FSC Korea decided to extend certain interim deregulatory measures on net stable funding ratio, liquidity coverage ratio for banks, and net capital ratio for securities firms. These measures were introduced in April 2020 to continue to support the financial sector amid COVID-19 pandemic. FSC Korea also decided to extend the duration of the repayment support for small and medium enterprises (SMEs) and small merchants until March 31, 2021, due to growing concerns about COVID-19 pandemic. The regulator highlighted that COVID-19 emergency support measures and follow-up plans for the Korean New Deal fund were the key topics of discussions at the financial risk assessment meeting held in September 2020.
FSC Korea announced extension of the following interim deregulatory measures:
- Liquidity Coverage Ratio (LCR) for Banks—In April 2020, FSC Korea introduced a measure to lower the foreign currency liquidity coverage ratio from 80% to 70% by the end of September 2020. Similarly, FSC also decided to bring down the total liquidity coverage ratio from 100% to 85% by the end of September 2020. FSC is now extending the timeline of these measures from the end of September 2020 to end of March 2021.
- Net Capital Ratio for Securities Firms—FSC Korea decided to extend the measure to lower risk-weights when calculating securities firms’ net capital ratio for newly issued business loans from the end of September 2020 to the end of December 2020.
- Net Stable Funding Ratio—The measure related to granting 10%p more leeway (from 10%p to 20%p) in net stable funding ratio rule of Korea Development Bank has been extended from the end of June 2021 to the end of June 2022.
At the financial risk assessment meeting, the FSC Vice Chairman Sohn Byungdoo discussed the government announcement about a new round of emergency support for small merchants and SMEs, with the intention to help these entities with the impact of the COVID-19 resurgence. With regard to the second-round emergency loan program for small merchants, the government will double the individual loan cap from KRW 10 million to KRW 20 million and allow first-round support recipients to be eligible for second-round emergency loans as well. Accordingly, the first-round support recipients within KRW 30 million may apply for second-round emergency loans starting from September 23, 2020. For SMEs, the government will make available KRW 2.5 trillion in additional lending support through preferential credit loans and expand issuance of primary collateralized bond obligation available for each business entity and sector.
Vice Chairman also highlighted that the government will work on follow-up measures for launch of the Korean New Deal fund. To this end, a working group, led by the Korea Development Bank and Korea Growth Investment Corporation, will be set up to come up with operational guidelines and specific plans. In September, the government will establish a guideline for Korean New Deal investment, which will specifically designate investment targets and areas in Digital and Green New Deal initiatives.
- Press Release on Extension of Deregulatory Measures (PDF)
- Press Release on Extension of Repayment Support for SMEs (PDF)
- Press Release on Financial Risk Assessment Meeting (PDF)
Keywords: Asia Pacific, Korea, Banking, COVID-19, LCR, NSFR, Basel, Credit Risk, SME, Regulatory Capital, Liquidity Risk, Loan Repayment, FSC
Previous ArticleCFTC Publishes Rules for Swap Dealers and Major Swap Participants
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
The Federal Financial Supervisory Authority of Germany (BaFin) proposed to amend the “Capital Investment Conduct And Organization Ordinance” and issued a draft circular on the minimum resolvability requirements for resolution planning.
The European Banking Authority (EBA) proposed guidelines, for the resolution authorities, on the publication of the write-down and conversion and bail-in exchange mechanic, with the comment period ending on September 07, 2022.
The Financial Services Authority of Indonesia (OJK) is strengthening cooperation with the Australian Prudential Regulation Authority (APRA) and the Japanese Financial Services Agency (JFSA)
The European Parliament and the Council published Regulation 2022/868 on European data governance (Data Governance Act).
The European Banking Authority (EBA) published phase 2 of its reporting framework 3.2. The technical package supports the implementation of the updated reporting framework by providing standard specifications