FSC works to ensure that finance plays a key role in developing innovative businesses and supporting the real economy, thereby fueling Korea’s more vibrant economic growth. Promoting advanced financial industry, stable financial markets, fair market order and reliable consumer protection are among FSC’s key policy agenda. Digital transformation and big data are increasingly playing larger roles in various aspects of financial services. In the era of 4th industrial revolution and digital economy, finance will help boost growth potential and create jobs as the government seeks to advance its Digital New Deal policy.
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Jun 25, 2009
- Economic Policy Directions for the Second Half of 2009
- Key DirectionsCurrent expansionary policies will continue until clear signs of economic turnaround are apparent, given uncertainties surrounding the economy. However, temporary measures will be reviewed in terms of their impact on the economy, and subject to be withdrawn when they expire. Real estate markets will be under close scrutiny, and any signs of market instability are sure to be responded to in advance with appropriate measures, in particular mortgage loans with tighter provisions. (According to the press briefing given on June 24, the Korean economy saw better-than-projected real GDP growth in the second half of 2009, registering a 1.7 percent increase from the previous quarter, while 0.7 percent growth was forecast originally.)The current policies concerning job creation and public welfare will continue to be pursued in the second half, but their impact and effectiveness will be reviewed. In this respect, supplementary budget spending, measures for promoting the service sector promotion and supporting business startups, and programs for training human resources will be put under evaluation.Market fund flows will be improved so that rich liquidity can move smoothly into the real sector. Long-term funding, such as MA funds and early IPOs of public companies, will be encouraged. Non-performing loans in the financial sector will be purchased through the KRW40 trillion Restructuring Fund.On-going corporate reform efforts will definitely be made: Creditor-led corporate restructuring at all times, early removal of bad loans in the financial sector, and more flexible job markets with improved labor-management relations. Relaxed lending conditions and expanded credit limits will be removed if the financial market stabilizes state-owned agencies are obliged to make on-going efforts to improve their management efficiency, and those subject to privatization will be prepared for it.The government will boost its efforts to raise the nation’s growth potential to prepa
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Nov 14, 2008
- Reporters' Discussion Points with Chairman of the Financial Services Commission
- 1. Recent Market Conditions International Markets- The global markets seem to be stabilizing after the announcement of the U.S. government’s bailout plan and the currency swap agreements signed between the key nations around the world.- Some uncertain elements still exist in the market which are expected to remain until the first quarter of 2009.- With regards to hedge funds managed by major institutional investors, there are likely to be adjustments made to the portfolios early next year which are likely to lead to swift changes in sovereign credit ratings around the globe.Domestic Markets- In response to the crisis, the Korean government utilizing all its resources and departments including the Bank of Korea (BOK), and the regulatory bodies has made devoted efforts to stabilize the domestic financial market.- To provide foreign currency liquidity to financial institutions, - We have carried out a list of actions; guaranteeing external debt payments by local banks; providing foreign currency liquidity using the Swap market; and supporting export financing through the EXIM Bank.- With respect to providing liquidity of domestic currency,- The BOK has acted aggressively by lowering the interest rate 3 times since October 9th, totaling 125bp, and expanding the number of RP receivers.- These efforts have cleared an opening in the flow of funds and has dissolved the liquidity freeze.- However, we are in a phase of a frictional credit freeze because of the lack of liquidity still in local funds.- As a result of the economic slowdown, worries of insolvency in weak segments of the economy are increasing market uncertainty.- Thus, the propensity of investors to be risk adverse is freezing the liquidity of corporate bonds and ABCP.⇒ To summarize the current situation and to put it figuratively, a blood transfusion is given to an anemic patient, but due to the hardening of the arteries, the blood is being prevented from spreading throughout the body.2. Direction of Counter
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Oct 27, 2008
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Oct 20, 2008
- Introduction of competitive auction swap facility
- Introduction of competitive auction swap facility- The Bank of Korea (BOK) will introduce a competitive auction swap facility, starting from October 20, 2008. o The existing swap market participation facility will continue to operate, but the amounts involved will be gradually reduced.- The purpose of this new facility is to enhance the predictability and effectiveness of foreign currency supply and to promote stability in the foreign currency funding market. o Market stability will be pursued by supplying foreign currency funds in more effective ways to domestic foreign exchange banks, which have had difficulties raising funds from abroad amid the worsening global credit crunch.- Unlike the existing swap market participation facility, the new competitive auction swap facility will be open to all foreign exchange banks in Korea. Under this program, the BOK will conduct FX sell buy swaps or currency swaps (pay) with banks at trade terms (amounts and interest rates) decided through competitive auction. o Under the swap market participation facility, introduced in September 2007, the BOK trades with agent banks first, and then the agents trade with other FX banks. o The new facility is different, in that every FX bank engages directly in swap trades with the BOK.- The BOK's expectation is that this new facility will help to ease the recent foreign currency funding market strains. * Please refer to the attached PDF below.
