Press Releases - Financial Services Commission

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Dec 23, 2019

Key Tasks in Financial Policy for 2020

The government introduced the 2020 Economic Policies on December 19, aimed at promoting innovation, restructuring the economy, pursuing inclusive growth and preparing the economy for the future. The Financial Services Commission will pursue the following key financial policies to support the government’s economic policies in 2020.KEY POLICY TASKSI. INCREASING FINANCIAL SUPPORT TO HELP THE ECONOMY REGAIN GROWTH MOMENTUM► Increasing funding for innovation-led growth drivers- Reform banks’ credit evaluation system to better evaluate corporate borrowers’ growth potential and technology(i) financing movable asset-based loans (including intellectual property) in the amount of KRW3 trillion by the end of 2020: introducing a lump-sum collateral system; providing incentives for banks; and establishing a new agency which purchases movable asset collateral or non-performing loans backed by movable assets to facilitate banks’ recovery of collateral(ii) introducing an integrated credit evaluation model starting with large banks to incorporate technology evaluation into banks’ credit evaluation system- Provide more than KRW10 trillion in facilities investment for SMEs as well as for major industries- Boost venture capital investments through capital markets by streamlining regulatory frameworks on private equity funds (PEFs) and easing net capital ratio (NCR) on securities firms investing in venture companies and SMEs.► Financing new and key industries- Support start-ups and scale-ups in high-tech and newly emerging industries(i) establishing the infrastructure to facilitate the use of financial and biohealth data in financial services (e.g. data exchange)(ii) increasing investment and incubating start-ups in 5G sectors(iii) providing government-backed loans and guarantees in the amount of KRW10 trillion in new growth sectors, such as system chips, biohealth and future car industries(iv) creating a Scale-up Fund worth KRW3.2 trillion to provide start-ups with growth
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Dec 23, 2019

FSC Reforms Non-Face-to-Face Customer ID Guidelines for Corporations and Foreigners

The Financial Services Commission unveiled a revised guideline for non-face-to-face customer identification on December 20, which is aimed at promoting online financial transactions by corporations and foreigners.BACKGROUNDThe non-face-to-face customer identification was first introduced to the banking sector in December 2015 for the purpose of improving consumer convenience. It was a major shift from the face-to-face identification method which had been in place for more than 20 years since the implementation of the real name financial transactions in August 1993. In February 2016, the non-face-to-face identification expanded to the non-banking sector (e.g. financial investment business and mutual banks).In January 2017, the FSC allowed corporations to open a new bank account though non-face-to-face customer identification; however, for corporations, only one representative could be identified through non-face-to-face identification method to prevent financial crimes, such as identify theft.Since its introduction, the number of new bank accounts opened through non-face-to-face customer identification has continued to increase. CHANGESFor corporations, opening a new corporate bank account by legal representatives, such as an employee or a board member, through non-face-to-face customer identification will be permitted. Legal representatives must present a power of attorney to financial companies for verification purposes.For foreigners, the alien registration card may be used to verify identity when opening a new bank account through non-face-to-face customer identification.SCHEDULEThe changes will go into effect on January 1, 2020, although each financial institution will determine whether and when to adopt non-face-to-face customer identification service for corporations. In January 2020, banks and financial investment sectors will draw up operational guidance in that regard.* Please refer to the attached PDF for details.
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Dec 19, 2019

FSC Designates 9 More Financial Solutions as 'Innovative Financial Services'

The FSC designated nine additional financial solutions as ‘innovative financial services’ to be included in its regulatory sandbox program on December 18. The FSC has thus far designated a total of 77 ‘innovative financial services’ since the launching of financial regulatory sandbox in April this year.OVERVIEW OF NEWLY ADDED ‘INNOVATIVE FINANCIAL SERVICES’1. An over-the-counter bond trading platform providing retail investors with investment information about a variety of bonds, which will offer opportunities for small-amount investments and increase investor convenience (SK Securities)2. An automated stock lending borrowing transactions service, which is expected to contribute to the prevention of naked short-selling and failure to deliver securities (True Technologies)3. A customer oriented mobile appointment scheduling service using artificial intelligence, internet of things and big data, which provides information about the best time to set up an appointment at banks to avoid busy times while offering recommendations about financial products based on an analysis about customer’s consumption and investment patterns (NH Nonghyup Bank)4. A data analysis service using homomorphic encryption, which makes possible the coding of personal financial information stored in different financial institutions for analyzing purposes (Korea Credit Bureau)5. A digital real estate beneficiary distribution platform using a blockchain-based distributed ledger technology which offers retail investors an opportunity to make indirect investments in small-and medium-sized commercial real estate (Kasa Korea)6. A global money transfer brokerage service offering small-sum overseas remittance service providers an opportunity to easily find overseas partners, which is expected to ease consumer access and lower transaction costs (Hanpass)7. An online foreign stock gift card platform which allows small amount investment in shares of foreign stocks (Shinhan Investment)8 9. A sim
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Dec 18, 2019

