"Additional Regulation if Voluntary Management Falls Short": FSS Urges Securities Firms to Observe the '15%' Credit Financing Limit

Meeting Held With Securities Firms' CROs

The Financial Supervisory Service (FSS) urged securities firms to faithfully implement its “voluntary management of credit financing” plan, which calls for keeping the share of credit financing for any individual stock at no more than 15% of each firm's total credit financing balance. The FSS said firms should proactively manage credit financing with investor protection as their top priority, even before completing the development of IT systems or incorporating the measures into internal rules. It also warned that additional regulatory measures could be introduced if voluntary management proves inadequate.

The FSS made the remarks at a meeting of chief risk officers (CROs) from securities firms, chaired by Assistant Governor Seo Jaewan, at the Korea Financial Investment Association in Yeouido on the morning of October 27. The meeting was attended by risk management executives from 10 comprehensive financial investment business operators, as well as officials from the FSS and the association.

At the meeting, Assistant Governor Seo emphasized that the securities industry should respond actively to ensure the recently announced measures to strengthen voluntary management of credit financing take root in the field. Under the measures, securities firms designated as comprehensive financial investment business operators are to manage their credit extension volume voluntarily, keeping it within 90% of their equity capital starting this month. If credit financing for any one stock exceeds 15% of a firm's total, the firm must reduce that share through voluntary measures, such as lowering individual limits or raising the required margin rate.

“It is encouraging that measures to strengthen voluntary management of credit financing have been put in place, but this is a time when it is important to respond promptly to market conditions,” he said. “Please manage credit financing proactively, with investor protection as your top priority, even before the IT systems are developed and the measures are incorporated into internal rules.” He also expressed disappointment that the industry's management of credit financing had not been sufficient since the meeting of securities firms' CROs on June 24, 2026. “Firms need to move away from mechanical, uniform risk management and proactively manage credit financing by taking a comprehensive view of market conditions and considering the soundness of both the company and its investors,” he emphasized.

Assistant Governor Seo also said, “Additional regulatory measures may be introduced if voluntary management is inadequate.” He urged firms to “refer to one another's practices and devise and implement proactive, effective management measures, as excessive growth in outstanding credit financing could lead to large-scale forced selling if stock prices plunge, amplifying market shocks and undermining market confidence.”

The meeting also featured examples of how securities firms manage credit financing. Some firms lowered stock classifications across all domestic stocks to reduce credit financing limits. Others cut the standard limit for stocks with high concentrations of credit financing from KRW 300 million to KRW 200 million and restricted extensions of increased limits. The meeting also discussed cases in which firms used robotic process automation (RPA) to monitor credit financing and stocks experiencing sharp intraday price swings in real time, and immediately took measures such as downgrading stock ratings and restricting credit financing when limits were exceeded or unusual signs emerged.

The CROs from comprehensive financial investment business operators who attended the meeting said they recognized the need to strengthen credit financing management and would actively cooperate with the voluntary management measures. An FSS official said, “Together with the association, we plan to support effective management of securities firms' overall credit extension limits and the share of credit financing for each stock.”

This content was produced with the assistance of AI translation services.