By Kim Sung-jin
Staff Reporter


The government pledged to drastically relax or remove unnecessary regulations hampering financial firms’ businesses to foster a buyer’s market buyer-oriented.

The Ministry of Finance and Economy (MOFE) said Tuesday that it will overhaul financial regulations. It will seek legislation on the integration of the capital market. The law will set the ground for the abolishing rules barring financial services firms from offering different types of financial services and take down the boundaries between financial market segments or regulatory entry barriers.

The ministry said it would soften or remove 101 regulations under 19 financial market-related laws by as early as the first half of next year.

``Despite continuous financial regulatory reform efforts, outmoded regulations that have lost their validity due to changes in the financial market environment,’’ Koh Kwang-hee, a MOFE official said.

``Also, the previous approach taken by the regulatory reform drive based on the compartmentalized financial sectors has revealed the limit of its effectiveness and caused some impartiality among firms in different financial sectors,’’ Koh said.

The latest push for financial regulatory reform also follows a flood of complaints from financial firms on the government’s post-regulation principle, where the regulation continued to fail to keep up with the rapid pace of the financial market’s development boosted by information technology.

It will revise 639 outdated rules in the long-term, with a plan to redress 101 of the 639 regulations as the first phase of the reform project.

Another distinct change in the proposed regulatory reform is that banks will be able to trade derivatives whose underlying assets will include raw material, such as steel, crude oil and grain, in addition to financial derivatives including interest and securities.

The role of banks is expected to grow much larger when the revised regulation takes effect, as banks are allowed to deal only with financial derivatives. Banks will also be able to more efficiently hedge risks with the raw material-based derivatives.

In a related move, the entry requirement for a special purpose company (SPC), now set at 10 million won ($9,620), will be lowered. A company usually sets up an SPC when issuing ABS in order to hand over its specific assets to be securitized to the special entity, thus isolating any financial risks.

sjkim@koreatimes.co.kr