Press Releases - Financial Services Commission

Press Releases

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Feb 01, 2018

Plan for Comprehensive Supervision of Financial Conglomerates

The FSC outlined its plan to introduce a comprehensive supervisory framework for financial conglomerate, one of the government’s financial reform agendas.The plan is to set out key policy tasks and principles for the supervision of financial conglomerates.ObjectivesThe comprehensive supervisory scheme is intended to capture and manage a full spectrum of their group-wide risks that conventional sectoral supervision cannot fully address. With the introduction of comprehensive supervisory framework, the FSC intends to close regulatory gaps between holding and non-holding types of financial groups by applying the same standards corresponding to their risks.The comprehensive supervisory scheme will also help prevent any possible contagion of group-wide risks into financial affiliates.Key Policy Tasks1. Comprehensive Supervisory Scheme► Scope of applicationAny group of companies with financial affiliates of KRW5 trillion or more in assets in at least two sectors of banking, insurance or securities will be subject to comprehensive supervisory rules.※ Financial holding companies, already regulated by the Financial Holding Company Act, and financial groups whose other financial business besides their main financial business is below a certain threshold (e.g. 5%) of assets or equity capital of the group or of the sector’s market share will be excluded.► Realignment of supervisory frameworkA consultative body, which consists of a group-level supervisory department and sectoral supervisory departments in the group’s financial affiliates, will be created to clarify responsibilities and facilitate coordination in group-wide supervision.► Reporting and disclosure requirementsA financial conglomerate under comprehensive supervision will be required to report its group-wide capital adequacy and aggregate risk management to the supervisory authorities on a regular basis and disclose the information to the public.2. Comprehensive Risk Management Scheme► Comprehensive r
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Jan 23, 2018

Financial Measures to Curb Speculation in Cryptocurrency Trading

The FSC announced measures that only allow cryptocurrency trading through real-name bank accounts linked to cryptocurrency exchanges and introduced a guideline to prevent cryptocurrency-related money laundering (hereinafter ‘Cryptocurrency-related AML Guideline’), as part of the government-wide efforts to curb cryptocurrency speculation and prevent cryptocurrencies from being exploited for illegal activities.Real Name Policy in Cryptocurrency TransactionsBanks will switch to real name policy starting from January 30 that only allows cryptocurrency trading through real-name bank accounts linked to cryptocurrency exchanges. Under the new rule, users who want to make cryptocurrency transactions must have a bank account under their real name at the same bank with cryptocurrency exchanges. Those who do not have their real-name account at the same bank will only be allowed to withdraw money from their existing bank account. To make new deposits, they are required to open a new bank account under their real name at the same bank with the exchanges.These are intended to make sure banks indentify their customers and comply with their anti-money laundering (AML) obligations relating to cryptocurrencies. Minors under the age of 18 and foreigners will not be allowed to open new bank accounts linked to cryptocurrency exchanges to deposit their money for cryptocurrency trading. Once the real name policy comes into force on January 30, existing anonymous bank accounts that have been used to trade cryptocurrencies will no longer be in use.Cryptocurrency-related AML GuidelineThe KoFIU and the FSS conducted joint inspections from January 1 to 16 on six commercial banks that offer bank accounts to cryptocurrency exchanges,1 and found a number of loopholes in banks’ compliance with AML regulations. Based on the results of our inspections, the KoFIU came up with a ‘Cryptocurrency-related AML Guideline’ to address such loopholes and clarify obligations and responsibilities of f
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Jan 15, 2018