Open Banking Service Launched for Banks and Fintech Businesses

The Financial Services Commission co-hosted a launch event for open banking service with the Korea Financial Telecommunications Clearings Institute on December 18.Open banking service was pilot launched in Korea on October 30 with participation by 10 banks. Beginning today, open banking will be available for a total of 16 banks and 31 fintech businesses, as more and more fintech firms are expected to join in the future.FSC Chairman Eun Sung-soo delivered congratulatory remarks at the event in which he emphasized the importance of openness along with efficiency and stability in payments sectors.Since its pilot launch on October 30, more than 3 million people have registered more than 7 million accounts through open banking.Chairman Eun stated that open banking has become more than simply a payment system and has emerged as a key financial infrastructure, bringing tectonic shifts in the financial industry. Open banking service in Korea provides wire transfer functions in addition to the account checking function.In order to continue to promote innovative financial solutions through open banking, Chairman Eun said that the government will establish legal foundations through revision of the Electronic Financial Transactions Act while expanding the scope and function of open banking service.Chairman Eun also emphasized the importance of ensuring safety and security in payments sectors in order to guarantee trust and stability in our financial payment infrastructures.* Please refer to the attached PDF for details.
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Dec 16, 2019

FSC Chairman Discusses Government Plans to Curb Overheating in Housing Prices

FSC Chairman Eun Sung-soo held talks on tightening mortgage regulations to curb overheating in housing prices on December 16. Chairman Eun urged careful preparation and coordination from all financial regulators as some of the newly introduced measures, such as a ban on mortgage lending for high-priced homes, will go into effect beginning tomorrow. Chairman Eun also underscored the importance of both micro- and macro-prudential management in our financial system.KEY MEASURESI. PROHIBIT MORTGAGE LOANS ON HIGH-PRICED HOMESThe government will prohibit mortgage loans on houses valued over KRW1.5 billion in government-designated speculative areas.II. STRENGTHEN MORTGAGE LENDING RESTRICTIONS IN SPECULATIVE AREASFor properties valued over KRW900 million in speculative areas, a loan to value (LTV) ratio of 20 percent will be applied for values in excess of KRW900 million, while a 40 percent LTV ratio will continue to apply for amounts up to KRW900 million.In addition, the government will gradually bring down debt service ratios (DSR) to 40 percent in all financial sectors by the end of 2021 in order to prevent unsecured personal loans from being diverted into home purchases.For individuals who own a single home and subsequently purchase a second home and for non-homeowners who purchase a property valued over KRW900 million, the current requirement to sell existing property and move into the newly purchased home within 2 years will be reduced to 1 year.III. IMPROVE MANAGEMENT OF LOANS IN LEASING BUSINESSWithin the speculative areas designated by the government, the Rent to Interest (RTI) ratio for individual home leasing business operators will be raised from the current 1.25 times to 1.5 times.IV. PREVENT OPPORTUNISTIC INVESTMENT BEHAVIOR USING JEONSE The government aims to prevent opportunistic investment behavior using jeonse by requiring multiple home owners or those who purchase homes valued over KRW900 million to pay off loans borrowed for jeonse.The Seoul Guarantee In
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Dec 16, 2019

