Press Releases - Financial Services Commission

Press Releases

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Jun 08, 2016

Restructuring Plan for Shipping & Shipbuilding Industries and Measures for Recapitalization of Policy Banks

The government held a ministerial meeting chaired by Deputy Prime Minister to discuss restructuring plans for shipping shipbuilding industries and measures to boost capital at state-run banks to fund the restructuring. I. Restructuring of Shipping Shipbuilding Industries [1] Shipping Industry▪ Hyundai Merchant Marine (HMM) The creditor group agreed on the company’s debt restructuring proposal on condition that HMM would successfully conclude its negotiations with bond holders and shipowners; and HMM would join a shipping alliance. HMM already gained bond holders’ approval for its debt restructuring proposal; and is expected to conclude its negotiations with shipowners on its chartered rates by this week. The government plans to keep supporting HMM to join the Alliance. ▪ Hanjin Shipping Hanjin is now undergoing negotiations with 22 shipowners on charter rates and planning to meet with bond holders to restructure its debt. Hanjin is required to make its self-rescue efforts to secure liquidity as HMM did, while the government keeps supporting the company get back on track. [2] Shipbuilding Industry The ‘Big Three’ – Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding Marine Engineering – have prepared self-rescue plans in case of further slumps and economic downturn.▪ Hyundai Heavy Industries (HHI) HHI plans to raise KRW3.5 trillion by selling non-core assets, streamlining management and reshuffling businesses. Creditor banks evaluate that HHI’s self-rescue plan will be able to withstand further cuts in orders than current estimates. ▪ Samsung Heavy Industries (SHI) SHI prepared its self-rescue plan of KRW1.5 trillion including measures to secure liquidity such as issuance of asset-backed securities or paid-in capital increase. Although SHI’s self-rescue plan is relatively small in size, creditor banks view the plan is appropriate in that it includes the liquidity measures.▪ Daewoo Shipbuilding Marine Engineering (DSME)
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May 24, 2016

Test Operation of Omnibus Account

The FSC/FSS and relevant agencies will launch a test operation of ‘omnibus account’ starting from May 25 with four standing proxies, two securities firms and one global financial investment company. The test run is (i) to have foreign investors engage in devising detailed procedures; and (ii) to prevent technical errors in electronic and settlement system in advance of a full operation of the omnibus account system in 2017. The test operation will be proceeding in two stages: ▪ [stage 1] Mock Trading (May 25~Sept. 2016) Participants will process a whole procedure of order, settlement and ex-post reporting through a mock trading system to check detailed operation process and stability of electronic system. ▪ [stage 2] Real Trading (Sept. 2016~before an official operation scheduled in 2017) A limited number of participants including global investors who participated in mock trading will conduct real trading through an ‘omnibus account.’ The FSC/FSS will gather their suggestions in the process of the stage 2 and amend the system until the full operation in 2017. The FSC/FSS will reflect suggestions gathered from global investors in the process of the test operation into detailed procedures of the omnibus account system; and help more global investors participate in each stage of the test run. FREQUENTLY ASKED QUESTIONS ABOUT OMNIBUS ACCOUNT Test Operation of Omnibus Account1. Why are you conducting the test run through mock trading, not real trading? - Given the nature of an ‘omnibus account’ which enables a consolidated processing of trading orders and settlements from multiple investors, detailed settlement procedures may differ according to each financial institution. If the omnibus account were testes in real trading from the beginning, it might incur losses to investors accruing from settlement errors. - The test operation will be conducted through mock trading based on various scenarios to minimize any possibility of settlement errors. We are plan
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May 20, 2016

FSC Statement on HMM Negotiations

HMM and KDB are doing their best efforts to successfully conclude their negotiations with shipowners on charter rates. What matters is successful conclusion of the negotiations; therefore, the negotiations will be proceeding without being bound to a specific timeline. However, if the negotiations dragged on for so long, it would delay restructuring process of HMM. Therefore, we hope the negotiations will be concluded as soon as possible. In regard with prospect of the negotiation, the FSC is neither optimistic nor pessimistic. We are well aware that the negotiations are a complex and tough process; and that those involved are doing their best to reach a mutually desirable conclusion. If the negotiations failed, we regard that it would be practically difficult for HMM to get back on track. In this context, the negotiations now underway are very significant. If failed despite such efforts, there would be few options left for creditors to choose. The normalization of a business requires sharing of burdens among stakeholders. Adjusting charter rates to appropriate levels is essential for normalization of shipping companies; therefore, we look forward to consideration and cooperation from shipowners. * Please refer to the attached file for details.
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Apr 26, 2016

