Financial stability is a prerequisite to innovation and inclusive finance policies. FSC maintains close market monitoring for any signs of market volatility and works to ensure stability in the financial markets. There are risk factors originating from abroad and from within. FSC focuses on making our economy more resilient from external shocks, such as a disruption in the global supply chain, and supporting Korea’s material, component and equipment industries to help boost their global competitiveness. Internally, FSC is closely monitoring the trends in household debt and seeking reforms to corporate restructuring in order to prevent domestic risk factors from turning into systemic risks. Policies aimed at increasing financial stability also include enhancing fairness in the financial markets by introducing a comprehensive legal framework for the supervision of financial conglomerates, improving market discipline and promoting transparency in corporate disclosure and accounting practices.
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Feb 01, 2024
- FSC Proposes Revision to Supervisory Regulation on Electronic Financial Services
- The Financial Services Commission proposed a revision to the supervisory regulation on electronic financial services on February 1. The revision is intended to shift the current regulatory framework from rule-based to principle-based one, allowing more room to make autonomous decisions for financial companies, and bolster the resilience of electronic financial system to disasters and cyberthreats. It has been pointed out that the current framework of the supervisory regulation on electronic financial services, which remained little changed since it was established in 2006, makes it difficult to flexibly respond to evolving security threats and encourage passive responses from financial companies. In particular, there has been a growing need for making financial industrys cybersecurity system more adaptable and resilient in response to technology advances (e.g. artificial intelligence or cloud computing) and evolving cyberthreats. Against this backdrop, the revision proposal is focused on allowing more room for financial companies to make decisions on their own on financial security matters and encouraging them to make more investment in cyber security by making financial security regulations more goal-and-principle oriented. First, the revision proposal reduces the number of rules to 166 from 293 previously to ensure that financial businesses can flexibly respond to new risks. Instead of prescriptive and exhaustive rules, the revised regulations will only present principles and goals and allow financial companies to make decisions on details on their own. For example, the revision proposal abolishes provisions specifying the method of creating users passwords and allows financial companies to adopt their own method of creating passwords and managing authentication system. Second, to bolster cyber resilience against disasters and electronic incidents, the revision proposal introduces requirements for certain types of small- and medium-sized financial companies and el
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Feb 01, 2024
- FSC Seeks to Bolster Cyber and Information Security Capacity and Resilience of Financial Industry
- The Financial Services Commission held a meeting with relevant authorities and financial companies on February 1 and announced plans to bolster cyber and information security capacity and resilience of the financial industry. At the meeting, authorities also unveiled and discussed key details of the revision proposal for the supervisory regulation on electronic financial services, which is put up for public comment until March 12. Vice Chairman Kim Soyoung of the FSC delivered opening remarks at the meeting, emphasizing on the need to establish a forward-looking cyber and information security system in the financial industry amid rapid changes taking place in digital sphere, such as cloud computing and artificial intelligence, and the evolving nature of cybersecurity threats. In this regard, Vice Chairman Kim said that it is necessary to focus on making financial industrys cybersecurity system more adaptable and resilient. To this end, the FSC will make the cyber and information security system more goal- and principle-oriented and encourage financial companies to boost their own cybersecurity capacity and bolster resilience to cyberthreats. With the revision of the supervisory regulation being proposed today, Vice Chairman Kim said that the approach to cyber and information security will shift from a narrow and compliance-focused practice of the past to a more comprehensive, proactive and self-driven one. Beginning with this rules change, the FSC will seek to revise the Electronic Financial Transactions Act in the future to strengthen financial companies self-governance responsibility over cyber and information security. Some of the key details of the revision proposal for the supervisory regulation on electronic financial service include (a) making rules simpler and allowing more room to make autonomous decisions for financial companies by reducing the number of rules to 166 from 293 previously, (b) requiring certain types of small- and medium-sized financial comp
