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Mar 30, 2015
- Additional KRW 20 trillion To Be Provided for the Mortgage Refinancing Program.
- The government will provide an additional KRW 20 trillion starting March 30 for the government’s mortgage refinancing program totaling KRW 40 trillion,1 after comprehensive review and consultation with relevant organizations.2We recognized mortgage borrowers’ high interest and demands to switch to fixed-rate, amortized mortgages at lower interest rates as its initial amount of KRW 20 trillion was sold out in just four days since its launch on March 24.3 The government considered it is the right time to push ahead a “Big Operation” to make the structure of household debt more stable in response to possible interest rate hikes.With the KRW 40 trillion mortgage refinancing program, the government estimates that the share of fixed-rate, amortized mortgages out of banks’ total mortgages would rise by as much as 10 percentage point. The program is also expected to reduce household debt by KRW 1.1 trillion per year as borrowers with switched mortgages worth KRW 40 trillion in total would start to repay the principal and interest payments together over a long term.The additional KRW 20 trillion is the maximum amount that the Korea Housing Finance Corporation can afford to provide additionally, given its capital capacity. There will be no further injection of funding to expand the program.Only those with floating-rate, interest-only mortgages from banks are eligible for the refinancing program. Banks will receive applications for the five working days starting March30. If the value of mortgages applied for the program exceeds KRW 20 trillion, borrowers with lower-price houses will be given a priority.We acknowledged that there is a demand for expanding the eligibility to those with fixed-rate mortgages repaying the principal. The program, however, is not to merely reduce borrowers’ debt servicing burden. The purpose of the program is to improve the quality of household loans by switching floating-rate, interest-only mortgages to fixed-rate, amortized ones.Therefo
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Mar 20, 2015
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Mar 17, 2015
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Feb 26, 2015
- Korea's Household Debt and Policy Response
- 1. CURRENT STATUS OF KOREA’S HOUSEHOLD DEBTAs of end-September 2014, outstanding household credit totaled KRW 1,060.3 trillion with household loans totaling KRW 1,002.9 trillion and merchandise credit1 KRW 57.4 trillion.2The ratio of household debt to income in Korea was 160.7 % (as of 2013), higher than 115.1% in the US(as of 2012) and 135.7% of the OECD average(as of 2012). However, Korea’s household financial assets to liabilities ratio maintained stable levels of 46%, while the ratios in Spain and other major OECD countries have been rising.The quality of household mortgage loans has been improved with proportions of fixed-rate and fully-amortized loans steadily increasing. As of end-2014, the percentage of fixed-rate and amortized loans out of banks’ household mortgage loans stood at 23.6% and 26.5% respectively, exceeding 20% initially targeted by 2014.2. POLICY MEASURES TO MANAGE HOUSEHOLD DEBT GROWTHIt is a natural phenomenon that household debt increases as economy grows. The bottom line is that it is important to boost the economy while maintaining household debt soundness.Under such awareness, the government has been managing household debt with policy measures focused on two aspects. First, secure soundness of the financial system by maintaining the pace of household debt growth at manageable levels, improving the quality of household loans and bolstering financial institutions loss-absorbing capacity. Second, ensure financial soundness of households with measures to boost household incomes and provide tailored financial services to financially-vulnerable households.The government set basic policy directions to manage household debt with「Comprehensive Measures on Household Debt」in June 2011.The policy measures were focused on maintaining the pace of household loan growth at economic growth rates; improving the quality of household loans with a larger share of fixed- rate and amortizing loans; and providing tailored support for low-income househ
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Jan 29, 2015
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Jan 27, 2015
- Plan to Support Convergence of Finance and Technology
- OVERVIEWThe convergence of IT and fin ancial sectors, or ‘financial technology’(here inafter ‘Fintech’), has emerged as a global trend. The trend also affects transaction pattern an d payment environment for domestic consumers and industries with rapidly growing c ross-border commerce and financial trans action on online or mobile platforms.Investment into the Fintech industry continues to grow around the globe, particularly in the U.S. and the U.K. with high e xpectation about the sector’s growth potential. As global IT leaders such as Alibaba and Apple entered payments market, the Fintech se rvices began to draw attention of the financial sector. Advanced countries including the U. K. actively support the growth of the Fintech indu stry to seize new growth opportunities.Korea has been less active in f ostering the Fintech sector so far due to regulatory barriers and financial security concern. As an IT powerhouse with the advanced financial industry, Korea has great potential for growth in the Fintech sector. In order for Fintech to bring innovative changes to financial services, we need to overhaul current financial regulatory framework mainly focused on offline serv ices. The FSC will also support financing of Fintech businesses and significantly lower barrier s to entry for electronic financial businesses. Financial security, however, is a prerequisite to t he growth of Fitech sector. To this end, the FS C will maintain a strict stance on security and c onsumer protection, while allowing financial service providers more room in their business o perations.1. Regulatory paradigm shift Minimization of ‘ex-ante’ regulationsSecurity review and evaluatio n for means of authentication will be abolish ed to allow financial firms to deliver consumers innovative convenient financial services and introduce more efficient authentication means on their own responsibility. (Revision to regulations related with electronic financial transaction within the second
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Jan 26, 2015
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Jan 15, 2015
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Dec 24, 2014
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Dec 04, 2014
