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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Jun 22, 2023
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Jun 21, 2023
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Jun 20, 2023
- Authorities Review Market Situation and Discuss Rollback of Eased Regulatory Measures
- The Financial Services Commission held a meeting with the Financial Supervisory Service, the Bank of Korea and financial industry associations on June 20 to check current market situation and discuss the progress of market stabilization measures and the operation of eased financial regulations. With financial market conditions stabilizing, demand for market stabilization programs remains not so high currently. However, to be prepared for uncertainties at home and abroad, authorities already made an agreement on continuing to make the PF-ABCP (project finance asset backed commercial paper) purchase program available until the end of February 2024 for PF-ABCPs guaranteed by securities firms.Market stabilization programs including the bond market stabilization fund and the corporate bond and CP purchase program currently have KRW35 trillion in their remaining capacity, which provides an ample room to respond in the future in the case of market instability. In addition, authorities are closely monitoring the real estate PF market and taking necessary steps to help normalize the projects considered to be facing the risk of default. In this regard, the real estate PF lending institutions consortium agreement was activated to ensure an orderly normalization of at-risk projects. Regarding the temporary easing of regulations applied on banks, insurers, savings banks, specialized credit finance businesses and financial investment businesses since after October of last year and extended partially in March 2023, participants evaluated that financial institutions are currently capable of responding to risks without the support made available by additional extension. However, to be prepared for potential expansion of uncertainties in the future, participants agreed on extending the availability of eased regulations for certain areas. As such, the eased regulations on banks loan-to-deposit ratio, credit offering limit between subsidiaries of a financial holding company and insuran
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Jun 12, 2023
- FSC Plans to Improve Accounting Rules to Enhance Transparency and Stability
- The Financial Services Commission announced a plan to make improvements to a set of key accounting rules on June 12, taking into account a comprehensive set of factors discussed and recommended by academic and industry experts. Since the accounting reform of 2017 (regarding the Act on External Audit of Stock Companies), there have been both positive and negative opinions in the past five years about the newly introduced accounting rules such as the periodic designation of an external auditor. Compared to the pre-reform period, experts generally see that the reform measures have helped to improve accounting transparency. However, businesses have called for making improvements to the system as they have been questioning whether the benefit outweighs the cost in introducing the reform measures. Against this backdrop, the FSC hasprepared the following measures to improve the accounting rules introduced five years ago. Lowering burden of external audit on internal accounting control system The cost of stock companies for setting up and maintaining an internal accounting control system is estimated to be about 90 percent of the cost paid out for audit fees. This sharp rise in their accounting costs has presented difficulties for many businesses. Meanwhile, a study by Korea Accounting Association finds that for stock companies with less than KRW2 trillion in assets, the relationship between the effectiveness of having a separate internal accounting control system and boosting their accounting transparency remains not so clear. Thus, authorities will postpone the requirement of external audit on the consolidated internal accounting control system for small- and medium-sized stock companies (those with assets less than KRW2 trillion) for five years (from 2024 to 2029). For those with assets worth KRW2 trillion or more, the external audit requirement will be implemented as scheduled starting from this year, but those asking for a postponement on their consolidated internal ac
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Jun 08, 2023
- Authorities Hold 1st Meeting on Benchmark Rate and Short-term Money Market
- The Financial Services Commission held a meeting with the Bank of Korea, the Financial Supervisory Service and relevant industry groups and institutions to monitor how domestic financial institutions are preparing for a transition away from LIBOR (London interbank offered rate) and discuss issues surrounding the operation of domestic financial benchmark rates. In coordination with relevant institutions and financial companies, the government has been working to make a transition away from LIBOR, responding to the European Unions Benchmark Regulation (BMR) compliance and participating in the global benchmark rate reform efforts. The following is an overview of these efforts so far. First, all financial contracts based on non-USD LIBOR, which ceased to be published in 2022, were successfully converted, and financial contracts based on LIBOR, which will be discontinued from July 2023, are being converted to an alternative rate such as secured overnight financing rate (SOFR). As of the end of May 2023, about 95.3 percent of domestic financial institutions contracts