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Jan 23, 2024
- FSC Announces a Plan to Improve the Soundness of the Convertible Bond Market
- Vice Chairman Kim Soyoung of the Financial Services Commission held a meeting with officials from relevant organizations and industry groups and announced a plan to bolster the soundness of the convertible bond (CB) market on January 23. The measures included in the plan are intended to strengthen rules on disclosure of information on the issuance and distribution of convertible bonds, making improvements to the current refixing rules and procedure, and strengthening investigation over unfair trading activities involving CBs. The FSC expects that these measures will help to address the following three oft-cited problems regarding the CB marketthe lack of transparency in the issuance and circulation of CBs, the arbitrariness in the refixing of convertible prices, and the potential misuse in unfair trading activities. In this regard, the FSC has prepared the following three measures to address these problems, taking into account opinions and suggestions raised during the public seminar held on the topic in last July. First, the disclosure of information about the issuance and circulation of CBs will be strengthened to boost transparency in the market. Authorities will seek to ensure that the types of information that can be critical to the corporate governance structure and share valuation, such as information about the entity designated by the company to exercise the call option and the plan for CB selloff close to maturity, are opened up to the public in a more transparent way. Second, the rules and procedure for refixing convertible prices of CBs will be made more reasonable. Current rules set the minimum level of refixing at 70 percent of the initial convertible price and allow companies to refix convertible prices below the minimum level only in exceptional casese.g. corporate restructuringvia securing a special resolution at a general shareholders meeting or through their articles of incorporation. However, some companies have exploited such exceptions to the ru
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Jan 18, 2024
- Strengthened Penalties on Unfair Trading Activities in Capital Markets Take Effect from January 19
- The Financial Services Commission announced that the revised Financial Investment Services and Capital Markets Act (FSCMA) and its subordinate statutes will go into effect on January 19. The revision deals with (a) introducing a penalty surcharge system on unfair trading activities, (b) legislating a method for calculating the amount of unfairly gained profits, and (c) providing a leniency to those reporting violations committed by oneself or others. The revised rules were prepared through close consultation and discussion with the Ministry of Justice, the Supreme Prosecutors Office, the Financial Supervisory Service and the Korea Exchange. The authorities expect that the changed rules will help to more effectively detect and prevent unfair trading activities and more strictly apply sanctions on illegitimate activities. First, the revision introduces a penalty surcharge system on unfair trading activities and enables authorities to impose a penalty surcharge of up to twice the amount of unfairly gained profits (maximum KRW4 billion when there is no illicit profit made or it is impossible to calculate an amount). Previously, only criminal penalties were available as a method of sanctioning unfair trading activities, which usually took long time to reach a decision by the court with the strict application of burden of proof. With the introduction of penalty surcharge, a speedier and more effective sanctioning will now be possible on unfair trading activities. In terms of the procedure for imposing a penalty surcharge, in principle, the FSC is able to impose a penalty surcharge after receiving an outcome of investigation from the prosecution service. However, when the matter has been consulted with the prosecution service or if it has been more than a year since the case was first reported to the prosecution service, the FSC is allowed to impose a penalty surcharge even before receiving an investigation outcome from the prosecution service. Second, the revision establi
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Jan 18, 2024
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Jan 10, 2024
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Jan 08, 2024
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Dec 28, 2023
- Authorities Hold Meeting to Discuss Corporate Debt Workout of Taeyoung Engineering and Construction