Financial Policy Roadmap for 2018

The FSC announced its financial policy roadmap for 2018 outlining financial policy plans to promote innovation in finance and support innovation-led, sustainable growth for the Korean economy. We put our focus on the following four key policy tasks:- trustworthy finance with financial reforms and fair market order- productive finance to support innovation-led growth for the Korean economy- inclusive finance to better serve those underserved or marginalized- innovative finance to promote competition and innovation in financial servicesPolicy FocusI. Trustworthy financeThe FSC will continue our reform efforts across the financial sector to regain the public’s trust in finance. Financial regulators will take the lead with more transparency and credibility in our regulatory practices. We will work together with financial institutions and other market participants to reform improper business practices and ensure fair market order.► Better governance in financial institutionsThe FSC will improve governance in financial institutions to ensure transparency in CEO succession procedure; expertise and independence of external directors; and active participation of minority shareholder. Details will be announced in February.► Consolidated supervision on ‘financial conglomerates’The FSC will introduce a consolidated supervisory system on the so-called financial conglomerates, corporate groups with financial affiliates of over KRW 5 trillion in more than two sectors – e.g. insurance and securities, etc. The new supervisory scheme is designed to manage soundness and risk of financial affiliates at the group level in a systematic and consolidated manner. Details will be announced in February.► Advancement in corporate governanceThe FSC will devise policy and regulatory incentives to encourage further adoption of stewardship code by institutional investors. Mandatory disclosure of corporate governance reports will be phased in for listed companies, starting with large
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Jan 11, 2018

Measures to Vitalize Kosdaq Market

The FSC announced measures for vitalizing the Kosdaq market to support the growth of start-ups and venture businesses. The measures are aimed at overhauling KOSDAQ listing requirements, strengthening Kosdaq’s competitiveness to compete with the KOSPI market, and improving market soundness and investor trust in Kosdaq.Key Measures1. Incentives to attract institutional investors▪ A new fund of KRW 300 billion, named ‘Kosdaq Scale-up Fund’ will be created with investments by the Korea Exchange (KRX), Korea Securities Deposit and relevant securities industry organizations to invest in Kosdaq-listed companies. 1st half of 2018▪ A new market index, named ‘KRX300,’ that incorporates Kospi and Kosdaq-listed companies will be introduced. Feb. 20182. Overhaul of Kosdaq listing requirementsKosdaq listing requirements will be revised in a way that puts more focus on a company’s growth potential. 1st half of 2018▪ Some requirements that hinder listings of start-ups will be abolished. To get listed on Kosdaq under the current rules, a company must generate profits from continuing operations and shall not be in a condition of capital impairment. Such requirements actually act as obstacles to listings of start-ups. It usually takes a considerable period of time for start-ups to generate profits; and some may undergo even capital erosion in the early stage of their business.▪ Listing requirements will be eased to allow Kosdaq listing of a company if the company meets certain threshold requirements in one of three criteria: pre-tax profit, market capitalization and equity capital.▪ To facilitate more listings under the so-called ‘Tesla standard,’1 underwriters with a track record of such listings will be exempted from the rules that oblige them to buy back shares for 90% of their IPO price if retail investors exercise their put-back options within a certain period of time, from one to six months, following the IPO.3. Kosdaq’s autonomy and independenceThe K
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Jan 08, 2018

KoFIU and FSS Inspect Banks over Cryptocurrency Trading Accounts

Korea Financial Intelligence Unit (KoFIU) and Financial Supervisory Service (FSS) started to carry out joint inspections today on six commercial banks that are offering trading accounts to cryptocurrency exchanges in Korea. The inspectors will look into whether the banks comply with their anti-money laundering (AML) obligations in their transaction with cryptocurrency exchanges; and whether they have in place appropriate measures to verify their customers’ identification in regard with cryptocurrency trading.Cryptocurrencies are highly likely to be used as a means to money laundering due to their nature of anonymity and non-face-to-face transaction. Particularly, the so-called ‘virtual accounts’ offered to cryptocurrency exchanges have been making it more difficult to identify real names of account holders, and leaving cryptocurrency trading more vulnerable to crimes and money laundering. In this context, banks are required to assume a greater responsibility as gate keepers to prevent such illegal activities using cryptocurrencies.Anti-money laundering measuresIn regards to the banks’ compliance with AML obligations, the KoFIU and FSS will inspect:1. whether they have in place internal controls and risk assessment in regard with money laundering risks by cryptocurrency exchanges;2. whether they conduct customer due diligence in regard with cryptocurrency exchanges;3. whether they have faithfully fulfilled obligations to report suspicious transactions.Real name verification systemTo make sure the ‘real name’ policy in cryptocurrency trading can come into force this month, the inspections will focus on:1. whether banks have in place electronic systems to check whether the name of a deposit account holder matches that of a virtual account holder;2. whether they have in place appropriate measures to stop transactions if cryptocurrency exchanges refuse to provide customers’ information;3. whether they have in place appropriate measures to refuse transaction
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Nov 21, 2017

