Press Releases - Financial Services Commission

Press Releases

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Dec 10, 2024

Plan for Promoting the Benchmark Rate Reform in 2025

On December 10, the Financial Services Commission and the Bank of Korea held the 5th Benchmark Rate and Short-Term Financial Market Consultation with related organizations, such as the Financial Supervisory Service, the Korea Securities Depository, and the Korea Exchange, as well as academics and market experts, to discuss the Plan for Promoting Benchmark Rate Reform in 2025. Progress of Benchmark Rate Reform in 2024 The benchmark rate is an interest rate that is used to determine the value of money or financial instruments to be paid or exchanged as a result of a financial transaction. It is used to determine the profit or loss of financial transactions, evaluate investment performance, and generally represent the costof short-term financing for financial institution. In major countries, the global benchmark rate reform process, triggered by the LIBOR manipulation case in June 2012, firmly established the actual transaction-based risk-free rate (RFR) as the benchmark rate for financial transactions focusing on derivatives transactions. In 2020, Korea enacted the Act on the Management of Financial benchmarks in accordance with the recommendationsof international organizations such as the Financial Stability Board, and started calculating the Korea Overnight Financing Repo Rate (KOFR) as a critical benchmark rate in 2021. However, the efforts of the KOFR activation went slowly due to the need to prioritize financial market stability during the global liquidity reduction process that began in 2022. In 2024, the government and the Bank of Korea began discussions on revitalizing the KOFR based on stable market conditions and formed a joint public-private working group while strengthening communication with market participants. In August 2024, the government and the Bank of Korea announced the principle of transitioning to a KOFR-centered benchmark rate system. Since then, the working group has been discussing the strategy for activating KOFR and plans to implement the s
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Dec 09, 2024

FSC Holds Market Monitoring Meeting (Dec. 9)

Chairman Kim Byoung Hwan of the Financial Services Commission presided over a market monitoring meeting on December 9 with officials from the Financial Supervisory Service, five major financial holding companies, policy financial institutions, and related organizations and industry associations to check market situations and discuss response measures. The following is a summary of Chairman Kims opening remarks. A Summary of Chairmans Remarks At the Ministerial Meeting on Economic Affairs held yesterday, the government made an announcement that the economic team will spare no effort in ensuring a stable management of the economy despite looming uncertainties caused by recent political situations. In this regard, the FSC and the FSS will continue to do our parts and carry out our responsibilities in unwavering ways to ensure the maintenance of stability in our financial system and the external credibility in the financial sector. While continuing to maintain a real-time market monitoring system around the clock, authorities are prepared to promptly implement market stabilization measures when it becomes necessary, including a KRW10 trillion stock market stabilization fund, a KRW40 trillion bond market stabilization fund, the corporate bond and commercial paper (CP) purchase program, and the supply of foreign currency liquidity through the Korea Securities Finance Corporation. Meanwhile, authorities will seek to consistently pursue financial policy agendas according to the previously planned schedule. While ensuring a seamless implementation of the previously introduced measures, such as the Corporate Value-up Program, establishing a system designed to prevent illegal short sale activities, and granting a license to a new internet-only bank, authorities will keep pursuing the agendas that were slated for December, such as the measures to ease the financial burden of small merchants and self-employed business owners and the indemnity health insurance reform measures. To
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Dec 04, 2024

FSC Holds Market Monitoring Meeting (Dec. 4)

