Press Releases - Financial Services Commission

Press Releases

Period: start
~
end

1month 3month Reset

Requirement

Jun 23, 2015

Plan to Strengthen Microfinance Support

The FSC announced its plan to strengthen microfinance programs to reduce financial burden of low-income borrowers and to support their self-sufficiency. BACKGROUNDThe government has been driving policy efforts to reduce financial burden of low-income borrowers and enhance their access to financial services through various microfinance programs. The Happiness Fund, launched in March 2013, purchased delinquent loans of 2.8 million low-income borrowers to reduce their debt repayment burden and supported debt-restructuring of 410,000 borrowers as of May 2015. Four major government-backed microloans have also provided a total of KRW 11 trillion to more than 1.1 million low-income borrowers since 2013. In order to expand microfinance support in a sustainable way, the FSC came up with its plan focused on increasing the amount of policy microloans, while reducing debt servicing burden of low-income borrowers. Policy incentives will be also devised to give more benefits to those who faithfully repay their debt. Microfinance policy will be pushed forward to support the self-sufficiency of low-income families and individuals through comprehensive assistance for debt restructuring, job seeking and micro-savings. KEY POLICY TASKS1. Expand provision of policy loans, while reducing financial burden for low-income borrowers The provision of government-backed microloans will be expanded from the current KRW 4.5 trillion to KRW 5.7 trillion per year, which will increase the number of beneficiaries from the current 470,000 to 600,000 per year. To reduce debt servicing burden of low-income borrowers, the ceilings of government-backed micro-lending will be cut by up to 1.5%p starting from August 2015. The FSC will lower the statutory ceiling on lending by non-banking institutions from the current 34.9% to 29.9% through revisions to the Credit Business Act. 2. Provide more incentives for policy loan borrowers who faithfully repay their debt Out of borrowers of government-backed microloan
Attachment 1
Jun 18, 2015

Plan to Introduce Internet-only Banks in Korea

The FSC announced its detailed plan to introduce Internet-only banks in Korea to enable financial consumers to use more convenient banking services at lower costs and to promote competition and innovation in the banking sector. KEY POINTS  Lower entry barriers and minimize ‘ex-ante’ regulations to attract more players and encourage diverse, innovative business models  Take a two-track approach: (i) pilot operation of one or two Internet-only banks under the current Banking Act; (ii) additional licenses for more diverse companies after a revision to the Banking Act to ease the restriction on shareholding by non-financial companies for Internet-only banks The FSC plans to announce a guideline for an Internet-only banking approval in July, begin to receive applications in September and grant a preliminary license for one or two Internet-only banks by the end of this year. DETAILED PLAN1. Easing of shareholding restrictionThe current Banking Act bans non-financial companies from holding more than 4% of shares in a bank. The restriction makes it impossible for ICT companies to enter banking business. Therefore, the FSC will ease the restriction on shareholding by non-financial companies from the current 4% to 50% only for Internet-only banks. Supplementary measures will be devised to pre-empt possible side effects of easing shareholding restriction. Out of non-financial companies, business groups subject to cross-shareholding restrictions will be exempted from the eased shareholding regulation to prevent only a few conglomerates from exercising too much economic control. The FSC will raise the ceiling of shareholding by non-financial companies to a 50% stake necessary for controlling power over management while keeping them in check by other shareholders. To avoid a conflict of interest, Internet-only banks will be subject to stricter regulations in regard with a large shareholder. The credit ceiling that a bank can provide its large shareholder will be cut
Attachment 1
Jun 09, 2015

Revision to Regulation on Financial Institutions' Outsourcing of Data Processing Business & IT Facilities

