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Jun 02, 2008
- The Plan for Privatization of KDB and Establishment of KDF
- Ⅰ. Purpose◇ Privatization of KDB is not intended for restructuring of public companies. It is a progressive strategy to develop the financial industry into a new growth engine by turning it into a high value-added industry.◇ Korea Development Fund (KDF), an advanced market-friendly policy financing vehicle to be established with funds from KDB's privatization, will support promising SMEs. - The privatization initiative provides the optimal solution to realizing the national agenda of nurturing a competitive CIB (corporate and investment bank).ㅇ By combining KDB, which has a strong corporate bankingcapacity, with Daewoo Securities, Korea's leadingsecurities house, the foundation will be laid to secure a competitive investment bank.ㅇ Advancement of innovative value-added industries will take place by securing a competitive investment bank, which will act as a core intermediary of the capital market.* An investment bank that provides risk capital to innovative industries, which will be central to the future Korean economy, is a must. - The privatization of KDB will trigger reorganizationand further advancement of the financial industry.ㅇ Domestic financial institutions typically stay complacent in the limited domestic market, maintaining their retail banking-focused revenue structure.* Currently, competitiveness of domestic banks and securities firms is limited as they concentrate on retail-banking and brokerage fees, respectively.* Overseas assets of leading global investment banks are over 50% of their total assets (e.g. Citi: 51%, HSBC: 56%, UBS: 91%). Yet, the average figure for domestic banks in 2006 was only 2.5%.ㅇ KDBH itself will actively seek MA opportunities to develop into a global investment bank through diversification of revenue structure and expansion of overseas business. By presenting new business models, it will act as a benchmark for other financial institutions. ⇨ This will provide domestic financial institutions with a new impetus a
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May 29, 2008
- Major meeting of FIUs in Korea progresses the fight against money laundering and terrorist financing
- The Prime Minister of the Republic of Korea, His Excellency Mr. Han Seung-soo opened the annual meeting of the Egmont Group of financial intelligence units.The Egmont Group consists of 108 financial intelligence units (FIUs) from across the world. Financial intelligence units are responsible for following the money trail, to counter money laundering and terrorism financing. FIUs are an essential component of the international fight against money laundering, the financing of terrorism, and related crime. Their ability to transform data into financial intelligence is a key element in the fight against money laundering and the financing of terrorism.In reflecting on the commitment of continued support by the Republic of Korea, Prime Minister Han Seung-soo said, “the Egmont Group has played a key role in the AML/CFT collaboration among government agencies.”This year’s meeting represents a milestone for the Egmont Group. Hosted by the Korean Financial Intelligence Unit (KoFIU), headed by Commissioner Young Kwa Kim, the meeting, the first plenary meeting in Asia, was attended by approximately 250 people from over 85 Egmont members, five (5) candidate/observer FIUs, and numerous international bodies.Mr. William Baity, Chair of the Egmont Committee said “this meeting reflects the commitment of the Republic of Korea and this region in the fight against money laundering and terrorist financing.”During the meeting, the FIUs of Moldova and the Turks and Caicos Islands were admitted as new members of the Egmont Group.In expanding and systematizing the exchange of financial intelligence information and fostering better communications among FIUs, more than 30 bilateral cooperation agreements were signed between Egmont members.The importance of the meeting was highlighted by the attendance of the incoming president of the Financial Action Task Force (FATF), the global standard setter for anti-money laundering and countering terrorism financing. Mr. Antonio Gustavo Rodrigu
