-
Jun 17, 2019
- FSC to Reform Benchmark Interest Rates
- The FSC and the Bank of Korea (BOK) jointly launched a taskforce to develop a new benchmark interest rate, which aims to replace the current benchmark interest rate of certificate of deposits (CDs) by 2021. Co-chaired by FSC Vice Chairman and BOK Vice Governor, the taskforce is composed of officials from the Ministry of Economy and Finance, the Financial Supervisory Service, market participants and research institutions.The rate-rigging scandal of the London Interbank Offered Rate (LIBOR) in 2012 prompted global reform efforts to improve the representativeness and credibility of benchmark interest rates. In preparation for the expiration of LIBOR in 2022, the US, the UK, the EU, Japan and Switzerland are replacing it with new benchmarks such as “risk-free” overnight rates. Other countries including Australia, Canada, Hong Kong and Singapore, whose currencies are not used to calculate LIBOR, are also developing alternatives to enhance the representativeness and transparency of benchmark interest rates and their consistency with international standards.In line with the global move, Korea will also develop a new benchmark interest rate as an alternative to the CD rates, currently being widely used as a benchmark interest rate in Korea’s financial markets.However, the CD rates have fundamental limitations in serving as a benchmark interest rate: (i) the issuance of CDs is not sufficient; and (ii) CD rates are based on quotes, not real transactions.Against this backdrop, the FSC and the BOK jointly launched a taskforce to develop an alternative to the CD rates, which aims to publish a new benchmark interest rate in March 2021. Meanwhile, the taskforce will also come up with measures in the second half of 2019 to boost the issuance of CDs and improve the current method of calculating CD rates.At a kick-off meeting on June 14, FSC Vice Chairman Sohn Byungdoo called for an active role by market participants including banks, financial investment companies and the KRX i
-
Jun 12, 2019
- FSC to Extend Guidelines for Comprehensive Supervision on Financial Conglomerates
- The FSC decided to extend the best practice guidelines for comprehensive supervision of financial conglomerates for another year with some revisions.The introduction of comprehensive supervision on financial conglomerates is one of key policy agenda under the Moon Jae-in administration. The comprehensive supervisory scheme is intended to capture and manage group-wide risks of financial conglomerates that conventional sectoral supervision cannot fully address. It will also help prevent any possible contagion of group-wide risks into financial affiliates.Since the FSC announced its plan to introduce a comprehensive framework for financial conglomerates in January 20181, best practice guidelines were established and implemented with seven financial conglomerates2 starting from July last year. As the guidelines are due to expire on July 1 this year, the FSC decided to extend the deadline to July 1, 2020. The FSC also made some amendments to the guidelines to reflect feedback received from financial conglomerates and make it better coordinated with other relevant laws.Given that the one-year pilot test under the guidelines is to be extended for another year, a list of financial conglomerates subject to comprehensive supervisory schemes will remain same with last year: Samsung, Hanwha, Mirae Asset, Kyobo, Hyundai Motor, DB and Lotte.Based on the guidelines, the FSC will provide detailed standards for designation of subjects of comprehensive supervision, capital adequacy and risk management assessment.At the same time, the FSC will continue our efforts to support a new legislation of comprehensive supervision on financial conglomerates. Currently, two bills have been proposed and under discussion at the National Assembly.