Chairman Kim Byoung Hwan of the Financial Services Commission convened a meeting on December 4 with officials from related authorities, financial institutions, and industry groups to check market situations and discuss response measures. The following is a summary of Chairman Kims opening remarks. A Summary of Chairmans Remarks Currently, the situation surrounding the foreign exchange market and overseas-listed stocks of Korean companies appear to be stabilizing. However, as there are concerns about a potential rise in volatility, financial authorities will utilize all available measures to prevent the spread of market anxiety and ensure a seamless and stable operation of financial markets in close coordination with policy financial institutions, related organizations, and industry groups. At the Emergency Meeting on Macroeconomic and Financial Issues (F4 Meeting) held earlier this morning, authorities decided to ensure the supply of unlimited liquidity support until the conditions return to normal in the financial markets. The measures include stock market stabilization fund in the amount of KRW10 trillion, bond market stabilization fund in the amount of KRW40 trillion, and the corporate bond and commercial paper (CP) purchase program all aimed ensuring market stability. At the same time, authorities will closely monitor financial companies foreign currency liquidity conditions to ensure their soundness, while supplying foreign currency liquidity through the Korea Securities Finance Corporation to prevent the risk of margin call emanating from a potential weakening of the Korean won. In responding to market situations, each organization is asked to strictly follow its own contingency plan. In this regard, policy financial institutions are asked to mobilize all available resources to ensure an active and flexible supply of funds to make sure that vulnerable groups, small merchants, and businesses face no challenges in meeting their financing needs. The stock market
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Dec 03, 2024

Revised Rules on Specialized Credit Finance Business to Allow Card Companies to Make Use of Business Credit Data

The Financial Services Commission announced that the government approved a revision bill for the Enforcement Decree of the Specialized Credit Finance Business Act at the cabinet meeting held on December 3. This revision will allow specialized credit finance businesses, such as credit card companies, to concurrently manage and operate a business credit bureau (CB) as prescribed under the Credit Information Use and Protection Act. Under the current legal framework, credit card businesses are only allowed to operate and provide credit information management service for individuals and credit rating service for sole proprietors (self-employed business owners) based on the diverse types of financial and non-financial data that they have accumulated in the process of operating payment services. However, handling (collecting, analyzing, and providing) credit information for business and corporate entities has not been allowed under the current legal framework since the Enforcement Decree does not specifically include business CB as a concurrent business operation that can be assumed by specialized credit finance businesses. Thus, this amendment adds business CB as a concurrent business operation that can be performed by specialized credit finance businesses. The revised Enforcement Decree will broaden the scope of data-driven services provided by specialized credit finance businesses and help to improve the overall business credit rating services in the financial sector, which will ultimately help to boost financial access and inclusiveness for small businesses. The revision will take effect on the day of promulgation (December 10, tentatively). The FSC will continue to work on regulatory improvements to facilitate the provision of more data-driven services by specialized credit finance businesses. * Please refer to the attached PDF for details.
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Nov 29, 2024

FSC Holds Meeting and Discusses Plans for Operating Temporarily Eased Financial Regulations

The Financial Services Commission held a meeting with related authorities and industry organizations on November 29 to discuss plans for operating temporarily eased regulations in financial sectors. At todays meeting, authorities discussed plans for the operation of the eased regulatory measures in the banking, financial investment, specialized credit finance, and savings banks sectors that are currently set to expire at the end of December this year. Given that an improvement in money market conditions is expected in the future and that all financial sectors liquidity ratios as of September 2024 stood above the normal regulatory levels, officials at todays meeting shared the same view on the need to gradually normalize the eased regulatory measures on financial companies liquidity requirements, which have been introduced at the time of market instability. In this regard, the banking sectors LCR (liquidity coverage ratio) requirement currently standing at 97.5 percent will be rolled back to 100 percent from January 1, 2025, and for financial investment businesses, the cap on the amount of bonds (issued by specialized credit finance businesses) that can be included when hedging risks associated with derivatives-linked securities (DLS) will also be downsized to 8 percent as scheduled from January 1, 2025. Meanwhile, the loan-to-deposit ratio of savings banks and the KRW-based currency liquidity ratio of specialized credit finance businesses will be gradually rolled back in stages. From January to June 2025, savings banks will be subject to a loan-to-deposit ratio of 105 percent (down 5 percentage points from 110 percent currently), and specialized credit finance businesses will be subject to a KRW-based currency liquidity ratio of 95 percent (up 5 percentage points from 90 percent currently) during the same period. In the second quarter of 2025, authorities will decide on whether to extend the period or completely roll back the eased regulatory measures after consider
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Nov 28, 2024

Licensing Criteria for New Internet-only Bank to Focus on Sustainability Based on Innovativeness and Inclusiveness