- The Financial Services Commission held a meeting with the related authorities and financial institution on December 28 to discuss measures to help business normalization of Taeyoung Engineering Construction and minimize the impact as the company filed for a debt workout under the Corporate Restructuring Promotion Act today. Since the turmoil in the real estate project financing (PF) market last year, the government has been closely monitoring market developments and financial conditions of major construction companies. Taeyoung EC has been faced with financial difficulties as it was struggling with refinancing its real estate PF loans and asset-backed securities amid global tightening of monetary policies. In particular, unlike other construction companies, it was found that Taeyoung EC had a high proportion of self-performed projects as well as high levels of debt-to-equity ratio and PF loan guarantees. These factors show particular characteristics of Taeyoung EC, which remain different from other companies situations. In this regard, the authorities at the meeting agreed that there is no possibility of a systemic risk across the construction sector or financial market as long as there is no spread of anxiety. Taeyoung EC has already demonstrated self-rescue efforts by coming up with KRW1 trillion on its own and submitted further plans to sell its subsidiaries and other assets. The company is currently working on its debt workout plan with Korea Development Bank, its main creditor bank, which will work on business normalization of Taeyoung EC based on the companys strong commitment to self-rescue efforts. As of the end of September 2023, there were sixty real estate PF development sites under management of Taeyoung EC. Based on the type and the progress of each project, various arrangements and solutions will be employed to either continue to carry out projects or seek restructuring or sale. At the meeting, Chairman Kim Joo-hyun of the Financial Services Commission
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Dec 27, 2023
- Stressed Debt Service Ratio Rules to Take Effect in 2024
- The Financial Services Commission announced that the stressed debt service ratio (DSR) rules will take effect in 2024 on all types of loans that have variable, mixed or periodically changing interest rate structures. The stressed DSR system imposes a certain level of additional stress rate when calculating the borrowers DSR as it takes into account the possibility of the borrower facing heavier repayment burdens in the future with increases in interest rates. The additional stress rate will be determined based on the comparison of interest rates between the five-year peak level and the present level (as of May and November of every year). However, to buffer against the possibility of overestimating or underestimating the risk associated with interest rate changes in times or both high and low interest rates, the additional stress rate will be decided between a minimum of 1.5 percent and a maximum of 3.0 percent. For loans with variable interest rates, an additional stress rate of the five-year peak rate minus the present rate will be applied. For loans with mixed interest rate structuresthose with a fixed interest rate for a certain period of time first and changed into a variable interest rate structure thereafterthe longer the period of fixed interest rate structure, the lower the level of additional stress rates. For instance, for 30-year loans, if the period of fixed interest rate is set between five to nine years, the additional stress rate will be applied at a 60 percent level. For the fixed rate terms of nine to fifteen years and fifteen to twenty-one years, the additional stress rate will be applied at a 40 percent level and a 20 percent level, respectively. For loans with periodically changing interest rate structures, additional stress rates will be applied at eased levels. For 30-year loans, if the period of interest rate change is five to nine years, the additional stress rate will be applied at a 30 percent level. For those with nine-to-fifteen-years an
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Dec 26, 2023
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Dec 22, 2023
- Authorities Plan to Set Up Taskforce to Effectively and Flexibly Respond to ELS Market Anxiety
- The Financial Services Commission and the Financial Supervisory Service held a meeting on December 22 to check current situation regarding the sales of Hong Kong index-linked equity-linked securities (ELS) by domestic financial institutions. They have recently been a source of anxiety for investors following sharp declines in Hong Kongs Hang Seng China Enterprises Index (HSCEI). At the meeting, the authorities reviewed the status of sales of ELS products linked to HSCEI and ways to effectively handle potential loss to investors. As of November 2023, the total volume of Hong Kong index-linked ELS products sold to investors amounted to KRW19.3 trillion. Among them, about 82.1 percent or KRW15.9 trillion were sold by banks. Most of the ELS products considered to be problematic are the ones issued after early 2021 when the HSCEI was at its peak. These ELS products are set to mature in early 2024 with the potential of inflicting loss to investors. To prepare for this possibility of investor loss, the financial authorities have instructed the sellers of these Hong Kong index-linked ELS products to come up with response strategies. In addition, from