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.
May 11, 2021
- Enhanced Autonomy and Accountability for Financial Investment Businesses on Chinese Wall Policy
- The government approved a revision bill to the Enforcement Decree of the Financial Investment Services and Capital Markets Actduring a cabinet meeting held on May 11, granting more autonomy to financial investment businesses with respect to their internal management of Chinese wall policy while boosting accountability through strict penalty rules. Key Details Each financial investment business should establish its own internal control standards for the prevent of information sharing between its units of material nonpublic information and information about the clients asset management status and determine specific types of information subject to and acts in breach of the Chinese wall policy as well as exemptions. An independent board-level member should be designated within the company for overseeing its own Chinese wall policy and educating employees on the matter. With more autonomy granted to financial investment businesses, both the civil and criminal penalty levels for violating the Chinese wall regulation have been strengthened. Therefore, financial investment businesses are encouraged to set up and maintain a high level of internal control standards. The revised Enforcement Decree also eases consignment rules by allowing financial investment businesses to consign their work to third-party agents except for duties related to internal control. The revisions will go into effect from May 20, 2021. * Please refer to the attached PDF for details.
May 10, 2021
- Corporate Restructuring Fund Worth KRW1 Trillion to Be Created This Year
- The FSC announced its plan to set up a third round of corporate restructuring fund in the amount of about KRW1 trillion by the end of this year to continue to promote market-oriented corporate restructuring and be prepared for growing demand amid the pandemic. Backed by fiscal expenditure of KRW67.5 billion, state-backed financial institutions will lead the creation of a master fund in the amount of KRW451 billion. Matching investments of KRW550 billion or more from the private sector will then help set up a fund worth KRW1 trillion in total. The first two rounds of corporate restructuring funds were created in the amount of about KRW3.2 trillion and so far invested about KRW1.76 trillion on thirty-eight business entities in support of their business normalization efforts. a) 1st round of corporate restructuring fund initially set up in August 2018 made investments in the amount of KRW1.0485 trillion on twenty-nine businesses, focusing on SMEs and middle market enterprises in shipbuilding, construction and heavy equipment and steel sectors to help improve the competitiveness of key industries. b) 2nd round of corporate restructuring fund initially set up in May 2020 made investments in the amount of KRW708.9 billion on nine businesses of different sizes and diversified investment methods by introducing private debt funds. Corporate restructuring funds have thus far contributed in (a) expanding the scope of participants traditionally reserved only for creditor institutions to include asset management companies, (b) encouraging private sector investments of some KRW2 trillion in the restructuring market and (c) diversifying investment methods through the introduction of private debt funds. Corporate restructuring funds will continue to set track records of promoting market-based restructuring efforts. Based on the market condition and investment performance, the authorities plan to expand the total size of operations up to KRW5 trillion. * Please refer to the attached
May 10, 2021
- Enhanced Investor Protection Measures to Be Applied on Highly Complex Investment Products
- The FSC announced that financial institutions will be required to record the sales process when selling highly complex investment products and making sales to elderly investors starting from May 10. In addition, a cooling-off period of two business days or more will be guaranteed for investors on highly complex investment products to allow them to make more prudent investment decisions. These investor protection measures were first introduced when the government announced the measures to strengthen investor protection with high-risk investment products in December 2019and have been included in the revised Enforcement Decree of the Financial Investment Services and Capital Markets Act which was passed in February this year. Key Details (Highly complex investment products) The concept of highly complex investment products has been introduced on derivatives-linked securities, financial derivatives and highly complex investment contracts for fund, discretionary investment or trust fund