The Financial Services Commission adopted the licensing criteria and procedure for authorizing a new internet-only bank at the 20th regular meeting of the FSC held on November 27, 2024. Previously on July 5, 2023, the government introduced a plan to grant new licenses to more nationwide commercial banks, regional banks, and internet-only banks to promote competition in the banking industry. With regard to the criteria and procedure for licensing new internet-only banks, the government said that it plans to consider the performance and stability of the operation of the three existing internet-only banks along with the statutory requirements prescribed under the current law. Since then, the government carried out an examination on the performance and effects of introducing internet-only banks and looked into areas where improvements are necessary. Meanwhile, a separate study was conducted on the competitiveness of financial companies SME and personal credit loan business operations to assess the areas where enhanced competition and increased supply of funds are needed. Based on the findings from these studies, the FSC and the FSS (Financial Supervisory Service) adopted the licensing criteria and procedure for authorizing a new internet-only bank as follows. The new licensing criteria will maintain the previously adopted licensing standards for internet-only banks, which include (a) the licensing criteria specified in the Banking Act and (b) the innovativeness and inclusiveness of applicants business plan. However, the key direction of application review and evaluation criteria will take into account the findings from the aforementioned studies. In this regard, the evaluation of application will focus on (a) the stability in raising capital, along with (b) the innovativeness and (c) inclusiveness, and (d) the feasibility of business plan. First, regarding the stability in raising capital, the evaluation committee will thoroughly look into whether the applicant has a su
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Nov 21, 2024

FSC Issues Prior Notice of Legislative Changes on Short Sale Regulations

The Financial Services Commission issued a prior notice of legislative changes regarding short sale regulations as a follow-up to the previously revised Financial Investment Services and Capital Markets Act (FSCMA) promulgated on October 22. The rule changes being proposed today address specific details that need to be stipulated under the revised FSCMA, which are expected to take effect from March 31, 2025 as follows(a) limiting the stock borrowing period for institutional investors, (b) introducing measures to prevent naked short sale through establishment of electronic net short position balance management system, internal control standards, and the securities companies verification duties, and (c) restricting short sellers from acquiring CBs (convertible bonds) and BWs (bonds with warrants) issued by the same company. Imposing a Limit on Institutional Investors Stock Repayment Period The stock repayment period for institutional investors should be determined by an agreement of both the lender and the borrower but should be limited to up to 12 months with 90-day repayment periods for renewal each time. However, exemptions are recognized in the case of delisting of stocks or trading suspension on the day of repayment, or when an account-to-account transfer (for bookkeeping entry at central securities depository) is being restricted. A violation of the repayment period may be subject to an administrative fine of KRW100 million for corporate investors and KRW50 million for retail investors. Introducing Measures Intended to Prevent Naked Short Sale Activities Corporate entities with an intention to engage in short sale of listed stocks need to take appropriate steps to prevent naked short sale in accordance with the revised FSCMA. All corporate entities should prepare internal control standards designed to prevent naked short sale. Their internal control standards should specify the role and responsibility of employees, item-by-item management of net short position b
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Nov 19, 2024

Rule Changes on Corporate Mergers and Acquisitions Approved by the Government

The Financial Services Commission announced that a revision bill for the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) intended to upgrade rules on corporate mergers and acquisitions (MAs) was approved by the government at the cabinet meeting held on November 19. The revised Enforcement Decree addresses the following(a) improving rules on determining merger prices when MAs take place between nonaffiliated business entities, (b) strengthening disclosure duties, and (c) revamping rules on the external evaluation process. First, the revised Enforcement Decree will improve rules on calculating and determining merger prices when MAs take place between nonaffiliated business entities. Previously, the Enforcement Decree had a provision directly regulating specific methods for calculating merger prices for MAs taking place between both affiliated companies and nonaffiliated companies. This rule may have acted as a barrier for companies when seeking corporate restructuring based on free negotiations. Therefore, the revised Enforcement Decree will remove the calculation method for merger prices for MAs taking place between nonaffiliated business entities, which will also help to enhance regulatory consistency with global standards. Second, the revised Enforcement Decree will bring about improvements to the external evaluation system by obligating companies to go through an external evaluation process when MAs take place between nonaffiliated business entities. For MAs between affiliated entities, companies will need to obtain consent from auditors (or audit committees) when selecting an external evaluation agency. In addition, the revised rules establish a code of conduct on quality management for external evaluation agencies to guarantee the maintenance of autonomy, objectivity, and fairness in performing functions related to MAs and address issues related to conflicts of interest. The revised Enforcement Decree will also require eva
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Nov 13, 2024

