FSC Plans Rollback of Temporarily Eased Financial Regulations Starting January 2025

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FSC Holds Meeting and Discusses Plans for Operating Temporarily Eased Financial Regulations Nov 29, 2024

The Financial Services Commission held a meeting with related authorities and industry organizations on November 29 to discuss plans for operating temporarily eased regulations in financial sectors. At today’s meeting, authorities discussed plans for the operation of the eased regulatory measures in the banking, financial investment, specialized credit finance, and savings banks sectors that are currently set to expire at the end of December this year.

Given that an improvement in money market conditions is expected in the future and that all financial sectors’ liquidity ratios as of September 2024 stood above the normal regulatory levels, officials at today’s meeting shared the same view on the need to gradually normalize the eased regulatory measures on financial companies’ liquidity requirements, which have been introduced at the time of market instability.

In this regard, the banking sector’s LCR (liquidity coverage ratio) requirement currently standing at 97.5 percent will be rolled back to 100 percent from January 1, 2025, and for financial investment businesses, the cap on the amount of bonds (issued by specialized credit finance businesses) that can be included when hedging risks associated with derivatives-linked securities (DLS) will also be downsized to 8 percent as scheduled from January 1, 2025.

Meanwhile, the loan-to-deposit ratio of savings banks and the KRW-based currency liquidity ratio of specialized credit finance businesses will be gradually rolled back in stages. From January to June 2025, savings banks will be subject to a loan-to-deposit ratio of 105 percent (down 5 percentage points from 110 percent currently) , and specialized credit finance businesses will be subject to a KRW-based currency liquidity ratio of 95 percent (up 5 percentage points from 90 percent currently) during the same period. In the second quarter of 2025, authorities will decide on whether to extend the period or completely roll back the eased regulatory measures after considering market conditions and the soundness and liquidity situation of each financial sector.

As the easing of liquidity requirements has been carried out under exceptional market circumstances on a temporary basis, and since financial companies now demonstrate adequate levels of liquidity and soundness conditions, authorities will continue to work on a normalization of regulations to ensure sound management of financial companies.

• Please refer to the attached PDF for details.

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