2011-2013 Plan Set for the Creation and Development of Financial Hubs

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The Financial Services Commission confirmed a basic plan of the creation and development of financial hubs at the 15th regular meeting after deliberation by the Financial Hubs Establishment Committee. The plan suggests fundamental direction of policies on the creation and development of financial hubs for the next three years (2011-2013), aiming at gaining position as a global leader of the financial market. The basic plan 2011-2013 includes the following matters: promotion of financial market, enhancement of competitiveness in financial industry, improvement of financial business infrastructure, and acceleration of creating and developing financial hubs.

 

(1) Promotion of Financial Market

There will be two main points in promoting the financial market: the establishment of Investment Bank and introduction of Hedge Fund. The finance market is going to be restructured after these changes take place. It is expected that the establishment of Investment Bank will reinforce the overall corporate financing capacity by issuing securities and getting involved in mergers and acquisitions. Also, different strategies of Hedge Fund will meet various investment demands in the market and provide a base for more sophisticated finance industry. Moreover, to secure stability and transparency of the capital market, unfair trades are going to be regulated more strictly by the government while disclosure of reliable information will be encouraged.

 

 (2) Enhancement of Financial Industry Competitiveness

The first step to gain more competitiveness in financial industry is to set appropriate plan for each category of businesses. Thus, Korean government has been observing both internal and external changes in financial field and laid out a scheme for each business.

Bank l  More capacity in new financial services including PB and retirement pension

l  Increased risk management skill regarding the global finance market

Financial

Investment

l  Diversification of types of stocks issued through promoting Investment Banks and introducing Hedge Funds
Insurance l  Secure various types of products and sales channels

l  Obligation of public notification or descriptions

Savings Bank l  Consolidate its position as microfinance mediation institution

 At the same time, there will be increased financial services for new industries to support the growth of new businesses. Primary collateral bond obligation (P-CBO) and new types of funds related to newly emerging industries are going to be issued, and venture investment from the private sector will be encouraged.

(3) Improvement of Financial Business Infrastructure

To form more effective financial infrastructure, a set of financial supervisory systems will be amended to correspond with the global standard such as FSB’s regulatory and supervisory policies.

Bank Amendment of laws to promote bank capital liquidity and implement Basel Ⅲ
Insurance Renovation of risk management system by operating RBC
Over-the-counter derivatives Introducing CCP for over-the-counter transaction transparency
Accounting system Efforts for successful settlement of IFRS
Credit Assessment Building own credit assessment system to reduce dependency on external credit ranking
SIFI Supplement of relevant systems for higher loss-absorbing capacity of SIFIs

 In addition, as a plan to improve the structure of financial corporation governance, Act on the Structural Improvement of the Financial Corporations will be enacted to improve the supervisory function and independency of the outside directors and auditing committees. Internal control and risk management capacity are expected to be strengthened as a result.

Consumer Protection Act, another law to be established, is going to regulate imperfect sales or indiscreet sales of similar types of financial instruments. In addition, the introducing differential premium system is under discussion for more efficient operation of deposit insurance.

The government is also looking forward to raise more qualified financial experts through improving the education quality of finance MBA courses and fostering professionalism of the workers in the field.

(4) Acceleration of Creating and Developing Financial Hubs

Business environment will be improved at an accelerating pace to successfully promote Seoul and Busan as major international financial hubs in Northeast Asia. Especially, Yeouido, located in Seoul, is going to the major financial center with an array of important financial institutes standing close together. Based on its reputation as a major marine transport and distribution center in the Northeast Asia, Busan will be developed as a specialized city for marine finance and derivatives. Moreover, the authorities concerned are putting steady effort to attract global financial institutions and to provide assistance to Korean firms that are seeking opportunities for oversea expansion. The Korean government will strengthen cooperation with China, India, East Asia and the Central Asia countries to make it easier for domestic Korean firms to expand into those countries. In detail, the government has been building a database about the financial systems in those countries and is trying to form a regional expert pool to provide advice to help financial companies operate successfully in international market. Job Fairs are planned to be held for more aggressive public relations, and there will be continuous efforts to promote South Korea as an international financial hub to attract as many foreign investors and financial institutions that are unaware of its potential. Improvement of overall business environment such as changes for better taxation and legal services will be followed as well.

By providing a friendlier business environment for both domestic and foreign companies, South Korea is looking forward to successful creation of financial hubs. Setting plans for the development of financial hubs and implementing those plans will ultimately lay the cornerstone for the economic growth of South Korea as a whole, and it would be a great opportunity to let the international society get aware of the nation’s potential to become an Asia’s financial leader.

 

 

 Kim, Yoon-joo (yoonjoo.kim912@gmail.com)

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