Press Releases - Financial Services Commission

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Jun 24, 2010

Amendments to the Enforcement Decree of the Mutual Savings Banks

As the Amendments to the Enforcement Decree of the Mutual Savings Banks Act have passed the Cabinet Meeting in June 22, they are expected to be enforced starting from July 2010.A major change is that banks’ equity capital will be calculated based on the BIS definition, and not on the balance sheet definition as previously done.Standards for calculation of a bank’s equity capitalPreviously, a bank’s equity capital was defined as total assets minus total liabilities on the balance sheet. Under the amended enforcement decree, mutual banks are required to follow the BIS definition of equity capital, which consists of Tier 1 capital, Tier 2 capital, and deductible items. Each has to meet the following qualifications:(1) Tier 1 capital: a bank’s core net assets with permanent features (e.g. paid-in-capital, capital surplus)(2) Tier 2 capital: capital equivalent to Tier 1, capable of covering loss(e.g. subordinated bonds, subordinated deposits, cumulative preferred stock)(3) Deductible items: Items that do not actually contribute to the soundness of capital should be excluded from equity capital. (e.g. treasury stock)(4) A bank’s equity capital ratio is to be calculated every six months. In two months after the calculation, the new ratio will be applied for six months.*Details on Tier 1, Tier 2 and deductible items will be specified in supervision regulations.Implementation scheduleThe amended enforcement decree mandates the Supervision Regulations of the Mutual Savings Banks and the Supervision Rules of the Mutual Savings Banks to stipulate details.The amendments are expected to be implemented starting July 1.*Please read the attached file for details.
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Jun 16, 2010

Conference on "The Global Financial Crisis and Microfinance: Challenges and International Cooperation"

The Financial Services Commission (FSC), the World Bank and the Korea DevelopmentInstitute (KDI) co-hosted an international conference on “the Global Financial Crisis andMicrocredit: Challenges and International Cooperation” on June 15.As the first-ever conference on microfinance jointly hosted by the Korean government and aninternational organization, it was attended by Kwon Hyuk-Se, the Vice Chairman of the FSC,Kim Seung-Yoo, the Chairman of the Smile Microcredit Bank, Tunc Uyanik, the SectorManger of the World Bank, and many distinguished guests. Participants had in-depthdiscussions on the impact of the global financial crisis on microfinance, each country’sresponse to the financial crisis, and initiatives to strengthen international cooperation. FSC’s Vice Chairman Kwon pointed out that the global financial crisis increased the numberof the poor and widened the gap between the rich and the poor, which could lead to a social conflict. Against this backdrop, he emphasized that microfinance serves as a social safety net for those who have no access to conventional financial services and an important means for overcoming the global financial crisis. Smile Microcredit project, the Korean model of microfinance, is led by the private sector withprivate donations and dormant savings as funding sources. In the wake of the global financialcrisis, fiscal conditions of many governments have been deteriorated. Vice Chairman Kwonsaid that under such circumstances, microfinance could be a viable option for each government to tackle economic polarization.The Korean government expects the conference to contribute to expanding microfinancebusinesses such as Smile Microcredit. Korea will bring the issue to the G20 summit meetingto urge that microfinance could play a key role in overcoming financial crises. 1. Diversify funding sources, including individuals’ contributions2. Cut operation costs by renting offices from public institutions as Smile Microcredit Bank’s bran
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Jun 14, 2010

2ND Round of Strengthened Regualtion on Financial Institutions' FX Soundness

BackgroundSince the government implemented the new rules to strengthen regulations on financial institutions’ FX soundness in January 2010, FX liquidity ratio has risen, the management of FX derivatives trade has been strengthened, and the overall FX soundness of banks has improved. However, the regulation to limit banks’ FX liquidity ratio has been applied to only domestic banks, not to local branches of foreign banks; therefore, foreign banks are still exposed to risks of mismatch between long-term assets in the Korean won and short-term borrowings in foreign currency.**Please read the attached file for details.Plans1. Regulations on domestic banks will be tightened to raise FX liquidity ratio and Mid-to 1. Regulations on domestic banks will be tightened to raise FX liquidity ratio and Mid-to FX liquidity ratio internally on a daily basis and report to financial authorities on a monthly basis. Securities held to maturity in foreign currency as well as foreign currency borrowings will be included when calculating the ratio of mid-to long-term financing in foreign loan portfolios. The ratio will be raised from 90% to 100%.2. The government will provide guidelines for local branches of foreign banks so that they can manage FX liquidity risk on a voluntary basis. Under the new guidelines, they will be advised to voluntarily manage their FX liquidity risks and acquire safer and longer term FX funding sources. However, some of the standards will be waived if their head office submits a letter of commitment to provide FX liquidity for its branch in Korea at times if needed. Implementing the new guidelines for local branches of foreign banks, a three-month grace period will be given to smooth out the transition. In managing FX liquidity risk, they will be subject to basically similar rules applied to domestic banks such as currency-specific liquidity risk management, diversification of funding source, and contingency funding plans. The guidelines will reflect opinions
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Jun 04, 2010