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Oct 14, 2008
- Briefing for Analysts
- 1. Total Foreign DebtRecent debts have largely been incurred as a result of bridge-financing (based on anticipated future returns) such as currency forwards. This type of financing has different characteristics to that of liabilities incurred to finance current account deficits which were prevalent prior to the Asian Financial Crisis.As of the end of June 2008, it is estimated that $151.8 billion out of a total of $419.8 billion of foreign debt by BOK will be not be subject to any repayment burdens, and thus reduce the actual foreign debt amount to $268 billion. The exclusion of debts which are not subject to any repayment burdens will result in an actual net foreign asset amounting to $154.5 billion.The current external debt ratio as of the end of June 2008 stands at 86.1%. However, the figure falls to 54.4% when foreign bank branches are excluded, significantly reducing external debt risks.2. External Debt by Sector A. Government Sector The bulk of the government sector debt ($51.8 billion out of $63.1 billion) consists of KRW-denominated government bonds and currency stabilization bonds purchased by foreigners, for which the Korean government and the BOK has ample repayment capacity.The remainder consists of $3.3 billion in foreign currency-denominated FX equilibrium bonds, $3.4 billion in public loans, etc. (i.e. long-term external debts that pose little risk). B. Banking SectorForeign debts without any repayment burdens incurred from shipbuilders' currency hedging, etc. account for 44.6%, or approx. $93.8 billion, of the external banking sector debt. Foreign debts incurred by domestic branches of foreign banks from their headquarters abroad are very low-risk compared with those of Korean banks.* Foreign bank branches hold 43.1% of total external banking sector debts, and 57.7% of short-term debts.We are applying stringent criteria for FX liquidity to domestic banks than observed in other countries; hence, our current FX liquidity level remains stable.* Develope
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Oct 10, 2008
- Key Issues on Korean Economy
- This document is prepared with the purpose to explain the following key issues on Korean economy.- External Debt- Foreign exchange reserve- Export- Current Account Balance- Korean Banks- FX Liquidity- Policy Responses 1. External Debt □ (Size) The ratio of external debt to GDP stands at 39% as of late 2007, which is lower than that of major developed economies1) and tolerable given the size of our economy.□ (Nature) Recent growth of external debt in Korea has risen as a counterpart to hedging activities undertaken by shipbuilders and overseas investors.ㅇ This is in stark contrast to massive foreign currency short-term borrowings induced for excessive investment by Korean Chaebols that led to the 1997 financial crisis.ㅇ As of June 2008, $152 billion out of $420 billion external debt are free of repayment burden, making the size of foreign debt with repayment burden reduced to $268 billion.ㅇ In addition, 22% of the total external debt (45% of short-term external debt) belongs to local branches of foreign banks, which makes it unfitting to be regarded as net external debt.ㅇ The IMF expressed that today's foreign debt increase in Korea not as risky as in the past. (08. 6.24, IMF Annual Consultation)1) the ratio of external debt to GDP as end of 2006 : UK(394%), Germany(144%), US(85%), Japan(35%) 2. Foreign exchange reserve□ (Size) Korea holds the 6th largest foreign exchange reserve in the world, which is deemed adequate.ㅇ The size is well beyond the IMF guideline, which is a global reference for the adequate size of FX reserve.2)ㅇ The IMF(Sep.4) and Fitch(July.16), a global credit rating agency, affirmed that Korea's reserve was sufficient.□ (Composition) Korea's reserve is composed of assets with low risk such as deposits, sovereign bonds, federal agency securities and supernational bonds.ㅇ As of September 2008, the total of $240 billion reserve can be cashed in immediately.2) IMF guideline for adequate FX reserve is a total of 3-month current pa
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Jul 29, 2008
- FSC Releases Draft Amendment to the Act on External Audit of Stock Companies