-
Jun 12, 2019
- Fourth Batch of Financial Service Providers Designated as 'Innovative Financial Services' for FSC's Regulatory Sandbox
- The FSC designated additional six financial service providers as ‘innovative financial services’ to be accepted into financial regulatory sandbox. As of June 12, 32 services are approved to be tested in the financial regulatory sandbox.Overview of designated innovative financial services1. A simplified payment settlement agency service of online to offline(O2O) order payment services. (Paymint)2. A platform for transfer, management and settlement of small-sum money for lending circles. (Kona I)3. An artificial intelligence(AI)-based service that evaluates sustainability of a SME by analyzing the company’s non-financial information(ESG: Environment, Social, Governance). (Who’s Good)4. A simple payment service that allows a customer to make payments through SMS verification process. (Settle Bank)5,6. A service that calculates real-time price and mortgage value of real-estate properties using AI algorithm. (Big Value, Gonggam Lab)Innovative financial services to be launched for service in June1,2. An ‘on-off overseas travel insurance’ which a policy holder can simply activate(On) the travel insurance when going abroad, and deactivate(Off) it once he/she returns Korea. (NH Property and Casualty Insurance, Rainist)3-6. A mobile loan brokerage service using smart phone application that provides optimal information on various loan products such as interest rates and loan limit. (Finset, Finda, Viva Republica, MyBank)
-
Jun 03, 2019
- FSC Announces Plans to Establish Financial Big Data Infrastructure
- The FSC announced its plans for financial big data infrastructure, as part of the government’s wider efforts to promote digital economy with the use of big data. The plans include open data system by Korea Credit Information Services (KCIS); creation of a financial data exchange by Financial Security Institute (FSI); and designation of a specialized agency for financial data to ensure safe use and combination of data across sectors.FSC Chairman Choi Jongku said data infrastructure will pave the way for further digital innovation and competition in the financial sector and a level playing field for financial companies and fintech start-ups.Open data systemThe KCIS1 will adopt an open data system called ‘CreDB’, which will be gradually open to fintech firms, financial companies and research institutions.It will first open a sample of de-identified data - 5% of the entire DB - starting from June 2019. The data will include 2 million people’s credit information such as their bank loans, late payment records or credit card accounts. The scope of data sharing will be gradually expanded to include credit information with insurance companies and corporate credit information.Starting from the second half of this year, CreDB will also provide universities and other educational institutions with synthetic data, a copy of original data, for research and training purposes.CreDB will be open further in the first half of 2020 with a broader sample of customized data tailored to the user’s analysis purpose.Financial data exchangeA data exchange will be established to facilitate data transactions among financial companies, credit rating companies, public institutions, fintech firms, research institutions and etc. Given the importance of security in data transaction, FSI2 will1 KCIS is Korea’s public credit registry (PCR) established under the Credit Information Use and Protection Act, which collects data of 40 million people from 5,000 financial companies.2 FSI is a fina
-
May 30, 2019
-
May 30, 2019
- FSC Introduces Deregulatory Measures to Boost Korea's Derivatives Market
- The FSC introduced deregulatory measures to make Korea’s derivatives markets more vibrant and competitive. The reforms are intended to strengthen the derivative market’s role for risk hedging and price discovery, as part of the government’s broader efforts to vitalize capital markets and support the real economy.BackgroundKorea’s derivatives trading volume fell sharply from its peak in 2011 but recovered to an extent after 2015 with increased trading of index products.1 Since the introduction of tighter regulations to curb speculative trading in 2011, the derivatives market’s soundness improved with an increase in the number of longer-term open contracts for risk hedging.2By investors, foreigners accounted for 50.4% of derivatives trading in 2018, up from 25.7% in 2011. Over the same period, the share of institutional investors decreased from 48.7% to 36.1%; and retail investors from 25.6% to 13.5%. Excessive entry barriers act as obstacles to retail investors, while strict margin requirements hinder institutional investors’ participation.The derivatives market is disproportionately concentrated in KOSPI200-related products, making it difficult to serve investors’ demand for a variety of derivatives products.Reform Measures► Lower entry barriers for retail investors (Q4 2019/FSC, KRX) Minimum deposit requirement will be abolished for professional investors and eased for non-professional investors: (i) KRW 10million or more for futures and options trading; and (ii) KRW 20million or more for all derivatives trading. One hour of education and three hours of mock trading► Ease margin requirements for institutional investors (Q3 2019/FSC, KRX) Currently, institutional investors are required to deposit an extra margin, 10 % of credit risk limit, in addition to 100% of the volume exceeding the credit limit. The1 Average daily turnover (unit: trillion won): 66.3(2011), 47.9(2013), 37.2(2014), 41.2(2015).45.0(2018)2 KOSPI 200 Futures Open Interest (unit: 10
-
May 27, 2019
- FSC to Ease Restrictions on Information Sharing in Financial Investment Business
