Financial Authorities Implement Volatility Mitigation Measures... Exemption from Securities Firms' Obligation to Maintain Credit Loan Collateral Ratio

[Photo by Financial Services Commission]

[Asia Economy Reporter Lee Jung-yoon] Financial authorities will implement measures to ease stock market volatility, including exemption from the obligation to maintain securities firms' credit loan collateral ratios, relaxation of the daily purchase order quantity limit for listed companies' treasury stocks, and special inspections of short selling.

On the 1st, the Financial Services Commission (FSC) held a joint financial market inspection meeting with securities-related organizations immediately after the stock market closed, chaired by FSC Vice Chairman Kim So-young, to assess market conditions and decided to implement measures to ease stock market volatility.

First, from the 4th to September 30th, to alleviate concerns over a surge in forced liquidation of credit loans due to a sharp stock market decline, the obligation for securities firms to maintain credit loan collateral ratios will be exempted. Currently, securities firms are required to secure collateral of at least 140% when implementing credit loans and maintain the collateral ratio specified in their internal regulations, but considering market conditions, they will be allowed to flexibly determine the collateral maintenance ratio.

Additionally, from the 7th to October 6th, the daily purchase order quantity limit for listed companies' treasury stocks will be relaxed. To protect investors and maintain market stability, the Korea Exchange can approve the relaxation of the daily purchase order limit for treasury stocks with FSC approval. Accordingly, securities firms can directly acquire the entire number of shares for which acquisition reports have been filed, and acquisition through trusts is also possible within the total amount of trust assets.

Furthermore, the Financial Supervisory Service and the Korea Exchange will conduct a joint special inspection of short selling to examine the current status of short selling and whether there is any possibility of market disruption.

The FSC and the Financial Supervisory Service stated, "Going forward, through the joint financial market inspection meeting held every Friday, we will monitor the stock market and other financial market conditions and review and implement necessary measures to ease market volatility according to the contingency plan."