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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May 25, 2023
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May 23, 2023
- Authorities Hold Joint Conference and Pledge to Stamp Out Unfair Trading Activities in Capital Markets
- The FSC held a joint conference on May 23 with the Financial Supervisory Service, the Korea Exchange and Seoul Southern District Prosecutors Office on the topic of stamping out unfair trading activities in capital markets. The conference was attended by experts from academia and research institutions. The heads of the FSC, FSS, KRX and the prosecutors office all agreed to boost inter-agency cooperation and expressed strong willingness to root out unfair trading activities in capital markets. The conference featured presentations on (a) ways to diversify sanctions on unfair trading activities, (b) measures to strengthen early detection mechanisms, (c) the KRXs handling of recent stock price manipulation cases and ways to improve in the future and (d) an overview on the current status of unfair trading activities in capital markets and how to handle from a judicial perspective. The following is a summary of FSC Chairman Kim Joo-hyuns opening remarks. Summary of FSC Chairmans Remarks In the wake of the recently uncovered unfair trading activities in our capital market and their damaging effects, relevant authorities have come together today to collectively seek measures to strengthen our response to fraudulent activities in capital markets. First, regarding the recent stock price manipulation cases, a joint investigation team made up of officials from the prosecutors office, the FSC and the FSS has already been set up, and it has been expanding its scope of investigation to all areas of suspicion. By thoroughly investigating and identifying illegal activities, authorities will make sure that those suspected of breaking laws are brought to justice. Second, authorities will promptly seek regulatory improvements in the current CFD (contract for difference) trading system on a separate track from the ongoing investigation. The improvement measures will include (a) providing more accurate investment information to investors, (b) resolving regulatory arbitrages vis--vis cred
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May 18, 2023
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May 08, 2023
- FSC Introduces Measures to Facilitate Corporate Merger and Acquisition Activities
- The FSC announced a set of measures aimed at facilitating corporate merger and acquisition activities on May 8. In the second half of this year, the FSC also plans to announce additional policy agenda items for facilitating corporate MA activities through coordination with the Ministry of Justice. Corporate MAs are an important mechanism to boost management efficiency and reorganize the structure of an enterprise. They also help to increase the overall productivity of an economy as well as its recovery from a downturn. However, the corporate MA market saw a significant decline recently due mainly to the worsening of macroeconomic conditions. Against this backdrop, the FSC prepared plans to (a) seek regulatory improvements on corporate MAs, (b) strengthen support for corporate restructuring through MAs, (c) support strategic MA activities in line with industrial restructuring demand, and (d) make domestic rules on corporate MAs more congruent with global standards. Key Details Seek regulatory improvements on corporate MAs to propel growth momentum Authorities plan to make improvements to some of the regulations that have been identified as unreasonable including those on public tender offer, corporate mergers and credit offering by investment banks. First, when making a public takeover bid, the burden of securing funds beforehand will be eased. A loan commitment from a trustworthy acquiring financial institution or an investment agreement from a limited partner will be recognized as an admissible document showing financial capability of a tender offeror. Second, in a spin-off or a post-spin-off merger, the process of converting CBs (convertible bonds) and BWs (bonds with warrants) will be streamlined as the electronic securities depository (Korea Securities Depository) will be allowed to get investor information directly from securities firms and process conversion of CBs and BWs electronically. Third, investment banks will be able to more actively offer credit to bu
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Apr 26, 2023
- Revised Rule to Require IPO Bookrunners to Check Payment Capability of Institutional Investors
- The FSC approved a revision bill of the regulation on financial investment businesses at its 8th regular meeting held on April 26. This revision bill is a follow-up to the measures to improve the soundness of the initial public offering (IPO) market announced in December last year and contains a measure to facilitate carbon emissions trading by securities companies along with other regulatory overhaul items. Requirement for IPO bookrunners First, when managing IPOs, the IPO bookrunner will be responsible for verifying institutional investors ability to pay for stocks before the allotment of shares takes place. In an IPO, the bookrunner performs a book building to check demands from institutional investors in order to determine an appropriate IPO price. The public offering price decided is then used to get subscription from retail investors. However, for certain high-demand items, the issue of fictitious subscription by institutional investors in excess of their payment capabilities and that of over-competition have been problematic. It has been pointed out that this practice of fictitious subscription has been hindering the price discovery function of the book building process, causing distortions in the IPO market. Thus, this revision is aimed at preventing the practice of fictitious subscription and strengthening the responsibility of IPO bookrunners throughout the book building process by introducing sanctions such as imposition of an administrative fine for unfair transaction activity when bookrunners fail to check institutional investors stock payment capabilities prior to allotting shares. This requirement will take effect from the securities registration reports for IPOs filed after July, after relevant rules change is completed by the industry association. With this revision bill, apart from the measures for allowing bookrunners to preliminarily review institutional investors demands and introducing the cornerstone investing system, all other follow-up items