The 4th UK-Korea Financial Cooperation Forum Held in Seoul

The Korean Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) hosted the fourth UK-Korea Financial Forum in Seoul today with the UK Treasury, the Financial Conduct Agency (FCA) and the British Embassy. The annual event, which took place alternately in London and Seoul since 2014, has served as an occasion to deepen cooperation between the UK and Korean financial regulators and expand business opportunities for both countries’ financial companies.This year’s forum focused on new challenges facing financial services sectors in both countries: falling fertility rates, ageing population and evolving technology. These changes will bring opportunities as well as threats to the financial sector. In this context, topics of this year’s forum included “the Future of the Insurance and Pension Industries” and “How to Promote Innovation in Financial Services.” The forum was attended by Korean and UK officials, financial companies and fintech businesses.In his opening speech, Choi JongKu, Chairman of the FSC said, “The UK has traditionally been a leader in finance and continues to lead in recent trends including fintech, which provides useful policy implications for Korea.” He also stressed the importance of continued cooperation in dealing with new risks that might come from the development of digital finance.In the following session, Andrew Bailey, Chief Executive Officer of the FCA delivered a speech titled “Public Policy Challenges for Consumer Protection Regulators.” In his speech, Mr. Bailey shared the findings and policy implications from the Ageing Population Project, which the FCA launched in February in 2016 to explore how the ageing population would impact the financial services industry. He emphasized the role of financial regulators needs to evolve, corresponding to changes in financial services with ageing population.On the sidelines of the forum, FSC Chairman Choi JongKu held a meeting with UK officials including K
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Oct 24, 2017

Comprehensive Measures for Household Debt Management

The government announced a comprehensive scheme to manage household debt in an effort to reduce financial risks in the short-term; and strengthen macroeconomic soundness, boost household income and repayment ability in the mid-to-long term.I. BACKGROUND: ASSESSMENT OF THE CURRENT CONDITIONSouth Korea’s household debt is unlikely to cause a systemic risk:▪ Household debt repayment ability is sufficient enough to keep default risks limited. Households’ net assets continue to increase as their property assets grow with mortgages The top 20 % of income earners owns 70% of household debt.▪ The soundness of household debt has improved as the proportion of fixed-rate and amortized loans increased.▪ Financial institutions have sufficient capacity to absorb unexpected losses, if any. Delinquency rates on household loans are kept low. Banks’ BIS ratio is 15.4% as of end-June 2017, exceeding the BIS requirement of 9.125%.▪ The pace of household debt growth began to slow as tighter screening standards for household loan applications apply across all the financial sectors.▪ The OECD and credit rating agency SP also evaluated that South Korea’s household debt is unlikely to pose a systemic risk, citing improvement in the quality of household debt with a growing share of fixed-rate and amortizing mortgages out of total household loans.However, some groups of borrowers, particularly whose debt repayment ability is highly limited, remain vulnerable to possible rate hikes.II. KEY POLICY MEASURESPOLICY REPSONESE TAILORED FOR CHARACTERISTICS OF BORROWERSThe government will provide tailored assistance for each grouping of borrowers according to their debt repayment capability.▪ (Group A) Borrowers with sufficient debt repayment ability- Policy focus will be on boosting household income and managing financial soundness ▪ (Group B) Borrowers who pay their debt on schedule but feel financially distressed- Policy responses will be focused on preventing deli
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Sep 28, 2017