management that are highly complex in structure for ordinary investors to understand with a potential of incurring loss in excess of twenty percent of the principal. In the case that financial companies are unable to determine whether an investment product is an highly complex investment product, they may request a decision from the relevant committees in the Korea Financial Investment Association and the FSC. (Investor protection measures) First, financial institutions are required to record and keep the recording of the process of selling highly complex investment products and signing contracts for highly complex discretionary investment or trust fund management. Investors in turn are able to obtain the recorded file from financial institutions. Second, investors will be guaranteed a cooling-off period of two business days or more on highly complex investment products and other highly complex investment contracts. During the cooling-off period, investors are provided with information on
May 06, 2021
- Adjustments Made to the Corporate Bond and CP Purchase Program for Low-rated Companies
- The FSC and the state-backed financial institutions announced that they will bolster support for low-rated companies through the pandemic-related support measures already put in place last year, which include a special purpose vehicle (SPV) aimed at purchasing low-rated corporate bonds and CP, primary collateralized bond obligations (P-CBOs) and the corporate bond and CP refinancing support program. In response to the spread of market anxieties in the wake of the COVID-19 pandemic, the government launched the corporate bond and CP market support programs covering businesses with credit ratings ranging from AA or above to A to BB. As a result, the corporate bond and CP markets have been stable thus far. However, there have been rising concerns about credit downgrades, limited support available through P-CBOs and the redundancy in the utility of some of the programs. As such, the authorities will make following adjustments to the programs to bolster support for SMEs. Key Measures (Support for low-rated businesses) First, more flexible eligibility requirements will be applied to low-rated companies. For the so-called fallen angels whose credit rating has declined after the announcement was made on the governments plan to operate an SPV on April 22, 2020, the provision of support will continue to be available for BB rated companies. For companies facing the risk of credit downgrades, state-backed financial institutions will provide comprehensive consulting services on their management status, financial structure, etc. (Temporary expansion of P-CBO support) First, individual companies sales cap will be expanded for SMEs that have seen their sales drop fifty percent or more and for low-rated (BB ratings) SMEs. The current standard of measuring their sales performance that is based on the estimated sales expected for the upcoming year will be changed to an arithmetic mean from the past three years. The sales cap on low-rated SMEs will also be expanded based on their fields
May 06, 2021
- Authorities and Lending Institutions to Ensure Support for SMEs at Risk of Credit Downgrades
- The financial authorities and lending institutions announced the availability of support to help mitigate excessive burdens of borrowing costs for SMEs and small merchants that are facing the risk of credit rating downgrades due to worsening sales performance amid the pandemic. First, for SMEs that may be experiencing a temporary setback in their sales performance due to COVID-19 but are highly likely to recover soon, banks, insurance companies and state-backed financial institutions that have the credit evaluating function within their institutions will sufficiently take into account their potential for recovery using various non-financial credit data available when evaluating their credit for loans. Second, for businesses whose credit ratings have been downgraded due to the pandemic-related sales shortfall but have not accrued any overdue payment and are maintaining business operation, the lending institutions will work to minimize negative effects on their borrowing conditions. Each financial institution will draw up its own operating standard to maintain lending caps and minimize increases in lending rates. The financial regulators will grant exemptions from sanctions on these loans extended to SMEs and small merchants. By the end of May, lending institutions will draw up their own operating standards on how to take into account the clients potential for recovery and ways to minimize disadvantages resulting from a downgrade in credit rating, and begin to apply these standards when evaluating credit ratings and extending loans from June 1, 2021. * Please refer to the attached PDF for details.