Corporate Restructuring Plan

The government outlined its plan for restructuring vulnerable industries and financially-distressed companiesTHREE-TRACK PLANCorporate restructuring will be proceeding on three tracks simultaneously. - [TRACK 1] RESTRUCTURING OF CYCLICALLY-VULNERABLE INDUSTRIESThe consultative body of government officials sets a direction for restructuring; and creditor groups proceed with restructuring of individual companies in line with the direction. - [TRACK 2] RESTRUCTURING OF MAIN DEBTOR GROUPS INDIVIDUAL COMPANIES (RATED C OR D) ON A CONTINUOUS BASIS Companies are to be sorted out through credit evaluations on a regular basis* to be put under a debt restructuring agreement, a workout or a court receivership. * Main debtor groups (April~June), large companies (April~July), SMEs (July~October) - [TRACK 3] PREEMPTIVE RESTRUCTURING OF OVER-SUPPLIED INDUSTRIES Industries with overcapacity will be encouraged to carry out voluntary and preemptive restructuring and reshuffling through MAs and facilities reduction. DETAILED PLANS FOR SHIPBUILDING SHIPPING INDUSTRIESSince October 2015, the government has been pushing through restructuring of five major industries vulnerable to a global slowdown to reduce overcapacity and boost long-term competitiveness. After reviewing progress in restructuring of these industries, the government has decided to push harder restructuring of shipbuilding and shipping industries as their business conditions have continuously deteriorated. 1. SHIPBUILDING ‘Big 3’ Shipbuilders - Daewoo Shipbuilding Marine Engineering (DSME) DSME will be required to submit to creditors a stronger self-rescue plan including additional layoffs and cost savings. - Hyundai /Samsung Heavy Industries Creditor banks will ask self-rescue plans and check progress in implementation of such plans.2. SHIPPING - Hyundai Merchant Marine (HMM) To be provided with support for business normalization from creditors, HMM is required to strike a deal with ship owners to lower charter rates
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Mar 30, 2016

FSC Announced CCyB Rate for Korea

The Basel Committee on Banking Supervision set global regulatory standards of bank capital adequacy and liquidity, including Countercyclical Capital Buffer (CCyB), on December, 2010, in order to protect the banking sector against excessive aggregate credit growth that have often been associated with the build-up of systemic risks. Therefore, the Financial Services Commission established the domestic regulatory basis for CCyB on December 16, 2015, with the amendment to the Regulation on Supervision of Banking Business.The FSC announced its first CCyB rate for banks and bank holding companies in Korea, with effect from March 31, 2016. At present, the buffer rate is set at 0% considering the current sequence of credit-to-GDP gap, macroeconomic conditions, coordination with relevant fiscal and monetary policies, and the current CCyB implementation cases of the other countries.The FSC will continue to check whether the Korean banking sector is in an appropriate position in light of the current credit growth and system-wide risks, and will adjust the buffer rate if necessary. Furthermore, the FSC will conduct its quarterly review based on analyses and data provided by Financial Supervisory Service, in which the result will be shared with the policy-relevant institutions, such as Ministry of Strategy and Finance and the Bank of Korea.*Please read the attached file for details
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Mar 24, 2016

Plan to Stimulate Financial Advisory Services

The FSC outlined its plan to stimulate financial advisory services in response to growing demand of financial consumers for more accessible and more tailored financial advisory services. The plan is mainly focused on offering financial consumers comprehensive advisory services in a professional and independent manner; facilitating more innovative and affordable advisory services such as robo-advisers; and making financial advice more accessible and more convenient for financial consumers. 1. Lowering barriers to entry for financial advisersUnder the current Financial Investment Services and Capital Markets Act (FSCMA), the minimum capital requirement is KRW500 million for registration as a financial adviser to provide advisory services for retail investors. The FSC will propose amendments to the Enforcement Decree of the FSCMA in the first half of this year to create a new registration category for financial advisers who offer advisory services only in a restricted range of financial products such as savings, funds and derivative-linked securities and lower capital requirement for them to KRW100 million. Banks will be also allowed to offer financial advice within the newly-created category of advisory services; however, they will be prohibited from offering financial advice in equities, bonds and derivatives, due to a possible conflict of interest. 2. Introduction of Independent Financial Advisers (IFAs)Independent Financial Advisers (IFAs) will be newly introduced to provide ‘independent’ advice, free from product providers. The IFAs are required to meet strict standards for independence: 1) they must receive advisory service fees from their clients, not from product providers; 2) they cannot provide financial products concurrently, but discretionary investment business providers are exceptionally allowed to provide both advisory service and products; and 3) they are prohibited from providing advice for specific products, while they are allowed to offer advice
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Mar 14, 2016

