Press Releases

All
Policy Agenda
Innovation
Stability
Inclusion
Others

FSC works to ensure that finance plays a key role in developing innovative businesses and supporting the real economy, thereby fueling Korea’s more vibrant economic growth. Promoting advanced financial industry, stable financial markets, fair market order and reliable consumer protection are among FSC’s key policy agenda. Digital transformation and big data are increasingly playing larger roles in various aspects of financial services. In the era of 4th industrial revolution and digital economy, finance will help boost growth potential and create jobs as the government seeks to advance its Digital New Deal policy.

Period: start
~
end

1month 3month Reset

Requirement

Dec 17, 2010

Basel III QIS and Its Implications

The Basel Committee on Banking Supervision (“the Committee”) published the results of its comprehensive quantitative impact study (QIS) on December 16, 2010 to ascertain the impact of the Basel III rules on banks’ capital adequacy, leverage and liquidity ratios. A total of 263 banks from 23 of the 27 Committee member jurisdictions participated in the study.In Korea, 8 banks submitted data for the comprehensive QIS including 5 Group 1 banks (Woori, Shinhan, Hana, KB and IBK) and 3 Group 2 banks (Nonghyup, Daegu and Busan).Capital ratios as of year-end 2009Group 1 banks’ average common equity Tier 1 (CET1) capital ratios under the new regime would have sharply fallen from an average gross CET1 capital ratio of 11.1% to 5.7%.This decline is mainly attributable to the new definition of capital deductions and filters not previously applied at the common equity level of Tier 1 capital. For the Group 1 banks, the reduction in CET1 capital is driven primarily by deductions of goodwill, etc.For larger banks (Group 1 banks), the change in net CET1 capital (with deductions) compared to gross CET1 capital (without deductions) amounts to -41.3%. The reduction in C ET1 capital of Group 1 banks from Korea by deductions amounts to 3.2%.In the meantime, CET 1 capital ratio of domestic banks would remain around 10.3% under the Basel III Framework, exceeding a CET1 target level of 7% (including the capital conservation buffer).Average capital ratios by banking group, in percent CET1 Tier 1 Total Change in CET 1 by deductions Gross Net Current New Current New Group 1 Average* 11.1 5.7 10.5 6.3 14.0 8.4 -41.3 Korean banks 11.3 10.3 11.1 10.4 14.7 13.5 -3.2 Group 2 Average* 10.7 7.8 9.8 8.1 12.8 10.3 -24.7 Korean banks 10.4 9.7 10.7 10.0 15.3 13.4 -1.8 *Average of banks from 23 countries Relative to a 7% CET1 level, the capital shortfall for Group 1 banks in the QIS sample is estimated to be €577 billion (KRW880 trillion) under the Basel III requirements (including the capital
Attachment 1
Dec 14, 2010

2011 Financial Policy Agenda

The Financial Services Commission (FSC) has made a publicly open presentation of its policy objectives for 2011 to President Lee Myung-Bak on December 14 at the Blue House.FSC Chairman Chin Dong-Soo unveiled the FSC’s 2011 policy agenda and had in-depth discussion with financial companies for low-income households, the general public, experts, and government officials on how to improve the practical effectiveness of financial support for low-income households.Six Key Objectives for 2011I. Preemptive Actions against Market Risks1. Taking preemptive measures to address problems in household debts and PF loans- Properly manage the pace of household debt growth not to increase exceedingly and eliminate systemic vulnerabilities of household debts by extending loans at longer-term, fixed rates or allowing borrowers to pay off principal in installments.- Prevent PF loans from being insolvent by conducting a more thorough review of business feasibility and reforming construction companies’ practices that have been recklessly providing payment guarantees; and encourage banks to write off bad PF loans as early as possible.- Expand financial restructuring funds by creating a common account for deposit insurance jointly held by individual financial sectors; raising deposit insurance premiums (from 0.35% to 0.40% for savings banks); securing restructuring funds, and strengthening the supervision of the Korea Deposit Insurance Corporation (KDIC).2. Strengthening measures to respond to internal and external risks and conducting a year-round corporate restructuring program- The FSC will strengthen its monitoring of financial markets and measures to enhance Korea’s foreign exchange soundness and to prevent the tipping of capital liquidity into one market. We will also review our contingency plans to counter crises such as Europe’s fiscal crisis or geopolitical risks on the Korean Peninsula.- Continue to conduct a year-round corporate restructuring program led by a group of c
Attachment 1
Dec 07, 2010