Amendments to the Enforcement Decree of the FSCMA Passed at the Vice Ministerial Meeting

Amendments to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) were passed at the vice ministerial meeting on June 3, 2010. Reflecting opinions gathered during the period of legislation notice, the following modifications were made to the first draft that had been previously announced:1. The original draft stipulated that applications for add-on business authorization shall be suspended for one to three years for financial investment institutions penalized with a warning or a higher punitive measure. However, accepting the opinion that the measure may be too harsh considering a warning is a minor penalty, the level will be raised to a suspension of business activities of branches and sales representative offices. The revised version specifies the level of punitive measures that affects authorization of financial investment institutions.2. Modifications will be made after further discussions in regard with the current provision that applies same criteria for disqualification of both non-registered executives and registered executives.3. Given that some modifications were made to the original draft, the Governor of the Financial Supervisory Service (FSS) will continue to exercise the authority mandated by the FSC to penalize employees and executives of financial investment institutions. 4. The limit on bond funds to indirectly reinvest up to 40% of their assets in government bond ETFs will be raised to 100%.5. Executives and employees from foreign multi-financial service providers operating collective investment businesses (i.e. asset management) were prohibited from holding concurrent positions in domestic financial institutions. However, the blanket ban was revised so that only those engaged in collective investment business (both employees and executives) are prohibited from holding concurrent positions in domestic financial institutions.The amendments will go through the cabinet meeting’s approval next week to be enforc
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Jun 03, 2010

Principles and Plans for Authorization of Financial Investment Businesses

Amendments to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) were passed at the vice ministerial meeting on June 3, 2010.Reflecting opinions gathered during the period of legislation notice, the following modifications were made to the first draft that had been previously announced:1. The original draft stipulated that applications for add-on business authorization shall be suspended for one to three years for financial investment institutions penalized with a warning or a higher punitive measure.However, accepting the opinion that the measure may be too harsh considering a warning is a minor penalty, the level will be raised to a suspension of business activities of branches and sales representative offices. The revised version specifies the level of punitive measures that affects authorization of financial investment institutions. 2. Modifications will be made after further discussions in regard with the current provision that applies same criteria for disqualification of both non-registered executives and registered executives.3. Given that some modifications were made to the original draft, the Governor of the Financial Supervisory Service (FSS) will continue to exercise the authority mandated by the FSC to penalize employees and executives of financial investment institutions. 4. The limit on bond funds to indirectly reinvest up to 40% of their assets in government bond ETFs will be raised to 100%.5. Executives and employees from foreign multi-financial service providers operating collective investment businesses (i.e. asset management) were prohibited from holding concurrent positions in domestic financial institutions. However, the blanket ban was revised so that only those engaged in collective investment business (both employees and executives) are prohibited from holding concurrent positions in domestic financial institutions.The amendments will go through the cabinet meeting’s approval next week to be enforce
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May 19, 2010