Revision to the Act on External Audit of Stock Companies

I. BackgroundThe Act on External Audit of Stock Companies (hereinafter referred as “the Act”) has gone through major improvements since the bill was enacted in 1981. Among them, the latest revision, passed by the National Assembly on September 28, 2017, is the most far-reaching reform of Korea’s accounting and audit practices, compared to a Korean version of the Sarbanes-Oxley Act. To deter a repeat of major accounting scandals in recent years, the revised bill contains fundamental changes in a wide range of issues, including external auditor independence, corporate accountability, and penalties against wrongful acts. Those changes will set higher standards for all stakeholders in their role, including companies, auditors and financial regulators, to further advance Korea’s accounting reform efforts. The revised bill will take effect November 1, 2018, one year after the date of its promulgation.II. Key ProvisionsCompanies, greater accountability and stronger internal control1. The scope of companies subject to external audit, currently limited to ‘stock companies’ under the Act, will be expanded to include ‘limited liability companies (LLCs).’* Specifics about companies subject to external audit and the scope of disclosure of audit reports will be delegated to the subordinate Enforcement Decree of the Act.2. The right to appoint an external auditor, currently exercised by the company’s management, will be transferred to internal audit organizations such as the ‘statutory auditor’ or the ‘audit committee.’3. Companies will be held more accountable for preparation of their financial statements.► A company shall not require an external auditor to prepare financial statements on its behalf.► If a company fails to submit financial statements to the external auditor and the Securities and Futures Commission (SFC) within the statutory deadline, six weeks before the general meeting of shareholders, the company’s representative director shall
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Aug 24, 2017

Rules on Overheated Short Sale Issues to be Amended

The FSC and Korea Exchange (KRX) announced a plan to amend regulations regarding overheated short sale issues, which came into force on March 27, 2017, in a bid to better detect overheated short sales and toughen penalties on violations of short-selling rules.For the past four months since the rules on designation of overheated short-selling stocks were introduced in March, KRX suspended trading of “overheated short–selling stocks” five times on the KOSPI market and six times on the KOSDAQ market.However, it has been pointed out that the criteria for designation of overheated short-sale issues are too narrow to verify more short sales deemed overheated2; and penalties for violations of short sale rules are too lenient to be effective.PROPOSED AMENDMENTSI. AMENDING CRITERIA FOR DESIGNATING “OVERHEATED SHORT-SELLING ISSUES”1. Key changesCurrently, short-sale issues are designated as “overheated issues” when:(i) short-selling value of a trading day accounts for 20% or more(KOSPI) and 15% or more(KOSDAQ) of total trading value of the day;(ii) the proportion of short sales value of the day increases 100% or more, compared to the average of the 40 trading days; and(iii) the stock price falls 5% or more, compared to the closing price of the previous day.The criteria will be amended to detect overheated short sale issues in a bull market and adjusted periodically depending on market situations.(i) The “proportion of short-selling” criterion3 will be lowered from the current 20% to 18% (KOSPI); and from 15% to 12% (KOSDAQ) out of total trading value of the day.* The criterion will not be applicable to issues whose price experiences a sharp drop of more than 10%; or KOSDAQ-listed issues whose proportion of short sales of a trading day accounts for more than 5% of the average of the preceding 40 days.(ii) The “increase rate of short-selling value” will replace the criterion of “increase rate of short selling proportion”* Short sale issues are designat
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Aug 02, 2017

FSC Tightens Mortgage Rules to Curb Speculative Demand in Housing Market

The government announced a package of measures that designate some “overheated” or “bubble-prone areas” in Seoul, Busan and other major cities and discourage speculative buying in the designated areas. As part of the government’s effort, the FSC will tighten loan-to-value (LTV) and debt-to-income (DTI) rules to curb speculative demand in the housing market.MORTGAGE RULES TO BE TIGHTENED IN BUBBLE-PRONE AREASLTV and DTI ratios will be tightened to 40% for home buyers in the designated regions, regardless of types of housing, amount and maturity of such mortgages.※ To protect real demand for housing, the ratios of both LTV and DTI will be relaxed to 50% for first-home buyers, low-income households with annual income of less than KRW 60 million, or low-price housing of less than KRW 600 million.TIGHTER MORTGAGE RULES FOR MULTIPLE HOME OWNERSFor mortgage borrowing by a household to own multiple homes, LTV will be tightened by a further 10%p across the country, while DTI will be tightened by 10%p for home buyers in the designated areas.FSC Chairman Choi Jongku immediately convened an extraordinary session with FSC commissioners to discuss needed revisions to relevant regulations so that new mortgage rules could become effective as soon as possible. Chairman Choi also held a meeting with heads of the FSS and financial institutions to ask closer monitoring to make sure expected tightening of mortgage rules should not result in a sudden surge in borrowing before the new rules take effect.* Please read the attached file for details.
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Jul 27, 2017

