunding platform (Hana Bank Wadiz, expected launch in January 2021)2. A mobile-based comprehensive retirement pension advising service that analyzes individuals’ multiple pension accounts and offers advises on pension products (Doomoolmori, expected launch in December 2020)3. An online financial investment platform that conveniently allows investors to purchase coupons for purchasing investment products on securities exchange platforms (KB Securities, expected launch in February 2021)4. A data analysis service using homomorphic encryption, which makes possible the coding of personal financial information stored in different financial institutions for analyzing purposes (Korea Credit Bureau, expected launch in august 2020) * Please refer to the attached PDF for details.
