Five months after Abolishment of Collaborative Debt Guarantee

 

‘Collaborative Debt Guarantee’, also called ‘Joint Debt Guarantee’, was one of the factors letting many people in debt traps. Binding liabilities under the guarantee worked as a real drag on people. Being aware of the side effects driven by collaborative debt guarantee, FSC abolished it for the purpose of minimizing losses suffered by individuals.

 

 

However, a new measure takes a while to be implemented in a full scope. This means that the abolishment is not yet complete, as there are some exceptions to the abolishment. For example, an entrepreneur lets the CEO bound by a collaborative debt guarantee. The other example is that a collaborative debt guarantee is effective when there are co-representatives within a corporate body.  

 

Due to these exceptional cases, many individuals cannot actually feel that collaborative debt guarantee was abolished. In other words, the ‘gradual’ abolishment has been recognized as ‘not very much effective’. However, the actual fact is that there has been improvement in figures during the past five months. FSC’s Financial Policy Bureau announced that the plan is being carried on as expected.

 

Responding to individual concerns saying that the measure seems not very effective, FSC will focus more on checking the abolishment process. Inappropriate cases of collaborative debt guarantee, which are not subject to exceptional cases, will be strictly monitored. Moreover, FSC will gradually reduce the exceptions to collaborative debt guarantee.

 

FSC’s regular follow-up will improve the system, letting the abolishment more effective. After taking a while, more people would say that they are the actual beneficiaries of the abolishment.

 

Regards,
Frank

 
* Related post; abolishing collaborative debt guarantee
https://financialservicescommission.wordpress.com/2012/09/11/abolishing-the-collaborative-debt-guarantee/

Do SMEs experience Financial Challenges?

 

Do you remember that FSC’s Chairman Kim went to on-site tour in August? His tour was to visit industrial complexes in Korea and to hear ‘what are the facing financial difficulties’ experienced by SMEs. Having had a series of conferences with SME entrepreneurs during the tour, FSC came up with measures to support SMEs.

 

 

To make it sure that those conferences were not ‘one-off’ events, Financial Policy Bureau at FSC checked how SMEs are running their businesses these days. This is with concern for SMEs’ financial difficulties in case of a prolonged economic downturn.

 

In general, SMEs do not experience difficulties in loan markets. The supply of funds through loans is readily available for SMEs in need. The figures cannot exactly represent how SMEs actually feel in loan markets, but they are useful reference to represent current trends in loan markets. Moreover, the rate of overdue payment for loans is considered pretty stable, similar to that in last two years.

 

Globally and domestically, there has been a continuous downward pressure in real economy. Under this circumstance, SMEs demanded fewer funds for expanding and improving their facilities. Also, economically sensitive sectors, including building and construction industry, newly established SMEs, and small SMEs, felt greater financial challenges compared to others. However, with stable prices for raw materials, SMEs could save up their costs for materials.

 

Amid economic uncertainties, the smaller and less powerful SMEs are actually facing more financial difficulties. After checking these concerned voices by SMEs, FSC came up with new measures to deal with the confronting challenge.

 

FSC requested that related financial policy entities cooperate more actively by increasing the size of fund available for SMEs. To provide funds more effectively, FSC will carry on SME analysis in a specific manner. For example, the analysis will be based on classification by industry, size, region, and purpose of fund in need. This in-depth analysis will be done during December by FSC with cooperation with banking sector, research institutes and other related entities. It is expected that the analysis will be a good indicator reflecting financial situation faced by each SME. Furthermore, FSC continues to support start-up businesses and innovation in financial sector. All these measures have the same goal in common, ‘expanding credit availabilities and improving financial sector.’

 

Of course, Frank will bring you an update once FSC’s analysis comes out in next month. Please follow us and find out how measures are actualized and contribute to improvement in financial sector.