have made this transition. Second, the government enacted the Act on the Management of Financial Benchmarks, which became effective in November 2020 and reflects international standards on benchmark rate reform, to strengthen credibility of domestic benchmark rates. In order to ensure a seamless utilization of domestic benchmark rates (Korea overnight financing repo rate and certificate of deposit rate) in the European Union, authorities have been working with EU counterparts to get an approval for congruity. Third, in February 2021, authorities selected the Korea Overnight Financing Repo Rate (KOFR) as Koreas new risk-free reference rate (RFR) and designated it as a critical benchmark rate under the Act on the Management of Financial Benchmarks. The KOFR is being published by the Korea Securities Depository (KSD) since November 2021. Currently, three-month KOFR futures and exchange traded funds (ETFs) have b
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Jun 08, 2023
- FSC Holds Meeting to Monitor Soft-landing of Maturity Extension and Payment Deferment Support
- FSC Vice Chairman Kim So-young presided over a meeting with the Financial Supervisory Service and relevant financial industry groups on June 8 to review current status of the efforts to soft-land the loan maturity extension and payment deferment program. The maturity extension and payment deferment program was introduced in the wake of the coronavirus pandemic to support SMEs and small merchants experiencing temporary liquidity problems. Since it was first launched in April 2020, the availability of support program was extended every six months. Currently, it is available under the measures to soft-land loan maturity extension and payment deferment for self-employed and SMEs, the fifth such six-month extension plan announced in September 2022.In accordance with the measures announced in last September, maturity extension is available for three years (until September 2025) and payment deferment is available until September 2028 according to individual payment plans submitted by borrowers. Specific terms of their payment plans (interest-only period, installment payment plan, etc.) are drawn up in consultation with each financial institution. Some of the key statistics of the maturity extension and payment deferment program as of the end of March 2023are as follows. Compared to the end of September 2022, the amount of loan balance and the number of borrowers receiving support declined by about KRW15 trillion and 46,000, respectively, as shown in the table below. This shows a smooth landing of the support program as borrowers are recovering payment capabilities due to improving business conditions, availability of low interest rate refinancing loans, debt adjustment support and so on. At the meeting, Vice Chairman Kim So-young said that authorities will work to ensure a soft-landing of the support program and continue to operate a help center at the FSS to make sure that borrowers can seek consultation on their payment plans, debt adjustment and the availability of othe
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Jun 01, 2023
- FSC Holds Meeting to Monitor Progress of Real Estate PF Market Normalization
- The Financial Services Commission held a meeting on June 1 to monitor progress in the normalization of the real estate project finance (PF) market along with officials from the Financial Supervisory Service, Creditors Coordination Committee, major financial holding groups and relevant policy financial institutions. As of the end of May 2023, a total of 30 real estate development projects have become subject to the assistance of the real estate PF lending institutions consortium agreement. Among them, business normalization is under way for 19 projects through provision of rollback on acceleration clause, new funds, deferment of interest payments and maturity extension. At the meeting, officials also went over the status of the support programs already announced and being provided by policy financial institutions such as business guarantees and policy finance support being offered by the Korea Housing Urban Guarantee Corporation (HUG) and Korea Housing Finance Corporation (HF), as well as KRW1 trillion worth of funds managed by Korea Asset Management Corporation (KAMCO). To support a seamless transition from short-term bridge loans to PF loans, the government already announced its plan to provide business guarantees worth KRW15 trillion through HUG and HF until the end of this year. As of May 30, the policy financial institutions provided a total of KRW6.01 trillion (KRW3.34 trillion by HF and KRW2.67 trillion by HUG) in support of the normalization of real estate projects. In addition, the special guarantee program set up to help alleviate anxieties in refinancing PF-ABCPs (asset backed commercial papers) provided a total of about KRW1.211 trillion (KRW0.12 trillion by HF and KRW1.914 trillion by HUG). To help ease the liquidity burden of regional real estate PF sites outside the Seoul metropolitan area and small- and medium-sized construction firms, the Korea Development Bank (KDB), Industrial Bank of Korea (IBK) and Korea Credit Guarantee Fund (KODIT) plan to prov
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May 30, 2023
- Authorities Plan to Overhaul Rules on CFD Trades while Restricting New Transactions for Three Months
