FSC Chairman’s “Red Tape Challenge Tour #2″

 

FSC Chairman Shin Je-Yoon visited Seoul Gyeongun School, a school for disabled children, and participated in a conference to discuss measures to ease financial regulations for the handicapped.

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Chairman Shin pointed out that the financial sector so far has not been paying enough attention to the socially vulnerable people and emphasized that it is time for the industry to put more efforts in satisfying each individual’s financial needs rather than seeking profits.

To do so, he promised that the government will abolish red tapes that restrict disabled people’s financial accessibility while increasing related infrastructure and services.

In particular, the FSC plans to revise insurance terms to for the disabled to but life insurance and eradicate insurance companies’ current practice of declining insurances.

Moreover, the FSC will strengthen financial education for the disabled individuals so that no one would experience any financial inconveniences or disadvantages due to their physical conditions.

Consumer Warning against Financial Scams

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The Financial Supervisory Service announced consumer warnings against Phishing and other fraudulent scams asking for personal information.

1. If you receive a call or a text message from the person who claims to know your personal information asking for security information or offering a loan, you should suspect financial fraud.

2. For any reason, calls asking for financial information or messages asking for PIN number online are 100 percent fraud.

3. If you are asked to pay certain fees in advance before a loan is approved, it is 100 percent fraud.

4. If you believe you’re a victim of financial fraud, or you suspect financial fraud, call the police at 112 or the Financial Supervisory Service at 1332.

Abolish financial regulations

In the beginning of 2014, the Financial Services Commission officially announced that it would abolish financial regulations that hinder sound competition in the financial market. In other words, the FSC will leave things up to the invisible hand in the market. Often time, as the government intervenes with economic issues in the market, freedom becomes restricted. Since there are lots of rules to follow, competition thereby decreases. More rules mean actors in the market have more things to consider when making decisions. They become more cautious and sluggish.

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Regulations have function of balancing powers in the market. Regulations promote sense of fairness among actors regardless of their status or size. However, the demerit of regulation is that it discourages competition. Competition is required in order for companies to constantly develop and to better the completion of products. According to Neo-liberalism; the most prevalent idealism regarding the market, the more freedom market has, the more it will flourish. Many believe that the market has self-sustaining function. Supply and demands naturally balance one another if no third party is in between. In addition, such function of invisible hand suggests that people who try hardest will receive according incentives in return. Freedom in the market generates fierce competitions and competitions are what make market grow through development.

Up until now, the Korean government was often involved with the flow in the market to protect fairness. Yet, after examining current market condition now is the time for deregulation and boost the market through freedom. From 2014, the FSC will focus in abolishing financial regulations that hinder sound competition. It recognized that competition is what it takes for advancement in the Korean market.

To increase effort, the FSC is planning on having T/F meetings regularly to discuss ways to boost competition. T/F meeting is a meeting composed of public officials and private experts to improve currently existing financial services. Secondly, the FSC will be concentrating on reforming regulations such as Bank account switch service to make more favorable environment for those in the market. Bank account switch service is a service when changing bank accounts, users can make use of the previously existing bank accounts and automatically shift the information into the new bank’s account. It reduces tedious and bothersome identification process users have to go through each time when they need to change accounts.

With all these effort, hopefully Korea’s financial market will regain vitality and take a great leap forward in economic development.

Jiae Choung
(sammy7953@naver.com)

First Anniversary of Happiness Fund-Story of a mother, “Happiness Fund gave our family hope”

It was like a bolt from the blue when I got a phone call from the hospital 5 years ago. That’s where the trouble started. After midnight, the bell rang. “Are you Mr. Kim’s family? I’m very sorry to inform you that Mr. Kim had a stroke.” I could not believe it. I could not even move my legs in surprise and fear.
Misfortunes came one after another. I failed to repay the mortgage, so I disposed of our house for public sale. Also our properties including a car, a husband’s sportswear shop and a warehouse were attached. We sold off all the properties but I still had to pay loans and taxes. Meanwhile, my third child was born. I could not receive any postnatal care since I had no way to afford it. However, I would not give up. I hoped that my children grew up to be bright and happy. I swore I would do anything I could do.

First, I had to deal with urgent issues. There wasn’t enough money to make our living, not to mention school expenses for my children who were 18 and 15 years old. I used credit cards to service other card debts, got instant cash services and got loans from non-bank depository institution for husband. Eventually my husband and I became credit delinquents. We could not live in Seoul anymore because it costs a lot of money. I asked my aunt to take care of my first daughter who should take the college entrance exam soon. Except her, my family moved to a remote country village where we managed to live by helping an acquaintance who was running a resort pension. I even did not have time to take care of my elderly daughter. However, we were forced to leave the place where we stayed in one month. With the help of a friend, we could rent a room which was 250,000 a month with down-payment of 5,000,000. But we were kicked out soon as we could not afford the monthly payment. Moreover, second daughter dropped out of school.

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However, there was a ray of hope for us. That was the ‘Happiness Fund’. I had my liabilities reduced by 50 percent. I could repay the loans on 10 years installment. Therefore, I am paying 79,000 won only at a time. Those eligible for debt rescheduling can also join the program which helps us to find jobs. This program gave a huge support to someone who is trying to overcome financial challenges. Now I can see the light from the darkness. My first daughter went to college on a scholarship. After that she got a job and trying to do her best as a member of the society. Second child is now participating in an employment program and preparing to get certificates.