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Mar 19, 2008
- Domestic Financial Institutions’ Bear Stearns-Related Credit Exposures and Supervisory Authorities’ Assessment
- The Financial Services Commission and the Financial Supervisory Service held a joint meeting on March 18 to take stock of domestic financial institutions' Bear Stearns-related credit exposures and appraise the ongoing financial market developments at home and abroad. The meeting was chaired by FSC Vice Chairman Rhee Chang-Yong and concluded with an action plan to step up market monitoring.Bear Stearns-related exposureDomestic financial institutions' Bear Stearns-related exposure was estimated at KRW443.1 billion (approximately US$434 million). Bank exposures totaled about KRW40.0 billion, which included KRW30 billion in Bear Stearns's debt securities, KRW7 to 10 billion in synthetic CDOs, and KRW400 million in derivatives (futures and options). Securities companies' investment in ELS by Bear Sterns was estimated at KRW211.1 billion. For insurance companies, the total exposure was put at KRW192.0 billion-KRW122.0 billion in debt securities and KRW70.0 billion in securitized assets including CDOs and CLNs.Assessment and responseWith J.P.Morgan Chase's assumption of Bear Stearns' liabilities, losses to be incurred by domestic financial are expected to be immaterial. The affirmation of the credit ratings of J.P. Morgan Chase by Moody's on March 17 following the Bear Stearns takeover is also expected to boost the prospect for minimal losses for domestic financial institutions. In response to the ongoing turmoil in the global credit markets and its likely adverse impact on domestic financial institutions, the FSC and the FSS agreed to form a joint market monitoring task force to keep a close watch on financial market developments and step up monitoring of sector-specific risks. This will include identifying domestic financial institutions' exposure to non-Bear Stearns assets, funding conditions for foreign currencies, unwinding of yen-carry trades, asset-liability maturity mismatch, and roll-over ratios.* Please refer to the attached PDF below.
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Feb 18, 2008
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Feb 14, 2008
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Feb 13, 2008
- Domestic Banks’ Net Income Estimated at KRW15.02 Trillion for 2007
- Preliminary figures put domestic banks’ combined net income for 2007 atKRW15.02 trillion, up KRW1.44 trillion from KRW13.57 trillion for 2006. Bank net income for 2007 was boosted by after-tax gains totaling KRW3.4 trillion from the sale of shares in LG Card (KRW3 trillion), SK Networks (KRW200 billion), and others that domestic banks held from debt-equity swaps in previous years.Excluding these one-time gains, bank net income for 2007 drops to KRW11.65 trillion, compared with KRW12.04 trillion for 2006.Interest income for 2007 was estimated at KRW31.2 trillion, an increase of KRW1.7 trillion or 5.8% from 2006. Non-interest income on the other hand jumped KRW3.4 trillion or 45.1% to KRW10.8 trillion on the back of robust increases in commission and securities-related gains. Service fee income, mostly from money transfer and ATM services, fell from KRW776.8 billion in 2006 to KRW701.9 billion in 2007, down 74.9 billion or 9.6%. But commission income from the sale of funds and bancassurance increased KRW1.1 trillion to KRW2.8 trillion.Domestic banks’ ROA for the year averaged 1.10%, down slightly from 1.13% a year earlier; net of gains from sale of debt-equity swap shares, ROA for 2007 falls to 0.85%, compared with 1.00% for 2006. Net interest margin was estimated at 2.45%, compared with 2.64% for 2006 and 2.81% for 2005.* Please refer to the attached PDF below.