 
Regards,
Frank

* Related Feature; Mr.Kim’s On-Site Tour
https://financialservicescommission.wordpress.com/category/franks-diary/mr-kims-tour/

How to let your golden ages shine?

 Hi, folks.

Many are saying that we now live in the era of ‘100-year life expectancy’. Others are saying this is one of the biggest social concerns, as aging society is coming without enough preparation. Regarding this matter, FSC’s Chairman, Kim Seok-Dong, delivered his address at ‘Retirement Strategy Forum 2012’ last month. (https://financialservicescommission.wordpress.com/2012/10/10/1047/)

At the Forum, Mr. Kim mentioned that FSC is working toward feasible measures to prevent the elderly from experiencing poverty. Then what is such a measure to support senior citizens in our society? One is ‘Reverse Mortgage’, called Joo Taek Yeon Keum (주택연금) in Korean.

 

Reverse mortgage is a pension program for the elderly with their own houses but not having cash income. Those homeowners can receive monthly pensions during their golden ages, if putting their houses as collateral.

Who are the senior citizens eligible for the pension? The elderly should be at least 60 years old as of the date of guarantee application. Also, the applicant should satisfy ‘one house per household’ requirement. That is, an elderly owning more than one property is not able to apply for the pension.

Then, let’s think about this case. Mr. Lee is 63-year-old and living in his own apartment in Seoul. He is living with his spouse, Mrs. Lee, whose age is 58. The apartment is under Mr. Lee’s name and this is the only property owned by him. Is he an eligible borrower for reverse mortgage?

It was not until this Tuesday (16^th of October 2012) that he became a successful applicant for the pension. Why? According to the previous age requirement which was effective till Monday (15^th of October 2012), ‘both’ homeowner and spouse should be over 60 years.

 

However, there were voices that this age requirement places too high threshold of eligibility. Taking this opinion account, FSC announced the partial amendment to Korea Housing Finance Corporation Act which eases the age requirement for reverse mortgage. Under the new requirement, only the homeowner should be over 60 years, regardless of his/her spouse’s age. This new measure came into effect as of this Tuesday when the partial amendment was passed at the Cabinet meeting.

FSC expects that this eased requirement will benefit more senior citizens by allowing residential stability and providing income during the golden ages. This is FSC’s effort to prepare for 100-year life expectancy era. I guess this is time for individual households to make their own blueprints for golden ages. Let your golden ages shine with the help of new policy measure and your back-up plan.

Regards,
Frank

[Movie] Margin Call (2011)

Right, this is the most awaited moment of the week. Friday!

Before the weather gets colder, it will be a good idea to go on a picnic for this weekend. However, I found many people having got flu these days. Some of you might be the one with a runny nose and keep sneezing. Then, for your weekend at home a bit more enjoyable, I am introducing an interesting movie.

“Margin Call (2011)”

Margin Call (2011)

First of all, I would like to tell you what ‘Margin Call’ means as a financial term. You would receive a margin call from a broker if one or more of the securities you had bought (with borrowed money) decreased in value. Then you would be forced either to deposit more money in the account or to sell off some of your assets. (Reference to Investopedia http://www.investopedia.com/terms/m/margincall.asp#axzz29dbRzQHI)

 

The movie tells about a famous financial company on Wall Street. For making more profits, the company downsizes. Eric, in this movie, is one of the victims fired during the downsizing process.

As he was working in the risk management division, he did a major analysis which was not yet completed at the time of his leave. The analysis is passed on to his protégé, Peter, who later finds out that certain financial products issued by the company have actually caused a large volume of debts.

The core message of this movie is ‘moral hazard’. The financial company is illustrated as having lost the sense of morality in financial market. Profits are the only ends for the company, while the others are not on the list of values that the company is pursuing. This message is directly spoken by the entrepreneur of the company, saying that “Be First, Smarter, or Cheat”.

