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Mar 05, 2007
- Asset-Liability Analysis of Domestic Banks: 2006
- An asset-liability analysis of domestic banks by the FSS shows bank assets totaled KRW1,191 trillion (average account balance basis) for 2006, up 11.0% or KRW118 trillion from KRW1,073 trillion for 2005. Loans and securities made up the bulk of the assets with the proportion of loans increasing from 67.6% to 68.3% and that of securities falling slightly from 21.6% to 20.9%. A 17.9% jump in loans to small-and medium-sized companies along with a 14.4% increase in housing loans during the year mostly accounted for the changes. On the liabilities side including equity, the proportion of deposits dropped from 53.4% a year earlier to 49.6%. The rest were mostly made up by debt issues (15.4%), borrowings (13.8%), and certificates of deposits (5.6%).An increase in loans and a drop in securitiesBank loans totaled KRW879.9 trillion, up 16.9% (KRW127.1 trillion) compared with 8.4% for 2005. In particular, loans to small- and medium-sized companies rose 17.9% (KRW45.9 trillion), a marked increase from 5.1% for 2005 and 2.6% for 2004. Household loans, led by housing loans, increased 13.5% (KRW40.8 trillion).Securities, on the other hand, rose 5.1% (KRW14.9 trillion) to KRW308.6 trillion, compared to 17.4% (KRW43.6 trillion) increase for 2005.Declining share of deposits as source of bank fundsThe source of funds for increased loans in 2006 came more from debt issues and CDs, which jumped by KRW38.0 trillion and KRW13.7 trillion, respectively, than from deposits. The proportion of deposits as a source of funds fell in 2006, as did in 2004 and 2005.In particular, as a result of the growth of CMA and other short-term, higher-yield products from non-banking financial institutions as alternatives to bank deposits, the proportion of demand deposits, savings deposits, and other low-interest deposits as a source of funds continued to drop in 2006.Continuing rise of loan-to-deposit ratioWith robust loans and sluggish deposits, the loan-to-deposit ratio of domestic banks showed a continued
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Feb 02, 2007
- New Disclosure Measures for Foreign Securities Issuers
- The Financial Supervisory Service announced several new measures it plans to adopt in order to fine-tune disclosure regulations on foreign securities issuers toward global standards amid growing interest among foreign companies to make public offerings or list in Korea. The FSS also plans to issue a new publication entitled “Guide to Stock Offering and Listing by Foreign Issuers” that explains the stock offering and listing processes and related regulations (in Korean).Regulations on public offering and listing by foreign issuers have been continually amended and fine-tuned to global standards since 2005. They include primary listing of foreign companies and foreign holding companies along with globally accepted listing standards (Dec. 23, 2005), exemption from mandatory IPO allotment (20%) to employee stock ownership plan (Feb. 15, 2006), mandatory designation of domestic agent for investor protection (Sept. 13, 2006), and simplified reporting format for foreign issuers (Jan. 24, 2007).New Disclosure Measures for Foreign IssuersThe FSS is planning to adopt several globally accepted investor protection measures in response to public stock offering plans by foreign entities that are incorporated as holding companies offshore in places such as Bermuda and Cayman islands.Disclosure on subsidiary unitsFinancial and non-financial disclosures are to be provided on a consolidated basis for the subsidiary units of offshore holding companies in order to ensure appropriate disclosures on the business activities of subsidiary units that effectively represent the activities of the holding company.Financial disclosures include financial statements and audit opinion from an independent external auditor. Non-financial disclosures include disclosures on key business activities, board of directors, affiliated companies, management makeup, and transactions with related parties.Disclosure on corporate governance structureDisclosures on the corporate governance structure of offshor
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Feb 01, 2007
- FSS to Launch Electronic Foreign Investor Registration and English DART Website
