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Dec 14, 2011
- Early Repayment of Bank Recapitalization Fund
- OVERVIEWIn December 2008, the government announced its plan to create the Bank Recapitalization Fund in order to help banks secure more equity capital in response to the global financial crisis. A total of KRW 20 trillion fund was raised with contributions from the Bank of Korea (KRW 10 trillion), the Korea Development Bank (KRW 2 trillion), and institutional and retail investors (KRW 8 trillion) . With the fund, the government purchased banks’ subordinated and hybrid securities and then securitized subordinated debt of KRW 8 trillion into bonds and sold them to institutional investors.UPDATES ON FUND OPERATIONOn March 31, 2009, the government purchased hybrid and subordinated securities worth KRW 4 trillion from eight domestic banks.As of end-November 2011, a total of KRW 1.3 trillion was repaid. The government fully recovered its investment in banks’ subordinated debt by selling a total of KRW 503 billion* subordinated securities in the market. Out of the investment in hybrid securities, KRW 0.8 trillion** was repaid as issuers chose to buy back their debt before maturity.EARLY REPAYMENT SCHEMESome banks expressed their intention to buy back their hybrid securities before maturity as their earnings this year have increased.Such an early repayment requires approval from the Bank Recapitalization Fund Operation Committee and the FSS Governor for selling those securities before maturity.On December 9, 2011, the Committee has approved sales of hybrid securities worth KRW 1.5 trillion that the Bank Recapitalization Fund held in Kookmin (KRW 0.6 trillion), Hana (KRW 0.3 trillion), Woori (KRW 0.2 trillion), and NH Bank (KRW 1.5 trillion).These banks will go through their internal procedure such as approval from their board of directors for early repayment and then apply for approval from the FSS Governor.Through the buy-back scheme, it is expected that KRW 1.5 trillion will be repaid by the end of this year, and the remaining amount of money to be recovered will be l
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Dec 07, 2011
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Dec 06, 2011
- Joint FATF/APG Typologies Workshop 2011 Held in Busan
- The Korean government will be co-hosting an international conference on Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT) in Busan for six days from December 5th to 10th. The Financial Intelligence Unit (KoFIU) of FSC will be representing the Korean government.The Joint FATF/APG Typologies Workshop 2011, jointly hosted by the Financial Action Task Force and the Asia Pacific Group on Money Laundering, groups of Financial Intelligence Units around the world setting the guidelines and implementing supervisory rules on AML/CFT issues. They are made up of 36 OECD nations and 40 Asia-Pacific nations respectively including Korea, Japan, Canada and the U.S.Roughly 250 representatives from 45 countries and 15 international institutions including the UN, IMF, and World Bank will be participating at the conference.Discussions will be around the following four major topic areas: A. Trade Based Money Laundering; B. Illicit Tobacco Trade; C. Guidance on Financial Investigation; and D. Laundering the Proceeds of Corruption.This would be the first time the City of Busan, which has been designated as one of Korea’s official financial hubs, is holding an international conference on AML/CFT of this magnitude and scale, which will raise the city’s international reputation.The FSC Chairman Kim Seok-Dong will be giving the keynote address emphasizing the need to find innovative countermeasures in response to the rising of newest tactics on money laundering as well as the necessity to narrow the compliance gap between FATF and APG member nations.The Congressman and Chairman Huh Tae-Yeol of Korea’s National Policy Committee will give the welcoming address emphasizing the need to strengthen AML/CFT efforts to combat against the risks and treats to international financial system that oppresses universal values such as democracy and human rights, calling for great international cooperation.*Please read the attached file for details.