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Jan 23, 2008
- Loan-Loss Provisioning to Be Adjusted for Credit Card Companies
- The FSC/FSS plans to adopt regulatory changes that will raise provisioning forcertain classes of assets of credit card companies and incorporate a higher proportion of asset-backed securities in the computation of adjusted capital ratio. The new fine- tuning measures are intended to level uneven provisioning rules currently in place for banks and credit card companies and to ensure adequate provisioning as a cushion against losses.Provisioning rules for bank credit card assets have been reinforced in anticipation of the implementation of Basel II. In December, 2005, provisioning rules previously applicable only to the undrawn cash advance amount—total cash advances available to a credit card customer less the amount drawn or used—were extended to cover the total undrawn line of credit. In December, 2006, provisioning rate was raised from 1% to 1.5% for credit card assets classified as normal and from 12% to 15% for assets classified as precautionary. But these rule changes have not been extended to credit card companies.New provisioning rates for normal and precautionary assetsUnder the proposed changes, the provisioning rates applicable to credit card companies are to be raised from 1% to 1.5% for assets classified as normal and from 12% to 15% for assets classified as precautionary. The rates for the three other classes of assets—those classified as substandard, doubtful, and presumed loss—to remain unchanged at 20%, 60%, and 100%, respectively. These adjustments will mean that both banks and credit card companies will be subject to the same provisioning rates for their credit card assets.Provisioning for total undrawn line of creditProvisioning against undrawn cash advances is to be extended to cover the total undrawn line of credit given to credit card customers (same as bank credit card customers). The 0.5% provisioning rate currently in effect is also to be changed to the new provisioning rates to be applied to each of the five asset categories.Higher
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Jan 09, 2008
- Bank BIS Capital Ratios, September, 2007, and Implementation of Basel II in 2008
- BIS Capital Ratios, September, 2007Bank BIS capital ratios at end-September, 2007, averaged 12.71%, down modestly from 12.75% at end-2006. A 14.02% (KRW130.3 trillion) increase in risk-weighted assets led by loan growth of small- and medium-sized companies more than offset the 13.6% (KRW16.1 trillion) increase in bank capital and lowered the overall BIS ratio for the period.With bank net income totaling KRW13.2 trillion for the first nine months of the year, tier-1 capital rose 15.81% (KRW13.4 trillion) and tier-2 capital 8.01% (KRW2.7 trillion). Of the 13 commercial banks, the capital ratio rose for 8 banks but fell for 5 others during the January-September period.Basel II Implementation in 2008Implementation of Basel II is set to begin in 2008 as scheduled for domestic banks. Of the 18 domestic banks, Kookmin has received regulatory approval for the use of internal-ratings-based (IRB) approach; the 17 others are to begin with the standardized approach. Both the Industrial Bank of Korea and the Korea Development Bank are also working on regulatory approval for the use of IRB approach in 2009. As the implementation of Basel II progresses, the BIS capital ratios of domestic banks are expected to initially fall by one to two percentage points from the pre- Basel II ratios, a relatively minor drop given domestic banks’ robust accumulated net profits (estimated at KRW15.8 trillion for 2007) and the ample capacity to boost both tier-1 and tier-2 capital. Moreover, with a reduced risk weight (from 100% to 75%) for loans less than KRW1 billion to small- and medium-sized companies as well as other downward risk weight fine-tuning provided under the Basel II-based capital rules, domestic banks are not expected to see any material changes in their capital base. For the six regional commercial banks, the drop under Basel II is expected to be even smaller.With most domestic banks aiming for the adoption of advanced IRB currently set to be introduced in 2009, the implementatio
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Jan 09, 2008
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Dec 24, 2007
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Nov 27, 2007
- FSC/FSS to Host IOSCO Asia-Pacific Regional Committee on November 28
- The Financial Supervisory Commission and the Financial Supervisory Service will host International Organization of Securities Commissions Asia-Pacific Regional Committee (IOSCO-APRC) and Roundtable Meetings on Wednesday, November 28, at the Lotte Hotel in Seoul.The IOSCO-APRC is one of four regional committees of IOSCO that focuses on regional issues in respect of securities regulation with 25 members representing securities regulators from 21 countries in the Asia-Pacific region. It is a high-level meeting of securities regulators in the region. It was held in Vietnam last year. At the Seoul meeting, about 50 senior securities regulators and representatives from OECD, ADB, and IOSCO are expected to take part.Following the APRC meeting led by Mr. Thirachai Phuvanatnaranubala, Chairman of IOSCO-APRC in the morning, three Roundtable Sessions will be held in the afternoon on (1) recent developments in securities supervision, (2) regulation of electronic trading systems, and (3) surveillance of private equity/hedge fund. The FSC/FSS will present its roadmap for the implementation of International Financial Reporting Standards (IFRS) and outline the Financial Investment Services and Capital Market Act (a.k.a. Capital Market Consolidation Act) set to take effect in February, 2009.* Please refer to the attached PDF for details.