FSC Holds Meeting to Review Market Conditions and Extends Operation of Market Stabilization Programs

Vice Chairman Kim Soyoung of the Financial Services Commission held a meeting on November 13 with related organizations and market experts to go over economic and financial market conditions at home and abroad in the wake of U.S. presidential elections and Feds monetary policy pivot and discuss policy responses to ensure market stability. Market Stabilization Programs At the meeting, Vice Chairman Kim said that it is necessary to maintain backstops in order to be prepared for the potential of rising uncertainty and volatility in the market. Therefore, Vice Chairman Kim said that the market stabilization programs currently in place will continue to be operated at the same level in 2025. In order to ensure stability in financial markets, Vice Chairman Kim said that it is necessary to take into account comprehensive factors, such as the political and economic uncertainties in major economies including the U.S., ongoing geopolitical risks in the Middle East, deepening global competition for Koreas strategic industries and the potential of downward adjustment in GDP growth, and the restructuring and resolution of problematic real estate development projects. As it is possible that financial markets may experience a temporary rise in volatility affected by various external factors, Vice Chairman Kim said that the government and related organizations will continue to stay alert and make consistent efforts to ensure market stability. To this end, the government and policy financial institutions (Korea Development Bank, Industrial Bank of Korea, and Korea Credit Guarantee Fund) plan to continue to make available liquidity support programs worth up to KRW37.6 trillion to ensure stability in the corporate bond and money markets in 2025, which include the following(a) bond market stabilization fund of up to KRW20 trillion, (b) corporate bond and commercial paper (CP) purchase program of up to KRW10 trillion, (c) primary collateralized bond obligation (P-CBO) support program of
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Nov 13, 2024

Korea-Poland MOU on Banking Supervision Signed to Promote Overseas Expansion of Korean Financial Services

Chairman Kim Byoung Hwan of the Financial Services Commission met with Jacek Jastrzebski, Chair of the Board of the Polish Financial Supervision Authority (KNF) at his office in Seoul Government Complex on November 13 where the two sides signed a memorandum of understanding (MOU) on banking supervision. This marks the first such visit to Korea by Chair of the Board of the Polish Financial Supervision Authority (KNF). Since the establishment of diplomatic ties in 1989, Korean companies have continued to expand their business presence in Poland. As of 2023, the number of Korean companies operating in Poland reached about 370 with the volume of investment standing at about KRW6 billion in cumulative terms and that of annual trade reaching about KRW9 billion. However, there still exist no Korean financial companies operating in Poland. As the financing needs and demand from Korean companies have been growing in local market, there has been growing interest among Korean financial companies to expand their presence in the Polish market. Following the previously held summit meetings between Korea and Poland (in July 2023 and October 2024), bilateral cooperation has been strengthened in the areas of defense industry, nuclear power, infrastructure, and advanced technologies, and it is highly anticipated that mutual exchange in economic and financial sectors will also accelerate. Against this backdrop, the visit by the Polish Financial Supervision Authority (KNF) along with the Polish banking sector delegation lays a foundation to boost bilateral exchange of banking businesses. Korea-Poland MOU on banking supervision At the meeting with Chair Jacek Jastrzebski of the Polish Financial Supervision Authority (KNF), FSC Chairman Kim Byoung Hwan showed strong commitment to boost cooperation going forward and talked about the significance of the progress made this year in enhancing financial cooperation between the two countries with the shuttle meetings held between chief financia
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Nov 11, 2024