May 03, 2021
- Authorities to Expand Support for Corporate Bond and CP Markets
- Vice Chairman Doh Kyu-sang held the 39th financial risk assessment meeting virtually on May 3 to review the implementation of the COVID-19 financial support programs for small merchants and SMEs. At the meeting, Vice Chairman Doh discussed ways to increase support for the corporate bond and CP markets and help businesses struggling with temporary credit rating downgrades. The following is a summary of Vice Chairman Dohs remarks. (Current Situation) Recent economic indicators suggest that the pace of the recovery back to the pre-pandemic level is taking place faster than previously expected. The IMF has recently revised up global growth forecast from 5.5 percent in January to 6.0 percent in April, and the recovery is accelerating in Korea backed by strong exports. However, a multi-speed recovery is becoming more apparent across different sectors as small merchants and self-employed business owners, especially in close contact businesses, continue to experience difficulties. As such, todays meeting will go over the progress of the existing financial support programs and find ways to draw up more targeted support for vulnerable areas in response to the multi-speed recovery taking place. (COVID-19 Financial Support) The financial sector has drawn up KRW81.5 trillion in lending support for small merchants and SMEs and KWR73.5 trillion in backstop for financial markets. With the spread of the vaccine supply and expectations for a recovery, the authorities also set up a diagnosis-response framework to more effectively work on the normalization of COVID-19 financial support measures. Based on these response measures, the authorities plan to regularly monitor conditions, make appropriate adjustments and strengthen the provision of targeted support on vulnerable areas. The COVID-19 financial support for small merchants and SMEs has extended about KRW78.3 trillion in lending support. The second batch of lending support in the amount of KRW7 trillion has so far extended about K
May 03, 2021
- Authorities Introduce Measures to Strengthen Oversight on Quasi-investment Advisory Businesses
- The financial authorities held the 3rd taskforce meeting on the prevention of unlawful and unfair trading activities in stock markets on April 30 and reviewed progress in the implementation of various measures. At the meeting, the authorities introduced and decided on the measures to strengthen management and supervision on the quasi-investment advisory businesses. The measures are aimed at (a) preventing quasi-investment advisory businesses from engaging in unauthorized business activities, (b) strengthening management from the time of their business registration to operation and exit and (c) bolstering detection of illegal activities using social media chatrooms, etc. Background A quasi-investment advisory business provides investment advisory services to an unspecified number of individuals. There are no particular entry requirements for these businesses as they are only required to register with the authority.With the goal of preventing damages to investors, the government has been working on regulatory improvements. Since September last year, the FSS has conducted inspections on 351 entities and detected a total of 54 cases where illegal activities are suspected. As the sales practice of quasi-investment advisory businesses has shifted to online spaces such as social media chatrooms and Youtube, the number of investor complaints being filed has also increased.Based on false or exaggerated promises of investment returns, investors are lured into paying high fees, inflicting financial damages to investors. As such, the financial authorities along with private sector experts have set up a taskforce and prepared the following measures to strengthen oversight on quasi-investment advisory businesses. Key Measures I. Root out unauthorized business activities - Strengthen public awareness on unlawful activities: The authorities will strengthen efforts to better inform investors about the typical types of illegal activities, including stock advisory social media chatroo
Apr 29, 2021
- Government Announces Household Debt Management Plan for 2021-2023
- The government announced the household debt management plan for 2021-2023 on April 29. The plan is aimed at (i) managing the growth rate of gross household debt at stable levels for the mid- to long-term and (ii) establishing lending practices based on individual borrowers repayment capability. Background Household debt growth remained stable from 2017 to 2019 as the government was able to implement a consistent policy for household debt management. However, due to expansionary fiscal and monetary policies put in place in response to the COVID-19 pandemic, the household debt growth rate accelerated in 2020.In this year, the growth rate has slowed down somewhat since the government announced a series of policy measures to tighten mortgage regulations and boost housing supply. However, the household debt level still remains high even though credit loans which was a dominant factor in the last years household debt growth in the second half appears to have come down to a stable level. Koreas household debt has been regarded as one of the potential sources of financial risk, given its relatively high ratio against GDP and fast pace of growth compared with major economies. However, the increase in private sector debt in response to COVID-19, which is a common phenomenon, has been inevitable to some extent. In addition, due to the governments efforts at improving the structural soundness of household debt, it is unlikely that household debt turns into a systemic risk in the short-term. Against this backdrop, the government intends to preemptively manage household debt from a macroprudential perspective to prevent it from turning into potential risk factors. Regulatory adjustments at a micro level are also needed to ensure that a tightening of mortgage regulations do not curtail first-time homebuyers access to mortgages. The current regulation of loan-to-value (LTV) ratio, uniformly applied across all homebuyers, has limited opportunities for first-time homebuyers. Moreover
Apr 22, 2021
- Financial Support through Key Industry Stabilization Fund Extended until the End of 2021
- The FSC announced that the authorities decided to extend the period of financial support made available through the key industry stabilization fundfor eight months until December 31, 2021 from the initial expiration date of April 30. The authorities also decided to make changes to the following requirements for business entities receiving support through the key industry stabilization fund. First, the base year of the salary freeze for highly paid positions (KRW200 million or more a year) will be changed from 2019 to 2020. Second, as these businesses are required to retain at least ninety percent of jobs to qualify for financial support, the reference date for counting the number of jobs will be changed from May 1, 2020 to May 1, 2021. * Please refer to the attached PDF for details.