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Nov 16, 2007
- Fund Assets Under Management: October, 2007
- Assets under management (AUM) of funds that invest at home and overseas totaled KRW330.8 trillion as of end-October, up sharply from KRW243 trillion at end-2006 and KRW218.2 trillion at end-2005. With surging stock markets at home and abroad, stock funds saw a KRW85.6 trillion increase in AUM since the beginning of the year.For funds that invest in overseas assets, AUM as of end-October came to KRW97.3 trillion, compared with KRW32.2 trillion at end-2006. The AUM of funds created in Korea accounted for KRW85 trillion of the total, compared with KRW19.3 trillion at end-2006. For offshore funds—those created outside Korea and sold to investors in Korea—the total was KRW12.3 trillion, down modestly from KRW13.5 trillion at end-May this year.Recent trends in fund investment1. The average investment-holding period in a fund jumped from 12.9 months in 2005 to 18.4 months as of end-September this year. The proportion of investor accounts with investment-holding period longer than 18 months came to 49.1% as of end-September and is likely to increase as more investors open installment plan accounts for stock investment. As of end-September, the number of stock installment plan accounts totaled 10.34 million with KRW34.5 trillion in AUM, compared with 6.43 million accounts with KRW21.9 trillion at end-2006 and 4.65 million accounts with KRW9.6 trillion at end-2005.2. The National Pension Service and many employer-sponsored retirement plans are increasingly turning to asset management companies for investment management, a development that bodes well for the future growth of the local asset management service industry. The NPS had KRW32.5 trillion under asset management companies as of end-September, up from KRW19.7 trillion at end-2006. For retirement plans, the figure jumped from KRW72.9 billion to KRW237.3 billion during the first nine months of 2007.3. Fund investment in China continued to pick up the pace in 2007 despite signs of overheated rush in Chinese markets. As
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Nov 06, 2007
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Oct 23, 2007
- FSC/FSS Announces "Roadmap for Advanced Financial Supervision" Aimed at Taking Korea’s Financial Supervision to the Next Level
- The Financial Supervisory Commission and the Financial Supervisory Service announced the formation of Committee for Advanced Financial Supervision jointly headed by Chairman/Governor Kim Yong-Duk and Vice President Choi Woon-Youl of Sogang University and the release of “Roadmap for Advanced Financial Supervision” following the Committee’s first meeting on October 22. The roadmap is a product of a public-private sector collaboration involving the FSC/FSS and 30 private sector representatives and experts from the academia, research institutes, the financial services industry, and civic organizations.The roadmap was initiated with the acknowledgement that the supervisory system— including the traditional approaches and practices—as well as the supervisory authorities’ organizational structure and human resources management has not satisfactorily kept up with the demands of the rapidly evolving market and is thus in need of change. The announcement of the roadmap, which coincides with the tenth anniversary of the creation of the FSS as a fully integrated financial supervisory authority, also comes amid a growing recognition that next three years may well prove pivotal for Korea’s prospect for emergence as Northeast Asia’s financial hub.Key Objectives under the RoadmapThe roadmap consists of five key policy objectives with 100 tasks (grouped into 12 areas) to be completed within the next three years as well as 30 performance measurement indices. The five key policy objectives outlined in the roadmap are (1) a fundamental shift in financial supervision, (2) responsive supervision, (3) support for business autonomy and innovation of financial institutions, (4) consumer and investor protection, and (5) confidence and trust in financial supervisory authorities.1. A Fundamental Shift in Financial SupervisionA fundamental shift and reorientation of financial supervision will be pursued. Currently, financial supervision takes a highly specific, rule-based approa
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Oct 18, 2007
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Sep 19, 2007
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Sep 17, 2007
- Financial Holding Companies' Net Income: First Half, 2007
- The net income of the four domestic financial holding companies—Woori Financial Group, Shinhan Financial Group, Hana Financial Group, and Korea Investment Holdings—totaled KRW4.02 trillion on a consolidated basis for the first six months of 2007, an increase of KRW1.10 trillion or 37.8% from the same period a year earlier. Excluding the one-time gains (KRW1.17 trillion in pretax income) from the sale of shares in LG Card by the holding companies, net income for the period drops to KRW3.17 trillion.ROA rose modestly for Woori, Shinhan, and Hana but fell for Korea Investment. Excluding LG Card-related gains, ROA fell compared to the same period a year earlier.As of end-June, 2007, assets of the four financial holding companies totaled KRW589.8 trillion on a consolidated basis, up KRW74.5 trillion from the same period a year earlier. Most of the asset increase resulted from the takeover of LG Card by Shinhan (KRW9.8 trillion), growth of loans to small- and medium-sized companies (KRW46.2 trillion), and increases in securities assets.In terms of group assets, banking constituted the largest asset for Woori (89.6%), Shinhan (83.4%), and Hana (94.9%). For Korea Investment Holdings, securities businesses made up 91.3% of the group assets.* Please refer to the attached PDF for details.