Korea's Second Internet-only Bank Open for Service

KakaoBank, Korea’s second internet-only bank, officially launched for service on July 27 after twenty months of preparation since the FSC granted preliminary approval.KakaoBank provides various financial services including account establishment, overseas remittance, and purchasing financial products 24 hours a day via mobile devices. In particular, the bank offers overseas remittance charge of only 10% that of commercial banks. It also plans to provide innovative financial services using big data and asset management using artificial intelligence(AI)-imbedded personal financial assistance program.*Please read the attached file for details.
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Jul 26, 2017

FSC Chairman Announces Financial Policy Roadmap

FSC Chairman Choi Jongku had his first meeting with the press since taking office and announced financial policy direction under the Moon Jae-in administration. The FSC will ensure (a) funds are channeled into more productive and innovative businesses, and (b) enhance financial accessibility for the financially-marginalized in a bid to establish a strong foundation for sustainable economic development.Funds channeling into productive businesses1. Financial industry as job creatorPolicy finance system will be overhauled so that necessary funds are effectively channeled into innovative businesses and sectors related to the fourth industrial revolution which have significant job-creating potentials. Companies with competitive technology and innovative idea will be enabled to take out loans with non-tangible assets such as patent and future sales as collateral. Moreover, the FSC will come up with measures in September for non-regular workers at public financial institutions to sign a full-time contract.2. Create quality jobs through financial innovationThe FSC will announce in the second half this year measures to encourage steady job creation in the financial sector through development of new innovative financial technology and services. Moreover, financial business licensing procedures will be improved to ease innovative financial companies’ entrance to the market.3. Overhaul financial system to facilitate investment into productive areasCapital regulations of each financial business sector will be overhauled to ensure investments are made into productive areas. Financial institutions will be encouraged to reasonably and transparently set interest rates at their own risk.4. Vitalize capital market investment for household income growthCapital market investment will be vitalized to help households accumulate wealth. The government will create a system that efficiently and stably manages household wealth such as enacting individual pension plan act5. Stably manage hou
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Jun 28, 2017

FSC Identifies D-SIBs for 2018

The FSC identified on June 28, 2017, four bank holding companies and one bank as domestic systemically important banks (D-SIBs) for 2018: Shinhan Financial Group, Hana Financial Group, KB Financial Group, NH Financial Group and Woori Bank.Under the D-SIB framework of the Basel Committee on Banking Supervision (BCBS), the D-SIB higher loss absorbency requirement is phased in by 0.25% per year from 2016 to 2019. Therefore, those identified as D-SIBs for 2018 are required to set aside an additional common equity capital of 0.75%, and the higher loss absorbency requirement will take effect on January 1, 2018.The BIS ratio for the identified D-SIBs at the end of March 2017 exceeds the minimum capital adequacy ratio1. Therefore, there is no actual burden at present for the identified D-SIBs to set aside additional capital.The FSC will identify D-SIBs every year in accordance with assessment criteria recommended by the BCBS.*Please read the attached file for details.
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Jun 21, 2017

FSC Held Market Monitoring Meeting on Results of MSCI 2017 Market Classification Review

FSC Vice Chairman Jeong Eun-bo held a meeting on June 21 with officials from relevant agencies to discuss the impact of the MSCI’s 2017 Market Classification Review and the government’s responses.INCLUSION OF CHINA A-SHARES INTO MSCI EMERGING MARKET INDEXIn its annual market review, MSCI decided to include China A-shares, 222 large-cap stocks of Chinese companies listed in either Shanghai or Shenzhen, into the MSCI Emerging Market (EM) Index.IMPACT ON KOREA’S FINANCIAL MARKETAs the inclusion of China A-shares increases China’s weighting in the MSCI Emerging Market Index, Korea’s weight in the same index is expected to decrease by 0.23 %p from its current 15.5%. Given the amount of funds tracking MSCI EM Index, which ranges between KRW 250 trillion (USD 230 billion) and KRW 1,900 trillion (USD 1.8 trillion), Korea may experience possible outflow of KRW 600 billion to KRW 4.3 trillion from the equity market.The FSC, however, sees MSCI’s decision will have a limited impact on the Korean stock market for the following reasons:▪ The change will be actually reflected in the MSCI EM Index in a year, from June 2018.▪ The amount of global funds investing in emerging markets continues to increase, recording a net inflow of USD 18.1 billion into emerging markets from April to May 2017.▪ Given that the Korean stock market attracted a net foreign capital inflow of KRW 9 trillionin the first five months this year alone, the amount of possible outflows (max. KRW 4.3 trillion) is not so significant.GOVERNMENT’S RESPONSESThe government will keep monitoring the impact of the MSCI’s decision to include China A-shares into its emerging market index on the Korean equity market. We will also continue our policy efforts to improve global competitiveness and attractiveness of our capital markets, and consultation with MSCI in regard with the inclusion of Korea on the list for potential reclassification to the MSCI Developed Market Index.* Please read the attached file
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Jun 14, 2017