Household Loans, October 2024

In October 2024, the outstanding balance of household loans across all financial sectors rose KRW6.6 trillion (preliminary), growing at a faster pace compared with the previous month (up KRW5.3 trillion). (By Type) Home-backed mortgage loans rose KRW5.5 trillion across all financial sectors, increasing at a slower pace compared with the previous month (up KRW6.8 trillion). Mortgage loans in the banking sector continued to rise at a slower pace (up KRW6.1 trillion up KRW3.6 trillion). Other types of loans increased KRW1.1 trillion overall, edging back up in both the banking (down KRW0.5 trillion up KRW0.3 trillion) and nonbanking (down KRW0.1 trillion up KRW0.8 trillion) sectors. (By Sector) The pace of household loan growth compared with the previous month decelerated in the banking sector while shifting back up in the nonbanking sector. In October, banks saw an increase of KRW3.9 trillion in household loans, a slowdown from the increase of KRW5.6 trillion a month ago. The growth of policy-based loans stayed at a similar level (up KRW2.1 trillion), but banks own mortgage loan issuance grew at a slower pace (up KRW4.0 trillion up KRW1.5 trillion) due to the self-regulatory move to tighten household loan issuance in the banking sector. Other types of loans including credit loans turned back up from a month ago (down KRW0.5 trillion up KRW0.3 trillion) due to the effects of demand for IPO subscriptions. The nonbanking sector saw an increase of KRW2.7 trillion in household loans, which expanded at a faster pace compared with the previous month (down KRW0.3 trillion). Mortgage loans in the nonbanking sector went up KRW1.9 trillion from the rise of KRW0.7 trillion a month ago led by group lending for new apartment subscriptions. Other types of loans increased KRW0.8 trillion from the decline of KRW1.0 trillion a month ago led by credit card and insurance policy-based loans. Mutual finance businesses (up KRW0.9 trillion), specialized credit finance businesses (up KRW0.9 tr
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Nov 05, 2024

Disclosure Requirement on Net Short Position Balance to be Strengthened from December 1

The Financial Services Commission announced that a revision bill for the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) was approved by the government at the cabinet meeting held on November 5. This revision intended to strengthen the disclosure requirement on investors net short position balance is part of the comprehensive short sale reform measures announced on June 13, 2024. Pursuant to the revised Enforcement Decree, investors with a net short position balance of 0.01 percent (excluding those with less than KRW100 million) or KRW1 billion or more of total issuance volume will be newly required to disclose their net short position balances from December 1, 2024. Previously, only those with a net short position balance of 0.5 percent or more were subject to the disclosure requirement. Therefore, investors that will newly become subject to the disclosure requirementthose with a net short position balance of 0.01 percent or KRW1 billion or more but less than 0.5 percentwill begin to disclose their net short position balances from December 4. The government and relevant institutions have been working on comprehensive short sale reform measures in order to address the problem of illegal and unfair trading practices. Some of the reform agendas requiring no revision to legislation have already been put into place. On September 27, the supervisory regulation on financial investment businesses was revised to bring down the cash collateral ratio of retail investors when borrowing stocks to 105 percent, which is the same level in place for institutional investors. The reduced cash collateral ratio for retail investors is expected to become effective from March 31, 2025. For market makers and liquidity providers, their stock borrowing period has been already limited to maximum 12 months with 90-day extensions each time through system upgrades made at the securities lending institutions (Korea Securities Depository and Korea Securitie
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Oct 31, 2024

FSC Vice Chairman Visits Germany and Lithuania to Support Overseas Expansion of Korean Financial Services

Vice Chairman Kim Soyoung of the Financial Services Commission visited Frankfurt, Germany and Vilnius, Lithuania from October 28 to November 1 in order to seek stronger financial cooperation with the European countries following bilateral summit meetings held in 2023. Meeting with ECB Supervisory Board Member On October 29, Vice Chairman Kim met with the European Central Bank (ECB)s supervisory board member Patrick Montagner to elicit consensus on the scope of cooperation prescribed in the draft memorandum of understanding (MOU) on banking supervision, which is expected to be signed by the end of this year. The agreed upon draft MOU contains provisions detailing cooperation and information exchange on banking supervision between the FSC and the FSS (Financial Supervisory Service) of Korea and the ECB regarding financial companies license application, appointment of directors, sanctions, and recovery and resolution plans (RRPs) upon request by the counterparty. This MOU is expected to help improve the crisis response capacity of both parties and enhance banking supervision through RRPs. After the fine-tuning of the draft MOU, Vice Chairman Kim and Mr. Montagner held talks on policy issues regarding sustainable finance and the introduction of artificial intelligence (AI) in the financial industry. On sustainable finance, both sides had opportunities to share their policy response and how they are dealing with the issue, for instance through climate risk stress test, etc. With regard to the advent of AI technology and its convergence with financial services, both sides agreed on the importance of international cooperation to build a regulatory framework that can help to maximize opportunities while minimizing risks presented by advance technologies. Meeting with Korean financial companies operating in Germany Vice Chairman Kim also held a meeting with a group of Korean financial companies doing business in Germany and had talks on local industry trend, operating condit
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Oct 31, 2024