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Apr 24, 2023
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Apr 17, 2023
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Apr 13, 2023
- FSC Introduces Measures to Improve the Process of Bank Branch Closure
- The FSC introduced a set of measures aimed at improving the process of banks branch closures at the 5th working group meeting of the taskforce on improving the management and operating practices of banks held on April 12. The key measures include strengthening the preliminary impact assessment process and expanding the scope of information provided to consumers. From now on, before a branch closure, banks should collect opinions from the branch customers and make decision prudently. When a branch closure is unavoidable, banks should arrange to have an alternative service provision channel beforehand through a joint office, small-scale office, makeshift office or teller partnership to make sure that the same level of service is provided to consumers as before. Key Details I. Strengthen the Preliminary Impact Assessment Process Under the common procedures established for banks branch closures, banks need to conduct a preliminary impact assessment prior to closing down a branch and establish an alternative service provision channel when a branch closure has been decided. However, with the number of bank branch closures going up steadily, there have been calls to strengthen the effectiveness of these common procedures. Therefore, taking examples from overseas cases,from now on, it will be necessary for banks to establish relevant procedures to collect opinions from the consumers using their branch and take consumer opinions into account to make an adjustment to their alternative service provision plan, perform an impact assessment again or reconsider the decision to close down the branch. When a considerable impact on consumers is expected, banks should continue to maintain their branch office in principle. However, if it is unavoidable to close down the branch, banks should ensure that consumers can continue to access financial services without much inconvenience after its closure by establishing an alternative service provision channel through a small-scale office, jo
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Apr 10, 2023
- FSC Proposes Rules Change in the Enforcement Decree of the Banking Act
- The FSC gave advance notice on April 10 regarding rules change in the Enforcement Decree of the Banking Act, which will be put up for public comment until May 22. The revision bill establishes a specific standard for when a bank should get authorization from the FSC if it closes down or transfers or acquires a major part of its business operation. It also contains a regulatory modification in agreement with upstream legislation and a penalty clause for a specific type of violation. When Citibank Korea decided to draw back its retail banking operation in 2021, the FSC was not able to proceed with an authorization process since the Banking Act stipulates a banks closure of the entire part of its business as an area where the FSC could deliver authorization. For the closure of a part of the banks business operation, the FSC then saw it unlikely that it could give authorization under the purview of the Banking Act. Nonetheless, given the necessity to protect the rights and interests of consumers, the FSC then gave the order to Citibank Korea to draw up a detailed plan to minimize inconvenience to consumers, protect consumer rights and maintain sound market order and implement its plan faithfully as it was authorized to take such action as prescribed by the Financial Consumer Protection Act. In March 2023, the Banking Act was amended, however, to subject banks to get authorization from the FSC when they close down not only the entire part of their business but a major part of their business operation as well. The amended Banking Act then delegates the authority of determining what constitutes a major part to its Enforcement Decree. Thus, this partial revision proposal for the Enforcement Decree of the Banking Act specifies the major part of the banks business operation to be closed down as a part of business constituting 10/100 or more of the banks assets and total profits. Also, considering that the transfer of a part of a business is in essence same as the closure of a
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Mar 29, 2023
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Mar 27, 2023
- Application of Temporarily Eased Financial Regulations to be Available until June 2023
- The FSC held a meeting with the FSS and financial industry associations on March 27 to check financial market conditions and the liquidity and soundness conditions of financial institutions and discussed extending the availability of temporarily eased financial regulations put in place since October last year. Temporary Market Stabilization Measures Expiration Schedule (Oct. 2022~) a) Banks: Postponement of normalization of liquidity coverage ratio (LCR) (92.5%, until end-June 2023), temporary easing of loan-to-deposit ratio (105%, until end-April 2023) b) Insurance companies: Temporary easing of cap on borrowing from retirement pension special accounts (until end-March 2023) c) Savings banks: Temporary easing of loan-to-deposit ratio (110%, until end-April 2023) d) Specialized credit finance businesses: Temporary easing of KRW-based currency liquidity ratio by 10%p (until end-March 2023), temporary easing of the creditable assets to real estate project finance