Chapter 8: Recent Regulatory Developments Regarding ABS in Korea
Kyung Hwa Moon INTRODUCTION I. Korea enacted the Asset-Backed Securitization Act (the “ABS Act”) on September 16, 1998 in the wake of the Asian financial crisis that hit the country in 1997. Even before the enactment of the ABS Act, there were attempts to securitize assets held by Korean companies, especially merchant banks and other financial institutions. However, not only were such attempts frustrated by the financial crisis, but also there proved to be many legal obstacles that made it practically impossible for securitization transactions to take place in Korea. The ABS Act was enacted to address such problems, especially by providing for special methods of perfection, minimization of insolvency risk, and tax and other benefits.1 Since the enactment of the ABS Act, the securitization market in Korea has grown rapidly and has become an important source of funding. In 2010, a total of over KRW 28 trillion asset-backed securities were issued.2 In terms of the proportion of asset-backed securities in the direct financing market in Korea, KRW 11.1 trillion asset-backed securities were publicly offered in Korea in 2010 out of a total of around KRW 112.9 trillion corporate bonds issued.3 In the initial stages after the enactment of the ABS Act, the securitized assets were mostly non-performing loans held by financial institutions and securitization was used to dispose of such non- For a detailed background on the enactment of the ABS Act, see Society for Research on Practices of Asset Securitization, KumYoongHyukMyung ABS [Financial Innovation ABS] at 291-295 (1999)...
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