Credit Card Merchant Fees To Be Lowered For More Small Merchants

The FSC proposed amendments to the Enforcement Decree of the Specialized Credit Financial Business Act to lower credit card merchant fees for small businesses with annual sales of KRW 500 million or less. Currently, preferential rate of 0.8% is applied to small merchants with sales of less than KRW 200 million; 1.3% to those with sales of less than KRW 300 million. The amendments proposed to raise sales threshold for preferential rates so that more small merchants and businesses can benefit from low preferential rates.CHANGES TO ANNUAL SALES THRESHOLD FOR PREFERENTIAL RATES▪ small merchants for preferential rate of 0.8%:KRW 200 million (current) → KRW 300 million (amended)▪ small and medium-sized business for preferential rate of 1.3%: KRW 300 million (current) → KRW 500 million (amended)The amendments are expected to save merchant fees of about KRW 350 billion per year for small merchants whose annual sales range from KRW 200 million to KRW 500 million.The amendment proposal will be open for public comments until June 26 and submitted to the Cabinet for final approval in late July to take effect in August.* Please refer to the attached PDF for details.
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Apr 13, 2017

New Approach to Corporate Restructuring

FSC Chairman had a meeting with CEOs of commercial banks on April 13 to set out a new approach to corporate restructuring. The new approach was outlined to complement the existing framework of corporate restructuring; and to shift its focus to more market-based restructuring schemes, in which capital market players including private equity funds (PEFs) play a bigger role in corporate restructuring.I. BACKGROUNDThe existing system led by creditor banks has limits as companies today, which used to heavily rely on bank loans, are increasingly using capital markets for fundraising via issuance of corporate bonds or commercial papers (CPs). Such a change made the process of adjusting the interests of creditors more complex and difficult. Against this backdrop, the FSC outlined a new approach to corporate restructuring aimed at improving the current restructuring system led by creditor banks and stimulating capital market-based restructuring schemes through PEFs.II. NEW APPROACH TO CORPORATE RESTRUCTURING1. Credit Risk Evaluation System To Be Improved▪ Banks will be required to revise their credit risk evaluation models and procedures withinthe second half of this year to make more accurate and rational evaluations so that they could sort out troubled companies to be put under restructuring in a timely manner.▪ For companies under a workout program led by creditor banks, banks will have to adoptstricter evaluation standards to decide whether to continue the workout program or not. If the workout program proved inefficient, the company undergoing the workout would swiftly turn to alternative schemes such as a buyout plan led by PEFs or court receivership including the newly-introduced ‘Pre-packaged Plan’ (or ‘P-Plan’).▪ For those who have been under workout program for more than three years, an extensionof the workout period will be permitted only in exceptional circumstances after a thorough evaluation by an external auditor.2. Market-based Restructuring Sch
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Apr 03, 2017

Korea's 1st Internet-only Bank Open for Service

‘K bank’, Korea’s first internet-only bank is officially launched on April 3 for service.At the opening ceremony, Financial Services Commission Chairman Yim Jong-Yong emphasized three significant meanings of the launch of K bank. First, K bank has already brought about a new wave of competition in the banking sector. Second, financial consumers will be able to enjoy numerous benefits including lower banking transaction cost, more convenient banking services, and easier access to loans compared to those provided by commercial banks. Third, more descent quality jobs will be created in the banking, IT, and fintech sectors.K bank will supply mid-interest rate loans worth KRW 500 billion for the next three years. It will start with providing retail banking services and its business scope will be widened to include mortgage loan, payment services, foreign exchange, and fund sales in time.K bank acquired preliminary approval for banking business in November 2015, and final approval in December 2016.*Please refer tothe attachedPDF for details.
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Mar 12, 2017