Introduction of Korea's Individual Savings Accounts (ISAs)

Korea’s Individual Savings Accounts (ISAs) were introduced on March 14, 2016, in which individuals can invest into various financial products such as savings, funds and derivative-linked securities. Previously, individuals had to open separate accounts for each financial product. The introduction of ISAs is expected to help individuals build an investment portfolio tailored to their risk appetite and investment purpose and manage their wealth more efficiently with the aid of asset management experts. ISA products are now on sale starting from March 14 through branches of 33 financial institutions – banks, securities firms and insurers. TYPES OF ISASThere are two types of ISAs: a trust-type product and a discretionary investment product. ▪ Trust-type ISAs The trust-type ISA is aimed at individuals who want to choose financial products to be included into their accounts on their own. Without the account holder’s direction, financial institutions cannot change the composition of investment portfolio. ▪ Discretionary ISAs The discretionary ISA is targeted for those who want to let asset managers manage their money. Financial institutions provide clients with model portfolios, considering their risk appetite and investment purpose. The client is then supposed to pick one of the model portfolios to let asset managers on behalf of them choose products to be included in the account. Without the account holder’s direction, financial institutions are allowed to rebalance assets within the account every quarter, evaluating profitability and safety of such assets. ※ Since only one ISA is allowed per person, individuals have to choose either a trust-type ISA or a discretionary ISA, considering which type of the ISAs is more suitable for themselves. WHAT PRODUCTS CAN BE INCLUDED IN ISAS▪ Savings products – savings and installment savings with banks and mutual savings banks; deposits with mutual financial institutions; and RPs▪ Investment products – public of
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Mar 09, 2016

Corporate Restructuring Progress in 2015 and Plan for 2016

PROGRESS IN 2015(RESTRUCTURING OF INDIVIDUAL COMPANIES) A total of 299 companies – 54 large companies and 175 SMEs – received the ratings of C and D in credit risk evaluations last year to be subject to restructuring. They are now under a debt workout program or a rehabilitation procedure. (MAIN DEBTOR GROUPS) The main creditor banks conducted from April to May 2015 the evaluation of financial health of the 41 main debtor groups for 2015 selected by the FSS. Based on the results of evaluation, those who fell short of certain thresholds signed an agreement with the creditor banks to improve their financial structure or to be under tighter monitoring. From November to December last year, the main creditor banks inspected financial conditions of affiliated companies of the main creditor groups and signed MOUs with financially-vulnerable companies to improve their financial health in a bid to prevent potential risks from spilling over into other affiliated companies. Domestic banks’ non-performing loan (NPL) ratio of corporate loans stood at 2.42%, a mere 0.33%p increase from the previous year. PLAN FOR 2016The FSC will push ahead preemptive and continuous corporate restructuring based on the results of credit risk evaluation for the main debtor groups and individual companies. We will also continue to support sector-specific restructuring for structurally vulnerable industries – e.g. shipping, shipbuilding, construction, steel and petrochemical industries, as part of the government’s effort to boost industry-wide competitiveness. (MAIN DEBTOR GROUPS)The main creditor banks will complete the evaluation of financial conditions of the main debtor groups by the end of April. Based on the results, the creditor banks will select those in need of improving their financial structure and signed the financial structure improvement agreement with them by the end of May. The creditor banks will also pick affiliated companies of the main creditor groups to be evaluated by
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Feb 10, 2016