- The FSC proposed reforms to the Financial Investment Services and Capital Markets Act (FSCMA) to improve business conduct rules on financial investment business.The reformed bill will include easing the current requirement of information barriers, known as ‘Chinese walls,’ to enhance its regulatory effectiveness and flexibility; and making it easier for financial investment companies to entrust their business, or engage in concurrent or incidental businesses to facilitate the emergence of innovative and specialized services. The FSC plans to submit its reform bill on the FSCMA to the National Assembly in the first half of this year.I. EASE RULES ON CHINESE WALLThe ‘Chinese wall’ rules were introduced to prevent conflicts of interests as financial investment companies increasingly expanded their business scope with concurrent businesses. Currently, information barriers are set up to block the exchange of information across business units – e.g. corporate financing business, proprietary investment business and financial investment business. However, the current regulatory regime stipulates details including the subject and implementation methods by law, leaving little autonomy to financial investment companies.Against this backdrop, the types of information, not types of business, will serve as a basis to apply the Chinese wall rules. For example, ‘material nonpublic information’ should be separated from other information related to management of customer property. Also, the FSCMA will be amended to provide only basic principles and leave implementation details to financial investment companies to allow more autonomy and flexibility.The current rules that require physical separation of offices, and prohibit executives and employees from holding concurrent positions across business units or with affiliate companies will be abolished. Instead, companies will be required to strengthen their internal control on ‘material nonpublic information’ and establ
-
May 26, 2019
-
May 23, 2019
-
May 16, 2019
- Regulatory Reforms to Promote Robo-Advisory Services
- The FSC reformed the「Financial Investment Business Regulation」to promote robo-advisory services:1. Robo-advisory firms will be allowed to manage funds and entrusted assets commissioned by asset management firms. (scheduled to be implemented from July 24, 2019)Under the current regulation, asset management firms are not allowed to commission their business of managing funds and entrusted assets to robo- advisory firms. The regulation was revised to allow asset managers to commission such business to robo-advisors on condition that the asset managers are responsible for investor protection.2. Individuals will be allowed to participate in Koscom’s robo-advisor testbed, which will accept applications from June 3, 2019.Currently, the testbed is open only to firms including fintech firms, not to individuals, given that only companies are allowed to provide robo-advisory services. Robo- advisors verified through the testbed are allowed to provide investment advisory and entrusted services. To commercialize robo-advisory services after they pass the test, individuals are required to register as an asset management firm or to form a partnership with asset management firms.3. Capital requirement was eased to make it easier for small fintech firms to provide non-face-to-face services via robo-advisors. (implemented from March 20, 2019)Previously, discretionary investment businesses were required to have additional capital of KRW4 billion besides the minimum capital of KRW1.5 billion to provide non-face-to-face services through robo-advisors. To facilitate the entry of small fintech firms in robo-advisory services, the capital requirement of additional KRW4 billion was abolished.4. Robo-advisors will be allowed direct management of fund assets. (scheduled to be implemented from July 24, 2019)Currently, robo-advisors are not allowed to directly manage fund assets, while they are allowed to manage entrusted assets. The regulation was revised to allow robo- advisors to manag
-
May 16, 2019
- FSC Secretary General Holds Meeting on Soundness of Household and Individual Business Loans
- FSC Secretary General, Sohn Byungdoo convened a meeting with the FSS and the KIF on May 15, to monitor the soundness of household and individual business loans.Summary of Secretary General’s remarksSecretary General Sohn stressed the need to exert more policy efforts to manage the soundness of household and individual business loans, and supporting financially vulnerable borrowers.Mr. Sohn said household loan default rate at the end of January 2019 stood at 0.84%(provisional figure), a slight increase compared to the end of last year(0.75%). However, he diagnosed the level of default rates1 is stable in general compared to last year. Individual business loan default rate at the end of first quarter, 2019 (0.75%) showed an increase as well compared to the previous month (0.63%), however, the default rate is yet reached a significant level.2.Mr. Sohn said that the recent increase in default rate is attributed to relatively loose screening on business loans, which has been on the rise in the recent few years; and rise in default rate in regional financial institutions3. But he stressed that since regional banks and non-bank financial firms4 have sufficient loss absorbing capacity, the risk of increased default rate to the financial system in general is restricted.Secretary General said the debt-service-ratio(DSR) will be fully implemented to the non-banking sector starting from June this year, and the financial regulators will thoroughly inspect that non-bank financial firms are appropriately operating the rent- to-interest(RTI) ratio and loan-to-income(LTI) ratio regulations.Mr. Sohn evaluated the financial industry’s voluntary debt reduction program for defaulted household loan borrowers is smooth-sailing, and emphasized that the government will ensure facilitation of debt reduction program tailored to each individual business loan borrower as well.