exposure ratio by 10%p (until end-March 2023) e) Financial investment businesses: Postponement on downsizing (from 12% to 8%) the cap on the amount of bonds (issued by specialized credit finance businesses) that can be included when hedging risks associated with equity-linked securities (ELS) under management (until end-March 2023), easing of net capital ratio risk weight when purchasing project finance asset-backed commercial papers (PF-ABCPs) guaranteed by own company (until end-June 2023) f) Financial holding companies: Easing of cap on credit extension between their own subsidiaries (until end-June 2023) Extended Availability of Eased Regulations With regard to the temporary easing of financial regulations applied since October last year on banks, insurance companies, savings banks, specialized credit finance businesses and financial investment firms, considering that there are lingering uncertainties in financial markets at home and abroad, authorities decided to extend the availability of deregulatory m
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Mar 23, 2023
- 4th Working Group Meeting Held on Improving Management, Operating Practices of Banks and Banking System
- The FSC and the FSS held the 4th working group meetingof the taskforce on improving the management and operating practices of banks and banking system on March 22, chaired by FSC Vice Chairman Kim So-young. Details of 4th Working Group Meeting Discussions First, participants discussed the recent progress and future plan for online deposit product brokerage service, which is aimed at enhancing consumer benefits and boosting competition in the banking sector. Financial authorities announced that the online deposit product brokerage service offered by nine companies that were selected as innovative financial service providers in November 2022 will be launched in June this year and that the authorities plan to provide support to ensure their seamless launch. Also, at the end of May, authorities plan to have another screening session for more than ten companies that submitted applications to be selected as innovative financial service providers to allow more diversity in the availability of relevant service platforms. Based on the result of pilot operation, authorities plan to consider whether to make online deposit product brokerage services official in 2024. In particular, when seeking to make it official, authorities plan to look into ways to include checking accounts as well as ways to expand the subscription limit within the boundaries in which excessive money moves can be avoided. In this regard, participants expressed high hopes for the benefits of online deposit brokerage services, particularly in connection with MyData services. A participant talked about the importance of ensuring fairness in algorithms to enable appropriate recommendation of deposit products, and that the service fee levels need to be set appropriately so as not to transfer deposit brokerage service fees to consumers. Another participant raised a concern about excessive money moves as consumers become more sensitive to interest rates, and said that there needs to be upper limits for subscripti
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Mar 16, 2023
- Prudential Regulations on Banks to be Revamped for Improving Loss Absorbing Capacity
- The FSC and the FSS discussed the plans for bolstering capital adequacy and loan loss reserve requirements in the banking sector to improve banks loss absorbing capacity, as part of the agenda at the 3rd working group meeting of the taskforce on improving the management and operating practices of banks and banking system held on March 15. Background The banking sector, whose soundness remained in good shape even in the pandemic situation, has faced with growing uncertainties since interest rates sharply increased and the won-dollar exchange rates surged in 2022. (Capital Adequacy) As of the end of September 2022, the CET1 (common equity tier 1) capital ratio stood at 12.26 percent, which is well above a minimum CET1 capital ratio requirement (7.0 to 8.0 percent), but is lowered than 12.99 percent at the end of 2021 due to the impact of losses on bond portfolio, etc. When compared to major economies,the capital adequacy remains relatively low, and banks recent moves to expand dividends are likely to lead to a further decline in their capital ratios in the future. (Asset Soundness) The delinquency rate on bank loans, which had fallen during the pandemic, is gradually edging upprimarily led by the household sector, due to recent increases in loan interest rates, etc. In order to ensure sufficient loss absorbing capacity of the banking sector in preparation for future uncertainties, authorities plan to improve prudential regulations on banks (capital adequacy and loan loss reserve requirements) for preemptive risk management. Measures to Revamp Prudential Regulations in Banking Sector I. Improvement of Capital Adequacy Requirement a) Imposition of Countercyclical Capital Buffer (CCyB) (As Is) CCyB was introduced in 2016 as part of the Basel III capital regulations but the level of CCyB remains zero percent until now. As the amount of credit rapidly increased from the second half of 2019, there were signals in which banks were supposed to accumulate CCyB. However, due to
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Mar 16, 2023
- 3rd Working Group Meeting Held on Improving Management, Operating Practices of Banks and Banking System
