Hi guys! Hope you guys are all doing well with this beautiful weather. By the way, I am wondering whether you are aware of recent financial news. Last March, there has been a revision on “Specialized Credit Financial Business Act”, which is to abolish interest-free installment for credit transaction. In response to this issue, the FSC recently made an announcement on further revision and its purposes are as follows:
– To seek concrete measures to implement the act
– To reinforce consumer protection and create sound operating environment
I’ll explain this new amendment in three categories in terms of its main objective.
1. Enforcement of consumer protection – Firstly, a new standard of refunding annual fee when consumers quit using their credit cards is established. Then, credit card users can receive a ten percent refund of the remaining costs; optional services such as vouchers and the expense of issuing this year’s credit card are deductible. Also, the explanation of loan products doesn’t seem enough to protect the consumers. Thus, sufficient information will be given to the consumers from the first stage in order to facilitate their understanding of some important points such as discount rate or late fee. Arbitrary change of payment date without prior notice is also banned to lessen burden on the credit card holders.
2. Promotion of sound operation of credit card companies – The advertisements of credit companies are regulated by education and management in order to prevent possibility of incomplete sales. Indirect regulation on marketing expense is also introduced with the use of two standards: the rate of expense on marketing and propriety analysis on management of marketing expense. Furthermore, thorough analysis on profitability of credit card products will take place due to different amount of optional services offered before and after the sales.
3. Enhancement of competitiveness through additional business – Those additional works include four projects: offering consulting service using big data such as sales information, allowing the usage of design patent related to the work, providing financial education to the consumers as well as the employees, and carrying out electronic financial transaction. The FSC believes that these additional projects will help credit companies to become more competitive.
This revised version of Specialized Financial Business Act will be effective from September 23rd after it goes through supervision from the relevant authorities. Though it requires further examination, it is expected to be beneficial for both the credit card holders and the credit companies as well and become a lubricant in credit card industries.
By Seunghye Shin (firstname.lastname@example.org)
Dear, readers. Long time no see!
Even though March is already slipping away, the wind is still cold these days. Be careful not to catch a cold in this capricious weather.
Today I brought a topic “hot” enough to warm you up!
Recently there has been some talks on “hot money”. This term is widely used in financial markets and the word “hot” came from the special characteristic of this kind of money. Hot money refers to capital flows that have a speculative purpose of earning short-term profits from differences in interest rate or exchange rate between two countries. Since this kind of capital flows show a relatively quick movement compared to other regular capital flows, which is why it is said to be “hot”, they create some negative effects in the economy.
To understand the mechanism of hot money as simply as possible, let’s just first think about regular capital flows among countries. Not only goods and services but also does capital move around trying to find places where it can be invested. Also capital moves around places where it can earn profits out of itself. For example if one country has higher interest rate compared to other countries, capital flows into that country in order to earn profits from the differences between interest rates, which means people with surplus capital try to put their money into the bank of that country because the bank provides higher interests.
Hot money works by the same mechanism and its purpose is to speculate. It flows in suddenly and after earning short-term profits, it swoops out of the financial market abruptly. Moreover, since hot money is mostly from developed countries that have a large amount of surplus capital, effects from this money speculation on the targeted country, usually developing countries, can be severe. Some of the expected effects are as followed:
– Inflation occurs when the large amount of money flows into a market.
– Exchange rate fluctuates with inflows and outflows of hot money.
– All the effects can lead financial markets to crash.
To sum up, sudden inflows and outflows of a big lump of money, which is a typical behavior of hot money, make financial markets unstable and it can lead one country’s economy to crash, just like what happened in Korea, 1997. This is why Financial Services Commission (FSC) along with Ministry of Strategy and Finance monitor the financial market of Korea carefully. It is a critical time these days, since large amounts of capital has been created by the global trend of quantitative easing policy.
This is all I have for this posting, I hope everybody finds this interesting!
See you soon. 🙂
From Ha Eun Kim (email@example.com)
The very last day of the year. What’s up for today? FSC’s office is wrapping up all the works throughout this year, and sharing some new year’s greeting with each other.
Here is FSC’s weekly update as well as the very first event in 2013. Have a lovely day 🙂