The FSC announced a 20-day notice (June 10~July 1) of revision to the Regulation on Financial Institutions’ Outsourcing of Data Processing Business IT Facilities. The revision intends to reduce financial institutions’ burden related with outsourcing of data processing business by shifting regulatory focus from the current ‘ex ante to ‘ex post’ regulations. Outsourcing their data processing, financial institutions are subject to obligations under relevant data protection laws and regulations to protect customers’ personal information. The revised draft will be reported to the Financial Regulatory Council to be held on June 18, reviewed by the Regulatory Reform Committee and finally approved by the FSC to be enforced. BACKGROUNDFinancial institutions outsource their data processing business for financial transaction information to cut cost and enhance efficiency. Korea established the Regulation on Financial Institutions’ Outsourcing of Data Processing Business IT Facilities in June 2013 to allow the outsourcing of such data processing business. Since then, there have been requests from financial institutions including foreign financial firms for further improvement in the relevant regulation in accordance with global standards. The FSC gathered opinions and suggestions from financial firms to come up with the revision to the regulation. KEY CONTENTS1. Streamline regulatory system The current regulation requires the outsourcing of data processing to be reported to the Financial Supervisory Service(FSS), while requiring the outsourcing of IT facilities to be approved by the Financial Services Commission(FSC).  With the revision, the requirement for approval in regard with IT facilities outsourcing will be abolished. Under the revised regulation, financial firms will be required to report the outsourcing of their data processing business to the FSS. 2. ‘Ex post’ reporting of data outsourcing Under the current regulation, financial institutions are r
Attachment 1
May 11, 2015

Authoritative Interpretation to be Presented to Promote Fintech Investments

As part of our efforts to promote the fintech industry, the FSC plans to present an authoritative interpretation of current financial laws later this month to clarify the scope of businesses that financial institutions are allow ed to invest.Under current financial laws, financial institutions are allowed to invest only in financial businesses or companies related with operation of financial institutions. Fintech companies fall under the category of business directly related to financial businesses or necessary to efficient operation of financial institutions, according to the current laws. However, ambiguity over the scope of ‘fintech’ businesses has virtually hindered financial firms from investing in the sector. Therefore, the FSC will eliminate such ambiguity by offering an authoritative interpretation in regard with t he business scope of ‘fintech.’1. Business Scope of ‘Fintech ’The FSC will offer an authoritative interpretation about the scope of fintech businesses based on the current financial laws – e.g. the Electronic Financial Transaction Act and banking laws, while reflecting recent trends with the fintech industry.(Electronic Financial Transaction Act)Ø electronic financial business operator – payment gate(PG), electronic debit payment means, electronic prepayment meansØ subsidiary electronic financial business operator – VAN, data system operator(‘Financial Computerization Business' under the article 35 of the Detailed Regulations on Supervision of Banking Business)Ø business of providing and managing programs by which data relevant to banking business are processed and transmittedØ business of selling or leasing computer systems relevant to banking businessØ additional communications business of relying and processing data relevant to banking business(New Businesses)* to reflect recent trends in the fintech industryØ analysis of financial data – e.g. analysis development of credit information or big dataØ development of fi
Attachment 1
Apr 23, 2015

Policy Direction for Capital Market Reform

The FSC outlined its policy direction and key tasks to push forward capital market reform in order to enhance the vitality of capital markets and strengthen its support f or real economic activities.As part of the capital markets reform, the FSC announced today its detailed plan to vitalize the KONEX, OTC trading of unlisted stocks and the derivative market. Plans for the remaining tasks will be announced as scheduled.I. VITALIZE THE KONEX MARKETCURRENT SITUATIONThe KONEX was launched in June 2013 as a third stock market to trade sh ares of start-ups and small medium-sized companies. The KONEX market has expanded rapidly in size since its launch. The number o f listed companies rose from 21 in July 2013 to 80 in March 2015. Market capitalization grew from KRW 0.46 trillion to KRW 1.94 trillion over the same period. It also provided a dire ct channel for small and medium-sized comp anies to raise capital as 27 companies raised a total of KRW 98.7 billion as of March 201 5.The KONEX currently allows only institutions or individuals with deposits of more than KRW300 million to invest. It has relatively eased listing regulations with t he appointment of designated advisors to assist f ilings, reporting and public disclosure of the KONEX-listed companies.MEASURES TO VITALIZE THE KONEX MARKETMore incentives need to be devised to encourage more start-ups to be listed on the KONEX, while attracting more venture capital investments.1. Lower barriers while exp anding incentives for investors(Individual investors) The de posit regulation will be eased to KRW 100 m illion from the current KRW 300 million to l ower hurdles to individual investors. The KONEX will also introduce a ‘small investment account’ to allow individual investors to inve st up to KRW 30 million per year regardless of deposit levels.(Institutional investors) Hig h-yield funds holding more than 2% of their p ortfolio in KONEX stocks will be given priority in allocation of shares in listings of such compan
Attachment 1
Mar 30, 2015

Additional KRW 20 trillion To Be Provided for the Mortgage Refinancing Program.

