Financial stability is a prerequisite to innovation and inclusive finance policies. FSC maintains close market monitoring for any signs of market volatility and works to ensure stability in the financial markets. There are risk factors originating from abroad and from within. FSC focuses on making our economy more resilient from external shocks, such as a disruption in the global supply chain, and supporting Korea’s material, component and equipment industries to help boost their global competitiveness. Internally, FSC is closely monitoring the trends in household debt and seeking reforms to corporate restructuring in order to prevent domestic risk factors from turning into systemic risks. Policies aimed at increasing financial stability also include enhancing fairness in the financial markets by introducing a comprehensive legal framework for the supervision of financial conglomerates, improving market discipline and promoting transparency in corporate disclosure and accounting practices.
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Oct 27, 2022
- Regulation on Loan-to-Deposit Ratio to be Temporarily Eased to Facilitate Corporate Financing
- The FSC announced that financial authorities will temporarily ease the regulation on loan-to-deposit ratio, which will enable banks and savings banks to provide sufficient liquidity to businesses. The demand for business loans increased as a result of the recent contraction of the corporate bond market.However, the current regulation on loan-to-deposit ratiohas prevented banks from responding actively to these demands for borrowing. To facilitate active response, loan-to-deposit ratio is chosen as a first step of temporary regulatory easing because it is only domestically regulated and swiftly adjustable. Authorities will continue to monitor financial market situations and consider whether other deregulatory steps on such indexes like LCR (liquidity coverage ratio), NSFR (net stable funding ratio) should be taken. Details of Temporary Regulatory Easing To help banks and savings banks to more effectively respond to corporate loan requests, the loan-to-deposit ratio requirements will be eased from 100 percent for both to 105 percent for banks and 110 percent for savings banks. The eased loan-to-deposit ratio requirements will be applied for upcoming six months first, and authorities will take into account extending the period after reviewing market situation. With this easing of loan-to-deposit ratio requirements, banks and savings banks will have additional capacity to lend more to businesses. Furthermore, competition for deposit-taking is alleviated, and thus reduced borrowing costs will help in part to contain upward pressure on interest rates of corporate loans. Further Plan Financial authorities will issue a no-action letter in October to allow temporary easing of loan-to-deposit ratio rules immediately. Changing the calculation method will also take effect immediately with a no-action letter in October, but authorities will revise the supervisory regulation on banking business afterward to make the change officially. Authorities will maintain close communication
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Oct 26, 2022
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Oct 26, 2022
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Oct 24, 2022
- Financial Authorities Hold Meeting to Respond to Bond and Money Market Situation
- FSC Chairman Kim Joo-hyun presided over a meeting of senior FSC officials on October 23 right after the government-wide emergency meeting on macroeconomic and financial stability took place. At this meeting, Chairman Kim ordered authorities to promptly take follow-up actions to implement the support measures announced at the earlier emergency meeting. After the senior official meeting, FSC Standing Commissioner Kwon Dae-young held another meeting with the Financial Supervisory Service (FSS), financial industry groups, policy financial institutions and commercial financial institutions to check the recent situation of bond and money market and related risk factors in financial institutions. At the meeting, financial authorities explained that they will immediately activate the KRW50 trillion-plus liquidity of supportive measures announced at the government-wide emergency meeting. Authorities emphasized that the government, aiming to ensure market stability, will provide ample support by all means necessary. In addition, as restoration of market mechanisms is the key to overcome the current problematic situation, authorities said, market participants such as financial institutions and institutional investors also should step up their own efforts to facilitate recovery of the role of financial markets as intermediaries and accordingly to ensure a virtuous cycle. Moreover, authorities underscored the need for concerted efforts of both the government and the private sector. Application of all available means at their disposal and close communication between them should be in harmony to ensure market stability as the government alone has limited financial resources. Financial industry groups, in response to authorities request, also showed their commitment to strengthen efforts to stabilize financial markets and actively cooperate with the governments measures. * Please refer to the attached PDF for details.