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Nov 26, 2014
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Nov 18, 2014
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Oct 29, 2014
- Plan to Improve Financial Holding Company System
- BACKGROUNDKorea’s financial industry adopted financial holding company system in 2011 to maximize synergy among financial subsidiary companies. Since the introduction, financial holding companies have achieved notable growth and played a crucial role for the financial system. However, there are also skepticisms about the financial holding company system due to domestic financial holding companies’ low global competitiveness, asset and management structure centered by bank1, and instable governance structure.Nevertheless, financial holding company system is an effective mechanism to enhance financial industry’s competitiveness. The system creates synergies among subsidiary companies by preventing risk spillover to other financial companies2, easing MA and restructuring process, and enabling business connection among subsidiaries. Moreover, the financial holding company system enables subsidiary companies to provide one-stop financial services and expand business overseas which are expected to contribute to the development of the financial industry.To such backdrop, the Financial Services Commission plans to improve regulations and provide policy support to maximize effectiveness of the financial holding company system.DETAILED PLAN1. Ease regulations on holding concurrent positions by employees(Current) Global financial holding companies encourage heads of matrix organizations to hold concurrent positions to cover wider range of business strategy and operation. However, domestic financial holding companies have been applying strict regulations to employees related to holding multiple positions which makes them difficult to provide integrated financial services by collaborating business units.(After revision) The government will encourage financial holding companies to allow holding concurrent positions and ease related regulations. Possible negative impacts will be minimized through the Financial Supervisory Service’s stringent screening process. Positions th
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Oct 27, 2014
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Sep 29, 2014
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Aug 26, 2014
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Aug 25, 2014
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Jul 15, 2014
- Plan to Improve License System for Financial Investment Business
- The FSC announced its plan to ease regulations on license system for financial investment business, which includes integrating business units for license, currently overly subdivided, and simplifying license process.KEY DIRECTION1. Improve License System for Financial Investment BusinessIn principle, financial investment businesses will be required to apply for a business license for only when it first enters the sector. The number of business units for regulatory approval will be cut from the current 42 to 13(see the table below). Once a financial institution is granted a regulatory approval for business(①~⑬), the company will be allowed to add new business within the same sector simply through add-on registration, without any additional procedure for approval.How business units for regulatory approval will change* Please refer tothe chartin the attached PDF. Regulations regarding majority shareholders will be also revised. - (Current) Person not allowed to participate in business management due to spinoff is classified as a “specially related person” under the Financial Investment Business and Capital Markets Act(FSCMA ), which unreasonably restricts such person from becoming a major shareholder. - (Revision) If the Fair Trade Commission confirms the person not participating in management due to spinoff, the person will not be classified as a “specially related person”. - (Current) A financial firm issued with sanctions equal to or stronger than institutional warning within the ‘recent three years’ is banned from becoming a largest shareholder of a financial investment company. - (Revision) For institutional warning, the period will be shortened to from the current three years to the recent one year.Other procedural regulations on license or registration will be eased or improved. - (Current) Under the current practice, a financial investment company issued with sanctions equal to or stronger than institutional warning is suspended from applying fo
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Jul 10, 2014
- FSC Announced Its Plan for Financial Regulatory Reform
- BACKGROUNDThe FSC announced its plan for financial regulatory reform to create new opportunities and growth drivers for Korea’s financial industry and economy.The global financial industry stands at a crossroads between decline in growth and another takeoff in the aftermath of the global financial crisis. Korea’s financial industry also has difficulties in seeking for clear vision, developing new profit models, and restoring public trust in the financial sector. The financial sector is now called for reinventing itself to support the real economy, to generate high-added value, and to bring more satisfactory services to financial consumers.The FSC identified both statutory and implicit regulations which constrained the growth of the financial industry. Since March 2014, we held dozens of meetings with stakeholders – e.g. financial institutions, consumers, etc. – and conducted a survey of stakeholders to get their views on existing regulations and recommendations for improvement. We also conducted a series of reviews on a total of 3,100 financial regulations, 1,700 regulations of which were shortlisted for further reviews. Out of them, 700 regulations were finally chosen to be reformed.KEY DIRECTION FOR FINANCIAL REGULATORY REFORM1. Build a financial regulatory system for ‘better regulation’A two-track approach will be taken for financial regulatory system: 1) a rule-based approach for regulations needed to maintain systemic stability, protect financial consumers, and ensure personal data security; and 2) a principle-based approach for regulations on approving financial institution s’ entrance into business, sales channel and business operation.2. Strengthen support for the real economy and reduce financial consumers’ inconvenienceRegulations on corporate lending, guarantee, and listing will be improved to facilitate the technology credit bureau(TCB) system. For financial consumers, excessive document requirement will be eased to enhance access to fina
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Jun 23, 2014