- The Financial Services Commission held a meeting with the Financial Supervisory Service, the Korea Exchange and the Korea Financial Investment Association on May 26 and held discussions to finalize a set of measures intended to strengthen regulations on trading of contracts for difference (CFDs). The measures include (a) enhancing transparency in the provision of information on the actual type of CFD investors and investment balances by item, (b) closing loopholes to prevent regulatory arbitrage by including the amount of CFDs provided in the securities firms maximum credit extension limit, (c) requiring individual investors applying for the qualified professional investor status to go through an in-person (including video call) verification process, and (d) establishing a new investment requirement for over-the-counter (OTC) derivatives transactions such as trading of CFDs. Enhancing transparency in provision of relevant investment information To help investors make more rational decisions about their CFD investments, authorities will improve the system to ensure the provision of more appropriate investment information. Even though those making investments in CFDs are mostly individual retail investors (making up about 96.5 percent), currently, when securities firms submit stock transaction orders following retail investors CFD trading, the investor type is currently marked as institutional investor when orders are submitted by a domestic securities firm or as foreign investor when orders are submitted by a foreign securities firm. This has created the problem of misrepresenting the flow of investment funds into particular investment items by institutional and foreign investors. In order to prevent this sort of misunderstanding by market participants, for stock transactions resulting from CFD trading, actual investor type (e.g., individual investor) will be recorded. In addition, as in the case of credit loans, the total and item-by-item CFD balances will be disclo
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May 25, 2023
- FSC Decides to Activate CCyB Requirement for Banks and Bank Holding Groups from May 2024
- The FSC decided to increase the countercyclical capital buffer (CCyB) requirement for banks and bank holding groups to one percent beginning on May 2024 at the 10th regular meeting held on May 24. The decision is a follow-up measure for the plan to improve the prudential regulations in the banking sector discussed at the third working group meeting of the taskforce on improving the management and operating practices of banks and banking system held on March 15. CCyB is an additional capital buffer requirement (within zero to 2.5 percent of risk-weighted assets) which takes into account the effects of procyclicality following credit supply on the financial system and the real economy. Since its introduction for domestic banks in 2016, CCyB has remained at around zero percent. The FSCs decision to increase the CCyB requirement to one percent takes into account comprehensive factors. First, even though the growth of household credit slowed down amid interest rate hikes, credit growth has remained high in the corporate sector. When looking at both the major total credit-to-GDP gap indicator and the complementary total credit gap indicator, there are strong signs for activating CCyB. Moreover, at the end of 2022, domestic banks Tier 1 common equity ratio was 13.50 percent (12.57 percent when including bank holding groups), which was higher than the regulatory ratio of 7.0 to 8.0 percent but fell slightly compared to 13.99 percent at the end of 2021 due to interest rate hikes and sharp rises in currency exchange rates. Also, as domestic banks net income in 2022 rose to KRW18.5 trillion (up KRW1.6 trillion y-o-y), it is deemed that banks are capable of setting aside additional capital. The FSC decided that it is necessary to preemptively require banks to build up capital to improve their loss absorbing capacity against the backdrop of macroeconomic uncertainties at home and abroad, potential growth of financial risks and the possibility of actually accruing expected losses
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May 25, 2023
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May 23, 2023
- Authorities Hold Joint Conference and Pledge to Stamp Out Unfair Trading Activities in Capital Markets
- The FSC held a joint conference on May 23 with the Financial Supervisory Service, the Korea Exchange and Seoul Southern District Prosecutors Office on the topic of stamping out unfair trading activities in capital markets. The conference was attended by experts from academia and research institutions. The heads of the FSC, FSS, KRX and the prosecutors office all agreed to boost inter-agency cooperation and expressed strong willingness to root out unfair trading activities in capital markets. The conference featured presentations on (a) ways to diversify sanctions on unfair trading activities, (b) measures to strengthen early detection mechanisms, (c) the KRXs handling of recent stock price manipulation cases and ways to improve in the future and (d) an overview on the current status of unfair trading activities in capital markets and how to handle from a judicial perspective. The following is a summary of FSC Chairman Kim Joo-hyuns opening remarks. Summary of FSC Chairmans Remarks In the wake of the recently uncovered unfair trading activities in our capital market and their damaging effects, relevant authorities have come together today to collectively seek measures to strengthen our response to fraudulent activities in capital markets. First, regarding the recent stock price manipulation cases, a joint investigation team made up of officials from the prosecutors office, the FSC and the FSS has already been set up, and it has been expanding its scope of investigation to all areas of suspicion. By thoroughly investigating and identifying illegal activities, authorities will make sure that those suspected of breaking laws are brought to justice. Second, authorities will promptly seek regulatory improvements in the current CFD (contract for difference) trading system on a separate track from the ongoing investigation. The improvement measures will include (a) providing more accurate investment information to investors, (b) resolving regulatory arbitrages vis--vis cred
