The FSC presented its annual work plan for 2023 on January 30. This year’s work plan includes twelve specific policy items under the initiatives of (a) ensuring strong financial market stability, (b) strengthening the role of finance to shore up the growth of the real economy and people’s livelihoods and (c) promoting the advancement of the financial industry into a high value-added strategic sector.
Key Details of 2023 Work Plan
Ensuring Financial Market Stability
I. Authoritieswill preemptively respond to financial market risk factors
Financial markets in Korea are, despite continuing uncertainties at home and abroad, on a stable recovery path backed by the KRW50 trillion-plus market stabilization measures and strong policy cooperation amog relevant authorities. In this regard, authorities will continue to work on the following:
a) Ensure market stabilization utilizing over KRW40 trillion of the remaining capacity of the market stabilization programs.
- Flexibly adjust the eligibility and size of the support in accordance with market situations. Authorities will widen the pool of eligible recipients and increase the maximum valueof bonds supported by the P-CBO (primary collateralized bond obligation) program (KRW5 trillion) in order to relieve businesses even with unfavorable credit ratings from difficulties in corporate bond issuance.
b) Seek flexible and creative policy solutions, in responding to current crisis situation, that are not bound by the past crisis-handling experience and appropriate for current market situations.
- Mobilize all available resources and capabilities in financial sectors to respond to the crisis by maintaining close cooperation with financial institutions, as well as relevant ministries.
II. Authorities will thoroughly manage risks linked to real estate market
a) Spare no effort to ensure a soft-landing of the real estate market as a countermeasure against a potential weakening of the real estate project finance (PF) which is considered as the biggest risk this year.
b) Make necessary funding available to the profitable real estate PF businesses through market stabilization programssuch as the guarantee support,bond market stabilization fund, etc.
c) Encourage lending consortiums to revise lenders’ agreements to voluntarily carry out liquidation of the real estate PF businesses that are deemed to be at risk of insolvency, and support normalization of real estate PF businesses by creating a fund (maximum KRW1 trillion), led by the Korea Asset Management Corporation (KAMCO), which purchases and liquidates the real estate PF businesses deemed to be insolvent.
d) Ease mortgage loan regulations for multiple-house owners,etc. until the end of March and pursue additional regulatory easing such as an expansion of loan-to-value (LTV) ratio for one-house owners while closely monitoring the household debt and housing market situations.
III. Authorities will prevent the spread of corporate insolvency and avert risk contagion in financial sector
a) Expand the scope of borrower enterprises subject to credit risk assessment from those who got credit extension of KRW3 billion or more currently to those who got credit extension of KRW1 billion or more in order to grant small businesses an opportunity of business normalization through a workout program, and improve the accuracy of credit risk assessment.
- In addition, make the small businesses who got credit extension of KRW1 billion or less to be eligible for the “fast-track financial support program” which provides maturity extension support only after a simple credit assessment.
b) Set up a corporate restructuring innovation fund worth KRW1 trillion in 2023 to enable support for business normalization driven by the private sector via capital markets. And effectively support the restart and recovery of businesses in connection with the Korea Asset Management Corporation (KAMCO)’s business supports such as the sale and leaseback program.
c) Extend the sunset date (currently scheduled for October 2023) of the Corporate Restructuring Promotion Act, which provides a legal ground for corporate workout, in order to enable insolvent businesses to preemptively and quickly receive debt adjustment support.
d) Bolster the loss absorbing capacity of financial sectors to prevent a contagion of insolvency from corporate sector to financial sector, for example, by newly establishing the right to ask the banking sector to set aside special loan loss reserves.
- Establish a “financial stability account” in the Deposit Insurance Fund to preemptively support liquidity injection and recapitalization of financial institutions undergoing temporary difficulties.
Sustaining Growth of Real Economy and People’s Livelihoods
IV. Authorities will support the expansion of future growth engines such as the New Growth Strategy 4.0
a) Provide KRW205 trillion in policy funds—including KRW81 trillion for five key strategic areasand KRW16 trillion in export finance—to support the “New Growth Strategy 4.0” and promote the goal of leaping to one of the top 5 power exporters.
b) Introduce business development companies (BDCs) that are publicly offered and exchange-listed to facilitate investment by retail investors in venture businesses and innovative firms that have high growth potential.
c) Institutionalize over-the-counter trading platform for unlisted stocks (currently operated under the regulatory sandbox program), which will provide promising investment opportunities for investors and seamless fundraising opportunities for venture startups and innovative firms.
d) Specify the corporations under duty and disclosure items for mandatory ESG disclosure of listed firms, which will begin in 2025, and provide ESG-related policy fund supportin diverse areas.
e) Pursue the Korea Development Bank (KDB)’s relocation to Busan to strengthen the role of policy financial services in promoting well-balanced regional development and fostering regionally specialized industries.