 

Nobody blames that a private entity is driven by a profit motive. However, that does not equal to becoming a corporation not caring about its social responsibility in the economy. This point was also mentioned by the FSC’s Chairman as well, when he met the representatives from the major financial holding companies in Korea. Chairman Kim, at the meeting, said that “Do not take away umbrellas (financial support for households) on rainy days (times of economic downturns)”. By saying so, he asked the financial corporations to hold their social responsibilities in our economy. For more details, you can have a look at our other blog posts; https://financialservicescommission.wordpress.com/category/mr-kims-meeting/

Does this movie sound interesting and seem to be the right choice for this weekend? Why don’t watch it, and find out how ‘margin call’ appears in the movie? Have a good weekend!

Regards,
Frank

p.s. Movie Trailer is available at http://vimeo.com/45554855

FSC’s Stance at the Public Hearing for Parliamentary Inspection

Obviously fall has come and the weather is getting a little cold in Korea. Today, to warm you up a bit, I am introducing you the hottest news these days.

 

Have you ever heard of ‘parliamentary inspection of the administration’? Most of the countries around the world have introduced this system since a long time ago. This is for the purpose of checking up whether each government body under the administration is on its right track and serving the given role.

 

So what is being ‘inspected’? Let me tell you more closely about the inspection system. On October 8, the parliamentary inspection was held at the National Assembly, targeting the finance-related government entities. Of course, FSC is one of those entities, being subject to the inspection. So, from now on, I will focus on the talks made by FSC’s Chairman, Kim Seok-Dong, during the public gearing.

 

The main topic of the public hearing was on the issue of ‘house poor’. Do you guys know what a house poor is? I hope you do, as I wrote the article on this matter just a month ago! Just in case you haven’t read my article, I will briefly explain it. House poor is a term referring to the households having their own houses but regarded as being poor. Then, why are they poor even if they have their own houses? This is because those people purchase their houses with excessive mortgage loans at low interest rates, when the housing prices skyrocket.

 

 

Now, assuming that you have got an idea of house poor, let’s get back to our issue today. During the hearing, the political circles were strongly pushing their assertion on the house poor against the financial authorities. They urged that government should inject financial aid to save those house poor.

 

However, their argument was in contrary to Mr. Kim’s point of view. Mr. Kim made it clear that the problem of house poor is owed to the borrowers’ faults. It was those borrowers who purchased their houses with excessive mortgage loans at their own wills, even though there is some extent of fault made by monetary and financial institutions. Those institutions should have been more careful about managing the households’ loans. However, primarily, the problem of house poor should be solved by the banks and borrowers themselves. Accordingly, injecting government’s money would take place later on when the problem seems under the state of emergency. Regarding the current economic slow-down which appears to be protracted for a while, Mr. Kim promised that FSC along with other related bodies will try their best to correspond to the economic problems.

 

 

 

 

As written in my previous articles, the financial institutions in cooperation with banks and other related agencies are introducing new policies such as ‘trust and lease back’ program and ‘free work out policy’. These policies are closely designed to help households in need. I am expecting that the political circles and the administration cooperate to bring out the best and most efficient outgrowth for our economy.

 

New Capitalism, New Socio-economic Policy, and the New Roles of Capital Markets

Hi everyone!

Today I want to talk about the International Conference held on the 19^th of September, which was to celebrate the 15^th anniversary of Korea Capital Market Institute.

Frank already posted this in his Diary a while ago, mainly talking about the speech addressed by the Chairman of FSC, Kim Seok-Dong (https://financialservicescommission.wordpress.com/2012/09/20/900/).  Of course, my post won’t be an overlapping one. In my blog post, I would like to tell you the details of Mr. Kim’s speech which was composed of three sessions. Let’s look at the specifics of each session talked on that day!

Internatioanl Conference by Korea Capital Market Institute

The 1st session was about ‘New Capitalism’ addressing the function of capital and the role of capital market which are shaping the financial and social reformation. I was lucky to hear opinions by the high-profile speakers, Prof. George Serafeim from Havard university and Geoff Mulgan, the CEO of the National Endowment.