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Nov 29, 2011
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Nov 18, 2011
- Lone Star Ordered To Sell Down Its Stake in Korea Exchange Bank
- I. Sale Order of Lone Star’s Excess Stake in KEBRULINGThe FSC decided to order Lone Star Fund IV (hereinafter “Lone Star”) to sell its stake in KEB that exceeds 10% of the total number of voting stocks within six months by May 18, 2012.** Article 16-4 of the Banking Act (5) Where a limit excess stockholder, etc. who has received an order under paragraph (3) fails to comply with the order, the FSC may order the limit excess stockholder, etc. to dispose of the stocks of a financial institution held by him in excess of the limit as set in Article 15(3)1 within a specified period of not more than six months.The sale order was made on ground that Lone Star failed to redress qualifications as a majority stakeholder in KEB within the deadline (October 28, 2011) set by the FSC, and the situation still remains unfixed.** Lone Star was ordered to redress its qualification as a majority stakeholder under the Banking Act that requires no record of punishment for violation of financial laws and regulations since it was ruled guilty of stock price manipulation and fined KRW 25billion.The FSC concluded that we should not delay our decision any longer, leaving the situation uncorrected.REASON FOR SETTING A SIX-MONTH PERIODThe FSC decided to give Lone Star a six-month period to reduce its stake in KEB, considering the number of stocks to be sold and precedent cases.Lone Star has to sell a total of 265 million shares (41.02%), the largest number of stocks that any shareholder was ever ordered to sell. We also took into our consideration fairness with a precedent case that a majority shareholder in an insurance company was given a six-month period to sell four million shares (41.4%).REASON FOR NOT SPECIFYING DETAILS OF THE SALEThe FSC decided not to specify details of the sale, considering the purpose of eligibility test for majority shareholders and reference cases home and abroad.The eligibility test for majority shareholders and the sale order of shares aim to eliminate unqua
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Nov 14, 2011
- FSC Approves Revision of Regulations on Financial Investment Business
- The FSC approved a revision of Regulations on Financial Investment Business at its 19th regular meeting held on November 16, 2011. With the approval of revision, the FSC laid the foundation for introducing home-grown hedge funds and prime brokers.From the beginning of this year, the FSC has been closely working with a joint task force composed of the academia, industry, and relevant institutions for revisions of Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) and related regulations.In order to ensure a soft landing of for home-grown hedge fund industry, the joint task force is currently drafting best practice guidelines, expected to be announced and implemented in November.*Please read the FSC press release “Proposed Revision of Regulations on Financial Investment Business” (Oct. 10, 2011) for Details.KEY CONTENTS OF THE REVISIONI. Regulations in regard with hedge funds1. Strengthened mechanism for preventing conflicts of interest arising from operations of hedge funds (Article 4-64)In order to prevent conflicts of interest, fund managers in charge of hedge fund operations, paid contingent remuneration, will be prohibited from operating other funds and discretionary investment assets, and sharing investment-related information.*In addition, it will be restricted for fund managers to directly or indirectly advertize names, investment performance and strategies of private equity funds including hedge funds.2. Criteria for hedge fund management firms and professionals(Companies) Asset management companies with a total of funds and assets under management more than KRW 10 trillion will be allowed to operate hedge fund management business.* “Track Record” criteria for securities and investment advisory firms(i) Securities firms with equity capital more than KRW 1 trillion(ii) Investment advisory firms with assets under management more than KRW 0.5 trillion(Persons in charge of hedge fund operation) Professionals with more
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Nov 08, 2011
- FSC Lifts Temporary Ban on Short Selling of Non-Financial Stocks
- The FSC decided to lift a three-month ban (August 10 - November 9) on short selling of non-financial stocks from November 10, while maintaining the ban on financial stocks for a while.Stock market volatility has been considerably subdued since August when the financial market turmoil began to unfold.** KOSPI: 2,172 (Aug.1) →1,801 (Aug. 9, short-selling ban) →1,653 (Sept. 26) → 1,919(Nov.7)However, given that potential Eurozone risks still remain such as a possibility of Greek default, growing concerns about Italy’s debt crisis, and upcoming maturity dates of PIIGS sovereign debt,* the FSC decided to maintain the short-selling ban on financial stocks vulnerable to internal and external factors.* PIIGS sovereign debt to be matured (unit: $100 million): 1,843 (4Q2011), 2,832 (1Q2012), 1,769 (2Q2012)In August, Greece, Italy, France, Spain and Belgium also banned short sales; however, Greece is the only country that banned short selling of all listed stocks as we did. The remaining four countries imposed short-selling bans on a few number of financial stocks.*Please read the attached file for details.
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Nov 04, 2011
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Oct 21, 2011
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Oct 10, 2011
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Sep 27, 2011
- Revision of Enforcement Decree of FSCMA Approved at Cabinet Meeting
- BACKGROUNDThe proposed revision of the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA), aimed at introducing home-grown hedge funds (tentatively named “specialized private equity funds”) to Korea’s capital markets, was approved at the Cabinet meeting on Tuesday, September 27, 2011.KEY CONTENTS OF THE REVISIONI. Creation of Hedge Funds1. The scope of hedge fund investors will be extended to individuals with risk-taking capability. (Article 271-2①)Currently, investments in private equity funds are allowed only to a limited number of “qualified investors” such as financial firms and pension funds. However, in order to provide more diverse investment opportunities, the revision will allow individuals who can invest KRW 500 million or more to join a hedge fund.2. The revision will bring about greater autonomy and creativity in asset management. (Article 271-2①②, Article 80⑥)(1) The requirement that private equity funds should invest more than 50% of their investments into companies under restructuring programs will be abolished so that hedge funds can invest in a wider range of assets such as securities, derivatives, and commodities.(2) Restrictions on leverage* and derivatives trading** will be eased so that hedge funds can employ more diverse investment strategies such as short selling and leverage.* Limits on leverage will be eased from 300% of fund assets to 400%.**Investments in derivatives, currently limited to 100% of fund assets in estimated maximum losses, will be allowed up to 400%, equivalent to restrictions currently applied to general private equity funds.3. A new category, “hybrid asset funds,” will be created for approval of hedge fund operations. Asset managers, securities firms and investment advisory firms that meet requirements* in equity capital, track record and expert fund managers will be given approval for hedge fund operations.(i) Hedge funds under the category of “hybrid asset funds
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Sep 18, 2011
- FSC Suspended Seven Mutual Savings Banks
- The Financial Services Commission (FSC) held a provisional meeting today and decided to suspend business operations of seven mutual savings banks – Jeil, Jeil II, Prime, Daeyeong, Ace, Parangsae, and Tomato – for six months.According to the result of the inspection by the FSS, six of the suspended savings banks – Jeil, Prime, Dae Young, Ace, Parangsae, and Tomato – were found to have their BIS capital adequacy ratio below 1%, and their debts exceed assets.As the plans for normalization submitted by the six savings banks were disapproved by the review committee, they were determined as insolvent and ordered to raise their capital adequacy ratios and normalize their businesses within 45 days in order to resume their operations.Jeil II was suspended because ①its BIS capital adequacy ratio is below 1%; ②there is a strong likelihood that the suspension of its parent company, Jeil, will lead to depositors’ bank runs, causing liquidity crunch; and ③it requested suspension.*Please read the attached file for details.