FSC Chairman's Speech - Korea Economic Forum

Ⅰ. GreetingsGood morning, ladies and gentlemen!I would like to begin with my thanks to Mr. Song Philho, CEO of JoongAng Ilbo, Mr. Lho Cholsoo, publisher of JoongAng Daily, and Mr. Chung Ki-young, president of Samsung Economic Research Institute, for inviting me to speak at today’s forum.I also wish to acknowledge and thank honorable ambassadors, business leaders, and members of the foreign press who are with us today.The global financial crisis, unprecedented in both scale and scope, now appears to have run its course.Troubling new developments in the euro-zone economies, however, remind us that there are still many post-crisis uncertainties we must contend with.So, once again, we must wonder where the euro-zone crisis is headed, and what impact, if any, it may have on Korea’s financial markets and the economy.And it is my hope that today’s forum will shed new light on some of the questions that are on everyone’s mind.This morning, I would like to use my time to outline major financial policy issues we confront and tasks that lie ahead.Ⅱ. Korea’s Financial Policy: Current Issues TasksThere is no question that the global financial crisis forced us to reflect on our past and take stock of what went wrong.The crisis was, in many ways, a heavy blow to our conventional wisdom: namely, a blind faith in market efficiency, innovation and risk-taking.Now, with the benefit of hindsight, the international community is working to introduce wide-ranging financial regulatory reform measures.I believe we must prepare wisely for what lies ahead and maintain our vigilance on changes that are unfolding in the global financial environment.For our part, we are going to formulate financial policies within the context of the new global financial order with a focus on enhancing Korea’s financial capabilities.Addressing Destabilizing FactorsFirst and foremost, we will continue to respond swiftly and preemptively to destabilizing market developments to put out the fire befor
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May 10, 2010

Contingency Plans for Southern Europe's Financial Crisis

Despite the EU-IMF rescue package* for Greece, financial markets faltered amid fears that southern European counties’ debt crisis could spread. Stock markets in the U.S. and Europe fell, and the KOSPI Index on May 6 fell 2% as well. The values of the US dollar and the yen against the Korean won surged. The US dollar against the Korean won on May 6 rose by KRW 25.8, and the yield of 3-year government bonds went up by 0.08%p.However, southern Europe’s debt crisis is expected to have only a limited impact on the Korean financial market because the domestic financial institutions’ exposure to the region is insignificant. As of end-2009, Korean financial companies’ exposure to southern European countries – Greece, Spain, Italy, and Portugal – is USD 640 million, just 1.2% of the USD 52.8 billion total external exposure. The total borrowings of Korean banks from those countries are only USD 390 million.As market concerns over southern Europe’s debt crisis and its contagion to Europe as a whole might persist for a while, the FSC plans to strengthen its monitoring on financial markets and European capital flows. To this end, the FSC and the FSS will closely monitor capital inflows and outflows and thoroughly examine domestic banks’ foreign liquidity soundness and external borrowing conditions.The FSC will utilize hot-lines and other communications channels with domestic banks to promptly detect and preemptively address market problems. We will also examine and complement individual banks’ contingency plans to raise their capital.Furthermore, in order to ease concerns in financial markets, the FSC will closely work together with the Ministry of Strategy and Finance (MOSF) and the Bank of Korea (BOK).At a global level, the Financial Stability Board (FSB) is expected to closely monitor the future developments of the Greek rescue package and promote global coordination through sharing information on each country’s fiscal and economic conditions.*Please refer
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Apr 20, 2010

Impacts of the Goldman Sachs Case on Financial Markets

1. Impacts on domestic and overseas financial marketsIn the wake of the civil action by the U.S. Securities and Exchange Commission (SEC) against Goldman Sachs on April 16, stock markets in the U.S. and Europe fell, and prices of the U.S. Treasury bonds and dollars rose.Domestic markets were also affected by the Goldman Sachs case to a limited extent. The KOSPI dropped by 30bps.Foreign investors sold in the market, and the U.S dollar against the Korean won rose.As of end-2009, domestic financial institutions hold the outstanding securities of USD 350 million issued by Goldman Sachs. That accounts for only 1.8% of foreign securities held by domestic financial institutions (USD 19.04 billion) and does not include a synthetic CDO related to the case.2. ImplicationsThe Goldman Sachs case is expected to bring only a limited impact on Korean financial markets considering the fact that Korean financial institutions hold no CDO at issue and only a small amount of other securities issued by Goldman Sachs. Also, under Korea’s Asset-Backed Securitization Act, it is virtually impossible for special purpose companies (SPCs) to issue synthetic CDOs, similar to the controversial product in question; therefore, it is unlikely that domestic financial institutions wouldexpose investors to similar risks.3. Policy responsesThe FSC will closely monitor any possibility that similar lawsuits would be filed worldwide and domestic financial companies might be involved. At the same time, the FSC will continue to improve investor protection systems such as prior reviews* for OTC derivatives. Currently, amendments to the FSCMA enforcement decree are underway to enforce the prior review system for OTC derivatives in June 2010, and the Korea Financial Investment Association(KOFIA) is formulating rules of prior reviews.*Prior reviews of OTC derivatives, introduced by the amended FSCMA in March 2010, are conducted by a review committee of the KOFIA. Products subject to a prior review include OTC
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Apr 15, 2010

