Weekly Global Financial News (Oct 13-Oct 19)

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Getting used to the ‘new mediocre’, Published: Oct 19

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With the Fed set to turn off its money taps at the end of this month, Evaporating inflation and slowing growth have put financial markets into such a spin, something International Monetary Fund chief Christine Lagarde has termed a “new mediocre”.

 

ECB eyes extra funding for Greek banks as Athens markets plunge, By Reuters, Published: Oct 16

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The European Central Bank will loosen its terms for accepting security from Greek banks to allow them to tap more of its funding. This will provide a powerful incentive for Athens to stay under the supervision of international lenders rather than attempt to go it alone.

 

Fed likely to end bond buying, may signal caution on rate hikes, By Reuters, Published: Oct 16

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As mounting signs of weakness overseas have led investors to question the Federal Reserve’s resolve, the central bank is likely to reassure investors that it won’t stand idle if global turbulence threatens the U.S. economy.

 

BOJ bill-buy offer fails to attract sellers, shows limits of easing strategy, By Reuters, Published: Oct 17

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The Bank of Japan’s offer to buy over $28 billion of government bills on Friday fall short of enticing enough sellers, underscoring growing difficulties of force-feeding banks with liquidity.

 

China to inject $33 billion of three-month loans into banks: sources, By Reuters, Published: Oct 17

http://reut.rs/1vSyFSj

China’s central bank is set to inject about 200 billion yuan ($32.66 billion) worth of three-month loans to keep liquidity ample and support the slowing Chinese economy.

 

Volatile markets deepen anxiety over European bank tests, By Reuters, Published: Oct 17

http://reut.rs/1t3PEjm

Violent swings on financial markets have deepened investors; anxiety about What Europe’s review of the health of its banks will reveal from European bank tests.

 

Argentina says to launch new two-year bond issue up to $1 billion, By Reuters, Published: Oct 17

http://reut.rs/1t3PEjm

Argentina will launch a new two-year sovereign bond for up to $1 billion, denominated in U.S. dollars and paid in the local peso currency.

 

Chairman Shin departs for FATF Plenary Session in Paris

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FSC Chairman Shin Je-Yoon will depart for Paris to attend FATF Plenary Meeting from October 18 to 25. As Korea assumed the presidency in February, Chairman Shin will be appointed president from July, 2015. He has been serving as vice-president from July.

The FATF hosts annual plenary meeting with 36 standing member countries, 8 regional anti-money laundering bodies, and 24 international organizations including the IMF. Chairman Shin will start his duties as FATF vice president by attending all meetings including steering committee meeting on the 19th, working group session on the 20th and 21th, and plenary meeting from October 22 to 24.

Korea’s great responsibilities in the FATF reflect Korea’s high international status as a rule setter in the fields of anti-money laundering and counter terrorist financing.

FSC’s achievements and performances in 2014

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The FSC Chairman Shin Je-Yoon made a briefing to National Policy Committee of the National Assembly about the FSC’s achievements and performances this year.

 

Facilitation of Technology Finance

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(TDB)

Technology Database(TDB) was established with participation of 32 public and private entities. TDB provides 9.6 million cases of technology information to 23 TCBs.

(TCB)

TCBs provided 1.8 trillion won worth of loans based on technology assessment results as of the end of August.

 

Development of Venture Capital Market

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(Growth Ladder Fund)

The FSC launched ‘Growth Ladder Fund’, a fund specialized in providing business fund for each development stage for venture companies and SMEs. Total 2.5 trillion won worth of subsidiary funds were raised as of the end of September. Growth Ladder Fund invested 310.1 billion won in 64 start-up stage firms as of the end of September.

(KONEX)

KONEX grew three folds in volume since the launch in July 2013. 61 companies are listed and total market value accounts for 1,315.4 billion won as of October. 4 KONEX-listed companies were re-listed in the Kosdaq market.

 

Improvement of Household Debt Structure

가계부채

 The volume of Korea’s household debt amounted at 1,040 trillion won as of the end of June. However, since the announcement of the government’s plan to improve household debt structure in June 2011 and February 2012, the pace of household debt increase has slowed and the debt structure has improved*. Experts evaluate that the risk of household debt problem to pose entire financial system failure has significantly diminished.

*Household debt increase rate: (2011)8.7%→(2012)5.2%→(2013)6.0%

*Fixed rate non-amortized loan/bank housing mortgage loan: (end-2010)0.5/6.4→(end June, 2014)17.9/21.6

 

Improvement of Financial Regulatory System

금융규제

The FSC streamlined regulatory approval process for financial investment business and reduced regulatory burden related with financial institutions’ business operations. Moreover, outdated and unrealistic regulations were abolished to create better business environment for financial firms. The FSC also improved procedures for inspection and sanction on financial companies to relieve their burdens.

 

Privatization of Woori Financial

우리금융

In accordance to the government’s ‘Plan to Privatize Woori Financial Group’ its provincial banks(Kyongnam and Kwangju) and 6 securities companies were sold. The government announced the third phase plan for Woori privatization in June, 2014 which is to sell Woori Bank’s stakes on a two-track basis. 30% controlling stake and 27% minority shares will be sold separately to encourage active participation.

 

Eradication of Unfair Transaction

불공정거래The FSC established Capital Market Investigation Unit in September, 2013 in a bid to eradicate unfair capital market transactions. As of the end of August, 2014 26 cases of serious illegal transaction acts have been detected and reported to the prosecution. Through close coordination with the FSS and the investigative authorities, the FSC greatly reduced the number of unresolved cases related to market violation*.