FSC Chairman Convenes an Emergency Meeting on Feb. 10

FSC Chairman Yim Jong-yong convened an emergency meeting of high-ranking FSC officials on February 10 to make sure policy measures are in place amid growing market concerns over the recent developments in financial markets at home and abroad. RECENT MARKET DEVELOPMENTSGlobal stock markets have shown increased volatility with a rebound in oil prices, the prospect of deteriorating profitability for European banks and the strengthening of the yen, while major Asian markets including Korea were closed for the Lunar New Year holiday. On the domestic front, geopolitical risks including North Korea’s missile launch on February 7 could heighten anxiety over Korea’s financial market to be open on Thursday, February 11. POLICY RESPONSESThe missile launch is likely to have little impact on Korea’s financial market, given its calm response to North Korea’s previous provocations. However, the FSC will stay alert to any possibility of further escalation and closely monitor financial market conditions to prevent such geopolitical risks from combining with risk factors in global financial markets to weigh on our financial market. Particularly, we will look into policy implications of recent developments in major financial markets such as Europe, Japan, China and the U.S. to come up with policy responses, if needed. There is also a need for investors to respond calmly to recent market uncertainties with a longer-term view, rather than overreact out of anxiety. The government will thoroughly review and fine-tune contingency plans to ensure prompt and preemptive actions against any possible crisis. FINANCIAL AID TO COMPANIES OPERATING AT THE KICThe FSC will offer swift and sufficient financial aid to the companies operating at the Kaesong Industrial Complex (KIC) to minimize their possible losses from the shutdown of the KIC operation after North Korea’s missile launch. Those companies will be granted a roll-over for their maturing loans and cuts in interest rates and fees u
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Feb 04, 2016

FSC Convenes Meeting over Recent Developments in Global Financial Markets and Policy Response

The FSC convened a meeting with the FSS and relevant research institutions to review policy implications of recent developments in global financial markets and discuss our policy responses. There are growing uncertainties in the global economy this year with a slowing Chinese economy and falling oil prices. The IMF cut its outlook for global economic growth in 2016 from 3.6% to 3.4%. As global economic conditions weighed on our economy, Korea’s exports dropped 18.5% in January compared with the previous month, raising concerns about the country’s economic slowdown. In response to such worries, the Korean government announced yesterday a stimulus plan including an injection of KRW 21trillion in the first quarter of this year through fiscal spending and policy financing in a bid to boost domestic demands and create more jobs. Global financial markets are also facing increasing volatility with Fed’s rate hike, China’s financial market turmoil and declining oil prices. The Fed’s rate increase last December has led to contraction in global liquidity, while accelerating capital outflows from emerging economies to advanced economies. Monetary policies among major central banks have become divergent as the BOJ cut its interest rates to minus 0.1 per cent last week, joining in the ECB’s move to negative interest rates. The ECB also hinted a possibility of further quantitative easing. Compared with major economies, Korea’s financial market stayed stable; however, volatility has recently increased to some extent in the local stock and currency markets. With increased volatility in global financial markets, foreigners’ selling of Korean stocks has continued from last June until early this year. Fluctuations in the currency market have also increased with the won-dollar exchange rate surging to 1,219.3 won yesterday, a record high since July 2010. There is no quick fix for current global market risks, which are likely to persist for a considerable period of this
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Feb 02, 2016

Financial Policy Roadmap for 2016

The FSC outlined its financial policy roadmap for 2016, focused on two main themes: Financial Reform and Financial Stability. The FSC will speed up the implementation of financial reform to promote competition and innovation in the financial sector, while strengthening financial stability in response to internal and external risks. Ten key policy tasks were laid out to push forward financial reform and financial stability: - financing innovative businesses to support the creative economy; - encouraging cultural changes in financial institutions; - promoting the financial industry as new growth driver; - enabling more convenient and innovative financial services; - supporting the growth of household wealth; - managing potential risks of household debt; - managing corporate default risks preemptively;- ensuring stability and fairness in financial markets; - expanding policy support for microfinance; and- strengthening financial consumer protection. 1. FINANCING INNOVATIVE START-UPS AND VENTURE COMPANIES The FSC will further stimulate investments in tech start-ups through tech investment funds worth KRW 750billion. We will continue to make our policy efforts to help the newly-introduced crowdfunding system take root as a fundraising channel for start-ups and venture companies. We will push forward the restructuring of the KRX into a holding company in an effort to bring more competition into the local bourse system. The KOSDAQ and KONNEX will be also reformed to attract more listings. The roles of policy banks such as IBK and KDB will be realigned to provide policy loans and state-backed guarantees for start-ups and SMEs in accordance with their growth cycle. 2. ENCOURAGING CULTURAL CHANGES IN FINANCIAL INSTITUTIONS We will continue our reform of financial supervisory practice and regulation to ease regulatory burden on financial institutions and encourage more private initiatives in the financial sector. Financial institutions will be also required corresponding chang
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Feb 01, 2016