-
May 15, 2019
-
May 15, 2019
- Third Batch of Financial Service Providers Designated as 'Innovative Financial Services' for FSC's Regulatory Sandbox
- The FSC designated eight additional financial services as ‘innovative financial services’ to be accepted into financial regulatory sandbox, following the first and second batch of financial services announced on April 17 and May 2. As of May 15, 26 services are approved to be tested in the financial regulatory sandbox.The eight financial services will be submitted to Financial Innovation Evaluation Committee and FSC within June for evaluation.Overview of designated innovative financial services1. A loan brokerage service that provides loan products offered by different financial firms, and credit evaluation service using mobile phone usage record such as service enrollment period, roaming, and bill payment record using mobile phones. (Finnq)2. A 24-hour artificial intelligence (AI) based insurance consultation and sales service.(Persona System)3,4. A payment system using smart-phone-embedded NFC for merchants without fixed stores such as food trucks and street vendors that enables payment of products they sell without credit card payment device or POS terminal. (Paycoq, Korea NFC)5,6,7. A loan brokerage service that provides various loan conditions including fixed interest rates and loan limit of different loan products tailored to each consumer. (MiBank, Finmart, teamwink)8. A P2P money transfer service using QR codes. (BC Card)
-
May 02, 2019
-
Apr 24, 2019
-
Apr 17, 2019
-
Apr 01, 2019
-
Mar 28, 2019
-
Mar 25, 2019
-
Mar 21, 2019
- Financial Policy Plans to Support Innovation-led Growth
- The FSC announced financial policy plans to support Korea’s innovation-led economic growth. At a proclamation ceremony, President Moon Jae-in said further growth of innovative start-ups in Korea are held back by banks’ lending practice, still centered on real estate collateral and financial records, resulting in a “financial divide” between large businesses and start-ups. That requires finance to play a more active role in funding innovation and sharing risk. FSC Chairman Choi JongKu laid out a comprehensive policy scheme to create a financial ecosystem for innovation-led growth.I. Overhaul bank’s corporate loan approval systemBanks’ corporate loan approval system will be overhauled to help start-ups - often with limited collateral - secure loans using their innovative ideas, technology and other various assets as collateral. Under the new loan approval system, the FSC aims to enable innovative start-ups and SMEs to secure loans worth KRW100 trillion over the next three year.► A new collateral scheme will be introduced1 in which corporate borrowers are allowed to combine various assets including patent, production equipment and inventories as a single package of collateral.► A comprehensive evaluation model which assesses the potential value of a company’s technology as well as creditworthiness will be introduced as early as 2020.II. Capital market reformsThe FSC will help innovative start-ups raise funds based on their growth potential. By easing listing requirements, the FSC aims for Kosdaq listings of 80 companies in high-growth, high-tech sectors including biotech over the next three years.► The government aims to raise KRW15 trillion over the next five years with public and private investments to support scale-ups in new-growth sectors such as future vehicles, bio-health and fintech.► The FSC will expand a pool of venture capital with regulatory reforms for private equity funds (PEFs), securities firms and professional investors.2► Kosda
