Resource Library

Author: Yong-Won Kim

This second edition highlights the key similarities and differences between IFRS and the current existing Korean GAAP before the mandatory adoption of IFRS. We hope it is of use to those who would like a broad understanding of the current K GAAP before the convergence.

Keywords: IFRS, Korea, GAAP, foreign currency translation, equity, assets, revenue recognition

Author: Hee Chun Chung

Following the collapse of Lehman Brothers in September 2008, the financial and foreign exchange markets in Korea were thrown into turmoil. The real economy also shrank rapidly under the impact of the international financial market unrest and worldwide recession.” The Bank of Korea’s response, highlighted in this paper, has been to reduce the base rate, support the expansion of banks’ credit supply capacity, and work to stabilize the foreign exchange market.

Author: various

Journal articles in this volume include: Efficiency of Korean New Rehabilitation Proceeding, Efficiency of Korean New Rehabilitation Proceeding, A Study on the Target of Avoidance in Korean Bankruptcy Law: When There is No Debtor’s Action, Special Treatment of Derivatives in Korean Insolvency Proceedings: Comparison with the United States and Japan, The Comparative Status of Secured Creditors in the Bankruptcy Procedure and Its Implication for the Financial Transaction, The Non-discrimination Clause and Credit Counseling :What Elements of U.S. Personal Bankruptcy System should be Introduced to Korea, and The Hotchpot Rule in Korean Insolvency Proceedings.

Keywords: bankrupcy law, derivatives, insolvency, secured creditors, credit counseling, debtor, CRL

Author: Meral Karasulu

Korean household debt has reached 148 percent of disposable income, high by emerging market standards. Most of this debt remains at variable rates, shifting the interest rate risk from better diversified financial institutions to households and increasing their sensitivity to macroeconomic shocks. This paper examines the sources of, and risks from, household debt by employing stress tests on household level panel data. Results suggest that a 100–300 bps increase in interest rates could increase distressed household debt household debt by 8½−17 percentage points (ppt). A drop in real estate prices by 10−30 percent could add another 4 ppt to distressed debt. Ongoing transition to amortizing mortgages in 2008−09 presents additional challenges as interest payments on debt are likely to increase further.

Keywords: household debt, stress tests, indebtedness, consumption, housing, trends, DSTI

Author: Choongsoo Kim

"My remarks today will focus on the changes in the global financial and economic landscape,and I will also offer some thoughts on the challenges now facing the Korean economy."

Keywords: Korea, Economy, global financial markets, price stability, Bank of Korea, policies, macroeconomic, monetary

Author: Korean Investment and Securities

February industrial activities in production, consumption and investment appeared generally weak. Industrial activity in February underperformed the market’s expectations due to economic–extrinsic factors rather than an actual economic slowdown. The widening political unrest in the MENA region and the disaster in Japan have yet to have an impact on domestic economic indicators.

Keywords: Korea, Macroeconomy, Recession, Recovery

Author: Financial Supervisory Service

In light of the ongoing distress in the financial markets amid a deepening worldwide recession, we see strengthening the safety and the soundness of financial institutions and the financial system as a priority. At the same time, we are stressing our core oversight and enforcement responsibilities and contemplating what our post-crisis priorities should be. So, in addition to stepping up our efforts on improving the soundness of financial service firms and the overall market competitiveness, we are looking at a number of post-crisis issues that financial markets will likely face. To reiterate, we intend to carry out our future tasks on three parallel tracks: responding to the global financial crisis, stressing our core oversight and enforcement responsibilities, and formulating post-crisis agenda.

Keywords: Korea, Regulation, Macroeconomy, crisis, FSS, organizational, income, securities, capital, delinquency, overseas, subsidiaries

Author: Hee Chun Chung

"Following the collapse of Lehman Brothers in September 2008, the financial and foreign exchange markets in Korea were thrown into turmoil. The real economy also shrank rapidly under the impact of the international financial market unrest and worldwide recession. The Korean won (KRW) plummeted against major currencies because of the outflow of foreigners’ investment funds and the deterioration of foreign currency borrowing conditions for domestic banks."

Keywords: collapse, crisis, global financial crisis, foreign exchange, KRW, Bank of Korea, liquidity, exchange markets

Author: Mr Ben S Bernanke

The global economic and financial crisis caused hardship around the world and tested central banks in both advanced and emerging market economies. Like their counterparts in the advanced economies, central banks in several key emerging market countries responded to the crisis by sharply lowering policy rates and by undertaking a variety of unconventional policy measures to support their economies. The Bank of Korea was among the first of the emerging market central banks to respond by reducing its policy rate by a cumulative 325 basis points between October 2008 and February 2009. It also took effective steps to increase the liquidity available to the Korean financial system.

Keywords: global financial crisis, economic, Bank of Korea, emerging market economies, liquidity, currency, reform

Author: Financial Supervisory Service

October 14, 2010 Weekly Newsletter for Financial Supervisory Services. Includes articles titled: On listed companies to make financial disclosures in English, Upgraded credit exposure monitoring system, FSS Eases Restrictions on Investment into Mutual Fund by Financial Institutions, ITMCs Post Rising Sales of Beneficiary Certificates in 2000, and Short-term Foreign Debts Decrease First Time since Sept. 1999.