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Sep 15, 2011
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Sep 09, 2011
- FSC/FSS to Host 18th Annual Conference of the IAIS
- The Financial Services Commission and the Financial Supervisory Service of Korea (FSC/FSS) will host the 18th Annual Conference of the International Association of Insurance Supervisors (IAIS) from September 29 to October 1, 2011, at the COEX Convention Center in Seoul. Approximately 500 insurance supervisors and industry representatives as well as senior officials from international organizations including the IMF and World Bank are expected to attend this year's conference. The theme for this year's meeting is "Toward a New Horizon for Insurance Supervision: Cross-Sector Cross-Border Harmonization and Cooperation," and discussions on wide-ranging supervision and industry issues and topics including insurance standards, risk management, and consumer protection are scheduled.The 2011 Annual Conference will be the third international conference on insurance supervision that the FSC/FSS hosts after the Asian Forum of Insurance Regulators in June 2007 and the IAIS Triannual Meetings in June 2008. The FSC/FSS is pleased to host this year's meetings and welcomes all IAIS members, observers, and guests to Seoul for the important gathering. As this year's Annual Conference demonstrates, the FSC/FSS will continue to support and contribute to the mission of the IAIS to set effective global insurance standards and facilitate supervisory cooperation across countries.Established in 1994, the IAIS is the international insurance standard-setting body representing insurance regulators and supervisors from 190 jurisdictions in some 140 countries and works closely with other financial sector standard-setting bodies and international organizations such as the Basel Committee on Banking Supervision and the International Association of Securities Commissions to contribute to global financial stability. It is headed by Executive Committee with members representing various geographical regions and supported by three key committees in its work of issuing global insurance principles, stand
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Sep 05, 2011
- Hotline Established among Financial Authorities in Korea, China and Japan
- FSC Vice Chairman Shin Je-Yoon will be hosting a vice-minister-level conference call on September 6 at 10am with China Banking Regulatory Commission (CBRC) and the Financial Services Agency (FSA) of Japan.*Attendees: Shin Je-Yoon, Vice Chairman, Financial Services Commission, KoreaWang Zhaoxing, Vice Chairman, China Banking Regulatory Commission, China Masamichi Kono, Vice Commissioner, Financial Services Agency, JapanThe conference call was arranged out of shared recognition that close cooperation among the financial authorities in Korea, China and Japan has become all the more important in order to effectively respond to financial crises as anxiety heightens in global financial markets due to concerns about fiscal soundness of the US and Europe.*Korea first proposed to establish Korea-China-Japan hotline among the financial authorities, which was welcomed by China and Japan.Discussions will be made on the current conditions of the global economy and financial markets; and future outlook of the global economy. We will also exchange our opinions about each country’s current domestic financial market issues; and discuss details about how to operate the hotline such as whether to hold conference calls on a regular basis.*Please read the attached file for details.