The government will provide an additional KRW 20 trillion starting March 30 for the government’s mortgage refinancing program totaling KRW 40 trillion,1 after comprehensive review and consultation with relevant organizations.2We recognized mortgage borrowers’ high interest and demands to switch to fixed-rate, amortized mortgages at lower interest rates as its initial amount of KRW 20 trillion was sold out in just four days since its launch on March 24.3 The government considered it is the right time to push ahead a “Big Operation” to make the structure of household debt more stable in response to possible interest rate hikes.With the KRW 40 trillion mortgage refinancing program, the government estimates that the share of fixed-rate, amortized mortgages out of banks’ total mortgages would rise by as much as 10 percentage point. The program is also expected to reduce household debt by KRW 1.1 trillion per year as borrowers with switched mortgages worth KRW 40 trillion in total would start to repay the principal and interest payments together over a long term.The additional KRW 20 trillion is the maximum amount that the Korea Housing Finance Corporation can afford to provide additionally, given its capital capacity. There will be no further injection of funding to expand the program.Only those with floating-rate, interest-only mortgages from banks are eligible for the refinancing program. Banks will receive applications for the five working days starting March30. If the value of mortgages applied for the program exceeds KRW 20 trillion, borrowers with lower-price houses will be given a priority.We acknowledged that there is a demand for expanding the eligibility to those with fixed-rate mortgages repaying the principal. The program, however, is not to merely reduce borrowers’ debt servicing burden. The purpose of the program is to improve the quality of household loans by switching floating-rate, interest-only mortgages to fixed-rate, amortized ones.Therefo
Attachment 1
Mar 20, 2015

Business Guideline for Financial Market Infrastructures

1. BACKGROUNDAfter the global financial crisis in 2008, countries around the world strengthened financial regulation and supervision in order to prevent systemic risk in financial markets. The G20 countries agreed on stricter supervision on financial market infrastructures, mandatory clearing of over-the-counter(OTC) derivatives through a central counterparty(CCP) and mandatory reporting of transaction information to a trade repository(TR). To avoid regulatory arbitrage among different jurisdiction, the G20 endorsed the Principles for Financial Market Infrastructures(PFMIs)1 as international standards for payment, clearing and settlement systems.In line with such a global move, Korea bolstered supervision on financial market infrastructures and is now in the process of implementing international standards into domestic regulatory framework. We strengthened monitoring and investor protection in derivatives markets. Korea also introduced a CCP for clearing OTC derivatives(April 2013) and mandatory clearing of Korean won IRS through a CCP(June 2014).With the establishment of the ‘Business Guideline for Financial Market Infrastructures,’ the FSC intends to adopt the PFMIs as clear guiding principles in supervision of domestic financial market infrastructures.2. SUMMARY OF「BUSINESS GUIDELINE FOR FINANCIAL MARKET INFRASTRUCTURES」*Attached: Full Text of the Business Guideline for FMIsOVERVIEWThe Business Guideline for Financial Market Infrastructures(hereinafter ‘the Guideline’) is to provide specific standards that financial market infrastructures(hereinafter ‘FMIs’) should comply with in conducting business pursuant to the Financial Investment Business and Capital Markets Act and its subordinate regulations.Reflecting the PFMIs, the Guideline reorganized provisions related with financial market infrastructure, scattered throughout the Financial Investment Business and Capital Markets Act, into a systemic order.FMIS SUBJECT TO THE GUIDELINEThe Guideline sh
Attachment 2
Mar 17, 2015