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Sep 03, 2007
- Bank Net Income: First Half, 2007
- Bank net income for the first half of 2007 totaled KRW9.92 trillion, up KRW1.88 trillion from KRW8.04 trillion a year earlier. Bank income for the first half of the year was helped by after-tax gains totaling KRW3.1 trillion from the sale of domestic banks’ equity stakes in LG Card (KRW2.9 trillion) and SK Networks (KRW200 billion). Excluding these gains, net income for the period totaled KRW6.8 trillion, compared with KRW7.2 trillion a year earlier.Whereas interest income rose 4.1% from KRW14.6 trillion to KRW15.2 trillion, non-interest income nearly doubled from KRW4.1 trillion to KRW8.1 trillion in the first half of the year on increased revenues from service fees and securities gains. Service fee income—including income from money transfer services, ATM and bancassurance sales—totaled KRW2.24 trillion, up from KRW1.94 trillion a year earlier.ROA for the first half of the year averaged 1.52%, compared with 1.41% a year earlier, but excluding the one-time gains realized from the sale of shares from debt-to-equity swaps ROA drops to 1.05%, lower than 1.25% for H1, 2006.The so-called structural profitability—a measures of profitability defined as bank income which is generated from operational activities and is both sustainable and recurring (Framework for the Assessment of Bank Earnings, BIS, 2002)—came to 1.47%, down from 1.62% a year earlier. A drop in net interest margin was the key factor for the lower profitability.* Please refer to the attached PDF for details.
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Aug 31, 2007
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Aug 30, 2007
- Mr. William A. Ryback, Former Deputy Chief Executive of Hong Kong Monetary Authority, to Join the Financial Supervisory Service
- The Financial Supervisory Service announced on August 30 the appointment of Mr. William A. Ryback, the former Deputy Chief Executive of Hong Kong Monetary Authority (HKMA), as Special Advisor to the FSS to help improve financial market regulation and foster global standards. The FSS expects Mr. Ryback to play an active role as well in helping the FSS strengthen its supervisory networks and cooperation with foreign regulators and international regulatory organizations.Mr. Ryback has extensive experience and expertise in banking supervision and international financial affairs from his thirty five years of professional career at the U.S. Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency. He also served as the Chairman of the Association of Supervisors of Banks of the Americas and a member of the Core Principles Liaison Group of the Basel Committee on Banking Supervision, and has over the years established strong ties and network with financial supervisors worldwide and multilateral organizations. Prior to the FSS appointment, Mr. Ryback worked as the Deputy Chief Executive of HKMA where he oversaw banking supervision and contributed to financial sector growth policies.Among others, the FSS expects Mr. Ryback to reinvigorate the ongoing preparations for the New Basel Accord as well as the FSS drive for deregulation and advanced financial supervision. With his strong ties and network with financial supervisors and international supervisory organizations, Mr. Ryback is also expected to make significant contribution to Korea’s financial hub initiative.Mr. Ryback will assume his duties at the FSS on October 22, 2007. Initially, he will act as Advisor to the Governor in international supervisory affairs such as the New Basel Accord and risk management in the banking sector. He is also expected to carry out special tasks on ongoing supervisory matters under the Governor’s direction. The FSS also announced that it will decid
