LTV regulations to be eased


The government made a decision to ease Loan-to-Value(LTV) regulations based on the judgement that the decade-old regulation is outdated and unreasonable for the recent property market. Moreover, the government took into consideration the fact that household debt structure is deteriorating and the interest burdens are rising for the ordinary people.

Although LTV regulation is a necessary financial measure to ensure financial consumer protection, it is not desirable that it is used to regulate the property market.

To such backdrop, the government will apply single LTV ratio of 70% in regardless of different regions and industries. Currently, the LTV ratio is applied differently according to regions from 50 to 85%. Moreover, some financial industries have different LTV ratio standards from 70 to 85%. Normalizing LTV ratio is expected to improve household debt structure and reduce interest burdens.

The government seeks to eliminate the LTV regulation’s functions for regulating property market while strengthening its positive role of improving financial stability.

Weekly Global Financial News (July 14 – July 21)


Argentina Countdown to July 30 Deadline: Default or Boom, By Bloomberg, Published: Jul 21

Argentina is facing a imminent risk of default coming in less than two weeks unless it reaches a deal with holders of defaulted bonds or U.S. courts grant a delay.

Japan’s samurai bond issuance on track to set record this year, By Reuters, Published: Jul 14

Japan’s samurai bond market is on track for a record year as Japanese investors tempt more foreign companies to issue yen-dominated debt. Though the spreads have narrowed, demands for Samurai bond is growing since yields on other types of fixed-income bonds and instruments in Japan are even lower.

Ukraine unrest, Gaza keep pressure on shares; bonds steady, By Reuters, Published: Jul 18

World markets remained under pressure after a Malaysian plane was downed near the Ukraine-Russia border and Israel stepped up a ground assault against Gaza militants.

China Bailouts Questioned as Second Company Faces Default, By Bloomberg, Published: Jul 18

China’s corporate bond market is facing its second default, fueling speculation the government is stepping back from its practice of bailing out borrowers and moving toward a more market-driven system.

Spain Marks Year of Recovery in Economy Hooked on Exports, By Bloomberg, Published: Jul 21

Spain looks to enter a second year of recovery, but whether the recovery is sustainable is remained as question as much of the industrial rebound was fueled by declining wages and government aiding measures rather than product innovation.

China Home Prices Fall in Record Cities, Signaling More Easing, By Bloomberg, Published: Jul 21

China’s new-home prices fell in a record number of cities, signaling curbs will be relaxed.

Microfinance Center to be established


The FSC announced its plan to restructure consumer finance support system on July 1, Wednesday. Among numerous issues, the government will establish Microfinance Center to provide comprehensive and integrated one-stop financial services ranging from finance for employment, welfare, and housing to life planning for the financially marginalized.

Under the current system, financial consumers had difficulties in receiving financial services they need due to generalized and limited number of financial products provided by banks, insurance firms, and so on. However, upon establishment of the center – which consists of experts from various consumer finance corporations such as the Credit Counseling & Recovery Services(CCRS), Korea Asset Management Corporation(KAMCO), and Smile Microcredit Bank(SMB) – financial consumers will be able to consult and receive financial services directly tailored to and differentiated according to their needs and circumstances. Ultimate goal is to ensure consumers’ financial independence so that they can make a comeback in their life or start a new beginning.

Plan to improve license system for financial investment business


The FSC announced its plan to ease regulations on license system for financial investment to streamline the current overly subdivided business units and simplify license process.

Financial investment businesses will be required to apply for a business license for only when it first enters the sector. Once a financial institution is granted a regulatory approval for business, the company will be allowed to add new business within the same sector simply through add-on registration, without any additional procedure for approval.

Moreover, regulations regarding majority shareholders will be also revised. Under the current Financial Investment Business and Capital Markets Act, a person who was not able to participate in business management due to spinoff is classified as a “specially related person” which unreasonably restricts the person from becoming a major shareholder. After revision, such person will no longer be classified as a “specially related person”.

The current regulations related to institutional sanctions will be mended as well. Eased regulations will be applied to financial investment firms which are issued with sanctions equal to or stronger than institutional warning in order to give additional opportunities for them to secure their foot in the market.

Given that it would take time for the revision to the FSCMA to allow add-on registration system, a fast-track procedure will be introduced temporarily in order to expedite regulatory approval process for added-on businesses. Such is expected to significantly reduce time for regulatory approval from the current 7 to 8 months to 3 to 4 months.

Measures that can be taken without law revision will go into force in September.


click to read press release ->

Weekly Global Financial News (June 07 – July 14)


China agrees to reduce FX intervention ‘as conditions permit’, By Reuters, Published: Jul 10

U.S. and Chinese leaders have reached an agreement that China will significantly reduce its intervention in the currency market when conditions are ripe. The value of the Yuan has long been the issue between two countries as U.S. accuses China for deliberately holding down its currency to boost its exports, which China denies.

Riding on Modinomics hopes, India’s indebted companies rush to lock in funds, By Reuters, Published: Jul 7

Many India’s companies are expected to raise capitals through share sales to pay off their debts. These indebted companies were squeezed due to sluggish economy but emboldened by a surge in the stock market and an anticipated economic recovery was observed after Narendra Modi was elected as prime minister

China’s yuan global ambition faces payments hurdle, By Reuters, Published: Jul 8

China quest to turn its yuan into a full-fledged global currency faces challenge as the planned roll-out of a worldwide payments is unlikely to be made because of policy snags and technology difficulties.

China eases M&A rules for listed firms By Reuters, Published: Jul 11

China is making it easier for listed firms to buy, sell or swap their assets by amending the merger and acquisition rules, its attempt to cut red tapes and encourage mergers.

Portuguese Bank Reveals Exposure After Missed Payment Shakes Markets, By Bloomberg, Published: Jul 12

Banco Espirito Santo SA sought to reassure investors by revealing its exposure to related companies after a missed payment on short-term debt by a Portuguese financial company jolted global markets. After the update on the lender’s solvency, European stocks and Portuguese bonds rebounded.

China says broad consensus reached on new BRICS bank, By Reuters, Published: Jul 14

The five BRICS nations have reached a extensive consensus on establishing $100 development bank. The decision symbolically shows the growing power of emerging economies in the global financial architecture, mostly led by International Monetary Fund and the World Bank.

What will be changed after financial regulatory system reform – no need to submit piles of documents anymore


Public financial institutions will be banned from asking unnecessary and overlapping documents from customers. Upon revision of the related regulations, financial firms will directly collect documents such as a copy of resident registration, certificate of tax payment, etc. through government database and credit information company.

Reducing the number of such documents is expected to save up to 12 billion won annually, given that a document incurs 4,673 won of social cost.

What will be changed after financial regulatory system reform – you can receive different financial services in one visit


Financial consumers had to bare inconveniences of visiting several offices of financial companies in order to receive services concerning different financial businesses. However, upon revising the related regulations, banks and securities companies of a same mother company will be allowed to share the same office. For example, a customer will be able to consult experts from both bank and securities companies about personal asset management in one visit to the integrated office.