Key Policy Direction for Financial Regulatory Reform

FSC Chairman Yim Jong-yong had his first press conference today since he took office on March 13, 2015 to outline a key policy direction for financial regulatory reform. Under his chairmanship, financial regulatory reform will be pushed forward with three key policy goals:(1) promote autonomy and responsibility in the financial sector; (2) expands the financial sector’s capacity to support the real economy; and (3) strengthen competitiveness of the financial industry.1. PROMOTE AUTONOMY AND RESPONSIBILITYThe role of financial regulator will be redefined to give more autonomy to financial companies. The financial regulator will act as a ‘referee’ who ensures that all rules and regulations of the game are correctly followed, not a ‘coach’ who directs details of the play. The whole process of supervision, inspection and sanction will be overhauled to reduce excessive regulatory burden on financial companies. Financial companies will be guaranteed the principle of autonomy in making decisions about service fees, interest rates and dividend payouts. The FSC and FSS will jointly make on-site visits to find and fix unreasonable regulations and practice.The FSC will foster a culture of responsibility in which financial companies voluntarily undertake their responsibility in expanding capacity, strengthening internal control and protecting financial consumers. Banks will be encouraged to make more efforts to strengthen their capacity and innovate by reflecting progress in such effort in their performance evaluation. Financial companies will be held more accountable for financial incidents or misconduct with the establishment of a code of ethics for financial consumer protection. Performance evaluation and compensation system will be improved so that executives and employees of financial companies could be rewarded for their commitment to innovation.2. STRENGTHEN SUPPORT FOR THE REAL ECONOMYThe FSC will channel more funds to businesses with innovat
Attachment 1
Feb 26, 2015

Korea's Household Debt and Policy Response

1. CURRENT STATUS OF KOREA’S HOUSEHOLD DEBTAs of end-September 2014, outstanding household credit totaled KRW 1,060.3 trillion with household loans totaling KRW 1,002.9 trillion and merchandise credit1 KRW 57.4 trillion.2The ratio of household debt to income in Korea was 160.7 % (as of 2013), higher than 115.1% in the US(as of 2012) and 135.7% of the OECD average(as of 2012). However, Korea’s household financial assets to liabilities ratio maintained stable levels of 46%, while the ratios in Spain and other major OECD countries have been rising.The quality of household mortgage loans has been improved with proportions of fixed-rate and fully-amortized loans steadily increasing. As of end-2014, the percentage of fixed-rate and amortized loans out of banks’ household mortgage loans stood at 23.6% and 26.5% respectively, exceeding 20% initially targeted by 2014.2. POLICY MEASURES TO MANAGE HOUSEHOLD DEBT GROWTHIt is a natural phenomenon that household debt increases as economy grows. The bottom line is that it is important to boost the economy while maintaining household debt soundness.Under such awareness, the government has been managing household debt with policy measures focused on two aspects. First, secure soundness of the financial system by maintaining the pace of household debt growth at manageable levels, improving the quality of household loans and bolstering financial institutions loss-absorbing capacity. Second, ensure financial soundness of households with measures to boost household incomes and provide tailored financial services to financially-vulnerable households.The government set basic policy directions to manage household debt with「Comprehensive Measures on Household Debt」in June 2011.The policy measures were focused on maintaining the pace of household loan growth at economic growth rates; improving the quality of household loans with a larger share of fixed- rate and amortizing loans; and providing tailored support for low-income househ
Attachment 1
Jan 29, 2015

Financial Policy Direction for 2015

The FSC announced its financial policy direction for the year of 2015 with three key policy goals and nine tasks.Creative FinanceInitial achievements in creative finance spread widely across all financial sectors- Facilitate the convergence of IT and financial sectors to promote the ‘Fintech’ industry- Strengthen the intermediary role of finance to support the real economy by encouraging investments by venture capital- Continue financial regulator y reform to strengthen competitiveness of Korea’s financial sectorConsumer TrustConsumer trust in the financial sector for further growth of the financial services sector- Improve the financially-marginalized’ access to financial services and expand supportive programs- Strengthen financial consumer protection by improving inconvenient practice in financial services- Restore consumer trust in the financial sector with establishment of ethics guidelines of the sectorFinancial StabilitySecure financial stability to support a strong recovery of Korea’s economy- Preemptively respond to potential risks of household debt- Conduct corporate restructuring in a preemptive manner on a year-round basis- Ensure financial stability against risk factors home and abroadKEY POLICY ACHIEVEMEN TS IN 2013 AND 2014For the last two years since the launch of the Park Geun-hye administration, the FSC has been committed to laying the groundwork for creative finance to promote innovation and competition in the financial sector.Technology financeThe FSC established infrastructure for tech finance such as technology data base(TDB) or technology credit bureau(TCB )1 to support financing of innovative tech fims. For six months since the ‘tech finance’ initiative took off, provision of technology-secured loans amounted to a total of KRW 8.9trillion in 14,413 cases. Interest payment burden reduce d 0.4%p with tech loans. Financial regulatory reformAs part of the government’s regulatory reform initiative, the FSC reviewed all statutory an
Attachment 1
Jan 27, 2015