V. Authorities will provide support for microenterprises and SMEs undergoing difficulties
a) Expand the eligibility of the low interest rate refinancing program available for sole proprietors from only the entities hit by COVID-19 previously to all sole proprietors and boost its user convenience (increasing credit limit, extending loan period, etc.) to make the program more effective.
b) Extend the support period of interest rate subsidies program on “Hope Plus” credit loan from one year previously to two years and broaden the eligible recipients to include micro-entrepreneurs who previously benefited from the interest rate subsidies program for micro-enterprises in 2020.
c) Implement KRW80 trillion of comprehensive financial support programs to help SMEs overcome management difficulties, in cooperation with the Ministry of SMEs and Startups.
VI. Authorities will alleviate housing and financial difficulties amid rate hikes and house price drops
a) Ensure seamless supply of special Bogeumjari Loan which eased application requirementstemporarily for a year to structurally reduce the interest burden of mortgage borrowers.
b) Supply fixed rate jeonseloan products with reduced interest rate by the Korea Housing Finance Corporation’s enhancing of guarantee ratio and lowering of guarantee fee rate.
c) Overhaul housing loan regulations for jeonse loans and loans for landlords who intend to return jeonse deposit money to tenants in order to lower housing costs of the tenants and remove deposit repayment difficulties of landlords.
- Extend the eligibility of guarantees on jeonse loans sought to a married couple who makes more than KRW100 million a year collectively and owns only one house and those who own only one house that has a market value of more than KRW900 million, for whom jeonse loan guarantees have not been available previously.
- Abolish various regulations on loans taken out by landlords with a purpose of repaying jeonse deposit money to tenants.
d) Broaden the eligibilityfor debt adjustment programs provided by private sector financial institutions for borrowers experiencing difficulties in making mortgage payments. And adjust the DSR (debt service ratio) application periodto make transferring loans easier for them to help alleviate burdens.
VII. Authorities will unburden financing difficulties and repayment burdens of vulnerable personal debtors in an era of high interest rates
a) Expand the supply of policy microfinance to up to KRW10 trillion for vulnerable borrowers who face difficulties in accessing traditional financial services.
b) Launch emergency loans for living expenses (up to KRW1 million) for borrowers with low income and low credit backgrounds (including delinquent debtors) to help them avoid turning to illegal private lending sources just for a small amount of emergency cash.
c) Double the amount of support for special guarantee products intended to help lowest credit borrowers from initially planned KRW140 billion to KRW280 billion.
d) Expand the availability of debt adjustment services for vulnerable borrowers to help them get out of excessive debt payment burdens amid a worsened economic condition and allow them to regain their footing.
- Expand the availability of interest rate reduction supportand payment deferment support programs currently available for young adults to the vulnerable borrowers of all ages. And provide debt adjustment support, like principal reduction, for borrowers deemed to be incapable of making repayments such as the recipients of basic livelihood security benefits and the elderly, even when they have overdue debt accounts for less than 90 days.
- Pursue enactment of an act on personal debtor protection, which will strengthen protections for debtors with measures to ease burdens such as overdue debt accrual and debt collection and to establish a debtors’ right to request debt adjustment.
VIII. Authorities will protect consumers from financial crimes and frauds
a) Spare no effort to prevent the spread of financial crimes and frauds which attempt to take advantage of vulnerable groups at a time of difficult economic and living situations.
- Apply the same procedures for remedies for victims of vishing scams utilizing virtual assets at virtual asset exchanges as the one currently in place at financial institutions. And establish a procedure for remedies for the sole proprietors who have fallen victims to threats related to their bank accounts.
b) Overhaul regulations on quasi-investment advisory business entities by prohibiting marketing activities through interactive online communication channels such as social media and chat rooms and promising of loss recovery or profit guarantee.
Promoting Advancement of Financial Industry
IX. Authorities will promote innovation in financial services that can have a global reach
a) Overhaul outdated regulations no longer suitable for a digital eraand revamp regulation on big techsand financial data securityin line with international standards to promote launch of new products and services based on the convergence and mixture of financial and non-financial sectors.
b) Make efforts to expand success stories where domestic financial services are introduced successfully in overseas markets.
- Promote exports of globally competitive financial service infrastructures such as credit data system or payment and settlement system to emerging markets and provide comprehensive support for fintech companies (from provision of local market information to foreign investor and human resource search to networking support for local partnership) that seek overseas expansion.
c) Strengthen cooperation with relevant ministries and seek improvement of comprehensive system in both financial and non-financial sectors to facilitate the domestic inflow of more global financial institutions and investments.
X. Authorities will strive to cultivate new sectors in financial sector such as fintech
a) Promote fintech startups through provision of fintech-specific consulting service, policy fund support (e.g. fintech innovation fund),boosting effectiveness in the operation of the D-testbed (digital-data testbed) program,etc.
b) Establish a regulatory system on virtual assets in phasesto protect virtual asset users in line with international trends and standards.
c) Revamp the regulatory system on the issuance and distribution of fractional investment items and digital asset securities (security tokens).