Amendments to Credit Business Act

Since an annual interest rate ceiling on loans extended by private lending companies was lowered from 66% to 49% in October 2007, there has been a growing need to reflect a downward trend of interest rates. As the market size of private lending business, mostly used by low-income earners, continues to grow*and interest rates on credit loans by these lenders almost reach the ceiling, there is also an urgent need to ease the burden of rising interest rate for low-income earners.In order to further lower the maximum interest rates that private lending companies and financial companies can impose on their loans, the FSC made amendments to the Enforcement Decree of the Act on Registration of Credit Business, etc. and Protection of Finance Users with a 20-day notice from April 15 to May 5.The amendments require private lenders and financial companies to lower their interest rate ceiling by 5 percent points from current 49% to 44% per annum. The new ceiling is applied to loan contracts that will be made or renewed after the amendments take effect.After a 20-day notice, the amendments will go through reviews of the Regulatory Reform Committee and the Ministry of Government Legislation, and a vice ministers’ meeting and a cabinet meeting and take effect right after being announced in July.The FSC plans to cut 5 percent points further within a year, monitoring market developments such as guaranteed lending and market interest rates.*Please refer to the attached PDF for details.
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Apr 07, 2010

Amendments to Financial Investment Regulation

The Financial Services Commission (FSC) made amendments to financial investment regulations to strengthen financial investment companies’ risk management of foreign currency derivative products. Under the amended regulation, starting from April 12, financial investment companies and universal financial companies are required to set and implement their own guidelines on risk management of foreign currency derivative products.As banks do since January 1, financial investment companies and universal financial companies subject to the amended regulation are required to set counter party deal limits and verify counter parties’ risk hedge purpose when they trade foreign currency derivative products with corporate investors.The amendments mandate financial investment companies and universal financial companies engaged in foreign currency services to set and implement their own guidelines on risk management of foreign currency derivative products. The guidelines need to include the followings:1. When trading foreign currency derivative products (currency forwards, currency options, etc) with corporate investors,* financial investment companies are required to verify whether the transaction is for risk hedging.2. Financial investment companies are required to set counter party deal limits,considering the remaining balance of foreign currency derivatives contracts they already had with banks and other financial services companies.*Please refer to the attached PDF for details.
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Mar 31, 2010

Issuance of Financial Investor Express Card

The Financial Services Commission (FSC) held a meeting on March 24 to discuss and approve the issuance of Financial Investor Express Card (FIEx Card). The FIEx Card is issued by the FSC and the Fn Hub Korea of the Financial Supervisory Service (FSS) under the cooperation of the Ministry of Justice to provide convenience for foreign financial investors’immigration procedures.As of March 15, 2010, thirty-two cards were issued to those who met the requirements, out of thirty-five applicants from twenty-two foreign financial institutions.As foreign financial investors with the FIEx Card will be able to use fast-track immigration lanes starting in April 1, immigration procedures for them are expected to become much more convenient. The FIEx Card is issued to deputy general managers or higher executives, holding a supervisory intra-company transfer (D-7) visa, of local branches of foreign financial institutions with an operating capital of KRW 7 billion or more. Foreign financial investors who meet the qualifications can apply for the card at any time at the Fn Hub Korea. (www.fnhubkorea.kr Tel: +82-2-3786-7153)* For more details on the FIEX Card, please refer to the FSC’s Press Release of January 13, 2010, “Introduction of Financial Investor Express Card.” *Please refer to the attached PDF for details.
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Mar 26, 2010