Follow-up Measures for November 11

The financial regulators are investigating alleged acts of unfair trading and risk management status of financial investment companies in relation to the selloff on November 11, 2010 that sparked the stock market plunge.Drawing on the consensus that Korea’s capital market should be operated to benefit all market participants, the regulators are now working with affiliated institutions and others for a long term plan to reform the current system while encouraging the industry’s own efforts to stabilize the market.Following are the measures under consideration by the regulators to draft amendments to the current rules or develop guidelines after gathering opinions from the market and industry.Stringent settlement risk management1) Tightening the margin ruleThe regulator will consider evaluating the settlement risk of a qualified institutional investor and determine the grade to impose margin requirements on the investor prior to trading when it fails to meet certain grade requirements.Currently, qualified institutional investors are allowed to deposit margins on a post facto basis.2) Setting a daily order limit for each qualified institutional investorThe regulator will consider setting a daily order limit for each qualified institutional investor based on total margin amount.Reform of trading system1) Implementing the random end rule for single price tradingIf the gap between the expected matching price at 14:50 (currently at 14:55) and the tentative market price (closing price) is 5% or more, the deadline for submitting quotations will be extended within 5 minutes to prevent sharp price movements.Industrialized countries such as Germany, the UK and France already introduced such a rule to mitigate steep fluctuations in matching prices.Sound derivative markets1) Setting derivative position limitsThe regulator will consider setting limits for the maximum positions that may be taken for derivatives including option contracts through a thorough analysis of global pr
Attachment 1
Nov 11, 2010

Global Financial Regulatory Reforms

1. Background of the G20 discussions on financial regulatory reformsOn November 15, 2008 in the midst of the global financial crisis, the Leaders of the G20 met for the first time in Washington to enhance international cooperation to restore global economic growth and achieve needed reform in the world’s financial systems. In Washington, the Leaders agreed on five principles for reform and the Action Plan to avoid future crises. The forty seven actions set forth in the Action Plan were mostly targeted to strengthen financial markets and regulatory regimes.Subsequently, at the London Summit on April 2, 2009, the Leaders monitored progress of implementation of the Action Plan agreed in Washington and declared eight major reform agenda. In particular, the Leaders gave a mandate to the Financial Stability Board (FSB) to coordinate global efforts on financial regulatory reforms.At the Pittsburgh Summit on September 25, 2009, the Leaders designated the G20 as the premier forum for international economic cooperation, fully endorsed the implementation standards of the compensation practices proposed by the FSB, and discussed main reform agenda 3 including addressing systemically important financial institutions (SIFIs). The Leaders also agreed on a concrete implementation timeline.At the Toronto Summit in June this year, the Leaders pledged to act together to fulfill the commitment within the timelines agreed to at the Washington, London, and Pittsburgh Summits. In particular, the Leaders agreed to accelerate the original timelines and complete discussions on a new bank capital and liquidity framework and policy recommendations to effectively address problems associated with SIFIs by the Seoul Summit.In accordance with the Leaders’ agreement, the FSB, collaborating with international standard setting bodies such as the Basel Committee on Banking Supervision (BCBS), has developed a detailed financial regulatory reform package with concrete implementation timelines, which
Attachment 1
Nov 10, 2010

Proposed amendments to the Enforcement Decree of the Banking Act Approved by Cabinet