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Oct 21, 2022
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Oct 20, 2022
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Oct 12, 2022
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Oct 05, 2022
- New Start Fund Launched on October 4 to Support Rebound of Micro-enterprises and Self-employed
- The FSC announced that New Start Fund, a bespoke debt adjustment program to help pandemic-hit micro-enterprises and self-employed business owners was launched on October 4. At the launching event, 19 financial industry groups and financial institutions signed a memorandum of understanding (MOU) for New Start Fund. From October 4, application for New Start Fund became available at 76 on-site nationwide locations and New Start Fund website. The MOU has been prepared after a series of consultation and communication between New Start Fund, Credit Counseling and Recovery Service (CCRS) and financial industry groups and institutions. It contains details about New Start Fund like eligibility, details of support, method of debt adjustment and its process, debt purchasing price, etc. Each financial industry group participating in the MOU signing event is currently at the final stage of collecting agreements from about 3,730 financial institutions expected to sign up for the partnership. FSC Chairman Kim Joo-hyun attended the New Start Fund launching event and thanked everyone who has contributed to the preparation. While stating that New Start Fund will help support the recovery of micro-enterprises and the self-employed and prevent social, economic and financial anxieties about insolvency risks, Chairman Kim urged authorities to ensure seamless operation of this new debt adjustment program. The pandemic-hit self-employed and micro-enterprises wishing to apply for debt adjustment can apply for New Start Fund by visiting one of the 76 on-site locationsfrom 9:00 am, October 4. Application is also available through an online platform. * Please refer to the attached PDF for details.
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Oct 05, 2022
- Relief Conversion Loan Available for Mortgagors Owning Houses Worth KRW400 Million or Less
- The FSC announced that mortgage holders owning only one house which is worth KRW400 million or less can apply for Relief Conversion Loan from Thursday, October 6 (The application period already started on September 15 for mortgage holders owning house worth KRW300 million or less). This preferential Relief Conversion Loan program which covers KRW25 trillion in total loan amount offers eligible mortgage holders to refinance their adjustable-rate or mixed-rate mortgages to those with long-term maturity, fixed interest rate and monthly principal payments. Application for Relief Conversion Loans will be accepted from October 6 to 17.Exact date will be allocated like the table below according to the last digit of birth year on applicants resident registration number (RRN). Depending on the type of the institution an applicant borrowed from, the institution receiving the application differs. When an original lender is Kookmin, Shinhan, Nonghyup, Woori, Hana Banks or Industrial Bank of Korea, the applicant should submit to the original lender. However, when an original issuing institution is other bank or nonbank financial institution, the application should be submitted to Korea Housing Finance Corporation. Applicants need to keep in mind the following factors before application. a) Check the type of benchmark rateyour mortgage uses and its adjustment periodas well as trends in benchmark rates to understand when your interest rate will be adjusted next and how much your benchmark rate will be increased during the interval. b) Decision to apply for Relief Conversion Loan should be made after comparing the expected interest rate of the forthcoming adjustment datenot your current interest ratewith the interest rate of Relief Conversion Loan. c) If interest rates fall in the future and then a borrower wishes to switch Relief Conversion Loan to another mortgage loan that offers a lower interest rate, a refinancing is possible without burden of an early termination fee. If the
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Sep 30, 2022
- Measures to Soft Land Loan Maturity Extension and Payments Deferment for Self-employed and SMEs
- The government and financial institutions decided to provide loan maturity extension for up to three more years and payments deferment for up to one more year for the borrowers currently using these programs.While providing sufficient time for the self-employed and SMEs to recover their repayment capabilities, authorities will ensure thorough protections for those who are unable to recover on their own with New Start Fund for the self-employed and a debt adjustment program for SMEs. During the extended period, loan forbearance programs will allow businesses to draw up their repayment plans tailored for individual situations in consultation with financial institutions. This will help ease the concern about financial institutions financial soundness and support soft landings for both borrowers and financial institutions. Overview Since April 2020, the financial authorities and financial institutions have made available loan maturity extension and principal or interest payments deferment for SMEs and small