Plan to Support Convergence of Finance and Technology

OVERVIEWThe convergence of IT and fin ancial sectors, or ‘financial technology’(here inafter ‘Fintech’), has emerged as a global trend. The trend also affects transaction pattern an d payment environment for domestic consumers and industries with rapidly growing c ross-border commerce and financial trans action on online or mobile platforms.Investment into the Fintech industry continues to grow around the globe, particularly in the U.S. and the U.K. with high e xpectation about the sector’s growth potential. As global IT leaders such as Alibaba and Apple entered payments market, the Fintech se rvices began to draw attention of the financial sector. Advanced countries including the U. K. actively support the growth of the Fintech indu stry to seize new growth opportunities.Korea has been less active in f ostering the Fintech sector so far due to regulatory barriers and financial security concern. As an IT powerhouse with the advanced financial industry, Korea has great potential for growth in the Fintech sector. In order for Fintech to bring innovative changes to financial services, we need to overhaul current financial regulatory framework mainly focused on offline serv ices. The FSC will also support financing of Fintech businesses and significantly lower barrier s to entry for electronic financial businesses. Financial security, however, is a prerequisite to t he growth of Fitech sector. To this end, the FS C will maintain a strict stance on security and c onsumer protection, while allowing financial service providers more room in their business o perations.1. Regulatory paradigm shift Minimization of ‘ex-ante’ regulationsSecurity review and evaluatio n for means of authentication will be abolish ed to allow financial firms to deliver consumers innovative convenient financial services and introduce more efficient authentication means on their own responsibility. (Revision to regulations related with electronic financial transaction within the second
Attachment 1
Jan 26, 2015

Improvement in Household Debt Structure

As a means to improve structu ral vulnerability of bank mortgage loans, the government has been encouraging banks to increase the proportion of fixed rate and amortiz ed loans since 2011.As of the end of 2014, banking sector’s proportion of fixed rate loans incr eased 7.7%p to 23.6% from 15.9% year-on-year, wh ereas amortized loans grew 7.8%p to 26.5% from 18.7% during the same period. The numbers exceeded the target1 set by ‘Measures to Improve Structural Soundness of Household Debt ’ announced in February.The proportion of fixed loan p roducts shifting to floating rate after 5 years and applying adjusted interest rate after every 5years went up significantly.The proportion of amortized l oans greatly increased due to the change in BIS’ minimum capital ratio and active partici pation by the banking sector.*Banks with the biggest proportio n of amortized loan(%): SC(40.7)→Kwangju Bank(29 .9)→KB(29.1)The government will continuo usly review the progress of the banking sect or’s efforts to improve household debt struct ure on a yearly basis.*Please refer tothe attachedPDF for details.
Attachment 1
Jan 15, 2015

Policy Initiatives for 2015: A 'Dynamic and Innovative Economy'

The government announced its policy initiatives for 2015 to realize a ‘dyna mic and innovative economy’ with relevant minis tries.1 Under the 3-year plan for economic innovation announced last year, the polic y initiatives are mainly focused on boosting the Korean economy’s vitality by creating new businesses, new industries and new markets.The FSC will push forward po licy tasks to vitalize a financial ecosystem to support the creative economy by channeling funds into innovative start-ups and venture companies.1. ESTABLISH FINANCING SC HEME FOR EACH STAGE OF BUSINESS LIFE C YCLEStart-upsA fund worth KRW 510billion will be created with contributions from the Growth Ladder Fund and Creative Economic Centers in local areas to provide funds for in novative local businesses.V-credit default swaps(V-CDS ) will be developed to reduce investors’ risks from investment into early-stage venture companies. The new derivative product will be des igned to sell venture investment risk separa tely. Structure of V-CDS and investment inc entives will be out within the first half of 2015.GrowthThe FSC will support tempora rily financially distressed companies by extending fast track programs for SMEs2 and utilizing KAMCO’s sale lease back program3.DivestmentThe FSC will make easier for investors to recoup their investment in SMEs . To this end, the FSC plans to foster brokerage services specialized in MAs of SMEs or v enture companies, raise a total of KRW 1trillion over the next three years to support MAs o f SMEs and launch a new trading platform for unlisted shares of SMEs and venture companies.4 Details will be set out in a ‘Plan for Stimulating Venture Capital Investment’ scheduled to be announced in the first half of 2015.2. PROVIDE POLICY FUNDS T O SUPPORT CREATIVE ECONOMYPolicy banks plan to provide a total of KRW 180trillion in 20155 to suppor t the creative economy. Out of the funds, about KRW 100trillion will be invested into new growth drivers including serv
Attachment 1
Dec 24, 2014