BackgroundPrior to the enforcement of the amended Banking Act*, proposed amendments to the Enforcement Decree of the Banking Act have been approved at the cabinet meeting on November 9. The proposed amendments are to be enforced starting November 18, 2010 after the President’s approval and announcement.* The amended Banking Act, announced on May 17, 2010, is scheduled to be enforced starting November 18, 2010.Key Amendments to the Banking Act Key Contents of the amended Enforcement DecreeA. Banks’ overseas expansionIn principle, banks seeking overseas expansion are allowed to submit a report to the authorities afterwards, except for only those who fall into one of the following categories prescribed by the amended Enforcement Decree.① (bank soundness) a bank’s BIS ratio or its CAMELS rating falls short of required criteria.② (investment method) a bank plans to make investment in or pursue an MA with a below- investment-grade local corporation.③ (business scope) a bank wants to engage in business activities other than banking, concurrently-run, and subsidiary business.④ (investment destination) a bank plans to expand into a below-investment-grade country or a country that has no diplomatic tie with KoreaFurther details are stipulated by the Regulation on Supervision of Banking Business**a bank’s BIS ratio is less than 10%, or its CAMELS rating is below 3; credit ratings of local subsidiaries are below B+; and sovereign ratings of the host country are below B+ etc.B. Disqualifications of outside directorsMost of disqualifying conditions for outside directors set by Best Practice Guidelines on Corporate Governance in Banks (announced in Jan. 2010) were prescribed in the Regulation on Supervision of Banking Business previously and are now to be directly regulated under the amended Banking Act. Details such as definitions of a “corporation which has a special business relationship with a bank”* and a “person who cannot carry out his/her duty faithfu
Attachment 1
Sep 20, 2010

Notice of Changes to Banking Supervision Regulation

The FSC has issued a notice of changes made to the Regulation on Supervision of Banking Business in preparation of implementing the amended Banking Act taking effect on November 18 and adopting the K-IFRS in 2011.1. Reporting obligations for banks’ overseas expansionBanks seeking overseas expansion are allowed to submit a report to the authority afterwards, except for only those who fall into one of the following categories. They are still required to submit their expansion plan in advance to the authority for consultation.(1) (Bank soundness) a bank’s BIS ratio is less than 10%, or its CAMELS rating is below 3(2) (Business scope) a bank wants to expand its business beyond its core and non-core businesses(3) (Destination) a bank wants to expand into a country whose sovereign rating is below B+* or does not exist in the first place.*** Nigeria, Argentina, Cambodia, Mozambique, etc.**Iran, Iraq, Laos, Ethiopia, etc.(4) (Overseas subsidiary) an overseas subsidiary’s credit rating is below B+2. Consumer protection(1) When bank customers sign or revise a service contract with a bank, the terms of a contract should be submitted to compliance officers for review and reported to the Fair Trade Commission (FTC).(2) Banks are obliged to ①publicly disclose their contract conditions including interest rates, fees, and transaction terms on their website; ②provide their customers with a written document that stipulates contract terms; and ③ensure their customers fully understand terms of the contract.3. Internal governance rules(1) Banks’ internal rules and policies of governance should be publicly disclosed on their own website and the Korea Federation of Banks website.(2) Internal rules and policies regarding governance should be made public immediately upon their creation or revision. Activities of a bank’s board pursuant to internal rules should be disclosed by the end of the following month after a regular shareholders’ meeting.4. Preparations for the K-IFR
Attachment 1
Jul 28, 2010

Proposal for Amendments to the Enforcement Decree of the Banking Act

1. BackgroundPrior to the enforcement of the amended Banking Act* (November 18), the FSC has made amendments to the Enforcement Decree of the Banking Act to prescribe enforcement details.*Amendments were made to the Banking Act to (1) improve corporate governance in banks; (2) redefine the scope of banks’ business activities; and (3) strengthen consumer protection.2. Key Contents(1) Disqualifications for outside directorsAny individual who works as a full-time executive or employee of a corporation which has a special business relationship with a bank is unqualified for an outside director of the bank. A “corporation which has a special business relationship with a bank” refers to any corporation which concluded a single contract with the bank, amounting to more than 10% of the total sales revenue.Any individual whose work might involve conflict of interest with a bank shall not serve as an outside director of the bank. A “conflict of interest” may arise when the person serves as an outside director of more than two listed companies, or the person holds more than 1% of stocks issued by the bank.(2) Banks’ subsidiary businessUnder the amended Enforcement Decree, banks are to be allowed to provide investment advisory service given that they already provide similar service such as private banking (PB) service.However, the FSC has decided not to allow banks to offer “wrap account” or customized portfolio management service and short-term financing service. For this matter, further deliberation will be given until a global consensus is reached on relevant issues such as financial consumer protection, and supervisory and regulatory reforms. Moreover, since most banks are under bank holding companies who already provide brokerage and asset management services, there seems to be little need for banks to join in selling “wrap account” products. The FSC sees that not allowing banks to deal with “wrap account” products would not hurt their private banki
Attachment 1
Jul 01, 2010