merchants experiencing temporary liquidity shortage from COVID-19. As businesses continued to incur damages from COVID-19, the maturity extension and payments deferment program has been extended six-month each for four times over the past two and a half years. Financial institutions have provided forbearance support for KRW362.4 trillion loan through this program till June 2022. As of the end of June 2022, 570,000 borrowers and KRW141 trillion loans are still under this support. Evaluation on Current Situation After COVID-19 business restrictions were completely lifted on April 18, business conditions for the self-employed and SMEs are gradually returning to normal. However, deterioration in economic and financial conditions such as rising interest rates, high price level and falling currency value delays a full recovery. Amid slow business recovery, there is a concern that the self-employed and SMEs may default on their debts if the loan maturity extension and payme
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Sep 28, 2022
- Measures to Strengthen Capacity to Respond to Unfair Trade Practices in Capital Markets
- The FSC proposed new measures to improve the effectiveness of penalties on unfair trade practices in capital markets. The measures include (a) a ban on new transaction and account opening for investment products and (b) disbarment from serving as a board member of listed companies up to 10 years. These measures will help prevent flagrant and repeated unfair trade practices and establish a sound capital market order. Authorities will propose a revision bill of the Financial Investment Services and Capital Markets Act (FSCMA) and propel its passage at the National Assembly. In addition, the FSC will make efforts to pass another FSCMA revision bill to provide calculating method for unfair profits acquired by unlawful trades and to introduce penalty surcharges. Background In capital markets, unfair trade practices increasingly take diverse and complex forms. However, the measures to punish, block and prevent them remain somewhat ineffective. In particular, unfair trades on material nonpublic information by board members of listed companies (who in fact should have a high degree of integrity) happen frequently and recidivism by those who previously committed unfair trades proliferates. The majority of ordinary investors suffer financial losses and trust in our capital markets is damaged. In May 2022, the new administration announced improving the effectiveness of penalties on unfair trade practices as one of 120 national policy tasks to restore fairness and trust in capital markets. Then, the government has prepared detailed plans through policy seminars and expert meetings. Current Situation and Problems (Overview of Unfair Trade Practice Cases) In recent five years (2017-2021), the number of unfair trade practice cases handled by the Securities and Futures Commission (SFC) was 274 in total, which translates into 54.8 cases annually. In terms of violation type, use of material nonpublic information was most prevalent (43.4%), followed by unfair trading (29.6%), market p
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Sep 13, 2022
- Ex-ante Disclosure Rule to be Introduced for Insider Transactions
- The FSC announced a plan to introduce an ex-ante disclosure for stock transactions by company insiders (board members or principal shareholders) which have been subject to only the ex-post disclosure rule thus far. Insiders of listed companies who plan to sell or purchase shares issued by his/her own company within a given year will need to disclose the purpose, price and volume of trading as well as expected trading period at least 30 days before the expected trading date. For nondisclosure, disclosure of false information or failure to comply with the trading plan, authorities will prepare effective compliance measures depending on the severity of violation such as a criminal penalty, fine, administrative action, etc. Introducing ex-ante disclosure is expected to enhance information transparency and market predictability regarding insider stock trading, thereby helping to ease market volatility. Since this measure is a closely anticipated policy task of the new administration, the financial authorities will make efforts to promptly prepare and submit a revision proposal of the Capital Markets Act to the National Assembly. Background Large-scale stock offloading by insiders such as board members of listed firms, etc. causing abrupt fall in stock prices has continued to present a source of discontent for investors and a concern for the society.Some ordinary investors suspect that company insiderswho have the ease of access to undisclosed company informationhave been using that information to pocket personal profits while ordinary investors are burdened with losses. Faced with this problem, the FSC has strengthened safeguards for ordinary investors by improving the rule in March this year to restrict stock sales for six months (a lock-up period) from the time of company being listed even for shares that have been acquired by exercising stock option. However, this measure alone cannot regulate sales of stocks by insiders after the lock-up period (six months) and that
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Sep 07, 2022
- FSC Prepares Additional Measures to Improve Convertible Bond Market