KoFIU Unveils H1 2024 Survey Result on Virtual Asset Service Providers

The Korea Financial Intelligence Unit (KoFIU) conducted a survey on 21 registered virtual asset service providers (VASPs) to assess the current state of the domestic virtual asset market and keep relevant statistics up to date. Survey Overview (Respondents) 21 VASPs(14 exchange service providers and 7 wallet and custodian service providers) (Survey Method) Data collected from VASPs (Period Covered) January 1, 2024 to June 30, 2024 Key Survey Findings for H1 2024 The domestic market for virtual assets in H1 2024 continues to show an upward trend from H2 2023 with average daily trading volume (up 67%), market capitalization (up 27%), total amount of deposits (up 3%), and number of users eligible to trade (up 21%) all increasing from previous six months. Total operating profits (up 106%) of VASPs also went up significantly. When compared with the survey results of H2 2023, the number of virtual assets listed on exchanges declined due to increased number of coin-only exchange service providers closing down their business operations. The number of new listings by the KRW-based exchange service providers remained the same as previous six months (155), while the number of delistings went up slightly (up 7%). The number of exclusively listed virtual assetsthose tradable via single VASP in the domestic marketdropped considerably (down 14%). Maximum drawdown (price volatility) of virtual assets increased 8 percentage points from the previous six-month period to 70 percent. External transfer of virtual assets by exchange service providers also increased considerably (up KRW36.7 trillion, or 96%). Among them, those transferred to registered entities under the travel rule declined slightly (down 2%p), while those transferred to whitelisted overseas entities and digital wallets rose somewhat (up 1%p). The number of employees hired by VASPs rose 6 percent for KRW-based exchange service providers but fell 51 percent for coin-only exchange service providers due to a higher rate of b
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Oct 16, 2024

Personal Credit Management and Debtor Protection Act Takes Effect from October 17

The Financial Services Commission announced that the newly legislated Personal Credit Management and Debtor Protection Act (the Act hereinafter) will go into effect from October 17. The new legislation passed by the National Assembly at the end of last year was promulgated in January this year, and the Enforcement Decree of the Act was also approved by the government at the cabinet meeting held on October 15, paving the way for implementing the law from October 17. Background So far, the personal delinquent debt management system has been largely dependent on the public sector-driven debt workout process made available through the Credit Counseling and Recovery Service (CCRS) and the courts bankruptcy proceedings, instead of having financial companies taking preventive steps beforehand by entering into negotiations with individual debtors. In this regard, the primary focus of financial companies has been maximizing their debt collection by delegating the function of debt collection activities to third parties or selling off debt to credit businesses. When debtors fail to make repayments on schedule, they become easily exposed to the growing burden of interest payments, which places them at risk of falling into long-term delinquency and facing excessive burden over debt collection. Against this backdrop, the Act was enacted in January this year for implementation from October 17 to help prevent defaults in a preemptive manner, thereby minimizing social costs associated with personal delinquency, and to seek an appropriate balance in terms of the rights and obligations of financial companies and debt collectors on the one hand and individual debtors on the other. In this regard, the Act and its subordinate regulations mainly deal with the following provisions(a) establishing a legal ground for financial companies to provide debt workout service of their own to individual debtors, (b) easing excessive interest burden on late payments, (c) strengthening rules on the sal
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Oct 11, 2024