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May 18, 2023
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May 08, 2023
- FSC Introduces Measures to Facilitate Corporate Merger and Acquisition Activities
- The FSC announced a set of measures aimed at facilitating corporate merger and acquisition activities on May 8. In the second half of this year, the FSC also plans to announce additional policy agenda items for facilitating corporate MA activities through coordination with the Ministry of Justice. Corporate MAs are an important mechanism to boost management efficiency and reorganize the structure of an enterprise. They also help to increase the overall productivity of an economy as well as its recovery from a downturn. However, the corporate MA market saw a significant decline recently due mainly to the worsening of macroeconomic conditions. Against this backdrop, the FSC prepared plans to (a) seek regulatory improvements on corporate MAs, (b) strengthen support for corporate restructuring through MAs, (c) support strategic MA activities in line with industrial restructuring demand, and (d) make domestic rules on corporate MAs more congruent with global standards. Key Details Seek regulatory improvements on corporate MAs to propel growth momentum Authorities plan to make improvements to some of the regulations that have been identified as unreasonable including those on public tender offer, corporate mergers and credit offering by investment banks. First, when making a public takeover bid, the burden of securing funds beforehand will be eased. A loan commitment from a trustworthy acquiring financial institution or an investment agreement from a limited partner will be recognized as an admissible document showing financial capability of a tender offeror. Second, in a spin-off or a post-spin-off merger, the process of converting CBs (convertible bonds) and BWs (bonds with warrants) will be streamlined as the electronic securities depository (Korea Securities Depository) will be allowed to get investor information directly from securities firms and process conversion of CBs and BWs electronically. Third, investment banks will be able to more actively offer credit to bu
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Apr 26, 2023
- Revised Rule to Require IPO Bookrunners to Check Payment Capability of Institutional Investors
- The FSC approved a revision bill of the regulation on financial investment businesses at its 8th regular meeting held on April 26. This revision bill is a follow-up to the measures to improve the soundness of the initial public offering (IPO) market announced in December last year and contains a measure to facilitate carbon emissions trading by securities companies along with other regulatory overhaul items. Requirement for IPO bookrunners First, when managing IPOs, the IPO bookrunner will be responsible for verifying institutional investors ability to pay for stocks before the allotment of shares takes place. In an IPO, the bookrunner performs a book building to check demands from institutional investors in order to determine an appropriate IPO price. The public offering price decided is then used to get subscription from retail investors. However, for certain high-demand items, the issue of fictitious subscription by institutional investors in excess of their payment capabilities and that of over-competition have been problematic. It has been pointed out that this practice of fictitious subscription has been hindering the price discovery function of the book building process, causing distortions in the IPO market. Thus, this revision is aimed at preventing the practice of fictitious subscription and strengthening the responsibility of IPO bookrunners throughout the book building process by introducing sanctions such as imposition of an administrative fine for unfair transaction activity when bookrunners fail to check institutional investors stock payment capabilities prior to allotting shares. This requirement will take effect from the securities registration reports for IPOs filed after July, after relevant rules change is completed by the industry association. With this revision bill, apart from the measures for allowing bookrunners to preliminarily review institutional investors demands and introducing the cornerstone investing system, all other follow-up items
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Apr 24, 2023
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Apr 17, 2023
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Apr 13, 2023
- FSC Introduces Measures to Improve the Process of Bank Branch Closure