- The Financial Supervisory Service will launch an electronic registration system for foreign investors and open an English DART website (http://enlgishdart.fss.or.kr) as part of an ongoing effort to simplify foreign investors’ investment procedures and improve their access to corporate information. DART, which stands for Data Analysis, Retrieval, and Transfer, is the FSS electronic disclosure system companies use to transmit regulatory filings and ongoing disclosures via the Internet.Electronic Registration of Foreign InvestorsUnder the current procedure, a foreign investor (or an agent) who wishes to acquire shares of listed companies and other exchange-traded securities submits an investment registration application along with the supporting documents to the FSS in person and returns three to four days later for the registration certificate.The new registration system, which is set to begin in May this year, will enable foreign investors to file investment registration applications and receive registration certificates electronically through financial institutions acting as their agents.Because the system utilizes information and telecommunication networks and electronic document exchange systems already used by financial institutions, no additional cost is expected from foreign investors or financial institutions. With electronic registration, the issuance of registration certificate, which numbers about 2,000 a year, is expected to be shortened from up to four days to no more than four hours.Opening of English DART WebsiteThe FSS will also open an English DART website (http://englishdart.fss.or.kr) on February 1 to improve foreign investors’ access to disclosures filed by Korea’s publicly traded companies. Foreign investors can use the English DART website to search all English disclosure documents voluntarily transmitted to DART and to Korea Exchange as well as corporate information available in English at Korea Listed Companies Association.The English DAR
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Jan 24, 2007
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Jan 18, 2007
- FSC Proposes to Merge Korea Exchange's Dual Futures Trading Systems into Single Trading System
- The Financial Supervisory Commission announced a proposal to integrate the dual futures trading systems of Korea Exchange into a single integrated trading system in order to facilitate trading in futures and improve market efficiency. Currently, two different futures trading systems—KOSPI futures trading system and Korea Treasury Bond (KTB) futures trading system—that were used by Korea Stock Exchange (KSE) and Korea Futures Exchange (KOFEX) before they were brought under the Korea Exchange are in use. Because of its dual nature, the current trading system is said to inflate transaction cost to investors and create system inefficiencies.Under the FSC proposal, tentatively set to be implemented by end-June this year, the KOSPI futures trading system is to be adopted at the Korea Exchange for all futures and options trading as it already effectively handles nearly all of futures and options trading, including KOSPI200 futures, KOSPI200 options, Star index futures, and stock options. The KOSPI futures trading system also has the advantages of familiarity to investors, significant cost-effectiveness compared to the KOFEX system, and locally developed technologies.When the integration is completed, investors and traders are expected to benefit from simpler and more consistent trading rules (e.g., buying and selling of futures and options with a single trading account), while the Korea Exchange is expected to save KRW2.2 billion in system maintenance cost a year.* Please refer to the attached PDF for details.
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Jan 12, 2007
- FSS Launches Online Search & Retrieval Tool for Legal and Regulatory Statutes Governing Financial Supervision
- The Financial Supervisory Service opened a new online search retrieval system for legal and regulatory statutes governing financial supervision along with their interpretations and applications on January 9. The new tool, a Korean-based website database that can be launched from the FSS Internet homepage, holds more than 1,900 separate entries (over 30,000 pages) on legal and regulatory statutes pertaining to financial supervision as well as their administrative and judicial interpretations and applications and explanation of FSS administrative procedures and financial supervision. The database for the new search retrieval system is set to be updated each month and is expected to increase by approximately one thousand new entries a year henceforth.BackgroundBecause of the generally complex nature of legal and regulatory statutes governing financial products and services, there has