FSC Approves Internet-only Bank License for Toss Bank

The FSC decided to grant ‘Toss Bank’ a preliminary license to operate internet-only bank on December 16. After receiving three applications on October 15, the Financial Supervisory Service formed an evaluation committee to review their applications, which took place on December 12-14.For ‘Toss Bank,’ the evaluation committee concluded that its business plan showed a sufficient level of innovativeness, inclusiveness and stability. Meanwhile, the committee decided that the application by ‘Soso Smart Bank’ did not show a sufficient level of preparation in terms of its financing and business plans. One of the applicants, ‘Familia Smart Bank,’ submitted a notice for withdrawal on December 11 prior to the review by the evaluation committee.‘Toss Bank’ may begin its operation within 6 months of getting a final approval from the FSC.* Please refer to the attached PDF for details.
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Dec 16, 2019

FSC Unveils Revised Guidelines for Financial Consumer Protection

The FSC unveiled a revision to the Guidelines on Financial Consumer Protection on December 16 in order to continue to encourage financial institutions to take more responsibility in consumer protection prior to the enactment of the Financial Consumer Protection Act by the National Assembly. The revised guidelines, which will go into effect on January 1, 2020, contain measures to enhance consumer protection function of financial institutions.KEY MEASURESI. ENCOURAGE CHIEF EXECUTIVES TO LEAD CONSUMER PROTECTION EFFORTS► Within financial companies, the position of chairperson of financial consumer protection council will be assumed by company’s chief executive officer (CEO) in order to boost the status of financial consumer protection council. The government will recognize an exemption to this rule and allow chief consumer officer (CCO) to assume the role of chairperson provided that the company has received an above ‘satisfactory’ rating on its consumer protection record.► In order to promote a comprehensive consumer issue management system in financial companies, the role and authority of financial consumer protection council will be boosted. When launching new products, the council has the authority to conduct impact analysis on consumers, review results of advertisement compliance assessment by relevant authorities and examine new or revised product information.► Financial institutions will be encouraged to hire a sufficient level of consumer protection specialists while coordinating with relevant departments, such as customer relations, product development and sales.II. GRANT MORE INDEPENDENCE AND AUTHORITY FOR CHIEF CONSUMER OFFICERS► Financial companies managing large amounts of assets and have a high frequency of consumer complaints reported within a particular region should appoint an independent chief consumer officer (CCO) among its board members.► CCOs should be given sufficient authority to oversee issues concerning consumer protection. By
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Dec 12, 2019

FSC Finalizes Measures to Strengthen Investor Protection with High-risk Investment Products

FSC FINALIZES MEASURES TO STRENGTHEN INVESTOR PROTECTION WITH HIGH-RISK INVESTMENT PRODUCTSThe FSC announced a finalized plan to strengthen investor protection with high-risk investment products on December 12. Taking into account opinions from the financial industry, the finalized plan includes detailed measures and amendments to the original plan announced on November 14. SUPPLEMENTARY AMENDED MEASURESI. STANDARDS FOR ‘HIGHLY COMPLEX’ INVESTMENT PRODUCTS‘Highly complex’ investment products will be determined by the following criteria: (i) the complexity of structure in investment products, (ii) the amount of possible loss and (iii) whether investment products are listed or not. In the case that financial companies are unable to determine whether an investment product qualifies as ‘highly complex,’ they may request a decision by the Korea Financial Investment Association and the FSC.II. VALIDITY FOR CLASSIFICATION OF INVESTORS BY RISK APPETITEThe classification of investors by their risk appetite will be valid for 1-2 years, shorter than the previously announced 1-3 years, to ensure a more up-to-date classification.III. SCOPE OF UNFAIR SALES PRACTICEUnderestimating the riskiness of ‘highly complex’ investment products and selling them as mid-risk products will be classified as ‘unfair sales practice,’ which will face strict punishment.IV. CLARIFICATION OF BUSINESS SCOPE BETWEEN FUND MANAGERS AND SELLERS The scope of business between fund managers and sellers will be specified to determine whether a fund belongs to an OEM fund or not. A fund does not belong to an OEM fund if:(i) fund managers and sellers discuss investor demand and market trend without specifying investment targets or management methods;(ii) they exchange general information irrelevant to the establishment and management of funds; and(iii) they keep records of their discussion with relevant internal control V. LIMITED PERMISSION FOR BANKS TO SELL ‘HIGHLY COMPLEX’ INVESTMENT P
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Dec 10, 2019

