Non-face-to-face Monetary Trust Contracts Allowed Using 'Yeongsangtonghwa' Video Calls

[Asia Economy Reporter Park Jihwan] Non-face-to-face contracts for specific money trusts using video calls will be permitted. Additionally, conducting stress tests for money market fund (MMF) managers will be mandatory. Asset soundness classification standards and net capital ratio (NCR) for business operations will also be strengthened to manage the soundness of real estate trust companies.

The Financial Services Commission announced on the 18th during its regular meeting that it had approved amendments to the financial investment business regulations containing these measures. This regulatory amendment is a follow-up to the "Field Innovation-Type Asset Management Industry Regulatory Improvement" plan announced in March last year. It will take effect from April 1.

According to the amendment, non-face-to-face contracts for specific money trusts and changes in management methods will be allowed going forward. The obligation to explain will be fulfilled to the trustor via video calls, and the trustor will be able to directly enter the types, items, proportions, and risk levels of the assets to be managed online. Currently, discretionary investment businesses can conduct non-face-to-face contracts if they fulfill the obligation to explain via video calls, but trust businesses are prohibited from doing so; this amendment aims to ensure fairness among different business sectors.

The regulatory amendment also includes measures to strengthen MMF soundness by mandating stress tests for collective investment managers operating MMFs and introducing a market value evaluation method for MMFs. Considering the preparation period for asset management companies, the stress test is scheduled to be first implemented in the first half of next year based on the end of this year.

Corporate-type MMFs with a proportion of stable assets such as government bonds and monetary stabilization bonds at 30% or less will adopt a market value evaluation method instead of the current book value evaluation method, thereby enhancing risk management. From April 1, 2022, the weighted average maturity limit will be relaxed from 75 days to 120 days.

Measures to improve the soundness of real estate trusts are also included. These concern asset soundness classification standards and the net capital ratio. First, soundness classification standards based on actual sales rates at different points after pre-sale will be established, and for projects with low sales rates, risk management departments such as risk management divisions will verify the appropriateness of estimated recovery values.

Additionally, when calculating the NCR, the deduction ratio of capital will be applied differentially according to soundness. This means that the risk amount due to potential payment risks of responsibility completion guarantee-type land trusts can be calculated and reflected in the NCR. Responsibility completion guarantee-type land trusts refer to cases where the trust company bears the obligation to complete construction if the contractor fails to complete the building within the deadline due to bankruptcy or other reasons.

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