- The FSC introduced a set of measures aimed at improving the process of banks branch closures at the 5th working group meeting of the taskforce on improving the management and operating practices of banks held on April 12. The key measures include strengthening the preliminary impact assessment process and expanding the scope of information provided to consumers. From now on, before a branch closure, banks should collect opinions from the branch customers and make decision prudently. When a branch closure is unavoidable, banks should arrange to have an alternative service provision channel beforehand through a joint office, small-scale office, makeshift office or teller partnership to make sure that the same level of service is provided to consumers as before. Key Details I. Strengthen the Preliminary Impact Assessment Process Under the common procedures established for banks branch closures, banks need to conduct a preliminary impact assessment prior to closing down a branch and establish an alternative service provision channel when a branch closure has been decided. However, with the number of bank branch closures going up steadily, there have been calls to strengthen the effectiveness of these common procedures. Therefore, taking examples from overseas cases,from now on, it will be necessary for banks to establish relevant procedures to collect opinions from the consumers using their branch and take consumer opinions into account to make an adjustment to their alternative service provision plan, perform an impact assessment again or reconsider the decision to close down the branch. When a considerable impact on consumers is expected, banks should continue to maintain their branch office in principle. However, if it is unavoidable to close down the branch, banks should ensure that consumers can continue to access financial services without much inconvenience after its closure by establishing an alternative service provision channel through a small-scale office, jo
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Apr 10, 2023
- FSC Proposes Rules Change in the Enforcement Decree of the Banking Act
- The FSC gave advance notice on April 10 regarding rules change in the Enforcement Decree of the Banking Act, which will be put up for public comment until May 22. The revision bill establishes a specific standard for when a bank should get authorization from the FSC if it closes down or transfers or acquires a major part of its business operation. It also contains a regulatory modification in agreement with upstream legislation and a penalty clause for a specific type of violation. When Citibank Korea decided to draw back its retail banking operation in 2021, the FSC was not able to proceed with an authorization process since the Banking Act stipulates a banks closure of the entire part of its business as an area where the FSC could deliver authorization. For the closure of a part of the banks business operation, the FSC then saw it unlikely that it could give authorization under the purview of the Banking Act. Nonetheless, given the necessity to protect the rights and interests of consumers, the FSC then gave the order to Citibank Korea to draw up a detailed plan to minimize inconvenience to consumers, protect consumer rights and maintain sound market order and implement its plan faithfully as it was authorized to take such action as prescribed by the Financial Consumer Protection Act. In March 2023, the Banking Act was amended, however, to subject banks to get authorization from the FSC when they close down not only the entire part of their business but a major part of their business operation as well. The amended Banking Act then delegates the authority of determining what constitutes a major part to its Enforcement Decree. Thus, this partial revision proposal for the Enforcement Decree of the Banking Act specifies the major part of the banks business operation to be closed down as a part of business constituting 10/100 or more of the banks assets and total profits. Also, considering that the transfer of a part of a business is in essence same as the closure of a
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Mar 29, 2023
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Mar 27, 2023
- Application of Temporarily Eased Financial Regulations to be Available until June 2023
- The FSC held a meeting with the FSS and financial industry associations on March 27 to check financial market conditions and the liquidity and soundness conditions of financial institutions and discussed extending the availability of temporarily eased financial regulations put in place since October last year. Temporary Market Stabilization Measures Expiration Schedule (Oct. 2022~) a) Banks: Postponement of normalization of liquidity coverage ratio (LCR) (92.5%, until end-June 2023), temporary easing of loan-to-deposit ratio (105%, until end-April 2023) b) Insurance companies: Temporary easing of cap on borrowing from retirement pension special accounts (until end-March 2023) c) Savings banks: Temporary easing of loan-to-deposit ratio (110%, until end-April 2023) d) Specialized credit finance businesses: Temporary easing of KRW-based currency liquidity ratio by 10%p (until end-March 2023), temporary easing of the creditable assets to real estate project finance exposure ratio by 10%p (until end-March 2023) e) Financial investment businesses: Postponement on downsizing (from 12% to 8%) the cap on the amount of bonds (issued by specialized credit finance businesses) that can be included when hedging risks associated with equity-linked securities (ELS) under management (until end-March 2023), easing of net capital ratio risk weight when purchasing project finance asset-backed commercial papers (PF-ABCPs) guaranteed by own company (until end-June 2023) f) Financial holding companies: Easing of cap on credit extension between their own subsidiaries (until end-June 2023) Extended Availability of Eased Regulations With regard to the temporary easing of financial regulations applied since October last year on banks, insurance companies, savings banks, specialized credit finance businesses and financial investment firms, considering that there are lingering uncertainties in financial markets at home and abroad, authorities decided to extend the availability of deregulatory m