Apr 19, 2021
- Improved Securities Lending System for Retail Investors to Come into Place from May 3
- The FSC announced that the improvements made to the securities lending system for retail investors will come into place from May 3, 2021. From May 3, seventeen securities firms will begin to provide stock lending services in the amount of about KRW2 trillion to KRW3 trillion. Retail investors wishing to participate in stock short selling are required to complete pre-learning and mock trading programs which will be available from April 20. Based on the level of experience of individual investors, the maximum investment amount allowed for short selling will be differentially applied. Key Details Retail investors access to stock short selling has been limited as a shortage in securities lending led to the decline in the demand for stock borrowing and number of securities firms offering such service. As of the end of February 2020, securities lending services were available from only six securities firmsin the amount of about KRW20.5 billion. In order to improve retail investors access to stock short selling, the FSC and financial investment businesses will begin to offer more opportunities for stock borrowing. A total of twenty-eight securities companies will provide securities lending services. However, as these companies have different schedules for completing the development of their IT system, from May 3, stock lending service will be available from seventeen securities firms first with the rest expected to join within this year. As such, it is expected that a total of KRW2.4 trillion in stock lending will become available for KOSPI 200 and KOSDAQ 150 stocks on May 3.For retail investors, a maximum of sixty days of stock borrowing period is guaranteed unlike institutional or foreign investors. Safeguards and Regulations for Retail Investors The following safeguards have been put in place to bolster investor protection against excessive loss. First, investors should have securities lending agreements with their trading firms and those without an existing account nee
Apr 16, 2021
- Authorities to Work for Minimizing Drawbacks from Citigroup's Consumer Banking Exit Plan
- According to Citigroups first quarter earnings report announced on April 15, Citigroup plans to pursue exits from its consumer franchises in thirteen markets including Koreaand to shift its strategy toward wealth management and institutional businesses in Asia. Until its business reshuffling plan becomes finalized, Citibank Korea is expected to provide the same level of services to its customers. With regard to Citigroups announcement, the FSC and the FSS will closely monitor developments while seeking necessary measures to minimize possible drawbacks that may be inflicted upon consumers, maintain stability with regard to the job situation and ensure protection of consumer data. * Please refer to the attached PDF for details.
Apr 14, 2021
- Authorities Hold Meeting on Improving Rules on the Suspension of Licensing Review Process
- The FSC announced that the financial development review committee held a second subcommittee meeting on policy and global finance issues on April 13. Main issues discussed by the subcommittee meeting include the measures to improve rules on the suspension of licensing review process and current conditions on household debt. The rules on the suspension of licensing review process applied to all financial sectors are aimed at preventing the issuance of license to legally disqualified entities that may be undergoing an investigation or lawsuit at the time of their licensing review process. However, as the financial authorities are unable to predict the outcome of their investigation or lawsuit, there has been a problem of delays in the licensing review process for indefinite periods of time. In this regard, the FSC put forward the following measures to improve the rules(a) improving the consistency and predictability of suspension by introducing more specific criteria for suspending the review process, (b) preventing indefinite delays in the suspension period by requiring the authorities to regularly check the appropriateness of resuming the licensing review process and (c) continuing with the licensing review process after a certain period based on the facts available up to that point. With regard to the current household debt situation, the subcommittee members emphasized the importance of managing gross debt level as household debt has increased amid the COVID-19 pandemic. At the same time, the subcommittee members also talked about the importance of continuing to provide financial support for non-homeowners to strengthen the housing ladder especially for the working class and young adults. * Please refer to the attached PDF for details.