- The FSC and the FSS held the 3rd working group meetingof the taskforce on improving the management and operating practices of banks and banking system on March 15, chaired by FSC Vice Chairman Kim So-young. Details of 3rd Working Group Meeting Discussions First, participants discussed policy direction for prudential regulations on banks to improve their loss absorbing capacity. Financial authorities introduced their plans to ensure that banks have sufficient loss absorbing capacity in preparation for future uncertainties by bolstering prudential regulations. In this regard, authorities will consider imposing countercyclical capital buffer (CCyB) to enhance banks overall capital adequacy ratio and introducing stress capital buffer depending on each banks risk management status and stress test result. In addition, authorities are currently working on revising the regulations on supervision of banking business, which will authorize financial authorities to request banks to set aside special reserves for loan loss and conduct a regular inspection every year on banks models for forecasting estimated loss and demand improvements if the results are deemed insufficient. Regarding these measures for enhancing banks loss absorbing capacity, participants said that it is necessary to consider appropriateness not only in the amount of capital buffers but also in the timing and the pace of implementation. First, participants said that improving the effectiveness of CCyB accords with the recent developments in capital requirements and research direction. If prudential regulation is tightened in the banking sector, however, it may cause a balloon effect in which potential risks move to the non-banking sector. In this regard, participants emphasized the need for a balanced approach, which considers the soundness of the nonbank sector as well. They also stated that it is necessary to keep close tabs on the real estate market, given similarities between the credit cycle and the real e
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Mar 09, 2023
- 2nd Working Group Meeting Held on Improving Management, Operating Practices of Banks and Banking System
- The FSC and the FSS held the 2nd working group meetingof the taskforce on improving the management and operating practices of banks and banking system on March 8, chaired by FSC Vice Chairman Kim So-young. Details of 2nd Working Group Meeting Discussions First, participants got briefed on and discussed the current progress in the development of a single-stop online loan transfer infrastructure and authorities plan for its expanded application. Authorities reviewed the progress of construction of a credit loan transfer system which authorities aim to launch in May 2023. To facilitate competition in the financial industry, authorities will broaden the scope of participating institutions (financial institutions, loan comparison platforms, etc.), make its fees calculation system more reasonable, and expand its service availability to include not only credit loans but also home mortgage loans. In this regard, participants said that a reasonable fees calculation for using the interest rate comparison platform is needed, and that it is essential to watch out another oligopoly created by platform business operators. Second, participants held in-depth discussions on ways to promote competition between the banking and nonbanking sectors as an extension of the discussion held in the recent meeting.Firstly, the financial investment, insurance and specialized credit finance business sectors each made a presentation on more concrete description of competition that can be realized when payment settlement services are allowed for its sector, following improvements in consumer convenience and ways to solve the previously identified risks. Regarding these, participants said that it is necessary to look at the payment settlement infrastructure from the perspective of for the same function, same risk and same regulations apply. If nonbanks are allowed to provide payment settlement services, various positive benefits to the public are expected such as convenient use of diverse types of
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Mar 06, 2023
- FSC Holds Meeting to Review Corporate Bond and Money Market Situation and Real Estate PF Risks
- The FSC held a meeting with relevant authorities to review the corporate bond and short-term money market situation and risks in the real estate project finance (PF) market on March 6.At the meeting, authorities discussed (a) the current corporate bond and money market trends, (b) direction for addressing risks in the real estate PF market, (c) direction to revise the inter-creditor agreement in real estate PF, and (d) measures to support private sector-led real estate PF restructuring. Inspection Results on Corporate Bond and Money Market At todays meeting, participants assessed that the corporate bond and money markets are showing clear signs of recovering from the contraction seen in the second half of last year. Corporate bond spreads have narrowed since the end of November last year,and demands for issuing corporate bonds are being smoothly absorbed in the market as the volume of non-financial corporate bonds issued in last January and February surpassed the amount of bonds reaching maturity.In the money market, interest rates on commercial papers (CPs) have continued to declinedue to the turnaround in liquidity conditions, and those on PF-ABCPs (project finance asset backed commercial papers) also appear to be on decline, compared to the end of last year. However, it is necessary to watch over market situations with vigilance because interest rates on PF-ABCPs with rating of A2 or lower still remain high, and as the issuance of corporate debts with shorter term maturities is taking place more frequently. Meanwhile, there still remain high uncertainties around financial markets this year, as it is forecast that the U.S. will continue to maintain its current tightening stance for longer with the help of its strong economic indicators and the higher-than-expected price indices and the war between Russian and Ukraine and the friction between the U.S and China continue. Therefore, participants agreed to continuously monitor the volatility of corporate bond and mone
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Mar 03, 2023
- 1st Working Group Meeting Held on Improving Management, Operating Practices of Banks and Banking System