*Cases pending for investigation: (end-2012)75→(July 2014)46

*Cases pending for trial: (end-2012)141→(July 2014)98

 

Improvement of Unreasonable Financial Practices금융관행

Since the launch of Financial Consumer Protection Bureau in August, 2013 the FSC has been abolished or improved unreasonable financial practices causing inconvenience to financial consumers. As of the end of September, 2014 65 unreasonable financial practices have been improved.

 

Simplication of Online Transaction System

온라인결제

The FSC abolished the requirement to use certified key when making online credit card payments exceeding 300 thousand won. Since September, the FSC has been encouraging credit card companies and payment gateway companies to facilitate non-Active X payment.

 

 

 

 

 

Government to achieve its technology finance goal by the end of the year

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Technology Credit Bureaus(TCB) provided total 3,187 loans based on technology assessment results which amounts at 1.8 trillion won as of the end of September, 2014. It is expected to achieve the initial goal of 7,500 loans at current pace by the end of the year.

< Total number & amount of technology credit loan>

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Amount of technology credit loan provided by banks account for 40% of the total, which reflects increasing number of banks are volunteerly giving out loans based on technology assessment results.

 

 < Number & amount of technology credit loan by banks (end-Sep) >2

Loans provided by IBK accounts for 1/3 of the total leading the movement to improve financing structure for SMEs.

Government to strengthen insurance industry’s role to better protect and safeguard people’s life

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“As we have witnessed from the Sewol incident, the impact of such disasters on our life is devastating. All of us have to recognize the money spent to ensure safety as an investment for the future, not a cost.”

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FSC Chairman Shin Je-Yoon mentioned in a conference held in Hanhwa 63 City (63 Building), Yeoui-do with the representatives of insurance industry, academia, and public agencies. He also had time to participate in safety drill conducted by Korea Fire Protection Association(KFPA).

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“Safety and insurance are the two pillars of national disaster management. Private sector, including the insurance industry, has to strengthen its role of pre-emptive disaster prevention.”

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To such backdrop, the government will strengthen the role of private insurance companies to effectively cover victims’ damages in case of massive disasters. The government will improve regulations and insurance policies. Comprehensive disaster insurance system against all risks related to disasters will be introduced. Moreover, insurance companies’ disaster prevention functions will be significantly strengthened.

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“Active participation and support of the private sector is crucial to reinforce the current social safety network.” Chairman Shin said during his speech to the participants. He emphasized that there cannot be any failure when it comes to policies related to the safety and protection of the people. Moreover, he promised the government’s unsparing support to strengthen the insurance sector’s role of preventing disasters.

FSC Chairman praises employees of banks with best performances related to technology finance

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On the occasion of the 100-day anniversary of the announcement of ‘Plan to Facilitate Technology Finance’, Chairman Shin Je-Yoon visited branch offices of financial firms which mostly actively gave out loans based on technology assessment results. Offices of Shinhan bank and IBK in Sihwa Industrial Complex were selected as best performing bank branches in the capital area.

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18 commercial banks signed MOUs with Korea Technology Finance Corporation and Korea Finance Corporation on June 30, 2014 and started providing funds to companies based on technology evaluation results. Shinhan Bank’s Sihwa Financial Center office provided technology finance accounting for 9.33 billion won for the past three months and IBK Sihwa office gave out 15.3 billion worth of loans based on technology assessment.

Chairman Shin praised the bank employees’ dedicated efforts and evaluated that there have been meaningful changes in the business practices of banks during the last 100 days. He compared the effect of technology finance as ‘killing three birds with one stone’ meaning that it benefits SMEs, banks, and the national economy all at once. Technology finance provides necessary funds to SMEs which have been neglected by financial institutions, allows banks to more effectively manage risks by enabling accurate estimation of default rates through technology credit assessment, and creates new growth engine for the national economy. Moreover, he added that accumulated data related to domestic companies’ technology information will become an invaluable national asset that can be utilized in reviewing government-level R&D projects and investment.

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The government will offer wide range of benefits to banks with excellent technology finance performances. The FSC will accelerate its efforts to realize ‘Creative Finance’ by further facilitating technology finance. Chairman Shin Je-Yoon will pay regular visit to nationwide bank branches with great technology finance performances to praise their efforts.

FSC to lead IT-finance convergence

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Convergence of internet technology and finance is one of the key tasks to realize ‘Creative Economy.’ Under such recognition, the FSC has been exerting its utmost efforts to improve regulations related to online payment system.

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This time, FSC Chairman Shin Je-Yoon visited IT firms representing Korea’s IT industry located in Pan-gyo Techno Valley on Monday. On the visit to Kakao Talk office, he was briefed on ‘Bank Wallet Kakao‘ and ‘Kakao Pay’, two most innovative online payment systems that are gaining popularity recently.

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“The government will overhaul negative regulations hampering convergence of IT and finance,” announced Chairman Shin while urging the industry to take more enterprising attitude to create new markets and warning that complacency will only lead to the failure to adapt to the global trend.

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“We will seek balance between actively introducing newly-developed financial services and strengthening consumer protection measures,” he said.

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The FSC and participants agreed to form a government-industry cooperative body for IT-finance convergence to share future vision and discuss measures to further develop the industry.