Chairman Yim Jong-yong of the Financial Services Commission (FSC) said recently that the FSC will push 18 detailed tasks under three major strategies, divided into six core sectors.
The first is to change the FSC’s role from coach to judge in the belief that the financial authorities should change first, in order to successfully lead the reform of the financial industry. Superb examples of financial supervision, inspection and regulations in advanced countries will be benchmarked to reform the entire process of the workings of financial supervision and the market. Both the FSC and FSS will launch a joint team to inspect financial reform as it progresses by seeking out various problems in regulations and practices and solving them. Reforms that are already made included the virtual suspension of practices to ask for confirmation and slapping penalties on those who don’t go along with the demands. The sanction on individuals will be switched to sanctions on organizations. They will be monetary sanctions. Limits on organizations that were sanctioned to start new businesses will be touched up, too.
Chairman Yim also said he will remove all regulatory barriers to allow the establishment of Internet banks. Regulations will also be lifted that require face-to-face meetings with borrowers for confirmation before loans can be granted. He made the statement at a seminar on the establishment of Korean-type Internet banks on April 16 at the Korea Federation of Banks in Myung-dong, Seoul. Yim said the move to set up professional Internet banks will be possible this time, unlike in 2002 and 2008, when the moves to set up those banks failed. He said online banking service will fly high soon due to reforms in the financial regulations and systems, paving the way for the new kind of banks in Korea.
Strengthened will be the capacities of the financial circles, internal controls and consumer protection to build a culture in which everyone will take the responsibility for his or her actions. A financial structure centered on loan provisions will be changed to help technology finance grow and spur the capital market activity.
The financial authorities will ease regulations on the private funds systems and venture capital investment after investigating technology finance and supplement it so that enough funds will be available.
Also planned: The creation of an ecological system for fintech against the fusion of finance and IT; the establishment of the Fintech Support Center for cooperation and communication among the government, the financial sector and the IT; the categorization of the financial regulations for the growth of the financial industry in autonomous and competitive ways.
The FSC will guide the banks to expand loans with 10 percent annual interest rates so that they would be the most popular loans in the banking community, as the FSC will not set an upper limit on bank loans.
The banks have been complaining that the 12 percent upper limit on loans has been keeping them from disbursing loans with higher interest rates.
On March 27, Chairman Yim told the managers of strategy and credit at nationwide commercial banks that financial authorities have not imposed the upper limit on loan interest rates and will not for the time being. He met them at the weekly Friday Meeting, where financial authorities and managers in charge of credit at commercial banks meet to talk about banking issues. The credit managers present at the meeting made proposals on bank credit matters, with many complaints over verbal guidance by the financial authorities, unclear regulations and financial regulations that are out of date.
The FSC and FSS will make available the cases of defaults on loans that are not excusable so that banks could be able to go about making loans without the fear of being held responsible if the loans default.
On a complaint that banks cannot diversify their earnings due to their inability to collect fees on consultancy services, FSC officials said if the banks register themselves as investment consultants, they can collect fees on their investment consultancy. Shinhan Bank, in fact, has been collecting fees on its consultancy on real estate investments to its customers.
As to a complaint that there have been too many cases of “breaking” in the regulations at Private Banking Centers, the officials said FSC has been moving toward exempting some financial products from the “breaking” regulations in consideration of the special features of the Private Banking Centers.
As of end-September 2014, outstanding household credit totaled 1,060.3 trillion won, with household loans totaling 1,002.9 trillion won and 1 2. The ratio of household debt to income in Korea in the US(as of 2012) and 135.7% of household financial assets to liabilities ratio in Spain and other major OECD countries have been rising.
The quality of household mortgage loans has improved proportionally and fully-amortized loans steadily increasing.
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