Revision to Regulation on Supervision of Banking Business

The FSC approved revisions to the Regulation on Supervision of Banking Business including introduction of Liquidity Coverage Ratio(LCR) and changes to calculation of the ratio of Korean-won denominated loans to deposits.KEY REVISIONS1. Introduction of Liquidity Coverage Ratio(LCR)The LCR rules will be implem ented starting from January 1, 2015. The minimum ratio for commercial banks will begin at 80%, which is higher than the Basel III requirement of 60%,given the current liquidity ratio of domestic banks. The ratio will be raised by 5%p per year over the next 4 years to meet 100% in 2019.2. Revisions to calculation of Korean-won denominated loans-to-deposits(LTD) ratioPolicy loans will be exempted from the total amount of loans in calculating loans-to-deposits ratio in order to enhance banks’ capacity to lend and allow greater flexibility in banks’ asset management.Covered bonds with a 5-year maturity or longer will be included the total amount of deposits in order to encourage the issuance of covered bonds and structural soundness of household debt.The revised LTD rule will take effect immediately.*Please refer tothe attached file for details.
Attachment 1
Dec 04, 2014

Bidding Results for Woori Bank Shares

The Public Fund Oversight Committee(PFOC) held its 103rd meeting on December 4 after receiving the bidding results for Woori Bank shares from the Korea Deposit Insurance Corporation(KDIC).(Minority shares) Out of the 23.76% stake on sale, the KDIC auctioned off 5.94% for KRW 453.1 billion, which offered higher price than the KDIC’s estimation. Successful bidders will be granted call options accounting for 50% of the winning bid. The sale process will be completed within next week after signing stock sale contracts.(Controlling shares) The bid ding procedure for the controlling stake, which needs at least two bidders to proceed, will be halted since only one bid had been received.The PFOC will continue to discuss and then decide when and how to resume sale of the remaining 48.06% stake.*Please refer tothe attachedPDF for details.
Attachment 1
Nov 26, 2014

Plan to Revitalize Korea's Stock Market

OVERVIEWThe FSC announced a set of measures to revitalize the Korean stock market, which has been in a slump in recent years. The benchmark index KOSPI has been hovering around the 2,000-point level since it hit 2,000 points for the first time in 2007. There is not enough supply of newly listed stocks to boost trading. The market infrastructure and trading system are not attractive to investors, compared to the advanced markets.The measures are aimed to address such structural problems of the stock market. First, the FSC will boost stock market trading by allowing the listing of more blue-chip stocks and new derivatives products and by encouraging more active role of institutional investors. Second, the FSC will enhance efficiency of the market infrastructure and trading system. Third, the FSC will strengthen investor protection and trust by improving disclosure rules.MEASURES TO REVITALIZE THE STOCK MARKET1. EXPAND INVESTMENT PRODUCTRevise listing regulation(Revision to the Capital Markets Act in the first half of 2015)In order to encourage the listing of more blue-chip stocks, the FSC will revise listing regulations to incentivize companies to go public such as allowing the issuance of bond with separable warrants and simplifying procedures for dividend payout.Introduce new derivatives products(Revision to the KRX regulation in 2015~2016)The FSC will allow the listing of new derivatives products such as Mini futures and RMB futures in one to two years. The listing of V-index options or ETF futures will be also considered depending on commodity market situation.2. ENLARGE PARTICIPATION OF INSTITUTIONAL INVESTORSCreate a common investment pool for small pension funds (in the first half of 2015)A common investment pool will be set up for smaller private pension funds. Korea Securities Finance Corp and asset management companies will jointly attract and manage investments from universities’ funds and private pension funds of corporations.Enlarge stock investments by
Attachment 1
Nov 18, 2014

