Check insurance policy details more conveniently

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Presently, insurance policy holders have to visit websites of Korea Life Insurance Association and General Insurance Association of Korea separately according to insurance coverage in order to check details related to the policies they purchased. However, from December 1, they will be able to check insurance details all at once by visiting either one of the websites.

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Moreover, customers have been complaining about the inconvenience related to personal identification verification process when making online inquiries on insurance policies since the current insurance websites only support verification method using accredited certificate. Upon implementation of the new system, customers will be able to use their cell phones when verifying personal identification starting from mid-December.

8th Anti Money Laundering Day

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November 28 was the 8th anniversary of “Anti Money Laundering Day” which also is the foundation day of the Financial Intelligence Unit (FIU), a FSC-affiliated authority responsible for the prevention of money laundering and terrorist financing.

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Since the establishment, the day was celebrated every year since 2007 to raise people’s awareness and interest on combating money laundering. This year, a commemoration event was held with the presence of more than 220 figures from the financial authorities, institutions, and academic circle.

“Thanks to outstanding IT infrastructure, we could successfully implement necessary systems for fighting money laundering and we are providing assistance to developing nations to do the same. Such efforts are awarded by being appointed as the chair country of the FATF beginning from next year” FSC Chairman Shin Je-Yoon said during his congratulatory speech praising everyone’s hard work and dedication. He also raised necessity for strengthening and expanding the range of supervision to the non-banking sector as well to effectively respond to evolving money laundering cries.

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Kyongnam Bank received a presidential award for its excellent contribution in prevention of money laundering. Meritz Fire & Marine Insurance was awarded Prime Minister’s commendation, and 30 employees of Shinhan and Korea Exchange Bank was granted FSC Chairman’s award.

Quantitative Easing

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Money circulates around the world, in different currencies and different amounts. Every currency has its own degree of competitiveness, which is measured by the exchange rate. If your country’s currency depreciates, then its value goes down, which makes it cheaper for other currencies to exchange into your currency. On the other hand, if the currency appreciates, then other countries can buy less of it with every unit of their currency.  

The currency rate is determined by the market. As trade and direct currency exchange take place, currency rate either depreciates or appreciates in relation to other countries’ currencies. However, at times, it could also be controlled by the government. According to the principles of economics, in order to encourage spending, there has to be more money circulating in the market. Also, banks have to offer low interest rates in order to encourage loaning and further spending. Therefore, when money does not circulate enough in one’s country, the government sometimes implements fiscal policies to increase the circulation. This process is called “quantitative easing”.

 In addition to more circulation of money domestically, as trade plays a large role in lots of countries these days, currency depreciation is done through quantitative easing. What this means is that, as lowering the currency value of a country makes it more attractive for the other countries to trade with that country, the government lowers the currency value to encourage more trade. Through this, the country can benefit financially from selling more of its products abroad.

Quantitative easing is done through purchasing securities. The banks purchase securities from the government and the market in order to increase the money supply. At the government-level, it may sell its bonds to other countries’ governments. Consequently, as the money circulation increases, the interest rates go down and the currency value further goes down. Moreover, as the overall liquidity of the country increases, people can borrow money with lower interest rate.

In addition to all the lucrative sides of quantitative easing, there is also the negative side. Looking at it from the domestic perspective, as there is more money in the market, quantitative easing may, and usually does, lead to higher inflation. The overall economy increases, but the price of goods and services in the country increase as well.

This is a strategy used by some countries throughout the world, the biggest examples being China and USA. It has also been reported recently that Japan is going through the same process. Countries strategically implement such policy while making sure that not every country is doing it at the same time. It is very difficult to strictly say whether quantitative easing beneficial or harmful, it does bring both benefits and side effects.

Foreign media introduces ‘Korea’s reunification finance’

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World’s leading media such as the Wall Street Journal, Bloomberg and Guardian introduced Korea’s plan for successful economic integration upon Korean reunification. They quoted FSC Chairman’s speech in a conference on unification finance that cost for economic integration can be financed by bond issues by policy banks and private investors without levying any burdens to the people.

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WSJ: A Tax-Free Korean Reunification Budget?

http://blogs.wsj.com/korearealtime/2014/11/19/a-tax-free-korean-reunification-budget/

WSJ: South Korea Sets Plan to Rebuild North’s Economy After a Possible Reunification

Bloomberg: Korean Unification Costs Clouded by Dearth of Data on North

http://www.bloomberg.com/news/2014-11-20/gaming-out-korean-unification-cost-clouded-by-ignorance-of-north.html

Guardian: South Korea says economic cost of unification could be $500bn

http://www.theguardian.com/world/2014/nov/19/south-korea-cost-unification-500bn

Korea’s Reunification and Financial Policy Tasks – 5 Utilization of NK Development Fund

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Wisely using money is more important than collecting it. USD500 billion raised to support NK Development will be concentrated in areas that have potential to increase NK economy’s productivity. 44

The government and policy banks will evaluate NK’s major special economic & industrial zones in order to select areas for the development fund to be invested. Factors such as industrial location and conditions for economic cooperation will be taken into account when deciding whether or not to make investment.55Participation by policy banks is particularly crucial because they are more capable than the government to assess and make analysis on projects. For example, ‘infrastructure fund’ will be created centered by policy banks to fund major infrastructure projects in the North.

Korea’s Reunification and Financial Policy Tasks – 4 Measures to Support NK Development

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With reunification comes huge cost. It is expected to cost huge amount of money considering NK’s underdeveloped economy. North’s nominal GDP is KRW33.6 trillion, mere 2% of the South’s. What’s more, NK’s basic infrastructure and industries are subpar. If we look into the German reunification case, West Germany’s sovereign debt to GDP rose from 40% to 62% just in 6 years after reunification due to the East’s underdeveloped economy. 11

Now, raising such a huge amount of money to develop NK becomes a crucial issue. Relying heavily on government budget can cause social conflict and accumulating money through foreign ODA has its limits which make the role of finance more important.

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Approximately USD500 billion is expected to be needed to support NK development. Among the total, about USD175 billion will be used to build necessary infrastructure and develop industries.

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USD17 billion will come from foreign ODA from countries such as US, Japan, China, and Germany and international organizations such as the World Bank, Asia Development Bank and United Nations. USD250-300 billion will be raised by policy banks. USD107.2-186.5 billion will be accumulated by attracting private invcestment in profitable projects and special economic zones. Lastly, approximately USD330 billion is expected to be earned in NK through tax and economic development.

Korea’s Reunification and Financial Policy Tasks – 3 Financial Policy Upon Economic Integration

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Main tasks for successful economic integration can be divided into 3 stages: Development, Implementation, and Integration.

In ‘Development’ stage, the main objective is to create a firm foundation for sustainable growth. We need to select and develop promising industries, re-establish railroad and harbor, open markets, and develop natural resources.

Implementing core system for market economy system will be the main challenge in ‘Implementation’ stage. It includes liberalizing price, privatizing properties, and adopting market system.

Lastly, in ‘Integration’ stage, the two different economic systems will be finally integrated. To do so, we need to integrate legislative system, infrastructure, and markets altogether.

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It is also very important to study and benchmark successful cases of economic integration outside of Korea.

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