the end of November 2023, the FSS has been conducting inspections on the twelve major banks and securities firms to closely scrutinize their marketing process, sales incentives and so on. Moreover, to be able to effectively and flexibly deal with various situations arising from potential investor losses, the authorities will set up and operate a taskforce run by the FSS to handle consumer complaints and mediation of conflicts and to carry out inspections and take needed actions on the sellers. At the meeting, FSC Secretary General Lee Se-Hoon said that the authorities will closely communicate with the market to ensure the availability of relevant information needed in the market, so that there is no increase in market anxiety concerning the Hong Kong index-linked ELS products. Secretary General Lee also added that based on the
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Dec 20, 2023
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Dec 20, 2023
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Dec 08, 2023
- Financial Company Executives to be Subject to Enhanced Internal Control Management Responsibilities
- The Financial Services Commission announced that a revision bill of the Act on Corporate Governance of Financial Companies was passed by the National Assembly on December 8. The revision requires financial companies to assign a responsibilities map for each executive officer in his or her line of work and revamps the ways in which executive members internal control management duties are examined. Under the current legal framework, which came into force in 2016, financial companies are required to establish their own internal control standards, but this has often been treated as a perfunctory and procedural matter, without the effect of bringing about real change from the employees or management. In this regard, the revised law aims to resolve this problem by clearly designating internal control responsibilities of executive members to ensure that all financial company executives treat internal control matters as their own responsibilities. First, the revision introduces a responsibilities map for all executive officers. This is not a uniform regulatory requirement imposed by the financial authorities. By having financial companies to set up and operate an internal control system on their own according to their own needs and circumstances and by having the responsibility of each executive officer clearly assigned, this measure aims to raise awareness and responsibility of executive officers about their internal control system. More specifically, CEOs of financial companies will need to prepare a responsibilities map showing how internal control responsibilities are shared and divided among their company executives, without having any redundancy or a vacuum, for confirmation by the board and submission to the authorities. In this regard, financial companies will also be required to verify the professional capacity, accountability and trustworthiness of their executive members. Submission of the responsibilities map will begin six months after the law takes effect star
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Dec 08, 2023
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Dec 06, 2023
- FSC and FSS Hold Meeting with Insurance Businesses
- Chairman Kim Joo-hyun of the Financial Services Commission met with the CEOs of major insurance businesses along with Governor Lee Bok-hyun of the Financial Supervisory Service on December 6 as part of a series of meetings scheduled with financial sectors to ensure close communication and mutual understanding with the industry. In his opening remarks, Chairman Kim first talked about the importance of corporate social responsibility among insurance businesses. As consumers are currently facing difficult financial situations due to high interest rates and inflation, Chairman Kim said that insurance businesses could place more efforts to help alleviate the difficulties experienced by their customers. Second, Chairman Kim talked about changes taking place in the insurance sector with the adoption of IFRS 17changes not only in accounting practices but also in their product development, asset and liability management and sales strategies. In this regard, Chairman Kim said that insurance businesses should work to ensure that these changing practices are not solely focused on boosting their financial performance, but instead, insurance companies should also work on building long-term trust with their customers. Lastly, Chairman Kim talked about the importance of finding new ways to ensure growth amid low birth and aging population and digital transformation. In this regard, Chairman Kim said that the government will provide support for innovation and growth of the insurance industry through regulatory improvements. At the meeting, insurance businesses and the industry groups shared the same view about the need to strengthen corporate social responsibility and said that the insurance sector will work to introduce specific measures after having an industry-wide coordination. * Please refer to the attached file for details.