been a growing awareness of the need to make financial laws and regulations more accessible to the general public. The new online tool was prompted by this need to help the general public search and access financial laws and regulations more easily and at the same time improve regulatory transparency.The plan for the new system took shape in August, 2006, when the FSS proposed an open search retrieve system after thorough review and study of similar systems in use elsewhere. The system was completed in late 2006 and went online January 9 after a series of operational tests.A Centralized Database of Legal and Regulatory Statutes Governing Financial SupervisionThe new search retrieve system is designed to function as a centralized database of all the legal and regulatory statutes, guidelines, interpretations, and explanations governing financial supervision. In particular, the new online tool employs a system of codification to classify and group interpretations and explanations of legal and regulatory precedents by year, financial sector, business operation, and laws regulations.Use of the
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Jan 05, 2007
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Dec 21, 2006
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Dec 18, 2006
- New Measures Proposed to Advance the Bond Market
- The Financial Supervisory Commission announced a set of proposals aimed at advancing the bond market on December 14. The new proposals are the work of a joint public-private task force created in February this year to recommend improvement in four key areas—corporate bond underwriting, market liquidity, trading of repurchase agreements, and disclosure—and help raise the transparency and efficiency of the bond market.1 The legal and regulatory amendments needed for the changes proposed by the task force are expected to be completed by June, 2007.Bond Market TrendSince the financial crisis, the bond market has shown a steady growth with the total issue amount and the trading volume increasing more than two-fold and five-fold, respectively, since 1998. Recently, however, corporate debt-financing has been declining amid falling capital demand for corporate investment and investors showing preference for cash accumulation.Corporate Bond Underwriting by Securities CompaniesAs a result of weak capital demand and the growth of privately placed issues, the market for corporate bond underwriting has been shrinking, putting a downward pressure on profits securities firms generate from underwriting.Securities firms authorized to underwrite bond issues numbered 45, 31 of which took part in an actual bond underwriting. Fees generated from underwriting averaged KRW3 billion for each securities firm in 2005.Because local securities firms compete more on underwriting fees than on funding ability, risk analysis, raising interest among investors, and other critical underwriting capabilities, they have thus far failed to build the kinds of reputation that investors generally expect. Local securities firms are also continually exposed to legal risks for inadequate attention to investor protection, e.g., poorly administered due diligence and faulty prospectus.Task Force ProposalAs a way to discourage unhealthy competition and improve the overall caliber of corporate bond underwriting
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Nov 24, 2006
- Assessment of Private Equity Industry, November 2006
- The Financial Supervisory Service issued an assessment of Korea’s private equity industry on November 22, 2006, to mark the second year of regulatory changes that allowed the formation of private equity funds (PEFs) as a recognized investment entity for the first time in December, 2004.Registered PEFsThere were 20 registered PEFs as of end-October with a total investor subscribed (committed) amount of KRW4.66 trillion, of which KRW1.99 trillion were actually called. Since the beginning of 2006, six PEFs were newly registered and one was terminated for a net increase of five. The subscribed amount increased KRW1.76 trillion and the called amount KRW760.6 billion in 2006. At the end of 2005, there were 15 registered PEFs with KRW2.9 trillion in total subscribed amount and KRW338.8 billion in total called amount.Fund RaisingThere were seven large funds (more than KRW300 billion), six medium-sized funds (between KRW100 billion and KRW300 billion), and seven small funds (less than KRW100 billion) as of end-October. Three of the large funds exceeded KRW500 billion in total subscribed amount. Most of the small funds were