They pointed out three kinds of crises, the environmental, social and governmental, as the current worldwide problems. They criticised the reality of giant corporations blindly seeking short-term profits. FSC’s Chairman also talked about this regard, referring to ‘Corporate Social Responsibility (CSR)’ in a long-term basis.

Next session was about ‘Applying the Idea of Capital Market in our Society’ touching upon feasible solutions to deal with current economic problems. The sessions was a series of speeches by the guest speakers from academia, research institute and financial sector.

The speeches were converged into one core message emphasizing the rational and ethical cooperation between different sectors in our society. For this ends, investors are asked to focus on creating social and environmental values. Moreover, each of us, as a member of our society, should make an effort to constantly figure out the potential in our county and develop it.

 The last session was followed by a panel discussion about ‘New Capitalism, New Socio-economic Policy, and the New Roles of Capital Markets.’ The discussion was a good wrap-up of the whole sessions, letting the guests listen to various perspectives regarding the issue. Overall, I thought that the conference was really well organized, as it allowed me to draw a big picture of the issue. If I have another chance to visit such a conference, I will surely bring the story to this blog. See you then!

FSC’s Chairman at Retirement Strategy Forum

Hello, Friends!

This is Haerim. Today, I have a news about retirement and how to prepare for it. I am aware that the idea of retirement does not seem much related to many of you who are the young generation in the society. You might think that retirement plan is something that is too early to think about right now. However, without enough preparation, aging is to bring negative social and political effects. I am telling you this, as many people in our society are not ready to financially support their own livelihoods after the retirement. This might become your story. The concern seems even more serious, considering that the life expectancy is growing ever higher and higher while the period of economic activity and employment is limited or even shortened. Now, can you feel that it is extremely important to start thinking of the retirement plan?

On 12^th of September, ‘Retirement Strategy Forum 2012’ was held at Westin Chosun Hotel in Seoul. I had a chance to attend the forum and found out that this is something that I want to share with the readers of this blog. The forum examined and discussed the aging situation in Korea, and looked for possible solutions to prevent the elderly from experiencing poverty. The forum also focused on effective retirement strategies and suggested feasible policies to provide benefits for the seniors.

Mr. Kim Seok-Dong at the Forum delivering his address

The Chairman of Financial Services Commission, Kim Seok-Dong, delivered the opening ceremony speech. Mr. Kim, being aware of the 100-year life expectancy era, expressed his opinion about the retirement issue and suggested preparing plans for the future. Mr. Kim referred to a figure from the UN report, saying that “the average age across 31 countries is going to be over 80 years just in the near future. Aging society is experienced in many of our neighboring countries.”

The rapid aging in the society, of course, needs a large volume of welfare expenses, which is to let the economy shrink. The government is responsible for some extent of burdens to provide social pensions. The amount of pension is limited to less than 0.3 % of the total GDP for now, and it is expected to increase to 1.2% by 2030. These figures are pretty alarming to those people in their 40’s and 50’s who are about to worry about their lives after retirement.

So, what if we are not prepared enough for the 100-year life expectancy? As you can guess, a social conflict between generations, the old and the young, will happen. Foreseeing this probable conflict, the government has suggested few policy measures, ranging from benefits for the elderly to efforts of decreasing fertility rate. Last year, the government proposed a new policy for the 100-year life expectancy, and formed a task force preparing for the long-term social changes. Also, the government introduces some financial products about the pension system. The private pension policies were deregulated to expand private pension market replacing the public pension system. For the development of pension policies, it is emphasized that the role of capital market is really important. The government is thinking about reorganizing the structure of the capital market in a way which contributes to more effective pension system as well as encourages the public investment to put more emphasis on the pension system.

