After Stock Market Plunge, FSS Temporarily Waives Collateral Ratio Requirement for 'Debt-Financed Investing'
For the next three months, securities companies will be exempt from the requirement to maintain collateral ratios for credit extensions.
The Financial Supervisory Service (FSS) announced on November 8 that it would implement the exemption from November 9 through January 31 next year by issuing a no-action letter. The measure is intended to reduce the risk of forced selling of securities-backed loans following a sharp market decline, in line with the emergency market situation review meeting held on November 6.
Under the measure, securities companies will be able to set collateral maintenance ratios based on borrowers and market conditions. Previously, when extending margin loans, securities companies had to secure collateral of at least 140% and require investors to provide additional collateral if the ratio fell below the level set by the company.
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An FSS official said, "We will monitor market conditions and work with relevant institutions to help ease stock market volatility."
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