Vice Chairman Speaks on Embracing Digital Transformation in Financial Industry

Vice Chairman Sohn Byungdoo attended the 6th International Financial Cooperation Forum hosted by the Financial Services Commission and the Council on International Financial Cooperation on December 10. This year’s forum was held on the theme of ‘Embracing Digital Transformation: The Future of the Financial Industry.’Vice Chairman Sohn delivered welcoming remarks at the forum, underscoring the three characteristics brought by digital transformation, such as hyperconnectivity, platform economy and the big blur. The Vice Chairman stated that the government has recently unveiled measures to support fintech start-ups to scale up, through easing entry restrictions to the financial industry, establishing a fintech-friendly IPO environment, expanding financial infrastructures for digital transformation and supporting fintech firms with overseas business opportunities.Vice Chairman Sohn also added that maintaining close communication with other countries is essential for information sharing and policy cooperation.* Please refer to the attached PDF for details.
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Dec 05, 2019

Measures to Improve Management of Risk Exposure in Project Finance

The government introduced its plans to improve the management ofrisk exposure in real estate project finance on December 5.BackgroundProject financing in real estate is a financing mechanism based onthe business value of the project and the expected cash flows of the project inthe future. Due to the recent financial deepening and continuing low yields,project financing has increased significantly. Project financing provides an efficientway to finance real estate or infrastructure development projects.However, due to heavy reliance on the expected value of theproject, risk exposure is highly dependent on market conditions. Without propermanagement of risks, or in the case of a distortion of profits or risks, it maypose a threat to financial stability.Risk exposure in project financing has continued to increase especiallyin non-bank sectors since 2013. The prevalence of high-risk project financingloans, such as bridge loans, has dropped whereas the level of exposure bysecurities companies and specialized credit finance companies increased. Debtguarantees in project financing also increased as the burden of credit exposureshifted from construction companies to financial institutions.Recent TrendsAt the end of June 2019, the total amount of debt guarantees inproject financing stood at KRW28.1 trillion, out of which KRW26.2 trillion issuedby securities companies. The outstanding loan balance in project financing stoodat KRW71.8 trillion, rising on average 11.6 percent a year from KRW39.3trillion at the end of 2013. By the end of June 2019, both the default rate andthe sub-standard asset ratio continued to decline since 2013 from 13.0 percentto 1.9 percent and 16.9 percent to 3.0 percent, respectively, due to anincreased volume in project financing loans.Key MeasuresI. Improvingthe Soundness of Debt Guarantees in Project Financing► Establishing anupper ceiling on debt guaranteesUnder the current system,securities companies face no upper limits on issuing debt guarantees
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Dec 04, 2019

Measures to Promote Fintech Scale-ups

The FSC announced measures to promote fintech scale-ups on December 4, which includes 24 key tasks in 8 different policy areas.BACKGROUNDThe government has been promoting the fintech industry as part of its innovation-led growth strategy amid digital transformation and the 4th industrial revolution. To this end, the government has introduced a financial regulatory sandbox, open banking, regulatory reforms and budget earmarks for fintech. In order to further develop Korea’s fintech industry and its ecosystem, the government plans to implement the following fintech scale-up strategies, which builds upon the progress made so far.KEY MEASURESI. IMPROVING THE CURRENT REGULATORY SANDBOX SYSTEM► Designate more than 100 ‘innovative financial services’ by the end of March 2020, which marks the one-year anniversary of launching the regulatory sandbox► Improve rules and practices in operating the regulatory sandbox: (i) protect innovative ideas and technologies through patents and intellectual property rights (e.g. providing legal counsel or expediting patent dispute resolution); (ii) impose a minimum level of additional requirements on ‘innovative financial services;’ and (iii) grant continuation of designation status through MA► Provide continuous support (e.g. costs on testing, security inspection, office space, etc.) for the entire cycle from designation of ‘innovative financial services’ to commercialization of innovative financial solutions.► Set up a supervisory framework tailored to the promotion of fintech firms – e.g. conducting supervision and inspection aimed at providing counseling or establishing regulatory grounds to grant fintech firms immunity in case of minor violations.II. PERFORMING REGULATORY REFORMS TO FACILITATE FINTECH DEVELOPMENT► Promote a flexible and dynamic regulatory environment where testing of ‘innovative financial services’ can lead to commercialization and ultimately to an improvement in regulatory reforms.► Con
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