Amendments to the Insurance Business Act

Amendments to the Insurance Business Act were passed at the National Assembly June 29, 2010 to strengthen insurance consumer protection.1. Strengthening insurance consumer protection(1) Insurers are subject to a stricter obligation to inform consumers of their insurance products. Selling their insurance policies, insurers have to provide prior information on their policies such as contract terms and conditions in which benefit payments are denied and receive consumers’ written consent. In violation of the obligation, an insurance company has to pay a fine of up to 20% of premium payments, or sales representatives and sales agencies are subject to a 20 million won or less fine.(2) The amended Act adopted a suitability or “Know-Your-Client” principle. Under the principle, insurers have to be well informed of consumers’ income, wealth, and investment purpose and recommend appropriate products that meet consumers’ needs. The principle will be applied first to universal insurance products.(3) In order to protect consumers from false or exaggerated advertisements, the amended Act specifies what should be included or not when advertising insurance products. Advertisements should include prior notices that recommend consumers to read brochures, contract terms and conditions, warning against possible loss of the principal. By omitting or providing insufficient information, advertisements should not mislead consumers to believe that benefit payments are fully guaranteed without any condition. Consumers should be well informed of the maximum amount of benefits, conditions to deny benefit payments, and immunity clauses.(4) For insurance contracts specified in the Presidential Decree (e.g. medical reimbursement insurance), it is an insurer’s obligation to confirm whether a consumer already has the insurance.(5) Insurers have to specify in their brochures conditions in which benefit payments are denied.(6) Policy holders are allowed to confirm, withdraw, and cancel* t
Attachment 1
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.
Attachment 1
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
Attachment 1
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
Attachment 1
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.
Attachment 1
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.
Attachment 1
Dec 16, 2009

2010 Financial Policy Agenda

The Financial Services Commission, the Fair Trade Commission and the Ministry of Strategy and Finance have jointly made a publicly open presentation of their policy objectives for 2010 to the President, Myung-Bak Lee today at the Korea Chamber of Commerce and Industry.Following the presentations from the three agencies, an open discussion took place on two main issues; job creation through active investments and sufficient support for low-income households.The Chairman, Dong-Soo Chin unveiled the FSC’s 2010 financial policy agenda on revitalizing the economy and improving the competitiveness of Korea’s financial markets.Five Key ObjectivesI. Funding Economic RevitalizationSupply sufficient funds to companies through policy financial institutions and the capital markets and invigorate green finance while strengthening corporate structures through restructuring1. Supply sufficient funds to companies through policy financial institutions- Supply a total of 23 trillion wons for facility investment through the KDB (9.5tn); IBK (8.0tn); KFC (1.35tn); KoDIT and Kibo (3.7tn)- Supply a total of 94 trillion wons to the small and medium enterprises through the IBK (29.0tn); KDB (10.0tn); KFC (2.1tn); KoDIT (36.7tn); Kibo (15.9tn)*The Korea Development Bank (KDB); the Industrial Bank of Korea (IBK); the Korea Finance Corporation (KFC); the Korea Credit Guarantee Fund (KoDIT) and the Korea Technology Finance Corporation (Kibo).In principle, the maturity extensions which were planned to end at the end of the year will be extended throughout the first half of next year while the upgraded guarantee ratio of 95% will be downgraded gradually; 90% in January; and 85% in July 2010. Newly applied guarantees in 2010 will be guaranteed within the range between 50% to 85%, the pre-crisis level.The burden will be alleviated on joint guarantees when venture companies raise capital from institutional investors.2. Supply sufficient funds to companies through the capital markets- Establish
Attachment 1
Jul 15, 2009

