Implementation pushed from January to July; firms meeting financial criteria can move to Konex without cleanup trading

Financial health of vulnerable borrowers, mutual finance sector deemed sound for now

The government has decided to delay by six months a planned tightening of market capitalization thresholds for delisting on the Kospi and Kosdaq, citing the need to allow time for market recovery.

Companies that meet certain financial requirements will also be allowed to transfer their listings to the Konex market without going through cleanup trading, softening the blow of a potential delisting.

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol presides over a market conditions review meeting at the Korea Federation of Banks building in Jung-gu, Seoul, on Friday. [Yonhap]
Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol presides over a market conditions review meeting at the Korea Federation of Banks building in Jung-gu, Seoul, on Friday. [Yonhap]

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol chaired a joint interagency market conditions review meeting Friday morning at the Korea Federation of Banks building, where officials assessed trends in domestic and international financial, foreign exchange and real estate markets and discussed response measures. Attendees included Financial Services Commission Chairman Lee Eok-won, Ministry of Land, Infrastructure and Transport First Vice Minister Kim I-tak, Financial Supervisory Service Governor Lee Chan-jin and Bank of Korea Deputy Governor Kwon Min-su.

The meeting focused on recent delisting trends in the Kosdaq market and the future direction of the delisting regime. The government and Korea Exchange have been pushing reforms to enable the swift and strict removal of insolvent companies. They decided to adjust some measures, however, after the business community raised concerns that deteriorating Kosdaq market conditions warranted a reconsideration.

The market capitalization thresholds for delisting were already raised on July 1, lifting the Kosdaq floor from 15 billion won ($11 million) to 20 billion won and the Kospi floor from 20 billion won to 30 billion won. The next step had been to raise the thresholds further — to 30 billion won for the Kosdaq and 50 billion won for the Kospi — starting Jan. 1 next year.

The government has now decided to delay that second round of increases by six months, pushing the effective date to July next year to allow time for the market to recover. The Kospi delay was also decided in light of similar requests from market participants and to ensure fairness with Kosdaq-listed companies.

The government will also introduce a pathway allowing companies placed on the administrative issues list due to falling below the market capitalization threshold to transfer to the Konex market if they meet certain financial requirements.

Eligible companies are those placed on the administrative issues list after July 1 this year due to a market capitalization shortfall, provided they meet the required criteria and apply to Korea Exchange for a transfer listing. Companies whose delisting date falls between the date Korea Exchange announces a rule amendment and the date the amended rule takes effect will also be allowed to apply if they meet the criteria.

Specifically, a company must meet at least one of the following conditions: it posted an operating profit in at least two of the past three fiscal years, or it posted an operating profit in at least one of the past three fiscal years while maintaining equity capital of at least 20 billion won. Companies with capital impairment are excluded.

Companies that qualify may transfer to Konex at their existing share price without going through cleanup trading. To facilitate a swift transition, the requirement to appoint a designated adviser — a standard Konex listing condition — will be waived for a set period. The same transfer pathway will be made available to Kospi-listed companies under identical criteria.

The meeting also reviewed risks in financial markets stemming from the recent rise in interest rates. Participants assessed that upward pressure on rates continues to build, driven by a combination of supply-side factors — including increased government bond issuance by various countries and corporate bond issuance by global AI companies — alongside expectations of policy rate hikes in major economies and rising oil prices tied to renewed tensions in the Middle East.

In response, officials agreed to closely monitor domestic bond market conditions and manage them in a stable manner to prevent excessive volatility.

A review of the impact of rising interest rates on vulnerable borrowers and the financial soundness of the mutual finance sector found conditions to be broadly sound at this stage. However, participants agreed that a sharp further rise in rates could intensify difficulties. Officials also reaffirmed their commitment to implementing without delay the support measures for vulnerable borrowers announced Aug. 28.


y2k@heraldcorp.com