Regulation on Banks' Loan-to-Deposit Ratios

In the 2010 Financial Policy Agenda announced in December 2009, the FSC unveiled its plans to adopt banks’ loan-to-deposit (LTD) ratio as one of its bank liquidity guidance ratios, which aims to encourage sound management of banks and alleviating factors driving the asset competition among banks. As a step to follow up with the announcement, the Regulation on Supervision of Banking Business is slated to be amended to employ banks’ liquidity or LTD ratio to measure bank management soundness after a notice and adjustment period between March 26 and April 15.BackgroundFor the past few years, expansion in mortgages and SME loans triggered off an asset competition among banks. As a result, signs of instability in banks’ liquidity became apparent during the 2008 financial crisis as bank debentures and other market-based capital served as funding sources while resources that are required to support stepped up lending were not backstopped with deposits.Although domestic banks’ LTD ratio was around 100% at the end of 2004, the ratio had risen sharply between 2005 and 2007 reaching 127.1% at the end of 2007. However, following the persistent guidance from the regulator to reduce the ratio since the second half of 2008, banks’ LTD ratio had fallen to 110.4% as of end-January 2010.Proposed ChangesThe planned changes in the regulation will apply to commercial banks in principle having won-denominated loans in excess of KRW2.0 trillion. This will include foreign bank branches, of which only HSBC will apply with KRW3.3 trillion in won-denominated loans as of December 2009, and the National Agricultural Cooperative Federation (NACF), the only one among the special purpose banks given the policy-driven nature of their loans.The ratio is calculated through the following method, excluding CDs: Loan-to-deposit ratio = won-denominated loans won/denominated deposits* * Demand deposits, savings deposits, time deposits (figures from bank balance sheets)The target for banks’ LTD
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Feb 23, 2010

Amendments to FSCMA Passed at the National Assembly

Amendments to the Financial Investment Services and Capital Markets Act (FSCMA) were passed at a general meeting of the National Assembly on February 18, 2010. The amendments were made based on six proposals submitted by legislators to address various issues raised since FSCMA came into effect in February 2009.The amendments are expected to take effect possibly in June 2010, three months after a public announcement.*Please refer to the attached PDF for details.
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Feb 10, 2010

SK Telecom Approved as a Major Shareholder of Hana Card

The Financial Services Commission (FSC) held its 3rd regular executive meeting on February 10, 2009 and approved the acquisition of 49% of Hana Card shares by SK Telecom as a major shareholder. The approval made SK Telecom the second largest shareholder of Hana Card by acquiring 57,647,058 new shares* of Hana Card. *Each share was bought at KRW 6,938.77 per share, 1.4 times its face value. The acquisition price totaled KRW 400 billion.*Please refer to the attached PDF for details.
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Feb 09, 2010

Plans to Build Trading Infrastructures for OTC Derivatives

As the G20 leaders at the Pittsburg summit on September 9, 2009 reached a comprehensive and concrete agreement to build trading infrastructures for over-the-counter (OTC) derivatives. In line with such effort, following plans have been devised for Korea’s OTC derivatives market. Current OTC derivatives market infrastructures in KoreaAs trading volume of OTC derivatives in Korea still remains insignificant, there are few market infrastructures such as a central counterparty clearing house (CCP) or an electronic trading platform in place. Currently, the Financial Supervisory Service (FSS) is running a derivatives monitoring system which serves as a trading info repository and where all derivatives contracts must be reported to.Future plansThe FSC’s Capital Markets Division will form a task force (TF) with academic and related institutions to monitor global discussions and exemplary cases in advanced countries so that specific plans to introduce trading infrastructures for OTC derivatives and to revise related laws and regulations by 2010.1. Creating trading infrastructures for OTC derivativesThe TF will conduct a thorough research on the possible effect of trading infrastructures for the OTC derivatives market to find out what method will be best suited for Korea.2. Providing legal groundsNecessary revisions will be made to the Financial Investment Services and Capital Markets Act (FSCMA) to provide legal grounds for a CCP which specify a definition of “clearing”, conditions for establishing a CCP, and measures to secure public interest.3. Standardizing OTC derivativesFor CCP clearing purposes, OTC derivatives such as IRS, CRS and CDS will have to be standardized.4. Other OTC derivatives infrastructuresFurther efforts will be made to enhance existing systems or to create a new trading info repository, a trading platform and other OTC market infrastructures, considering global trends.* Please refer to the attached PDF for details.
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Feb 01, 2010

