South Korea: emphasis on restructuring

Last Friday (June 19), the Financial Supervisory Service (FSS) in South Korea held the first 'FSS speaks' in Seoul to present an overview of the future direction of financial supervision in Korea to foreign participants, while also discussing key issues of common interest.

In his welcoming address, FSS governor Kim Jong Chang expressed his appreciation of the contribution that foreign companies made to Korea's financial sector development, and mentioned the importance of co-operation and responsibility as partners and members of Korea's financial industry.

The governor pointed out that it was too early to view current financial and economic conditions as wholly favourable, and cited Korea's experience that premature optimism on economic conditions stymied corporate restructuring efforts in the past. In this regard, the governor emphasised the need to build a solid base for growth through aggressive and meaningful restructuring.

In particular, the governor conveyed that the FSS will accelerate creditor-led restructuring of large companies, and stressed the need to press forward with restructuring efforts to ensure the long-term viability of financial and non-financial companies, however painful this might be in the short run.

The governor stated the FSS intends to take steps to facilitate prompt and efficient restructuring through the capital markets. To achieve these ends, the financial supervisory authorities are working towards measures that would allow private equity funds to acquire assets such as real estate and non-performing loans, in addition to controlling equity stakes. He also mentioned allowing private equity funds to borrow directly from financial institutions and qualifying for certain tax incentives.

The governor said that although some attribute the global financial crisis to regulatory failures and argue against further deregulation, FSS efforts will continue to improve the regulatory environment by enhancing international harmonisation and promoting fair competition for domestic and foreign financial firms.

The meetings will now be held on a regular basis every year.

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