'Omnibus Account' for Foreign Investors to be Introduced

The FSC announced its plan to introduce an ‘omnibus account’ in an effort to make it easier for foreign investors to trade locally-listed stocks in the Korean stock market. The newly-introduced ‘omnibus account’ system is expected to reduce transaction costs of global asset management companies and make foreign investors’ trading of locally-listed stocks through global securities firms more convenient. BACKGROUNDThere is a growing need for the current foreign investor registration system to improve in accordance with changes in investment environment and practice: - As Korean capital markets become mature, index-tracking passive funds are taking an increasing share of the Korean stock market. Such passive funds are sensitive to transaction costs as they frequently trade in many countries. - Global securities companies are increasingly using omnibus accounts to process multiple trading orders. - The current foreign investor registration system needs to become less rigid as foreign investment limits in Korean companies were abolished except for some public purpose companies(PPC). Against the backdrop, the FSC held meetings with various market participants to gather their opinions and came up with measures to make the foreign investor registration system more reasonable and flexible in accordance with global practice. The system will be improved based on the following three principles: - enabling convenient trading of foreign investors in the Korean stock market in accordance with global investment practice, - ensuring conformity with other relevant domestic rules such as Korean tax regime, and- maintaining monitoring of foreign capital in Korea’s FX and stock markets, which is one of the core functions of foreign investor registration system. CURRENT FOREIGN INVESTOR REGISTRATION SYSTEM1. OverviewForeign investors must register their personal information with the FSS before they can invest in locally-listed stocks. Upon registration, foreign investors are
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Jan 21, 2016

HSCEI-Linked ELS Market Conditions and Policy Response

The FSC held a press briefing on HSCEI-linked ELS market conditions and its policy response as the benchmark index sharply fell to 8,015.44 on January 20, raising concerns over increasing volatility in the market. The outstanding balance of HSCEI-linked derivative products decreased from KRW 37.1trillion in September 2015 to KRW 37trillion as of January 19, 2016. ▪ Outstanding balance of HSCEI-linked products: KRW 35.8trillion (June 2015) → KRW 37.1trillion(Sept. 2015) → KRW 37.0trillion (Jan.19, 2016)Recent sharp falls in the index triggered “knock-in” for some HSCEI-linked ELS products; however, that does not necessarily mean investors’ losses. Most ELS products are structured to pay investors previously-agreed profits if the index recovered to certain levels even after the index fell below knock-in levels. Out of the outstanding HSCEI-linked ELS, 96.7% will reach maturity after 2018; if the HSCEI recovered in the meantime, therefore, it would not incur losses to investors. The FSC sees that further falls in the index will be unlikely to threaten soundness of brokerage firms which raised capital through HSCEI-linked ELS issuance. The average NCR of domestic brokerage companies stands at 486.7% at the end of September 2015, up 19.5 %P from 467.2% in June 2015 when Chinese stock market turmoil had not yet occurred. In addition, for capital raised through HSCEI-linked ELS, brokerage companies are hedging against volatility of the underlying index. As volatility in the HSCEI increases, the FSC will strengthen monitoring and supervision on the ELS market. To make sure brokerage firms manage their capital raised through ELS issuance in a sound and transparent manner, the Regulation on Financial Investment Business will be amended to separately handle such capital from other proprietary assets in accounting. We will keep monitoring whether brokerage firms properly manage hedging assets. We will examine sales practice of ELS products, particularly checking whe
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Jan 19, 2016