Keywords: FSS, Mutual Funds, Credit exposures, foreign debts, Investments

Author: Jae-Youn Lee

Deposit insurance schemes must retain credibility in order to achieve the desired goals of protecting small depositors and enhancing fiancial system stability. Although Korea’s level of insurance coverage is in line with global standards, there is less confidence in the speed at which depositors in insolvent financial companies can resume transactions. Although the period of stays on deposit withdrawals for savings banks where there has been a suspension of business has been shortened, it is still longer than globally recommended standards.

Keywords: FSS, KDIC, deposit insurance, deposit payments, insolvency

Author: Winston T. H. Koh

Comments on a “chapter that examines the events surrounding the rapid expansion of household debt in South Korea since the foreign exchange crisis that Korea suffered in 1997, which occurred as part of the Asian Financial Crisis. A specific focus of the chapter is to investigate the developments in the housing loan market and the credit card crisis in 2003, and the government response to address the issues in both the housing loan market and the credit card industry. The chapter argues that the crisis stems from regulatory failure, and with timely and proper regulatory actions, much of the difficulties that occurred in the credit card market would have been alleviated or averted"

Keywords: household debt, debt, foreign exchange crisis, GDP, housing market, mortgage loans, social welfare

Author: Sokmo Yun and Soyeon Hong

“As the news that FHCs will acquire troubled MSBs, coincided with the change of FSC governor, the market seems to worry that regulatory risks might loom again. As such, we did a reality check on potential regulatory risks. We believe “moral suasion” (as is shown by the recent government jawboning of banks to acquire troubled MSBs) is the most likely fallout ahead of the presidential election scheduled in December 2012. Like the recent MSB case, we believe this moral suasion could be bad for sentiment towards banks, but the actual impact on bank fundamentals should be limited. We believe further moral suasion might loom in: (1) potential margin pressure from government jawboning of banks to supply credit at lower interest rates and (2) potential window guidance on the bad practice of banks extending the grace period for mortgage loans. “

Keywords: moral suasion, regulatory, risk, FHC, bank tax, foreign currency, privatisation, IFRS

Author: Jae-Ha Park (KIF)

The need is growing for preemptive government policies to countervail the rising tide of economic uncertainties in Korea and overseas.   Some of the prevailing uncertainties overseas include global inflation, signs of an economic slowdown in the major developed countries, and the fiscal crisis in the euro zone.   Domestically, sources of instability include rising prices, household debt, the distress in savings banks, and the heightened volatility of capital inflows.   To stablity prices and address financial market uncertainties, the top priority of the conomic policy agenda for the second-half of 2011 should be to maintain sability of all areas of the economy through gradual raising of interest reates, regulating liquidity and preventing financial institutions from engaging in excessive expansionary competition, and reorganizing distressed savings banks.

Keywords: Korea, macroeconomy, inflation, interest rates, economic policy

Author: Kang Seung-Woo

Korean credit card companies have aggressively pushed loan services as new revenue sources.But the increasing number of loans may end up as bad to the detriment of users, which can further aggravate household debt, market watchers say.According to the Financial Supervisory Service (FSS) and the card industry Monday, local credit card issuers lent a collective 24.9 trillion won ($22.16 billion) in 2010, up 38.3 percent from the preceding year.

Keywords: credit cards, debt, household debt, consumer, FSS, Korea, over-indebtedness

Author: Hyoungsik Noh

Following the global financial crisis triggered by the US subprime mortgage meltdown, the US, EU, and UK have been drawing up legislation to instill responsible lending practices. In Korea, best practices for mortgage loans emphasize responsible practices during the loan review, but these also need to be assured over the course of the loan. Korea should move towards systematic lending rules for the entire financial sector and establish responsible lending practices in order to prevent excessive devt, ensure the soundness of lenders, and protect loan consumers.

Keywords: Global financial crisis, lending, lending practices, loans, responsible lending, subprime, ability to pay

Author: Tsutsumi, M., R. S. Jones and T. F. Cargill

"The intensification of the global financial crisis in late 2008 led to large capital outflows from Korea and turmoil in its capital markets. However, the prompt response by the government and the central bank stabilised Korea’s financial sector in early 2009 and recovery followed relatively quickly. In contrast to 1997, financial institutions have overcome the crisis without significant damage. Increased assistance for small and medium-sized enterprises has played a large role in overcoming the crisis, but should be scaled back to avoid supporting non-viable firms and to expand banks’ capacity for risk appraisal, leading to a more market-oriented financial system. As a small open economy, Korea also needs to reduce its vulnerability to sudden capital outflows. In addition, it is important to use prudential regulations effectively to limit the risk of mortgage lending, upgrade the corporate governance of financial institutions and develop securitisation by ensuring transparency."

Keywords: Bank of Korea, securitisation, capital injections, Korean financial sector, global financial crisis, credit rating agencies, capital markets, Basel II, short-term foreign debt, FSS