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Aug 09, 2011
- Temporary Ban on Short Selling
- The Korean stock market has declined for six consecutive days since August 2, amid growing concerns over the possibility of U.S. economic recession and spreading of the European fiscal crisis.*KOSPI: 2172.31p (Aug. 1) → 1801.35p (Aug. 9), ∆370.96p (∆ 17.1%)In particular, over two days from August 8 to 9, the KOSPI has dropped 142.4 points, or7.44 % as the aftershock of the downgrade of the U.S. sovereign rating significantly increased volatility in the market.*There were the 5-minute suspensions of trading in the KOSPI market (“sidecars”) and the 20-minute suspensions of the Kosdaq market (“circuit breakers”) for two consecutive days.Short sales are significantly increasing in the falling markets, spreading market anxiety. The amount of short sales, which was KRW100 billion per day on average in the first half of this year, has recently surged over KRW 400 billion, exceeding the previous record high of KRW 234.6 billion since September 2008. Short sellers are mostly foreigners and institutions. From August 2 to 5, they sold an average of KRW 314.7 billion per day in short selling, accounting for 96.7% of the total short-selling transactions.Against this backdrop, the FSC has decided to temporarily ban short selling of all listed stocks in the Korea Exchange and Kosdaq markets for three months from August 10 to November 9.* In response to the global financial crisis in 2008, the FSC banned short selling of all listed stocks, starting October 1, 2008; and lifted the ban on non-financial stocks from June 1, 2009, while keeping the ban on financial stocks.During the same period of the three months, the FSC will temporarily ease restrictions on the amount of equities that securities issuers can buy back their own.* Please read the attached file for details.
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Jul 26, 2011
- Revision Bill of the Financial Investment Services and Capital Markets Act
- BACKGROUNDThe Financial Investment Services and Capital Markets Act (“FSCMA”) was established in 2007 as a comprehensive overhaul of capital markets regulations in order to promote autonomy and innovation in capital markets.Since the FSCMA took effect in February 2009, however, we had to weather the impacts of the global financial crisis. As a result, we still fell short of bringing about innovative changes that we initially intended with the enactment of the FSCMA such as creation of globally competitive investment banks (IBs).Meanwhile, after the financial crisis, global discussions on strengthening financial regulations and global coordination have been underway; and now is the time for us to domestically carry out what we have discussed at the global level.Against this backdrop, we see this is the right time to lay the foundation for the future of Korea’s financial industry, while coping with current global and domestic financial issues (e.g. Europe’s fiscal crisis, Korea’s household debts).The FSC has drafted a revision bill of the FSCMA, made public for 20 days from July 27 to August 16.KEY REVISIONS TO THE FSCMAI. Development of Korean IBsFor the development of home-grown investment banks capable of financing new growth industries and large overseas projects,1. Securities companies that meet certain statutory requirements such as equity capital and risk* management capability will be qualified as investment banks (or “comprehensive financial investment services providers”).*Given that securities companies can start prime brokerage services just with a revision of the FSCMA Enforcement Decree, the minimum amount of equity capital for a security firm to provide investment banking services will be set at 3 trillion won, which could be further raised later depending on developments after the revision of the FSCMA.2. The revision bill has regulations on corporate lending, internalization of order execution in place in order to help IBs provide a comp
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Jul 20, 2011
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Jul 04, 2011
- Plans for the Soundness of Savings Banks' Management
- CURRENT CONDITIONS OF SAVINGS BANKS(Assets) As of end-March 2011, total assets of 98 mutual savings banks in operation were KRW74 trillion, down 2% from KRW75.5 trillion at the end of 2010.Mutual savings banks’ operations are still focused on extending real estate-related loans including PF loans, which accounts for 42.8%* of their total outstanding loans as of end-March 2011.(*cf. 44.7% at the end of 2010)(Deposits) As of end-March 2011, mutual savings banks received a total of KRW 64.4 trillion in deposits, down 2.8% from KRW66.3 trillion at the end of 2010.(Soundness) As of end-March 2011, the delinquency ratio of mutual savings banks rose to15.8%, up 1%p from 14.8% at the end of 2010, mainly due to rise in the delinquency ratio for real estate –related loans.*As of end-March 2011, the delinquency ratio for real estate loans rose to 20.4%, up 2.4%p from 18.0% at the end-December 2010.Despite incurred losses of savings banks, the BIS capital-adequacy ratio rose to 10.25%, up 0.42%p from 9.83% at the end of 2010, backed by continued efforts for recapitalization.* With losses of seven savings banks whose operations were suspended added, the BIS ratio combined would drop to around 7%. (as of end-March 2011, 7.57%, lower than 9.14% in June 2010)(Profitability) Due to the sluggish real estate market and growing competition in the retail financial sector, mutual savings banks recorded a total of KRW333.3 losses from July 2009 to June 2010; and KRW48.7 billion from July 2010 to March 2011.* From July 2010 to March 2011, 67 savings banks (68.4%) posted profits while 31savings banks (31.6%) incurred losses.PLANS TO ENHANCE THE SOUNDNESS OF SAVINGS BANKS’MANAGEMENT1. To help mutual savings banks’ “soft landing”- Additional purchase of non-performing PF loans from savings banks: As of June 20, the government purchased non-performing PF loans worth KRW1.9 trillion through the Restructuring Fund and singed an MOU with savings banks to help them normalize their oper
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Jun 30, 2011