Domestic Banks’ Preliminary SBL Ratios

Since August 2009, Korea’s financial authorities have been encouraging domestic banks to lower their average SBL (substandard or below loans) target ratio to 1% by end-December 2009.As of end-December 2009, domestic banks’ SBL ratios averaged 0.99% to meet their target ratios, excluding the KRW3.0 trillion in debt obligations that arose in December from the unexpected workout of the Kumho Group affiliates and a number of shipbuilders*. *Kumho Industries, Kumho Tires, SLS Shipbuilding, 21st Century Shipbuilding, etc.When setting the target ratio, corporate restructuring-related SBLs were allowed to betaken out of calculation because they were expected to take longer to resolve through sales, dispositions, and other means.If these corporate restructuring-related SBLs are included, the average SBL ratio is 1.22%.The SBLs resolved in H2 2009 during the targeting period were KRW17.7 trillion, an increase of 47.5% over the KRW12.0 trillion resolved in H1 2009.Detailed FiguresDomestic banks’ end-2009 SBL ratios inclusive of the large restructuring-related debt of KRW3.0 trillion in December was 1.22%, dropping sharply by 0.29 percentage points from the end-June 2009 ratio of 1.51% on the back of support to lower SBL.In terms of amount, the total SBLs were KRW15.7 trillion, down KRW3.9 trillion or19.9% from KRW19.6 trillion at end-June 2009.By class, the SBL ratios of both corporate and household loans each fell by 0.33 and 0.16 percentage points respectively in H2 2009 to 1.58% and 0.48%.The SBL ratio of small and medium-sized enterprises (SME) was 1.82%, falling by a significant 0.67 percentage points during H2 2009. The SBL ratio of household and mortgage loans, meanwhile, was 0.48% and 0.37% respectively, the lowest levels for both since figures began to be kept for both in March 2002 and December 2005.In 2009, domestic banks resolved KRW29.7 trillion in SBL, double the KRW14.0 trillion resolved in the preceding year.Of the KRW29.7 trillion, KRW9.5 trillion was re
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Jan 28, 2010

Results of the 9th Public Funds Oversight Committee Meeting

The Public Funds Oversight Committee, co-chaired by Mr. Sang Ki Min and the FSC Chairman Dong-Soo Chin, held the 9th meeting on January 27, 2010. Reported by the Korea Depository Insurance Corporation (KDIC) and the Korea Asset Management Corporation (KAMCO), the committee has decided on the criteria to select advisory firms and the method of sale of minority stakes in Woori Finance Holdings Company.Key Outcomes1. The committee decided to sell minority shares of Woori Finance Holdings in a block sale. The committee also approved the criteria to select advisory firms which will arrange the sale. Two domestic companies and two foreign companies will be selected in order to attract both foreign and domestic investors and further develop the securities sector in Korea.Details such as the size or the timing of sales will be determined by the committee after further deliberations.2. As decided at the meeting, the KAMCO and other creditors, who own a 68.2% stake in Daewoo International Corp., will sell 50% plus one share through open bids. Twenty-four percent of Kyobo Life Insurance shares, owned by Daewoo International, will be also put for sale.3. The committee also approved a plan for partially securitizing the project financing loans bought from financial companies through the Corporate Restructuring Funds (CRF) on September 2009. Specific plans are to initiate a transfer of project financing loans of KRW 59.4 billion to a special purpose company within February. The SPC will be co-funded by the CRF itself within KAMCO and other financial companies. The SPC will issue senior bonds of KRW 9.3 billion of which the CRF will take over. The rest will be issued as subordinated bonds of which financial companies will purchase.* Please refer to the attached PDF for details.
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Jan 20, 2010