Household Loans, September 2024

In September 2024, the outstanding balance of household loans across all financial sectors rose KRW5.2 trillion (preliminary), growing at a slower pace compared with the previous month (up KRW9.7 trillion). * Change (in trillion KRW, m-o-m): +4.1 (Apr 2024), +5.3 (May), +4.2 (Jun), +5.2 (Jul), +9.7 (Aug), +5.2 (Sep)p (By Type) Home-backed mortgage loans rose KRW6.9 trillion, increasing at a slower pace compared with the previous month (up KRW8.5 trillion). Mortgage loans in the banking sector also rose at a slower pace from a month ago (up KRW8.2 trillion up KRW6.2 trillion). Other types of loans declined in both the banking (up KRW1.1 trillion down KRW0.5 trillion) and nonbanking (up KRW0.1 trillion down KRW1.2 trillion) sectors. (By Sector) The pace of household loan growth decelerated in both the banking and nonbanking sectors compared with the previous month. In September, banks saw an increase of KRW5.7 trillion in household loans, a slowdown from KRW9.2 trillion a month ago. This is mainly attributable to a slower pace of mortgage loan growth in the banking sector (up KRW8.2 trillion up KRW6.2 trillion), backed by the effects of implementing the second phase stressed debt service ratio (DSR) rule from September and the banking sectors self-driven moves to strengthen household loan management. Other types of loans, such as credit loans, in the banking sector edged down KRW0.5 trillion from the rise of KRW1.1 trillion a month ago. In the nonbanking sector, mortgage loans went up at a faster pace (up KRW0.3 trillion up KRW0.7 trillion) compared with the previous month, but other types of loans fell KRW1.2 trillion from the increase of KRW0.1 trillion a month ago due mainly to the effects of bad debt write-offs at the end of the quarter. Mutual finance businesses (down KRW0.4 trillion), specialized credit finance businesses (down KRW0.4 trillion), and savings banks (down KRW0.2 trillion) saw drops in household loans, while insurance companies (up KRW0.4 trillion)
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Sep 26, 2024

Revisions to FSCMA Expected to Bring About Major Improvements to Short Sale Regulations

The Financial Services Commission announced that a revision bill of the Financial Investment Services and Capital Markets Act (FSCMA) intended to upgrade rules on short sale was passed by the National Assembly at the plenary session held on September 26. The passage of the revised FSCMA by the National Assembly officially brings within legal purview the short sale reform measures that have been sought by the government since the decision to ban short sale was introduced in November last year amid concerns about frequent occurrences of naked short sale activities and their disruptive effects on markets fair pricing function. Under the revised FSCMA, institutional investors will be required to set up their own electronic short sale processing system, while both institutional and corporate investors will need to prepare relevant internal control standards. For institutional investors, there will be a new restriction on the stock repayment period for borrowed stocks. Monetary penalties that can be imposed on unfair trading and illegal short sale activities will be strengthened, and new sanctions mechanisms will be introducedsuch as a ban on trading financial investment products and restriction from being appointed or serving as an executive at listed companiesto enhance the effectiveness of punishment and sanctions. Background Since the announcement of the short sale reform proposal on June 13 this year, the FSC and related organizations have been swiftly working on follow-up measures. Prior to making revisions to the legislation, authorities have been proactively working to prepare for establishing an electronic short sale processing and monitoring system and limiting the stock repayment period for institutional investors. Since August, the Korea Exchange (KRX) has been working to set up Naked Short-selling Detecting System (NSDS), which is designed to detect and identify naked short sale activities based on the records of short sale orders transmitted by institutional
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Sep 26, 2024

Korea-Vietnam Financial Cooperation Forum Highlights Sustainable Finance and Capital Market Development