Apr 08, 2021
- Government to Set up Diagnosis-Response Framework for COVID-19 Financial Measures
- Vice Chairman Doh Kyu-sang held the 38th financial risk assessment meeting via teleconference on April 8 to review risk factors in the economy and financial markets and discuss the establishment of a diagnosis-response framework for COVID-19 financial support measures. The following is a summary of Vice Chairman Dohs remarks. (Current Economic and Market Situation) There are signs of an economic recovery this year with strong exports and improvements in industrial output. The expectation for recovery is also growing as international organizations have revised up their growth forecasts for 2021. However, as the number of new infection cases has been on the rise recently, many small-sized businesses and self-employed are still experiencing difficulties. At the same time, there are rising concerns about uncertainties in financial markets as liquidities around the world have grown to unprecedented levels. In this regard, the IMF and the FSB suggested the importance of risk management in financial sectors while also stressing the need to maintain adequate provision of financial support. Major economies are gradually adjusting their policies. The Chinese government is seeking to control liquidities and property market overheating. The US and Japan have rolled back some of the financial support measures while continuing with policies for recovery. Against this backdrop, the Korean government has also sought multidimensional ways to improve the COVID-19 financial response measures with a mid- to long-term perspective. As such, todays meeting will discuss ways to improve our COVID-19 financial response framework. (Diagnosis-Response Framework on COVID-19 Financial Measures) The government will set up a diagnosis-response framework on COVID-19 financial measures. First, a working group will be established to systematically and regularly monitor various indicators on virus prevention and quarantine, the real economy and financial sectors. Based on the working groups diagnosis
Mar 31, 2021
- Legal Framework on the Supervision of Non-holding Groups to Allow Preemptive Risk Management
- The FSC introduced the supervisory regulation on non-holding financial groups on March 31 as a final step in setting up the legal framework on the supervision of financial conglomerates. The FSC first introduced the best practice guidelines on the supervision of financial conglomerates in July 2018 and has carried out oversight on the financial soundness of non-holding financial groups through administrative guidance. The enactment of the new legislation (the Act hereinafter) in December 2020 paved the way for establishing legal foundations for the supervision of non-holding financial groups.As the Act is scheduled to go into effect on June 30, 2021, the authorities will put up the supervisory regulation for advance notice from April 1 to April 21, scheduled to go into effect on the same day as the Act after an approval from the FSC. The supervisory regulation contains specific details about the designation of non-holding groups, internal control and risk management requirements, capital adequacy standards, rules and procedures for reporting and disclosure and assessment criteria for risk management. The new legal framework on the supervision of financial conglomerates takes into account international standards as well as the regulatory experiences gained from the past two years. The authorities expect that the new Act will help enhance the management of group-wide risks in a more systematic and effective way, thereby allowing a more preemptive management of systemic risks in the financial markets. * Please refer to the attached PDF for details.