XI. Authorities will pursue advancement of capital markets in line with global standards
a) Establish an investment environment congruent with global standards to boost the attractiveness of domestic capital markets by abolishing the foreign investor registration system, phasing in English disclosure requirement for listed firms, etc.
b) Create general shareholder-friendly rules regarding dividend through a revision of the Financial Investment Services and Capital Markets Act (FSCMA) and inducing change in dividend practices, in order to enable investors to invest in companies with knowledge on dividend information.
c) Seek improvement of the rights and interests of general shareholders by bolstering the disclosure requirement on the purpose of treasury stock acquisition and disposition, strengthening penalties for the violation of the reporting duty on stocks held in bulk (a.k.a. 5% rule), etc.
d) Prepare a comprehensive plan to improve the competitiveness of publicly offered funds to boost their profitability and expand their investor base.
XII. Authorities will consider consumer trust and convenience improvement as foundation of financial industry advancement
a) Enhance the internal control system of financial institutions and pursue regulatory improvements to bolster transparency in financial institutions’ appointment procedures of executive officers.
b) Apply an additional deposit insurance limit (e.g. KRW50 million) on pension savings independently from other types of savings, in order to protect consumer assets more safely.
c) Establish a single-stop, online loan transfer infrastructure to help borrowers switch from high-interest rate loans to low-interest rate ones more easily.
d) Digitize the claiming process for the indemnity medical insurance proceeds in order to ensure that policyholders can more easily receive insurance proceeds in full.
* Please refer to the attached PDF for details.
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Now, let's delve into the concepts and key details outlined in the article about the Financial Services Commission's (FSC) annual work plan for 2023:
1. Ensuring Financial Market Stability:
I. Authorities Responding to Financial Market Risk Factors
- Utilizing over KRW40 trillion in remaining capacity for market stabilization programs.
- Adjusting eligibility and size of support based on market situations.
- Widening the pool of eligible recipients and increasing the maximum value of bonds supported by the P-CBO program.
II. Thorough Management of Risks Linked to Real Estate Market
- Efforts to ensure a soft landing for the real estate market.
- Funding for profitable real estate project finance (PF) businesses through stabilization programs.
- Encouraging voluntary liquidation of at-risk PF businesses.
- Easing mortgage loan regulations until the end of March.
III. Prevention of Corporate Insolvency and Risk Contagion
- Expanding the scope of borrower enterprises subject to credit risk assessment.
- Setting up a corporate restructuring innovation fund.
- Extending the sunset date of the Corporate Restructuring Promotion Act.
- Bolstering the loss-absorbing capacity of financial sectors.
2. Sustaining Growth of Real Economy and People’s Livelihoods:
IV. Support for Expansion of Future Growth Engines
- Providing policy funds to support the "New Growth Strategy 4.0."
- Introducing business development companies (BDCs) for retail investors.
- Institutionalizing over-the-counter trading platform for unlisted stocks.
- Specifying corporations for mandatory ESG disclosure.
V. Support for Microenterprises and SMEs
- Expanding eligibility of low-interest rate refinancing program.
- Extending support period for interest rate subsidies.
- Implementing comprehensive financial support programs for SMEs.
VI. Alleviation of Housing and Financial Difficulties
- Ensuring a seamless supply of special Bogeumjari Loan.
- Overhauling housing loan regulations for jeonse loans.
- Broadening eligibility for debt adjustment programs.
VII. Unburdening Financing Difficulties for Personal Debtors
- Expanding the supply of policy microfinance.
- Launching emergency loans for living expenses.
- Expanding availability of debt adjustment services.
VIII. Consumer Protection from Financial Crimes and Frauds
- Efforts to prevent the spread of financial crimes and frauds.
- Overhauling regulations on quasi-investment advisory entities.
3. Promoting Advancement of Financial Industry:
IX. Innovation in Financial Services
- Overhauling regulations for the digital era.
- Expanding success stories of domestic financial services in overseas markets.
X. Cultivating New Sectors in Financial Industry
- Promoting fintech startups.
- Establishing a regulatory system on virtual assets.
- Revamping the regulatory system on fractional investment items.
XI. Advancement of Capital Markets
- Establishing an investment environment congruent with global standards.
- Creating shareholder-friendly rules regarding dividends.
XII. Consumer Trust and Convenience Improvement
- Enhancing the internal control system of financial institutions.
- Applying an additional deposit insurance limit on pension savings.
- Establishing a single-stop, online loan transfer infrastructure.
- Digitizing the claiming process for indemnity medical insurance proceeds.
This comprehensive work plan demonstrates a multifaceted approach by the FSC to address challenges, ensure stability, and foster growth across various sectors of the financial industry in 2023.