- The FSC and the FSS held the first working group meetingof the taskforce on improving the management and operating practices of banks and banking system on March 2, chaired by FSC Vice Chairman Kim So-young. At the meeting, authorities shared the operating method of the working group and taskforce as well as discussed specific task items intended to promote competition in the banking sector and seek improvements in its industrial structure. Method of Operating the Taskforce and Working Group The taskforce and its working group will make public details of discussion on each task item after each meeting in order to enhance the understanding of general public. During discussions, authorities will consider not the interest relationship between different sectors but practical benefits to the general public, such as an improvement in consumer access to financial services, reduction in interest rate burdens, etc., as a core criterion, upon which specific improvement measures are prepared. In addition, in the process of taskforce and working group discussions, if there are certain task items that can be implemented early, authorities will immediately announce related improvement measures and promptly carry out follow-up actions. In this regard, participants were briefed and discussed on the measures to expand disclosure of the differences between interest rates on deposits and loans at todays working group meeting as a way to promote interest rate competition in the banking sector. They decided to implement the measures to require banks to disclose not only the differences between interest rates on newly transacted deposits and loans but also those between interest rates on outstanding deposit and loan balances. Especially, alongside promoting competition in the banking sector, authorities will promptly examine and review issues related to the banks interest rate calculation system and bonus remuneration practices. First, regarding banks interest rate calculation system, th
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Feb 10, 2023
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Jan 12, 2023
- Authorities Hold Meeting to Monitor Financial Market Situation and Discuss Stabilization Measures
- FSC Vice Chairman Kim So-young presided over a meeting with the Financial Supervisory Service and policy financial institutions on January 12 to check the corporate bond and CP (commercial paper) market situations and discuss the effects of market stabilization measures currently in place as well as the support plan for 2023. At todays meeting, participants shared a common assessment that the corporate bond and CP market conditions have been improving recently as interest rates on corporate bonds and CPs are continuing to decline, and in particular, as the level of purchase demand surpassed the volume of newly issued higher-grade corporate bonds and CPs.Also, in order to ensure that recent market movement toward stability can become sturdier, authorities agreed on the need to maintain active implementation of the market stabilization programs, and shared a common view on the need to boost the effectiveness of support on higher-grade corporate bonds and CPs and strengthen support for non-higher-grade corporate bonds and CPs, so that the movement toward stability can spread to non-higher-grade corporate bonds and CPs as well. The market stabilization programs introduced last year still have a total of KRW40 trillion or more in their support capacity, and thus, authorities will continue to actively put them into use going forward. a) The bond market stabilization fund currently has about KRW6.4 trillion in its remaining capacity (additional capital call of KRW9 trillion possible), and it will continue to reinforce market demand for higher-grade corporate bonds, while authorities consider an expansion of both the target and the size of purchase. b) The corporate bond and CP purchase program run by the Korea Development Bank (KDB) and Industrial Bank of Korea (IBK) currently has about KRW7.6 trillion in its remaining capacity, and it will continue to actively operate to purchase corporate bonds and CPs with a focus on non-higher-grade ones. c) The P-CBO (primary collater
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Jan 11, 2023
- Government Prepares KRW80 Trillion Financial Support Programs to Help SMEs Overcome Crisis
- The FSC and the Ministry of SMEs and Startups (MSS) held talks with policy financial institutions, the Korea Federation of Banks and major industry groups representing SMEson January 11 and announced their joint plans to provide financial support for SMEs to help them overcome the complex crisis situation they face currently. A total of KRW80 trillion of policy financial supports (KRW50 trillion from the FSC and KRW30 trillion from the MSS) will be newly supplied. This KRW80 trillion financial supports are designed to help them overcome the current triple-highs (interest rate, inflation and USD to KRW exchange rate) risky situation, to support growth of innovative businesses and to assist the recovery or re-start of vulnerable firms. After the announcement, the FSC and the MSS listened to complaints and suggestions from field industry groups for SMEs. Financial Support for SMEs (KRW80 Trillion) I. Background High interest rates and concerns about a global recession rapidly increase managerial burdens on SMEs, and this condition is expected to continue for some time in the near future. With the increase in loan balances, SMEs face added burdens for interest expenses due to rate hikes, and there are more SMEs struggling with increased production costs following rising in raw materials prices and global supply chain reshuffles. To improve the potential growth in our economy, SMEs need to get into the new growth sectors and secure their own competitiveness through business conversion. However, with the challenging economic situation recently, it is necessary to support the growth of innovative businesses and the resurgence or re-start efforts of vulnerable SMEs through policy finance. II. Overall Direction The government will supply a total of KRW80 trillion via policy funds (KRW50 trillion from the FSC and KRW30 trillion from the MSS) and seek system improvements in diverse areas to bolster the crisis-response capacity and growth potential of SMEs, and to expedite norm