- The Financial Services Commission organized a joint private-public Task Force (from Apr. to June, 2008) composed of officials from the government/supervisory authority, business representatives and accounting experts to establish an advanced accounting system. The Task Force conducted a rigorous review of major issues relevant to Korea's accounting system and devised improvement measures. Based on the review and a public hearing held on June 4, the FSC drafted the Amendment to Act on the External Audit of Stock Companies and the Amendment to Certified Public Accountant Law.Opinions collected during the 20-day announcement period from July 29 to August 17 are to be reflected in the Amendments before submitting them to the upcoming regular National Assembly session after completing relevant procedures like deliberation by the Regulatory Reform Committee/the Ministry of Legislation and the vice ministerial- cabinet meeting. Announcement of the revised Enforcement Decree of the Act on External Audit of Stock Companies is scheduled in August.Key ChangesThe primary objective of the draft amendments is to bring about changes that will facilitate international convergence of accounting standards and efficiency in line with the full introduction of IFRS by: (i) relieving unlisted companies of the excessive accounting burden; (ii) build infrastructure including legislation for the adoption of IFRS, and (ii) improving supervisory system and reinforce expertise to boost accounting transparency.1. Revision of the Act on External Audit on Stock Companies- Changes in Title/Composition of Financial Statements and Consolidated Financial Statements (draft article 1-2)Change title/composition of financial statements to align with the IFRS, (as is) balance sheets, statements of income, statements of appropriations of retained earnings, statements of change in equity, statements of cash flows, (to be) statement of financial position, statement of comprehensive income, statement of chang
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Feb 14, 2008
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Jan 09, 2008
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Apr 13, 2001
- The Major Policy Objectives of FSC for 2001
- 1. Main Policy Direction The financial industry is increasingly shaping the back-bone of knowledge-based economy of the 21st century of global and digital age. Fully recognizing such trend, financial regulatory authorities have taken policy directions which are to ensure strengthening the financial industry for the stable and sound financial markets and future economic growth. Accordingly, the government has shifted its focus from government-led restructuring policies to market-oriented approaches for continuous restructuring financial markets. Further, financial institutions will be encouraged to be more actively engaged in “software” reform to strengthen profitability and competitiveness. 2. Continuous Financial and Corporate Restructuring Reform in the Financial Sector• Preventive Supervisory and Prompt Corrective Action Measures: The terms and conditions of Management Improvement Arrangement, which is to be signed between ailing financial institutions and authorities, will be intensified to prevent managerial risk before PCA is enforced. • Continuing Reduction of Bad Loans: By monitoring commercial banks’ progress, on quarterly basis, with their efforts to reduce the ratio of substandard and below to total loans to the targeted 5% or below by the end of this year• Bank Mergers Among Sound Banks: To be more globally competitive by achieving greater economies of scale and by creating universal banking system The merger trend has been set off by the financial holding company and the merger between Kookmin Bank and Housing Commercial Bank (HCB), and other banks are encouraged to follow suit. Reform in the Corporate Sector• Effective Credit Risk Evaluation: To activate the corporate credit risk assessment system in full scale, by which creditor banks can assess credit risk of each of their debtor companies for the prevention of further increase of ailing assets, and, when necessary, for the timely exit of non-viable companies from the market The monthly
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Sep 25, 2000
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Aug 03, 1998