I think we have a bright future ahead of us. We do not need to feel nervous, gloomy, depressed or guilty anymore. Instead, we are designing our future on our own and preparing to own a small business. Once again, I really appreciate the help that gave me huge support in my life.

I believe the Happiness Fund can make a big achievement thanks to the support of many institutions. The FSC is encouraging other financial institutions to participate in the debt-relief program. Also the Korea Asset Management Corporation(KAMCO) has diverse experiences in dealing with the related funds. The FSC is trying to help debtors to find jobs, in cooperation with the labor ministry. There had been a concern that the Happiness Fund could trigger moral hazards at the beginning. However, considering the fact that around 83% of people who have benefited from this program earn less than 20 million won a year, there is no need to worry about it anymore.

 

Weekly Global Financial News April 7-April 13

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ECB says will prime QE, but far from pulling trigger yet, By Reuters, Published: April 7

http://reut.rs/1ec2gP8

The European Central Bank will be prepared for monetary easing policy, so called quantitative easing, to deal with low inflation but the implementation is still a long way as they don’t see immediate need for.

U.S. warns China over currency depreciation, By Reuters, Published: April 8

http://reut.rs/QZHoQY

The United States warned China that the recent currency weakness could raise serious concerns if it signals a change in China’s policy from allowing market-determined exchanged rate. Washington has been pressuring China for years as a weaker yuan makes Chinese consumers less able to buy foreign goods.

BOJ’s Kuroda Dismisses Possibility of Imminent Action, By Wall Street Journal, Published: April 8

http://on.wsj.com/1eCfYW3

Bank of Japan Gov, Haruhiko Kuroda made it clear that further easing measures would not be taken, dismissing speculation over the higher tax. He stressed that different from the previous tax increase in 1997, the economy has been steadily moving toward the price stability target and growth will recover afterward.

Basel eases bank capital rule for derivatives clearing, By Reuters, Published: April 10

http://reut.rs/OZw853

The Basel Committee of banking supervisors eased the rule on the capital amount that banks must hold to cover trading positions at clearing houses from 2017. The decision was made to lighten the burden for banks to lend as concerns over financial stability have been mitigated.

Greek Bond Sale Tops $4 Billion in Return to Markets, By Bloomberg, Published: April 11

http://bloom.bg/1igsOxO

Greece made a landmark come back to international markets with a bond sale of 3 billion euros ($4.2 billion), showing encouraging signs of recovery.

 

 

Private Equity Fund and Economic Growth

The Financial Services Commission has decided to loosen regulations imposed on the expanding private equity fund. Its primary aim is to promote active merging and acquisition of businesses in various markets. By implementing such policy, the government is hoping to bring more economic growth, active investments and circulation of liquidity in the market.

Private Equity Fund(PEF) refers to the investment of funds or equity into various private companies. It can be done in terms of limited partnership, where two or more firms come together with a certain contract and come to an agreement. Each firm is only liable for a limited amount of money that the partners have invested. PEF is used for funding technologies, growth of capital, or even for the acquisition of other companies.

For instance, if there is a company on the verge of bankruptcy, a number of investors will gather together to buy that company and rebuild it with new group of human capitals. Each firm willing to invest will put in a certain amount of equity into that company to let it stand again.

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Several changes have been made for the PEF policy. Before, PEFs could only buy stocks, but now businesses or sectors of the business can directly be bought and sold. The policy has loosened the many restrictions to allow for a free flow of money in the economy.

There are several benefits for loosening the policy. The foreigners now have an easier access to the economy. They can make easier buyouts, which might trigger more investments from overseas. This may help to further develop the economy and the business in general. Since foreign investments bring a large amount of money at once, this may also serve useful for the economy.

There are, however, disadvantages that may also arise. The policy not only loosened the investment restrictions, but it also makes it harder to gain more profit, especially for foreign investors. In this sense, there is an uncertainty of whether the foreign investors will be more interested in Korea after the change of the PEF policy. Moreover, since Korea is inexperienced in dealing with the large buyouts from overseas investors, this may also create some confusion for the foreign investors as well as domestic ones.

The policy change in the PEF shows that Korea is striving to take a step forward in the world’s market and economy. The merits and the disadvantages have to be weighed carefully in before further implementing such policy.

FSC Chairman’s “Red Tape Challenge Tour #1″

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“We will abolish unreasonable regulations right away”
“Red tapes will be reduced immediately so that all of you can do your business in a more friendly environment”

FSC Chairman Shin Je-Yoon expressed his strong commitment to cut red tapes hampering business environment for venture companies. During “Red Tape Challenge Forum” held at D.Camp, a center for young entrepreneurs co-established by banks, more than dozen of financial experts, officials from financial corporations and entrepreneurs freely shared ideas and opinions on current red tapes and ways to reduce them.

“I hope more investment fund flows into venture companies”
“Please put more efforts in creating an environment for young students to do business”
Participants eagerly gave out their suggestions and expectations toward the government.

The Park Geun-hye administration is committed to reducing red tapes in all sectors of business to lay a foundation for Creative Economy, one of the new administration’s flagship policy targets.

Chairman Shin will prepare such occasions more frequently in which various groups of economic players discuss and raise opinions on ways to overhaul the current regulations.