SK FSS, FSC Liquidity Management

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.
  • Feb. 2021 Consultation
  • On Feb. 24, 2021, SK FSC consulted on proposed measures for credit finance firms.
  • 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.

Regulators SK FSC; SK FSS
Entity Types Bank; Corp; MSB
Reference CP 2021-57, 2/24/2021; PR 2/21/2021
Functions Compliance; Financial; Legal; Reporting; Treasury
Countries South Korea
Products Banking; Corporate; Loan
Regions AP
Rule Type Proposed
Rule Date 2/21/2021
Effective Date 4/5/2021
Rule Id 98628
Linked to Rule :94715
Reg. Last Update 2/24/2021
Report Section International

Last substantive update on 02/24/2021