Korea's Reunification & Financial Policy Tasks

1. Historical Implication of Korea’s Reunification2. Current Status of North Korea’s Economy3. Financial Policy Task Upon Economic Integration4. Measures to Support NK Development5. Plan to Build Financial System for Stable Economic Integration6. Plan to Reform Financial System for Macroeconomic Stability7. Conclusion* Please note that this material is to encourage constructive discussion among academia, policy banks and financial institutions about Korea's reunification. This is not the Korean government's official stance at the moment, which needs further discussion in the future.* Please refer to the attached PDF.
Attachment 1
Oct 29, 2014

Plan to Improve Financial Holding Company System

BACKGROUNDKorea’s financial industry adopted financial holding company system in 2011 to maximize synergy among financial subsidiary companies. Since the introduction, financial holding companies have achieved notable growth and played a crucial role for the financial system. However, there are also skepticisms about the financial holding company system due to domestic financial holding companies’ low global competitiveness, asset and management structure centered by bank1, and instable governance structure.Nevertheless, financial holding company system is an effective mechanism to enhance financial industry’s competitiveness. The system creates synergies among subsidiary companies by preventing risk spillover to other financial companies2, easing MA and restructuring process, and enabling business connection among subsidiaries. Moreover, the financial holding company system enables subsidiary companies to provide one-stop financial services and expand business overseas which are expected to contribute to the development of the financial industry.To such backdrop, the Financial Services Commission plans to improve regulations and provide policy support to maximize effectiveness of the financial holding company system.DETAILED PLAN1. Ease regulations on holding concurrent positions by employees(Current) Global financial holding companies encourage heads of matrix organizations to hold concurrent positions to cover wider range of business strategy and operation. However, domestic financial holding companies have been applying strict regulations to employees related to holding multiple positions which makes them difficult to provide integrated financial services by collaborating business units.(After revision) The government will encourage financial holding companies to allow holding concurrent positions and ease related regulations. Possible negative impacts will be minimized through the Financial Supervisory Service’s stringent screening process. Positions th
Attachment 1
Oct 27, 2014

The Sales Process for Minority Shares in Woori Bank

The sales process for minority shares in Woori Bank has started with a public announcement made on October 27, 2014.The Korea Deposit Insurance Corporation put its 18% stake in Woori Bank for auction.Bidders are allowed to make bids for minority shares of between 0.4% and 10%.As an incentive to draw more tenders, winning bidders will be given call options of 0.5 shares per share. The KDIC will keep possession of approximately 9% of its share to pay out the call options. Investors can exercise their call options anytime within three years after one year since the issuance.With public announcement on the sale on October 27, the bid will be closed on November 28.Successful bidders will be selected and announced within December.*Please refer to the attached PDF for details.
Attachment 1
Sep 29, 2014

Plan to Improve Prudential Regulations on the Asset Management Industry

The FSC set out its plan to improve prudential regulations on the asset management industry. The plan includes the abolishment of the NCR rules and management evaluation and the reform of prompt corrective action scheme.DETAILED PLAN1. Replace the NCR with ‘minimum capital requirement’The net capital ratio(NCR) has been used as standards for prompt corrective action to asset management firms as well as securities firms since the rules were first introduced in April 1997. There have been, however, claims by market participants that the NC R rules are less effective to asset management companies as the NCR regime is better suit d to securities firms’ business model and environment.The FSC plans to replace the NCR rules with the ‘minimum capital requirement’. Asset management companies will be required to hold equity capital that exceeds the ‘minimum capital requirement.’The minimum capital requirement is the sum of ①regulatory capital requirement, ②capital requirement for client asset management, and ③capital requirement for proprietary investments.- (Regulatory capital requirement) An asset management company is required to meet the minimum capital requirement need to maintain its business license.- (Capital requirement for client asset management) An asset management company is required to accumulated reserve money in proportion to clients’ deposit to be used for compensations in case of clients’ damages.- (Capital requirement for proprietary investments) An asset management company is required to accumulate a certain proportion (e.g. 5~10%) of its proprietary investments in capital buffer against investment risks.2. Abolish management evaluationThe current management evaluation system will be abolished for the asset management industry. Instead, operational risk evaluation will be introduced to evaluate asset management companies’ internal control an d risk management. Evaluation results will be used only as reference for supervision, not
Attachment 1