Standing Commissioner Lee Hyung Ju of the Financial Services Commission traveled to Hanoi, Vietnam from September 25 to 26 to attend the Korea-Vietnam Financial Cooperation Forum, meet with senior officials from the State Bank of Vietnam and the State Securities Commission, and have a meeting with officials from local branches of Korean financial companies operating in Vietnam. Vietnam is Koreas third largest trade partner and it hosts the second largest number of Korean financial companies following the U.S. FSC Standing Commissioners visit this time was aimed at promoting domestic financial companies and policy financial institutions business expansion in Vietnam. Korea-Vietnam Financial Cooperation Forum On September 25, FSC Standing Commissioner Lee Hyung Ju attended the Korea-Vietnam Financial Cooperation Forum held in Hanoi under the theme of sustainable finance and capital market development. The forum was jointly sponsored by the FSC and Vietnams State Bank of Vietnam and State Securities Commission. The forum was organized into two parts(a) Towards a Sustainable Future: Enhancing Korea-Vietnam Financial Synergies and (b) Capital Market Development and Transition Finance. In the opening of the first part, Standing Commissioner Lee delivered congratulatory remarks where he introduced various climate finance strategies being pursued by the Korean government, such as the guidelines on K-taxonomy, green bonds and green finance, and ESG disclosure standards. Speaking on the mutually beneficial relationship that has been maintained between Korea and Vietnam since the establishment of diplomatic ties in 1992, Standing Commissioner Lee said that he expects this forum to help build a more future-oriented financial partnership between the two countries. In the second part, Standing Commissioner Lee delivered opening remarks where he introduced Koreas recent capital market reform initiatives and key elements of Corporate Value-up Program. To make sure that growth momen
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Sep 25, 2024

Digital Asset Protection Foundation to be Set Up to Ensure Safe Return of User Funds from Closed Down VASPs

The Financial Services Commission will authorize the digital asset industrys plan to establish an organization that will be charged with the task of protecting users assets (Digital Asset Protection Foundation or the foundation hereinafter) on September 26. The industrys self-regulatory initiative led by the Digital Asset Exchange Association (DAXA) aims to protect the rights and interests of virtual asset users and establish a sound order in market transactions. The foundation will be tasked with receiving users assets transferred out from those closed down exchange service providers after a having consultation process, and then safely keeping and managing these assets, and ultimately returning them to their owners. Background To help minimize potential damages inflicted to users in the event of virtual asset service providers (VASPs) going out of business, financial authorities have made continuous efforts so far to make sure that virtual asset users are able to safety get their assets back even when their service providers go out of business. To this end, authorities introduced guidelines on the business closure of VASPsand conducted site inspections on those exchange service providers that are no longer in operation. However, despite these efforts, there are continuing concerns about the protection of users assets due to the lengthy process of returning assets to their owners. Currently, ten out of twenty-two coin market exchange operators have terminated their business operations and three others have suspended operating their businesses. For most of these companies that have gone out of business, it is practically difficult to resume or continue to run their business operation even with assistance from others. It is also difficult to assume that those closed down exchange service providers will be able to return users assets even with continuing inputs of human and financial resources. Moreover, private keys to users virtual asset wallets are stored at these e
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Sep 24, 2024

Revised Rules on Microfinance Support Expected to Increase Availability of Funds for Inclusive Finance

The Financial Services Commission announced that a revision bill for the Enforcement Decree of the Microfinance Support Act was approved by the government at the cabinet meeting held on September 24. This revision bill is aimed at ensuring stable foundations for supplying microfinance assistance to vulnerable groups as the need to provide policy-based microloan products has been growingagainst the backdrop of the continuation of challenging economic conditions, such as high interest rates and high prices. In this regard, the revised rules will temporarily (a) increase the common rate of microfinance contributions financial companies are required to make, while (b) offering an incentive of reduction in the differential contribution amounts (which are determined by financial companies subrogation rates) to those making active efforts in supplying policy-based microloan products. First, the common rate of microfinance contributions financial companies make in relation to the size of their household loans, which currently stands at 0.03 percent, will be increased by 0.005 percentage points for banks to 0.035 percent and by 0.015 percentage points for insurance companies, mutual finance businesses, specialized credit finance businesses, and savings banks to 0.045 percent. The increased common contribution rates will be in place until December 31, 2025. This is expected to help expand the availability of funds for guarantees intended to supply policy-based microfinance assistance. Second, financial companies that are making active efforts in supplying policy-based microloan products will be eligible to receive a reduction in the amount of microfinance contributions they are required to make in relation to their subrogation rates (differential contribution rates) on a temporary basis until December 31, 2025. It aims to lower financial companies burden of differential contribution amounts, which are determined by their subrogation rates, for those with outstanding records i
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