2016 Financial Policy Focus #2

PROMOTE COMPETITION AND INNOVATION IN FINANCIAL SECTOR The FSC unveiled its second part of policy plan for 2016 in a policy report to President Park Geun-hye on January 18. Following on its first statement on January 14 focused on economic risk management and financial stability, the second announcement is particularly focused on promoting competition and innovation in the financial sector to maintain the momentum for financial reform drive. 1. Financing innovative businesses to boost the “creative economy”▪ Startups and SMEs will be able to raise funds through crowd funding as the newly-introduced funding scheme is scheduled to take effect on January 25.▪ A total of KRW 750billion will be operated through tech investment funds to further stimulate investment in tech start-ups, while loans of KRW 20trillion per year will be extended to tech firms according to evaluation of their technology. ▪ The FSC will push forward the structural reform of the KRX to bring more competition among exchanges and facilitate funding for venture and start-up companies. ▪ A total of KRW 80trillion will be injected to boost new growth drivers such as ICT, software and cultural sectors. ▪ Financial regulations will be enforced in a more transparent, rational and responsible manner. Financial institutions will be also called for cultural changes on their own such as performance-based compensation and stricter standards for compliance. 2. Promoting Fintech and financial industry as key growth driver▪ The FSC will continue to make policy effort to help Korea’s fintech industry to go abroad and provide globally competitive services. ▪ Regulatory constraints will be eased to facilitate use of big data by financial institutions to provide a variety of financial services. ▪ Internet-only banks will be launched in the second half of this year to enable more convenient banking services. ▪ Securities firms will be encouraged to go into high value-added and innovative busine
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Jan 14, 2016

2016 Financial Policy Focus #1

PREEMPTIVE MANAGEMENT OF ECONOMIC RISKS The FSC set out its policy plan to manage economic risks facing the Korean economy in a first round of 2016 policy report to President Park Geun-hye on January 14. Policy focus will be on:  managing household and corporate debt proactively;  increasing stability of Korea’s financial market and financial sector; expanding policy support for microfinance, and; strengthening financial consumer protection. 1. Managing household debt The FSC will manage household debt risks under the principle that “debt should be borrowed within the borrower’s repayment ability and paid back in installments from the beginning.” ▪ Banks will adopt stricter standards for screening mortgage applications as newly-established screening guidelines are to be effective from February in Seoul and its metropolitan area, May in provincial areas. We will scrutinize household lending by non-banking sector to prevent tighter constraints in the banking sector from causing a surge in household lending by non-banking sector. ▪ Policy incentives will be devised to stimulate a reverse mortgage scheme.▪ KRW 26trillion will be provided to offer fixed-rate and amortized mortgages. ▪ New financial products will be devised to utilize a pool of key money deposits that tenants get back as they convert their lease to monthly rent so that they can pay their monthly rent with return on such products. 2. Managing corporate debt Preemptive and prompt restructuring will be pushed forward for marginal companies and ailing industries. ▪ Troubled companies will be sort out through credit risk assessment to be placed under a debt workout program or file for court receivership depending on their chances of normalization. ▪ The government agencies will work out industry-wide restructuring for structurally vulnerable sectors such as shipbuilding, shipping, petrochemical, steel and construction industries. ▪ The FSC will encourage more private initiati
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Jan 13, 2016

FSC Convenes Meeting for Reviewing Responsive Measures Against North Korea's Possible Cyber Attack

Financial Services Commission Standing Commissioner, Koh Seung-beom convened chief security officers of financial institutions and banks on January 13, Wednesday, to review the financial sector’s response plan against North Korea’s possible cyber attack against key financial system, which in the past has been accompanied by armed provocations. Immediately after the nuclear test on January 8, the FSC raised financial security alert* to ‘moderate’ stage and has been maintained so far.* Low → Moderate → Substantial → Severe → CriticalThe Financial Security Institute has been thoroughly monitoring North Korea’s possible cyber attack attempts on domestic financial system since the latest nuclear test, however, no unusual sign has been detected yet.The FSC will maintain its intense monitoring system on key financial systems to prevent in advance financial incidents caused by the North’s cyber attack and ensure financial consumer protection.*Please read the attached file for details
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Jan 07, 2016

