On Feb. 21, SK FSS issued measures for credit finance firms.
SK FSS, FSC introduced measures to strengthen liquidity management of companies.
Follows Jan. 2021 SK FSC proposed amendments to enforcement decree, see #94715.
Liquidity
Establish best practices for risk management by periodically measuring the liquidity risk of specialized credit finance companies, and reporting to the board of directors.
Liquidity risk management best practices will be introduced as the model standard for specialized credit finance companies, and will be implemented in April of this year.
Reinforce liquidity risk management disclosure so that stakeholders such as consumers and investors can easily understand the liquidity situation of individual companies.
Expand disclosure scope to a level similar to banks, including qualitative indicators.
After analyzing the Covid situation, one quantitative indicator that was insufficiently effective was deleted, and two indicators with high significance were newly added.
Adjust the leverage limit for non-card companies, as non-card companies with liquidity problems in Mar. 2020 were found to have higher leverage limits than card companies.
To resolve such problems, gradually reduce the leverage limit of non-card companies.
Effectiveness
Adjustment of leverage limit of non-card companies will be announced in Feb. 2021.
Adjusted the leverage limit of non-card credit finance companies from 10 to 8 times.
If the company has paid dividends of 30% or more of net income for the previous fiscal year, the limit on total assets to equity capital is further adjusted to 7 times.
Revised provisions will be effective from Jan. 1, 2022; but during transition period from Jan. 1, 2022 to Dec. 31, 2024, the leverage limit is allowed to be relaxed.
Opinions on the matter should be submitted by Apr. 5, 2021.
