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Financial Stability Board’s strong outreach in Global Financial resilience is expected

Korea will be the first emerging economy to host the Financial Stability Board meeting on the 20th of October, 2010. In its third plenary meeting in Basel, Switzerland, the board decided to have the fourth event in Seoul before the G20 summit. Since Korea is also the chair country of upcoming G20 forum, a Financial Services Commission official said that Korea will be able to take the lead in reforming the financial framework.

 The Financial Stability Board (FSB) was established in April 2009 as the successor to the Financial Stability Forum (FSF). The FSF was founded in 1999 by the G7 Finance Ministers and Central Bank Governors to promote stability in the international financial system. Yet, among the leaders of G20 countries, there had been a broad consensus on stronger institutional ground with an expanded membership. And this movement resulted in the creation of FSB, an extended form of FSF. In an attempt to strengthen its effectiveness, financial authorities from the G20 nations, international financial institutions and several global standard setting bodies joined the FSB as the new members. The FSB performs the initiative role to develop and implement strong regulatory, supervisory and other policies in pursuit of financial stability. 

 As a member of FSB, Korea, especially the Bank of Korea and Financial Services Commission came to have an even more crucial role. FSC is involved in FSB Steering Committee which provides operational guidance and sets the agenda in general. So FSC has been trying to boost regular meetings among the FSB leaders and to continue active discussions. One of them was the financial reform conference called “Envisioning a New Financial System: An Emerging Market Perspective” which Dong-Soo Chin, the chairman of FSC held on Sep.2 in Seoul. The conference called attention to the increasing impact of emerging markets to the world economy, paving the way for more balanced participation of emerging countries in the global finance sector.

 

 

(Sep.2th Korea-FSB Financial Reform Conference, taken from Herald Media)

In fact, a decade ago, Korea felt the tremendous pain due to 1997 Asian Financial Crisis. In the wake of 1997 crisis, Korea had no choice but to strongly restructure corporate and financial field, dealing with long-neglected structural problems hidden behind rapid growth. Passing a time of economic revitalization and renewal, Korea learned valuable lessons and now, it is positioned as one of the competitive global economies. This unique experience enables Korea to serve as a potential broker that can bridge the gap between the emerging and the advanced markets.

 Sharing Korea’s pre-experience and know-how, particularly on financial regulation reform, perspectives of emerging economies can be brought into the global reform process. Many experts admit that Asia will be the engine of future global economic growth. In order to make the emerging markets less vulnerable to external shocks, global financial safety net is strongly required and in this sense, international standards will help them free from poor financial infrastructure.

 Currently, a lot of critical financial agenda are on the FSB table. For instance, to enhance transparency among market participants, prudent oversight of capital, liquidity, leverage and risk management is necessary. Along with Basel III, which delineates the rate of bank capital buffer, Bank Levy is considered a possible measure to increase banks’ crisis management capability, although the feasibility of the proposal still remains to be seen. Furthermore, efforts to reduce systemic risk generated by interconnectedness among financial institutions worldwide led to global coordination to devise measures that cover broader range of financial markets and instruments. Systemically important financial institutions will be strictly monitored and the size of “shadow banking” such as hedge funds and off-balance sheet entities will be shrunk. New international controlling standards on hedge funds will emerge and Central Counter Parties will be installed for over-the-counter (OTC) derivatives. In addition, more standardized forms of OTC products will be used and regulation on credit rating agencies will be intensified. 

                                                                                               (Picture from the Korea Times)

The FSB will take up a vital role of making these regulatory reform recommendations to the G20 summit. Once a certain regulatory reform is approved and adopted through the Financial Stability Board and G20 forum, those international standards are to be implemented by each country. Throughout this highly critical process, Korea is anticipated to undertake a number of initiatives to assess each regulation across sectors, identify regulatory gaps and examine related issues, and reflect emerging Asian market perspective. Gearing up for the G20 summit, FSB activities are an important step in facilitating G20 reform agenda. Everyone hopes to see successful outcome from the impending FSB meeting in Seoul.

Lee, Ki Yeon (kiyeon.m.lee@gmail.com)

What does the FSC do???

Many people are confused about the difference between the FSC and the FSS (the Financial Services Commission and the Financial Supervisory Services).Financial Services Commission

“Aren’t they the same thing?” you ask. 
“No, they are not.”

The two words, “commission” and “supervisory” should give you a hint. 

The FSC (commission) is a government entity where all the financial policies and regulations are formed. It is the main regulating body that is able to license financial institutions and have the ability to create and revise finance related laws.

35-08-2-27-2The FSS (supervisory), on the other hand, is a non-government entity that has been given authority by the FSC to oversee and supervise the financial institutions.