Mar 30, 2021
- Authorities to Closely Monitor Illegal and Suspicious Activities Linked to Property Market Speculation
- Vice Chairman Doh Kyu-sang presided over the kick-off meeting of the special financial response team on March 30 as a part of the government-wide effort to root out speculation in the real estate market. The financial response team will be chaired by the Vice Chairman of the FSC and made up of about one hundred officials from the Korea Financial Intelligence Unit (KoFIU), Financial Supervisory Service, Korean Federation of Banks and Korea Credit Information Services. It will serve as a financial sector control tower in the governments efforts to prevent speculation in the real estate market. More specifically, the special financial response team will carry out inspections on lending practices, suspicious transactions and so on while also looking into areas for regulatory improvements. At the meeting, Vice Chairman Doh stated that controlling speculation in the property market remains one of the top priorities of the financial sector and laid out following agendas for the operation of the team. First, the authorities will carry out inspections on existing loans that are suspected to be linked to speculation and report immediately to the investigative authority upon finding any unlawful activities. Second, in close coordination with the real estate market monitoring agency that is soon to be established, the authorities will set up a monitoring system that targets particular regions and financial institutions with sudden hikes in suspected cases. Until then, the KoFIU will maintain close monitoring and share relevant information with the investigative authority. Third, there will be stringent penalties without exception when violations are found in the process of issuing land loans. Fourth, the authorities will work to improve the relevant rules on non-housing mortgage loans and include the measures in the household debt management plan that is expected to be announced in April. * Please refer to the attached PDF for details.
Mar 30, 2021
- New Regulations on Stock Short Selling to Take Effect from April 6
- The government approved the revisions to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) during a cabinet meeting held on March 30. The amendments and the revised FSCMAwill take effect on April 6. (Penalty standards) The revised FSCMA created the imposition of penalty surcharges on illegal short sale activities. Specific amounts for monetary sanctions will be determined through comprehensive consideration of the total amount of short orders and profits gained from the illegal short sale activity. (Record keeping requirement on securities lending agreements) The revised FSCMA requires short sellers to keep their securities lending agreements for five years to be presented promptly to the relevant authorities upon request. As such, the Enforcement Decree will be revised to prescribe specific criteria to be maintained, including information on stock items, number of shares, transaction dates, counterparties, lending periods, fee rates, etc. It also requires the maintenance of transactions data stored in an electronic transaction processing platform or other format that is not susceptible for alteration. (Restriction on short sellers participation in capital increase) The revised FSCMA restricts short sellers from participating in a companys capital increase via issuing new shares once the company has made such a plan public, except in certain cases. As such, the Enforcement Decree will be revised to determine a specific time period wherein the short sellers participation in capital increase is restricted as well as specific cases for exception as specified below. If an investor has shorted a companys stocks during the restriction period, the investor cannot participate in the companys capital increase, except for the cases where the short selling is deemed to have no unjust effects on the issuing price as stated below. - Restriction Period: From one day after the disclosure of the companys capital increase plan until the dete
Mar 30, 2021
- Maximum Legal Lending Rate to be Lowered from 24% to 20% from July 7
- The FSC announced that the maximum legal lending rate will be lowered from the current twenty-four percent to twenty percent starting from July 7 this year as the government approved the amendments to the relevant lawsduring a cabinet meeting held on March 30. In order to minimize the possibility of negative impact on individuals with low credit scores, the FSC plans to make available a sufficient level of microfinancing opportunities to vulnerable groups, improve rules on credit businesses while working to prevent illegal predatory lending practices and work to expand the supply of mid-range interest rate loans to borrowers with low credit standing. Financial institutions and credit businesses are encouraged to reduce their lending rates in excess of the twenty percent limit on a voluntary basis. The authorities will closely monitor the lending rates while working to inform the public about the change in the maximum lending rate. * Please refer to the attached PDF for details.