so-called “deal-by-deal” PEFs that specialize in a specifically targeted company.Management fees typically ranged between 1.5% and 2% of the subscribed investment amount when PEFs were first introduced. But with a majority of institutional investors preferring financial, rather than strategic, investment whose returns do not depend too much on the fund management skills of the general partners (managers) of PEFs, management fees fell to a lower range between 0.1% and 2% of the investment executed.InvestmentsEleven PEFs had executed investments totaling KRW999.0 billion in 27 companies, including a KRW343.9 billion takeover of a privately held company in June, 2006, the largest PEF investment to date. Since the beginning of the year, the number of companies in which PEFs invested jumped from 9 to 27 with the total executed amount sharply up from KRW26
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Nov 15, 2006
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Nov 15, 2006
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Nov 10, 2006
- Asset Management Companies' Preliminary Net Income:First Half of FY2006
- Regulatory filings by 49 asset management companies–36 domestic and 13 foreign–show preliminary net income for the first six months of FY2006 ended September 30 totaled KRW150.9 billion, up KRW93.6 billion from KRW57.3 billion a year earlier. Pretax income came to KRW200.0 billion, compared with KRW78.5 billion a year earlier.A large increase in management fees boosted by a surge in investment into stock funds pushed asset management companies’ net income for the period. Management fees, which averaged 63 basis points at end-September, compared with 58 basis points a year earlier, jumped KRW124.8 billion or 67.1% to KRW310.7 billion. Investment in stock funds, which typically generate higher management fees than other funds, more than doubled from KRW21.9 trillion at end-September, FY2005, to KRW46.4 trillion.Domestic asset management companies’ pretax income for the period totaled KRW155.8 billion, an increase of KRW91.2 billion or 141.2% from a year earlier. For foreign asset management companies, the total come to KRW44.2 billion, compared with KRW13.9 billion a year earlier.As of end-September, assets under management totaled KRW230.7 trillion (net asset basis), an increase of KRW25.2 trillion or 12.2% from KRW205.5 trillion a year earlier. Both stock funds and hybrid funds grew by KRW24.5 trillion and KRW9.5 trillion, respectively, from a year earlier, but money market funds fell by KRW15.5 trillion during the period. Assets under the management of domestic asset management companies came to KRW191.4 trillion. For foreign asset management companies, the total was KRW39.3 trillion.* Please refer to the attached PDF for details.
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Nov 01, 2006
- IMF-FSC/FSS to Host Macroprudential Supervision Conference in Seoul
- The International Monetary Fund and Financial Supervisory Commission / Financial Supervisory Service will jointly host an international conference on macroprudential supervision in Seoul from November 7 to 8, 2006, at the Grand Hyatt Seoul Hotel.The conference, entitled “Macroprudential Supervision: Challenges for Financial Supervisors,” underscores the growing interest in macroprudential supervision among financial supervisors. With an emphasis on system-level approach to regulatory and supervisory frameworks, macroprudential supervision is taking shape as an added safeguard against financial instability.There have been a number of discussions among international organizations and several national supervisory authorities in recent years on various aspects of macroprudential supervision. But the Seoul conference is expected to be the first major international conference that will focus exclusively on macroprudential supervision. Thus, it will give the participants a unique opportunity to share with others experiences and expertise on macroprudential supervision.Approximately 350 participants at home and from abroad, including representatives from the International Monetary Fund and Bank for International Settlements, and the heads of the U.K. Financial Services Authority and the Australian Prudential Regulation Authority, are expected to attend the conference. Four separate sessions—Financial Stability, Approaches to Macroprudential Supervision, Stress Testing, and Case Studies of Macroprudential Supervision—with presentations and discussions on 15 topics are scheduled during the two-day conference.* Please refer to the attached PDF for details.