Key Financial Policy Issues

This is a summary of the report submitted to the National Policy Committee at a special session of the National Assembly on the most current and pressing key issues in financial policies.There are five key topics on the report:I. Plans to finance green growth related industries (MOSF/FSC – July 6) II. Privatization of Korea Development BankIII. Progress on corporate restructuring (FSS – July 15)IV. Strengthened risk management on mortgage loans (FSS – July 6) V. Amendments to the medical insurance business (FSC – July 1)Relevant announcements or press releases have recently been released through the FSC, FSS, or the MOSF (Ministry of Strategy and Finance). They are available on our website for your reference.The second topic which has not been dealt with previously is covered herein;Privatization of Korea Development Bank (KDB)1. Current stateThe privatization of KDB and the establishment of Korea Public Banking Corporation (KPBC) are well underway. This is to resolve market conflict with private financial companies and conduct policy lending more effectively.A. Related policiesThe National Assembly has agreed to have the KPBC Act established (March 3, 2009) and the KDB Act amended (April 29, 2009). Consequently, relevant laws and decrees were enforced on June 1, 2009.B. KDB spin-off planA committee of members from the FSC, MOSF, MKE, KDB and professionals from the private sector are discussing ways to break up the current KDB into KDB Holding Company, KPBC, and the remaining KDB.Due diligence has been conducted by an accounting firm on two accounts, from March 16 toApril 30 and May 22 to June 5. The spin-off will be based on the projected financial statement as of end-August 2009. KDB is forecast to have assets of KRW 172.2trn, liabilities of KRW 155.0trn, shareholders’ equity of KRW 17.1trn and a BIS ratio of 13.1% as of end-August.Assets will be allocated in a reasonable manner so that KDB can be privatized smoothly and KPBC can conduct public lending e
Attachment 3
Jun 25, 2009

Economic Policy Directions for the Second Half of 2009

Key DirectionsCurrent expansionary policies will continue until clear signs of economic turnaround are apparent, given uncertainties surrounding the economy. However, temporary measures will be reviewed in terms of their impact on the economy, and subject to be withdrawn when they expire. Real estate markets will be under close scrutiny, and any signs of market instability are sure to be responded to in advance with appropriate measures, in particular mortgage loans with tighter provisions. (According to the press briefing given on June 24, the Korean economy saw better-than-projected real GDP growth in the second half of 2009, registering a 1.7 percent increase from the previous quarter, while 0.7 percent growth was forecast originally.)The current policies concerning job creation and public welfare will continue to be pursued in the second half, but their impact and effectiveness will be reviewed. In this respect, supplementary budget spending, measures for promoting the service sector promotion and supporting business startups, and programs for training human resources will be put under evaluation.Market fund flows will be improved so that rich liquidity can move smoothly into the real sector. Long-term funding, such as MA funds and early IPOs of public companies, will be encouraged. Non-performing loans in the financial sector will be purchased through the KRW40 trillion Restructuring Fund.On-going corporate reform efforts will definitely be made: Creditor-led corporate restructuring at all times, early removal of bad loans in the financial sector, and more flexible job markets with improved labor-management relations. Relaxed lending conditions and expanded credit limits will be removed if the financial market stabilizes state-owned agencies are obliged to make on-going efforts to improve their management efficiency, and those subject to privatization will be prepared for it.The government will boost its efforts to raise the nation’s growth potential to prepa
Attachment 1
Nov 14, 2008