Mar 29, 2021
- Financial Authorities to Strengthen Monitoring and Detection of Fraudulent Activities
- The FSC held a meeting on the prevention of fraudulent and illegitimate activities in financial services with the relevant institutions on March 26 and discussed ways to strengthen prevention, detection and punishment of fraudulent activities and to improve consumer remedies. The authorities decided to set a special response period from March 29 to June 30 this year in order to strengthen monitoring and detection of fraudulent activities. The government will also continue to work on improving regulations through legislative efforts. Key Tasks (Investment Advising via Social Media) Carry out a joint monitoring and inspection on stock investment advising activities that utilize social networking services and operate special investigation teams focusing on particular stock items (Fundraising Conducted by Unregistered Entities) Expand the scope of punishable activities to include the act of providing disinformation on illegitimate financial products and misrepresenting them as legitimate and of promising a profit on illegitimate products (Vishing) Strengthen prevention and detection of vishing scams through a closely coordinated information sharing system between the relevant institutions and send out public alerts about new vishing scams (Illegal Predatory Lending) Provide support to the victims of illegal predatory lending by helping to recover interest payments in excess of the maximum interest rate that is permitted by the law * Please refer to the attached PDF for details.
Mar 25, 2021
- FSC to Closely Monitor Market Situations and Gradually Roll Back Crisis Response Measures
- Vice Chairman Doh Kyu-sang held the 37th financial risk assessment meeting via teleconference on March 25 and discussed the progress in the implementation of the COVID-19 financial support for small merchants and SMEs. The following is a summary of Vice Chairman Dohs remarks. (Pandemic Response Measures) In response to the COVID-19 pandemic, the government implemented a KRW175 trillion-plus emergency financial support package to provide support for small merchants and SMEs, stabilize financial markets and help businesses in key industries with liquidity shortages. Thanks to the active support shown by the financial institutions, markets quickly bounced back and financial difficulties experienced by small merchants and other vulnerable groups began to ease. On the Korean governments bold response to the crisis situation, the IMF in January this year released a positive assessment, and the OECDs recent growth forecast expects Korea to achieve a full recovery within this year. Bold and preemptive responses were effective given that the scale of policy response had to exceed market expectation at a time when extreme anxieties were spreading across markets. However, with signs of an economic recovery in the US, inflation expectations have been rising as well as the long-term bond yields. In this regard, the government will closely monitor market situations and work on preemptive management to prepare for a possible rate hike in domestic markets. In addition, there have been growing concerns about inappropriate trading activities in stock markets. There are active discussions going on in this regard at the National Assembly to strengthen penalties on unfair and inappropriate trading activities, such as price rigging. The government will closely cooperate with the relevant institutions to work on the prevention of inappropriate trading activities. (Maturity Extension Payment Deferral) Since April 1 of last year, all financial institutions made available maturity extensions
Mar 24, 2021
- FSCMA Revisions for Improving Rules on PEFs Passed by the National Assembly
- The National Assembly of the Republic of Korea passed the amendments to the Financial Investment Services and Capital Markets Act during a plenary session on March 24, with aims to improve the rules on private equity funds. The amendments will go through an approval process at a cabinet meeting prior to the pronouncement and will take effect six months thereafter. The amendments introduce stronger protection measures for retail investors in the PEF market. The amendments to the FSCMA passed by the National Assembly represent an integrated version of various proposals and are the result of the governments efforts to improve rules on PEFs and strengthen investor protection with high-risk investment products. The FSC will work on revising lower regulations to achieve the intended goals. Key Revisions I. New PEF Classification The current PEF classification system that places distinctions between the professional investment type and the management participation type based on the purpose of fund management will be changed. The new classification system will place distinctions depending on the scope of investment entities. II. Safeguards for Retail Investors The revised FSCMA contains stronger safeguards for retail investors making investments in general PEFs as follows. - PEF sellers will be required to check whether the PEFs they sold are being managed by management firms according to their prospectus requirements. - PEF trust agencies, such as banks and prime brokerage service providers, will be subject to tighter monitoring requirements on PEFs. - PEFs with certain sizeswill be subject to external audits to help improve the fairness in valuation while all PEF management firms will be required to provide quarterly asset management reports to investors. - Stronger liquidity management measures will be introduced to prevent maturity mismatches, etc. III. PEF Management Rules The rules governing the management of both general PEFs and institution-only PEFs will be identic