FSC Holds Meeting over Risk Factors in Financial Markets in 2016

The FSC held a meeting on January 7, Thursday morning with the FSS, KRX and KCIF to examine internal and external risks in financial markets in 2016 and ensure prompt policy responses to stabilize markets if needed.GLOBAL FINANCIAL MARKETSGlobal financial markets started 2016 with increased volatility amid market anxiety over China’s stock market plunge and geopolitical tensions such as the severance of diplomatic relations between Saudi Arabia and Iran and North Korea’s nuclear test. The Federal Reserve’s monetary tightening began in December last year without causing considerable shocks to financial markets; however, the pace of rate hikes and subsequent movements in the dollar still remain uncertain. Uncertainties in the Chinese economy – China’s stock market turmoil and currency depreciation – could also threaten global financial market stability. A series of events in recent few days this year alerted us to a rough year for global economic and financial conditions. The government will remain vigilant on future developments in financial markets to take swift actions if necessary. DOMESTIC FINANCIAL MARKETSKorea’s financial markets are relatively calm in the face of external destabilizing factors. Affected by China’s stock market plunge on January 4, Kospi fell 2.2% on that day but shortly recovered 0.6% on the following day. North Korea’s nuclear test on January 6 did not have large impact on the stock market. However, the government keeps closely monitoring financial market conditions in response to further developments in China’s stock market turmoil and North Korean nuclear issue. POLICY RESPONSEThe FSC will closely monitor foreign capital flows in Korea’s stock market, especially changes in capital flows by advanced countries with the U.S. interest rate hikes and possible capital outflow by fiscally distressed oil-producing countries. We will also push ahead our policy efforts for the inclusion of Korean stock markets in MSCI advanced m
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Jan 06, 2016

Government Convenes Emergency Meeting over Imapct of North Korea's Nuclear Test

The Korean government convened on January 6 afternoon an emergency meeting over the impact of North Korea’s nuclear test on Korea’s financial markets. North Korea’s official Korean Central News Agency reported at 12:30 p.m. that North Korea had conducted a hydrogen bomb test after a 4.8 magnitude earthquake had been detected near its north east Yanggang Province at around 10:30 a.m. The government officials at today’s meeting checked the possible impact on Korea’s financial markets and discuss policy responses ahead, given that geopolitical risks of the Korean economy are likely to be heightened with the latest nuclear test by North Korea. Korea’s financial markets showed increased volatility right after the report of North Korea’s nuclear test but soon recovered. The government sees that Korea’s financial markets are not likely to be significantly affected by today’s nuclear test, given that impacts of previous events of North Korea- related issues were temporary and limited. However, the government will remain vigilant against any possibility that uncertainty such as a possibility of further nuclear tests could expand volatility in Korea’s financial markets and real economy, amid market’s overreaction to recent events such as Chinese’ stock market plunge and Middle East instability. * Please read the attached file for details.
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Jan 05, 2016

Amendments to the Enforcement Decree of Financial Investment Services and Capital Markets Act

Crowdfunding rules will take effect January 25 this year as relevant amendments to the Enforcement Decree of the Financial Investment Services Capital Markets Act were approved in a Cabinet meeting on January 5, 2016. The amendments are intended to stipulate details regarding the scope of issuers and registration requirements for crowdfunding intermediaries. KEY PROVISIONS 1. Scope of Issuers Smaller and startup companies with their business operations less than 7 years are to be allowed to issue securities through crowdfunding. Venture companies and SMEs engaging in projects such as technology development and cultural business are to be allowed to raise capital through crowdfunding regardless of how many years they are in business. 2. Registration Requirements of Crowdfunding Intermediaries To be registered as an intermediary for a crowdfuning offering, a company must have a minimum capital of KRW500 million and meet requirements similar with those of investment advisory services and discretionary investment services. 3. Investor Protection (1) Limits on capital raising by issuers: A company is allowed to raise up to KRW700 million per year through crowdfunding.(2) Limits on investments by investors: Investors are subject to differentiated caps on the amount of investments depending on their professional knowledge of investment and risk- taking capacity. (3) Exception to ban on securities sales by investors: In principle, investors are prohibited from selling securities within a year of issuance. However, issuers, large shareholders and professional investors are exceptionally allowed to sell their holdings within a year. * Please read the attached file for details.
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Dec 30, 2015

FSC Identifies D-SIBs for 2016

The FSC identified on December 30, 2015 four bank holding companies and one bank as domestic systemically important banks (D-SIBs) for 2016 : Hana Financial Group, Shinhan Financial Group, KB Financial Group, NH Financial Group and Woori Bank. Those identified as D-SIBS are to be required to set aside an additional capital of 1% if deemed needed, by 0.25% per year in the next four years from 2016 to 2019. * The average BIS ratio for banks and bank holding companies – 13.99% for banks and 13.68% for bank holding companies – at the end of September 2015 exceeds the minimum capital adequacy ratio ; 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 proposed by the Basel Committee on Banking Supervision (BCBS). * Please read the attachedPDF for details.
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