After attending the forum and listening to Mr. Kim’s address, I thought that every individual needs to build their own financial and economic capabilities for their retirement. Totally depending on the hands of government and public pension does not seem sufficient. It is now time to have a strategic planning for our lives ahead so as not to make your life burdensome after retirement.

[EVENT] ‘Financial Consultation for the Low-income households’

Good afternoon all.

If you have checked either our Facebook Page (http://www.facebook.com/financialservicescommission) or ‘Frank’s Calendar’ category of this blog, you would know that a big event is being held today. The event is ‘Financial Consultation for the Low-income households’, at Korea Chamber of Commerce and Industry.

The event was organized by Financial Services Commission (FSC) and Financial Supervisory Service (FSS) in cooperation with other related bodies. Lots of information and advice were given, covering the following areas; loan for low-income households, loan for small-merchant, credit recovery programs, employment, and welfare. About 900 people visited this event, showing their great interests particularly in ‘New Hope’ loans, low-interest rate loans, and pre-workout programs. The event brought up a variety of issues, letting the visitors receive a comprehensive set of consultation on each individual’s facing issues.

 

Giving the opening address at this event, the Chairman of FSC, Mr. Kim Seok-Dong, emphasized that “Financial support for the low-income households should be neither temporary nor superficial.” To enhance financial support for low-income households, he introduced that ‘Financial Call Center for Low-income Households’ is to come up at the end of this month. This is a part of FSC’s continuous efforts to support the low-income households. Considering that both quality and quantity of financial support has increased, FSC will now work towards establishing a supportive system which is more convenient and easily accessible by the low-income households. After having a direct consultation session with some visitors, Mr. Kim expressed that FSC’s policy measures will do the best to reflect those concerned by the visitors at today’s event.

[Sketch] Mr.Kim at the Bellwether Series 2012

Good afternoon guys.

Have you all enjoyed reading the special features; Mr. Kim’s Tour and Mr. Kim’s Meeting? I guess you might feel familiar with the Chairman Kim Seok-Dong, even though you haven’t had any contact with him! And I hope you are also getting more aware of the policy measures by FSC.

Today, I am posting a brief sketch of ‘The Bellwether Series: South Korea, 2012’ held this afternoon at Grand Hyatt Hotel, Seoul. Does anyone know what it is? The Bellwether Series is a conference held by The Economist magazine, for the purpose of discussing the current issues of economy and finance. This time, the topic was ‘Asia Finance: Victory by Default?’

Many professionals in economic and financial sectors were invited to the conference, including academia, public officers, economists and analysts. The conference was divided into several sections to encourage active communications between those invitees and thus to share various thoughts and opinions.

Then who’s going to address the Korea’s financial policies at the conference? Right, The FSC Chairman Kim Seok-Dong was scheduled to deliver the keynote speech. His keynote speech was about ‘Korea’s Financial Policies Ahead’. In his keynote speech, he mentioned the recent developments in financial sector and suggested future policy measures to promote a better financial system in Korea. Shortly after the keynote speech, Mr. Kim represented his perspectives about ‘Developments in South Korea’s financial sector and Key policies for the year ahead’ during the one-on-one interview session. Both the speech and interview helped the audience gain clearer insights into a policy direction being sought by Korean financial authorities. For those of you want to know the details about Mr. Kim’s keynote speech, please follow this link http://www.fsc.go.kr/downManager?bbsid=BBS0030&no=81412. A full script of his speech is available in pdf format. Also, follow-up post will be written very soon, telling you more about the conference!

 

Cheers, Frank

 

FSC This Week: Mon, Sep 3 ~ Fri, Sep 7

Good morning all 😀

The first week of September! Can we feel a little bit  that Fall is on its way now?
Here I am uploading the FSC’s schedule for this week.
Something special for this week is the conference held by The Economist.
FSC’s Chairman Kim Seok-Dong will be there to deliver a keynote speech!
I’ve got a chance to be there as well, so I will share the moment with you shortly after the conference.

Have a nice week 🙂