Risk Assessment of Banks' Mortgage Loans

Household mortgage loans extended by banks totaled KRW 260.1 trillion at the end of September 2009, of which KRW 112.0 trillion (43.1%) are loans with lump-sum redemption contracts, and the remaining KRW 148.1 trillion (56.9%) are loans with redemption by installment contracts.Forty percent of the loans with lump-sum redemption contracts, KRW 44.7 trillion, will reach maturity in 2010.Fifteen percent of the loans with installment contracts, KRW 22.3 trillion, will start to be repaid with interest and principal in 2010.Risk AssessmentCompared with previous years, the amount of loans with lump-sum redemption contracts due in 2010 is relatively moderate. * *KRW44.3 trillion (2008), KRW43.3 trillion (2009), KRW44.7 trillion (2010)The numbers are estimated at the end of the previous year, with Sept. figures used for 2010.The loans with installment contracts, KRW 22.3 trillion, which will start to be repaid with interest and principal in 2010, have also decreased from KRW31.2 trillion of 2009.In particular, given that the rollover ratio of lump-sum payment loans exceeds 95%, the actual amount of household debt which poses a burden of full repayment is just around KRW 2 trillion.The extension of interest-only payment period for loans with redemption by installment contracts also helped to ease household financial bur den; from Nov. ’08 to Oct. ‘09, interest-only payment periods were extended for KRW 10.5 trillion in loans.Considering stabilizing housing prices* and low loan-to-value (LTV) ratio**, it is unlikely that the households’ debt repayment burden will significantly increase. *Housing price change (%, qoq): -1.0(1Q09), 0.4(2 Q), 1.3(3Q), 0.3(Nov), 0.1(Dec) **L TV ratio (’0 9 July): Korea 47.1%, U S 74.9%, U K 85.2% (end-December 2007)*Please read the attached file for details.
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Jan 13, 2010

Introduction of Foreign Investor Express Card

The Financial Services Commission (FSC), the Ministry of Justice and the Fn Hub Korea (the Center) of the Financial Supervisory Service have agreed to issue the "Financial Investor Express Card" with an aim to increase the number of foreign executives of foreign financial institutions eligible for fast-track immigration lanes. Also, the Center has published the "Visa Immigration Guide for Foreign Employees of Financial Institutions" to help meet foreign employees' needs related to immigration and visa issues.Financial Investor Express CardWith the introduction of the Financial Investor Express Card, foreign executives of a Korean branch of a foreign financial firm will become eligible to use fast-track immigration lanes.So far, only the executives of a Korean subsidiary of a foreign-invested enterprise and the holders of the Investor Express Card1 have been permitted to use the fast track.However, to reflect the contribution of branches of foreign financial firms to the Korean economy and to help attract foreign investment, the three organizations have decided to expand the benefits of fast-track immigration lanes.The Financial Investor Express Card will be issued to deputy general managers or higher executives, holding a supervisory intra-company transfer (D-7) visa, of a Korean branch with an operation fund of KRW 7 billion or more.The FSC and the Center will complete the preparations by the end of January 2010 and begin to accept applications and issue the card from February. (Please call Financial Hub Korea at +822-3145-7171 for inquiries)The introduction of the card is expected to improve conveniences of foreign investors and promote foreign investment in the financial industry.Visa Immigration Guide for Foreign Employees of Financial InstitutionsTo make a better living environment for foreigners, the Center, with the cooperation of the Ministry of Justice, has been providing foreign employees of financial institutions and their families with supporting service
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Jan 11, 2010

Progress on Improving Banks' Corporate Governance

The global financial crisis has shed light on the importance of corporate governance in financial institutions. In particular, banks have been the major beneficiaries of government relief programs* such as government guarantee for bank deposits and foreign debts. However, as the OECD and the BCBS noted, banks’ board of directors often neglected their social responsibility by failing in risk management, pursuing short-term profits, and paying out excessive compensation. Against this backdrop, improving corporate governance in financial institutions, particularly in the banking sector, is being actively discussed at the global level. Direct financial regulations may bring about side effects by undermining financial inter-mediation and adding burden to financial consumers. In contrast, improving corporate governance minimizes the side effects and restores the public trust i n financial institutions to ensure that the financial sector can support the real economy and prevent the recurrence of crisis.An overview of global discussions1. OECDThe OECD reports, The Corporate Governance Lessons from the Financial Crisis (Feb. 2009) and The Corporate Governance and the Financial Crisis: Key Findings and Main Messages (June 2009), assert that corporate governance in financial institutions should be improved, citing that the boards of directors, particularly outside directors, involve problems such as the pursuit of short-term oriented profit, the payment of excessive compensation, and the failure of risk management, and also citing that the current system doe s not give shareholders enough power to hold the management in check. To address these weaknesses, the OECD is working with the FSB to publish a set of recommendations on improving corporate governance, Strategic Response to the Financial Crisis.2. U.K.Since the Turner Review point ed out the need to improve corporate governance, Sir David Walker has led an independent review of corporate governance in the UK banking ind
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