FSC Holds Emergency Meeting on Financial Markets after Court Ruling on Presidential Impeachment

FSC Chairman Yim Jong-yong convened an emergency meeting on Sunday, March 12 with top officials from the Financial Supervisory Service(FSS) and other relevant financial institutions to monitor market effects and discuss policy responses after the Constitutional Court’s decision on last Friday to uphold the parliamentary vote to impeach the country’s President.Korea’s financial market remained calm even in the face of an unprecedented situation of presidential impeachment. Global investors and foreign media generally view that the court’s ruling has eliminated a considerable amount of uncertainty, which would help boost consumption and investment in the Korean economy. However, there is a possibility of further market fluctuations depending on political developments including the upcoming presidential election. We also face external uncertainties such as the Fed’s possible rate increase and growing security tension involving North Korea’s nuclear threat.Against this backdrop, the government will stay alert to internal and external risks and take swift actions, if necessary, with a 24-hour emergency response system already in operation since last year. In a pre-emptive move to stabilize corporate bonds market after the U.S. interest rate hikes, policy banks are ready to inject a total of KRW900 billion in helping smaller companies issue corporate bonds. The government will crack down and strongly discipline market-disruptive activities to capitalize on the upcoming presidential election, while tightening its monitoring over possible cyber attacks against financial institutions. We will continue to manage household debt risks in a preemptive manner with a particular focus on the recent rapid growth in the non-banking sector and high-risk loans. The government will continue corporate and industry restructuring as planned to ease market concerns.* Please refer to the attachedPDF for details.
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Jan 05, 2017

Financial Policy Direction for 2017

The FSC outlined its financial policy direction for 2017, focused on (i) prompt and thorough response to financial market risks; (ii) financial support for stabilization of household livelihood; and (iii) financial reforms and innovation to revitalize the economy.I. Prompt and thorough response to financial market risks Financial market stability- The FSC will closely monitor financial markets to keep risk factors under control through a 24-hour emergency response system.- Measures will be taken to stabilize corporate bond market to ensure stable funding conditions for companies in response to increased volatility in financial markets. Household debt management- Guidelines on stricter screening of loan applications will be expanded to all financial institutions to make sure borrowers take loans that they can afford and repay in installments.- The FSC will set out a roadmap in the first quarter of 2017 for improved standards for screening a borrower’s creditworthiness - e.g. gradual introduction of debt service ratio (DSR) as a tighter standard to assess a borrower’s debt repayment ability. Corporate restructuring- Corporate restructuring will be carried out under consistent principles that emphasize a troubled company’s self-rescue efforts and burden sharing.- A new framework for corporate restructuring (‘Pre-packaged Plan’), which combines advantages of creditor-led debt workout and court-led rehabilitation, will be promoted to expedite business normalization of a troubled company. Sound financial market practice- The FSC will promote more transparency in corporate management and financial transactions by improving the current accounting and audit system, encouraging the introduction of ‘stewardship code’ to a wider range of companies and establishing sound financial market practice.II. Financial support for stabilization of household livelihood Microfinance support for low-income borrowers- The government will increase its injection of
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Dec 29, 2016

FSC Identifies D-SIBs for 2017

The FSC identified domestic systemically important banks (D-SIBs) for 2017: Shinhan Financial Group, Hana Financial Group, KB Financial Group, NH Financial Group and Woori Bank. Those selected as D-SIBs are required to hold an extra capital of 1%, by 0.25% per year in from 2016 to 2019. ※ The average BIS ratios for banks and bank holding companies at the end of September 2016 exceed the minimum requirements; therefore, there is no actual burden at present for D-SIBs to set aside additional capital. The FSC selects D-SIBs every year from 2016 in accordance with assessment criteria proposed by the Basel Committee on Banking Supervision (BCBS). *Please read the attached filefor details.
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