- The FSC announced additional measures for improving rules on the convertible bond market on September 7. As in the case with the convertible bonds (CBs) and bonds with warrants (BWs) issued by listed firms, the regulation on refixing and call option will also apply to (redeemable) convertible preference shares issued by listed companies. Background In October 2021, the FSC introduced a revisionto the regulation on the issuance of securities and disclosure to help prevent CBs from being used in unfair transactions in such cases where CBs are used expediently to increase the shareholding of largest shareholders. Moreover, the FSC introduced a supervisory guideline on the accounting practices of CB call options to help improve the transparency in CB market from an accounting perspective. However, in the process of pursuing regulatory improvements, a concern has been raised about the possibility of stronger regulation (on refixing, etc.) posing excessive restriction on companies fundraising activities.Therefore, the authorities have prepared additional measures for regulatory improvement after examining the trend of CB issuance since the revised regulation went into effect from December 1, 2021. Convertible Bond Market Trend (Issuance Amount) The monthly average CB issuance amount in the first quarter of this year was KRW579.0 billion, a drop of 36 percent compared to the same period last year (KRW904.6 billion)This is on a par with the declining trend of corporate bonds over the same period (down 29.2 percent y-o-y). However, when including the amount of CB issuance prior to the implementation of the revised regulation (KRW2.2 trillion, November 2021), the monthly average CB issuance amount appears to be on course for recovery after a temporary fluctuation. (Issuance Rate) With the expansion in liquidity amid COVID-19 response measures, the CB issuance rate went down slightly in 2020 but edged back up narrowly due to the effects of base rate hike, etc. (Refixing Propor
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Sep 01, 2022
- FSC Holds 4th Financial Risk Taskforce Meeting
- FSC Vice Chairman Kim So-young held the 4th financial risk taskforce meetingon August 31 jointly with other relevant institutions.The 4th taskforce meeting discussed the following two agenda(a) measures for improving the loss absorbing capacity of financial sectors in response to financial market uncertainties and (b) detailed implementation plans of various market stabilization measures which had been deployed in past financial crises. Summary of Vice Chairmans Remarks In his opening remarks, Vice Chairman Kim assessed that volatility in financial markets has increased due to concerns about the prospect of the Feds aggressive monetary tightening, Europes economic recession, and potential economic slowdown in China, etc. Given the increased uncertainty in financial markets such as rising debt servicing burden of borrowers and a potential collapse in major asset prices, Vice Chairman Kim emphasized that it is necessary to strengthen monitoring of risk factors in the financial sector and prepare response measures preemptively. In order to proactively respond to the accumulated risks such as an increase in lending to vulnerable borrowers and real estate project finance (PF) loans, Vice Chairman Kim stated that the financial authorities will examine the level of loan loss provisions of banks and nonbanks to make sure that they have sufficient capacity to absorb potential losses. He said that the authorities are planning to (a) raise the loan loss provision coverage ratio for the nonbank sector such as savings banks, mutual finance companies and specialized credit finance businesses and (b) introduce a regulatory ground to allow the finical authorities to require banks to set aside additional special loan loss reserves. In particular, for the nonbank sector whose assets have been rapidly increased, Vice Chairman Kim said that the authorities will ensure that they hold a sufficient level of capital while bolstering risk management. In addition, considering the close-knit
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Aug 29, 2022
- New Start Fund for Small Merchants and Self-employed Business Owners Hit by Covid-19 To Be Launched
- A debt adjustment program, called New Start Fund, for small merchants and self-employed business owners hit by the Covid-19 crisis will be launched in October.The New Start Fund is intended to ease their debt payment burden as they are struggling to repay their debt since they suffered unavoidable losses while cooperating with the governments quarantine measures such as social distancing policy and restrictions to business operations. Background Over the past two and a half years, self-employed business owners and small merchants have suffered inescapable damages in the process of cooperating with the governments preventive measures, such as restrictions on business operation, in response to the COVID-19 crisis. As their businesses slowed down and financial conditions deteriorated, small businesses turned to debt and the size of their loans have grown significantly with increased burdens for principal and interest payments. Major institutions including the Bank of Korea evaluate the size of potential insolvency of self-employed business owners to be about 5 to 8 percent of their total loans. With