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Sep 22, 2006
- Introduction of Third Insurance with Cash Value and Bancassurance Supervision
- Bancassurance was first introduced in August, 2003, to help consumers purchase insurance at a lower cost and improve market efficiency. In light of the potential impact of bancassurance on the insurance market, a phase-in approach was adopted. Under this approach, sale of savings-type insurance began in August, 2003. This was followed by the sale of exclusively protection-type “third insurance” providing coverage against illnesses and injuries as well as post -illness and post -injury risks in April, 2005. In October, the sale of third insurance with cash value at maturity (TICV) is set to begin.Sales of Bancassurance ProductsDuring the second phase of bancassurance (April, 2005, to June, 2006), sales totaled KRW7.3 trillion–KRW6.2 trillion for life and KRW1.1 trillion non-life insurance products–on earned premium basis. With earned premium rising more than 30% in FY2005, the growth outlook on the bancassurance market looks positive. Nearly all of the bancassurance sales (98.9%) were made through banks. Kookmin Bank and Shinhan Bank held 28.8% and 19.4%, respectively, of the sales.Market for TICVThe market for TICV, which is set to begin in October, is estimated at KRW12.7 trillion–KRW7.9 trillion for life and KRW4.8 trillion for non-life insurance products–a year, approximately 14% of the insurance market.When the third-phase bancassurance commences, insurance products that can be sold through banks and other financial institutions are expected to account for 51.5% of life insurance products and 36.1% of non-life insurance products.Tax Benefits of TICVConsumers are expected to benefit from, among others, tax deductions and longer-term policies with TICV, a protection-type insurance that allows up to KRW1 million in deductions from the policyholder’s taxable income. The policy term for savings-type insurance is limited to 15 years (non-life), but no such term restriction is applicable to TICV as it is a protection-type insurance.Upsides of TICVConsumer
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Sep 12, 2006
- Equity Disclosure Filings First Half 2006
- An analysis of disclosure filings for investment in listed companies for the first six months of 2006 showed a total of 2,397 investors held five percent or more equity interests in 1,624 listed companies (700 Stock Market-listed and 924 KOSDAQ-listed). During the period, 2 tender offers and 122 proxy solicitations were made, compared with 5 and 108, respectively, during the same period a year earlier.Disclosures Filed under the “Five-Percent Rule”Disclosures filed under the five-percent reporting rule for the first six months of the year totaled 4,157, compared with 4,499 for H2, 2005, and 5,717 for H1, 2005. The total for H1, 2005, includes 1,791 re-filings made under the amended reporting rule that took effect March 29, 2005. Excluding the re-filings, the total for H1, 2005, was 3,926. Filings by foreign investors have steadily increased since 2003.By investment purpose, filings for exercising influence on the management totaled 1,609 (1,580 companies: 666 Stock Market-listed, 914 KOSDAQ-listed) as of the end of June. Those for investment only totaled 872 (1,139 companies: 516 Stock Market-listed, 623 KOSDAQ-listed).Filings by Foreign InvestorsA total of 307 foreign investors–288 legal entities and 19 individuals–held five percent or more equity interests in 505 listed companies, of which 242 were Stock Market-listed and 263 KOSDAQ-listed.Tender Offer FilingsTwo tender offer filings involving Choong Nam Spinning Co., Ltd. were made during the first six months of the year. There were no tender offers intended for enhancing management control or going private during the period.Proxy SolicitationsA total of 122 disclosures were filed for proxy solicitation during the first six months of the year. Of the total, 110 or 90.2% were for the purpose of meeting the quorum requirements in the general shareholders’ meetings. There were 12 filings for proxy contests during the period.* Please refer to the attached PDF for details.
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Sep 01, 2006
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Aug 30, 2006
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Aug 30, 2006
- Bank Loans Classified as Substandard or Below: First Half, 2006
- Bank loans classified as substandard or below (SBLs)–substandard, doubtful, or presumed loss–totaled KRW8.8 trillion at the end of June, down from KRW9.7 trillion at the end of 2005. The ratio of SBLs to total outstanding loans fell from 1.22% to 1.02%, the lowest ratio since the forward-looking criteria were first adopted in 1999. Disposition of borrower collateral, aggressive write-off of SBLs, and a smaller increase in new SBLs–KRW6.0 trillion compared with KRW8.8 trillion for H1, 2005, and KRW7.1 trillion for H2, 2005–mainly contributed to the drop in SBL ratio for the first half of 2006.The SLB ratios fell for all the key borrower groups during the first half from end-2005, averaging 1.09% for corporate loans, 0.86% for household loans, and 1.80% for credit card receivables. The ratio fell for 14 banks but modestly rose for 4 others.* Please refer to the attached PDF for details.
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Aug 17, 2006