Reporters' Discussion Points with Chairman of the Financial Services Commission

1. Recent Market Conditions International Markets- The global markets seem to be stabilizing after the announcement of the U.S. government’s bailout plan and the currency swap agreements signed between the key nations around the world.- Some uncertain elements still exist in the market which are expected to remain until the first quarter of 2009.- With regards to hedge funds managed by major institutional investors, there are likely to be adjustments made to the portfolios early next year which are likely to lead to swift changes in sovereign credit ratings around the globe.Domestic Markets- In response to the crisis, the Korean government utilizing all its resources and departments including the Bank of Korea (BOK), and the regulatory bodies has made devoted efforts to stabilize the domestic financial market.- To provide foreign currency liquidity to financial institutions, - We have carried out a list of actions; guaranteeing external debt payments by local banks; providing foreign currency liquidity using the Swap market; and supporting export financing through the EXIM Bank.- With respect to providing liquidity of domestic currency,- The BOK has acted aggressively by lowering the interest rate 3 times since October 9th, totaling 125bp, and expanding the number of RP receivers.- These efforts have cleared an opening in the flow of funds and has dissolved the liquidity freeze.- However, we are in a phase of a frictional credit freeze because of the lack of liquidity still in local funds.- As a result of the economic slowdown, worries of insolvency in weak segments of the economy are increasing market uncertainty.- Thus, the propensity of investors to be risk adverse is freezing the liquidity of corporate bonds and ABCP.⇒ To summarize the current situation and to put it figuratively, a blood transfusion is given to an anemic patient, but due to the hardening of the arteries, the blood is being prevented from spreading throughout the body.2. Direction of Counter
Attachment 1
Oct 27, 2008

Briefing for Foreign Correspondents

The following briefing items were discussed with foreign correspondents on Monday 27th October, 2008.
Attachment 3
Oct 20, 2008

Introduction of competitive auction swap facility

Introduction of competitive auction swap facility- The Bank of Korea (BOK) will introduce a competitive auction swap facility, starting from October 20, 2008. o The existing swap market participation facility will continue to operate, but the amounts involved will be gradually reduced.- The purpose of this new facility is to enhance the predictability and effectiveness of foreign currency supply and to promote stability in the foreign currency funding market. o Market stability will be pursued by supplying foreign currency funds in more effective ways to domestic foreign exchange banks, which have had difficulties raising funds from abroad amid the worsening global credit crunch.- Unlike the existing swap market participation facility, the new competitive auction swap facility will be open to all foreign exchange banks in Korea. Under this program, the BOK will conduct FX sell buy swaps or currency swaps (pay) with banks at trade terms (amounts and interest rates) decided through competitive auction. o Under the swap market participation facility, introduced in September 2007, the BOK trades with agent banks first, and then the agents trade with other FX banks. o The new facility is different, in that every FX bank engages directly in swap trades with the BOK.- The BOK's expectation is that this new facility will help to ease the recent foreign currency funding market strains. * Please refer to the attached PDF below.
Attachment 1
Oct 14, 2008

Briefing for Analysts

1. Total Foreign DebtRecent debts have largely been incurred as a result of bridge-financing (based on anticipated future returns) such as currency forwards. This type of financing has different characteristics to that of liabilities incurred to finance current account deficits which were prevalent prior to the Asian Financial Crisis.As of the end of June 2008, it is estimated that $151.8 billion out of a total of $419.8 billion of foreign debt by BOK will be not be subject to any repayment burdens, and thus reduce the actual foreign debt amount to $268 billion. The exclusion of debts which are not subject to any repayment burdens will result in an actual net foreign asset amounting to $154.5 billion.The current external debt ratio as of the end of June 2008 stands at 86.1%. However, the figure falls to 54.4% when foreign bank branches are excluded, significantly reducing external debt risks.2. External Debt by Sector A. Government Sector The bulk of the government sector debt ($51.8 billion out of $63.1 billion) consists of KRW-denominated government bonds and currency stabilization bonds purchased by foreigners, for which the Korean government and the BOK has ample repayment capacity.The remainder consists of $3.3 billion in foreign currency-denominated FX equilibrium bonds, $3.4 billion in public loans, etc. (i.e. long-term external debts that pose little risk). B. Banking SectorForeign debts without any repayment burdens incurred from shipbuilders' currency hedging, etc. account for 44.6%, or approx. $93.8 billion, of the external banking sector debt. Foreign debts incurred by domestic branches of foreign banks from their headquarters abroad are very low-risk compared with those of Korean banks.* Foreign bank branches hold 43.1% of total external banking sector debts, and 57.7% of short-term debts.We are applying stringent criteria for FX liquidity to domestic banks than observed in other countries; hence, our current FX liquidity level remains stable.* Develope
Attachment 1