the availability of COVID-19 support measures such as the loss compensation support, funding support through fiscal spending and the loan maturity extension and payment deferment program, the vulnerability of their debt situation had not surfaced yet. However, there are possibilities that their insolvency potential may build up and expand if there is another wave of COVID-19 or a worsening of the economic or financial conditions due to high levels of interest rates, prices and USD-to-KRW exchange rates. Against this backdrop, the FSC has prepared a debt adjustment program (called New Start Fund) to help prevent an expansion in the insolvency potential of the pandemic-hit small businesses and to provide a chance of credit recovery and restart for debtors who have already turned insolvent. The debt adjustment program will help lower excessive payment burdens (high interest ra
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Aug 19, 2022
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Aug 18, 2022
- KoFIU Cautions Virtual Asset Users against Unregistered Virtual Asset Service Providers
- The Korea Financial Intelligence Unit (KoFIU) announced on August 18 that it has notified illegal business activities of 16 unregistered Virtual Asset Service Providers (VASPs) to the investigative authority. The KOFIU urged virtual asset users to practice extra caution in order to avoid incurring damages that may result from their transactions with unregistered VASPs. I. Unregistered Operation of Foreign-based VASPs in Domestic Market The KoFIU has notified the investigative authority about the violation of unregistered business activities of 16 foreign-based VASPs* carrying out business activities intended for domestic consumers pursuant to the Act on Reporting and Using Specified Financial Transaction Information (the Act hereinafter). * KuCoin, MEXC, Phemex, XT.com, Bitrue, ZB.com, Bitglobal, CoinW, CoinEX, AAX, ZoomEX, Poloniex, BTCEX, BTCC, DigiFinex, Pionex The 16 foreign-based VASPs were found to have been engaged in business activities targeting domestic consumers by offering Korean-language websites, having promotional events targeting Korean consumers and providing a payment option that supportsthe purchase of virtual assets using credit cards. On July 22, 2021, the KoFIU notified foreign-based VASPs that have business operations targeting Koreans about their obligation to registertheir business with the authority pursuant to the Act. However, the 16 aforementioned entities were found to have business operations targeting Koreans without obtaining a registration and thus the authorities plan to take necessary measures. II. Actions Taken on Unregistered VASPs a) The KoFIU has notified the investigative authority about the violation of registration duties (under the Act) of 16 unregistered VASPs, and plans to inform FIUs in their respective countries about their violation. For illegal business activities of unregistered entities, maximum 5 years of imprisonment or up to KRW50 million of fine can be imposed with a restrictionfor registering as a VASP in dome
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Aug 11, 2022
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Jul 28, 2022
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Jul 26, 2022
- FSC Announces Plan to Introduce Insolvency Resolution Mechanism for Financial Institutions
- The FSC announced a plan to introduce an insolvency resolution mechanism for financial institutions (tentatively called financial stability account) to help prevent insolvency of financial institutions. The plan was discussed at the financial risk response taskforce meeting held on July 26. With changes in financial market environment, there have been calls for introducing a mechanism that can help protect financial institutions against insolvency and prevent risks from spreading in advance. In the wake of the 2008 global financial crisis, major economies such as the U.S., EU and Japan established such preventive support systems. In this regard, the FSC is considering ways to introduce an insolvency resolution mechanism for financial institutions (tentatively called financial stability account)for insolvency prevention of financial institutions through liquidity provision and capital expansion. The FSC will prepare a detailed plan after coordinating with relevant ministries and institutions and gathering opinions from experts and seek revision to the Depositor Protection Act accordingly. Background With some of the changes taking place in the financial industry such as the growth of the nonbank sector, deepening interconnectedness between financial sectors and unpredictability in shock originating from the real economy sector, there is growing concern about risks in certain areas spreading across the entire financial system. Therefore, through provision of liquidity injection and capital expansion to the financial sector facing temporary distress amid a crisis situation, it is necessary to keep the cost of maintaining stability in the financial system to a minimum levelby preventing insolvency of financial institutions as well as spread of risks. Major economies such as the U.S., Japan and EU had already set up relevant systems to prevent systemic risks and minimize the cost of insolvency resolution in the wake of the 2008 global financial crisis. On the contrary, t