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Nov 29, 2023
- FSC Proposes Measures to Improve the Early Loan Repayment Charge System in the Banking Sector
- The Financial Services Commission announced a plan to improve the early loan repayment charge system in the banking sector on November 29 after having a series of consultation with banks between October and November. The proposed measures intend to make banks early repayment fees more reasonable and transparent for consumers. Currently, under the Act on the Protection of Financial Consumers, it is prohibited in principle for banks to impose early repayment charges on loans, although the law allows them to charge early repayment fees if the borrower make repayments within three years from the date of loan issuance. In this regard, banks charge early repayment fees to make up for the loss expected from interest profits and to compensate for relevant administrative costs. On average, the volume of early repayment fees received by banks amount to about KRW300 billion every year. However, there have been complaints about the fact that the banks early repayment fee system is being operated in a uniform way and that it fails to take into account the actual costs incurred by individual banks in a realistic way. For instance, the early repayment fee rates charged on home mortgage loans by five major banks are currently 1.4 percent for fixed interest rate loans and 1.2 percent for variable interest rate loans across the board. On the contrary, examples from overseas cases show that banks early repayment charges can be operated in various ways while taking into account the actual cost and particular operational needs of banks. Therefore, the authorities plan to revise the relevant supervisory rules and best practice guidelines and strengthen disclosures to make the current early repayment charge system more reasonable and transparent. First, a set of guidelines will be established to ensure that banks charge early repayment fees reflecting only the necessary costs actually incurred in the process of handling loan products. For instance, the guidelines will reflect the cost dif
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Nov 27, 2023
- Authorities Meet with the Banking Sector and Hold Talks on Boosting Integrity, Social Responsibility and Innovation
- Chairman Kim Joo-hyun of the Financial Services Commission met with the heads of major banks along with Governor Lee Bok-hyun of the Financial Supervisory Service on November 27 as part of a series of meetings scheduled with financial sectors until the end of this year. In his opening remarks, Chairman Kim talked about boosting integrity, social responsibility and innovation in the banking sector, emphasizing that the public needs to be able to trust bank employees, believe that financial services from banks are available for them in times of difficulty, and see that banking services are adopting high-tech and innovative technologies. With regard to the revision bill of the Act on Corporate Governance of Financial Companies currently moving through the National Assemblys legislative process, Chairman Kim said that this revision will help to establish an awareness among bank employees about the need to attend to their business more ethically. On the issue of household debt, Chairman Kim said that, from the standpoint of ensuring a sustainable growth in the economy, the role of the banking sector is important to effectively manage household debt growth. The seventeen domestic banks attending the meeting today are planning to draw up specific measures to help reduce the interest payment burden of small businesses and the self-employed. The banking sector also pledged to make efforts to establish appropriate internal control practices expected from them in preparation for the implementation of the revised Act on Corporate Governance of Financial Companies. The FSC and the FSS plan to hold subsequent meetings with nonbank financial institutions to ensure close communication and mutual understanding with the industry. * Please refer to the attached file for details.
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Nov 23, 2023
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Nov 21, 2023
- KoFIU Advises VASPs to Inform Customers about Business Closure One Month before Expected Termination Date
- The Korea Financial Intelligence Unit (KoFIU) issued recommendations for virtual asset service providers on November 21 that those expected to terminate their business operation should inform their customers about the business closure plan at least one month prior to the expected termination date. More specifically, when deciding to terminate their business operation, VASPs are first advised to establish an internal process to minimize potential damage or loss to virtual asset users, addressing issues such as the issuance of advance notice to their customers, provision of support for deposit/asset withdrawal, handling of user data and remaining user assets, etc. Second, when a business closure is in sight, VASPs are recommended to notify their business termination plan at least one month before the expected termination date communicated via website and to the users individually. After notifying, they should immediately halt signing up new users or accepting deposits. In addition, they should set up a plan and allow a sufficient timeframe (for instance, for at least three months) for their customers to withdraw deposits (in cash or virtual asset). Third, the VASPs facing business termination should handle their customers user data and other relevant data as required by related laws. Fourth, virtual asset users are advised to check the operating status of their service providers to avoid any loss or damage. If they find that their service providers are no longer in operation, they should check their assets in custody and seek immediate redemption. The KoFIU will closely monitor VASPs to ensure that their business termination does not cause damage to users and carry out site inspections when deemed necessary. The authorities will also thoroughly check whether the VASPs facing business termination are faithfully carrying out measures to ensure user protection. * Please refer to the attached file for details.