To understand more clearly, you need to know the background of their establishment.

 

The following is an excerpt from the FSC; we’ve left out the extensive details and made it as simple as possible:

Korea‘s financial supervision structure underwent a major change on February 29, 2008, when the Financial Supervisory Commission was integrated with the Financial Policy Bureau of the former Ministry of Finance and Economy (Ministry of Strategy and Finance) to become the Financial Services Commission. The integration was envisioned as a more effective institutional arrangement that enables the government to perform its oversight with greater efficiency and consistency and at the same time better respond to the market.

As Korea‘s principal supervisory authority, the new FSC is given broad statutory mandate to carry out three key functions:

  1. Financial policy formulation
  2. Financial institution and market oversight
  3. Anti-money laundering

The FSC thus has the statutory authority to draft and amend financial laws and regulations and issue regulatory licenses to financial institutions. In addition, the FSC oversees cross-border matters such as supervising foreign exchange transactions conducted by financial institutions to ensure their financial soundness.

In respect of anti-money laundering, the Korea Financial Intelligence Unit (KoFIU), which was also integrated into the FSC as part of the reorganization, leads the government‘s anti-money laundering and counter-terrorism financing efforts.

Under the reorganization, the Financial Supervisory Services (FSS) acts as the executive supervisor for the FSC and principally carries out examination of financial institutions along with enforcement and other oversight activities as directed or charged by the FSC. Unlike the FSC, the FSS is staffed by non-civil servants and headed by the Governor.ci_img

The FSC is led by 9 commissioners

  • The Chairman is appointed by the President with the recommendation of the Prime Minister.
  • The Vice Chairman is appointed by the President with the recommendation of the Chairman of the FSC and concurrently holds the position of the Chairman of the Securities Futures Commission (SFC) within the FSC.
  • 2 standing commissioners are appointed with the recommendation of the Chairman of the FSC.
  • Of the 5 non-standing commissioners 
    • Vice-Minister of the Ministry of Strategy and Finance
    • Governor of the Financial Supervisory Service
    • Deputy Governor of the Bank of Korea
    • President of the Korea Deposit Insurance Corporation
    • The remaining non-standing commissioner is appointed with the recommendation of the Chairman of the Korea Chamber of Commerce and Industry, who recommends an industry representative.

These 9 commissioners have the authority to deliberate and decide on all policy matters relating to the inspection and supervision of financial institutions and the securities and futures markets. The FSC also has the authority to issue and revoke licenses from financial institutions.
Legislation relating to the financial sector is drafted and submitted to the National Assembly by the FSC.

Who are you, Fin Pol?

Hello, Welcome to Fin Pol!

need helpFin Pol is a new name  for the english blog operated by Financial Services Commission. Fin Pol is the shorten name of ‘Financial Policy’ which will serve as a means of communication to inform the recent Korean financial issues.  Fin Pol will let you know what is going on in Korean Economic situation and tell you more about how financial institute is dealing with this issue.
We surely welcome your comments and will get back to your  curiousity if you want you know further.  Indeed we are looking forward to sharing ideas with you. 

Welcome to Finpol, you Bloggers!

Who is the Financial Services Commission?

                                                                       Introduction

ci_imgThe Financial Services Commission (FSC) has been established for the purpose of protecting the integration of Korea’s financial markets by promoting sound credit system and fair business practices. To this end, the FSC serves as a consolidated policy making body for all matters pertaining to supervision of the financial industry as a whole. To raise the efficiency, the posts of the FSC Chairman and the FSS Governor were separated on March 2008 for clear distinction between policy making and execution of financial market supervision.

Main Responsibilities
 
 The FSC comprises nine commissioners including the Chairman, the Vice Chairman, the Vice Minister of Strategy and Finance, the Deputy Governor of the Bank of Korea, the President of the Korea Deposit Insurance Corporation, the Governor of the Financial Services Commission, two members recommended by the Chairman of the FSC, and one recommended by the Chairman of the Korea Chamber of Commerce and Industry. The Chairman, appointed by the President of the Republic of Korea, presides over the FSC meetings and exercises control over general affairs. The resolutions of the FSC meetings are adopted upon the concurrence of a majority of those present. The followings are primary functions of the FSC.

  • Deliberation and Resolution of Important Financial Issues
    • Issues concerning the advancement of financial industry, the stability of financial markets, the promotion of a sound credit system and fair trading practices
  • Guidance and Supervision of the Financial Supervisory Services
    • Matters pertaining to the guidance and supervision of the FSS such as amendment  of the Articles of incorporation and approval of budget and financial statements