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Dr. Jae-Hoon YooChairman & CEO
Korea Securities Depository
PensionClearCSD’s New Frontier
1. Importance of the Corporate Pension Market in
Korea
2. Corporate Pension Reform To Date
3. Development of 「 PensionClear 」
4. Is PensionClear Innovation in CSD Business?
Outline
The 3-layer pension structure to secure old-age income in KoreaBut, still low income replacement rate
Korea
OECD Average Source : OECD
Old-agepoverty rate
53.1%
12.7%
2.1%
7.8%
45.6% (total)
63.6% (pub-lic)
Pension replacement
ratePublic pension
spending to GDP
Enhanced role of corporate pen-sion to ensure massive retire-ment population
Short history of less than 10 years
Low coverage rate of both workplaces (16.3%)and workers (51.6%)
Rapid growth of 22%, but still small in to-talasset size
01
Corporate pension market
Korea corporate pension assets
Global corporate pension assets(2013)
1. Importance of the Corporate Pension Market in Korea
2. Corporate Pension Reform to Date
Reform Plan
The Korean government is making efforts to reform corporate pension
02
Market Issues
Unfair product distribution practices Limited selection of productsBiased towards in-house products
Conservative regulation on asset allocation
Mostly bundled contracts
Only contractual-type schemes
Establish fair business practicesFair treatment of all productsProhibit in-house products
Rationalize asset allocation rulesExpand limits on risky assetsEncourage conversion to Defined Contribution(DC)
plansMandatory unbundled contractsMutual checks between service
providersIntroduction of fund-type schemes
Ensure independence and expertise of management
Less pressure on operation risk manage-ment
Conflicts of interest due to agency problem
Weighted towards safe assetsMostly Defined Benefit(DB) plans
3. Development of 「 PensionClear 」
Single platform facilitating automatic processing of all back-office opera-tions related to corporate pension (October 2015)
03
PensionClear
Support corporate pension reform policies
Enhance competitiveness of market players by improving back-office ef-
ficiency
Strengthen investor protection and confidence
Goals
Building on KSD’s existing fund back-office system(FundNet)
Objectives Service Scope KSD Platform ModelBefore
After
Build single plat-form
Managemessage stan-
dards
Integrate cash settlement
BankBank
Insurance
Securities
Insurance
BankBank
Insurance
Securities
Insurance
Product trading (Custodian ↔ Product Provider)
1
Management support(Asset Manager ↔ Custodian)
2
Account transfer (Asset Manager ↔ Asset Manager)
3
04
What is FundNet?
A STP (Straight Through Processing) platform for fund service processing
An information hub in Korea’s fund market
An industrial communication network (348 participants)
High Market Transparency Enhancing Investors’ reliability
Operational Efficiency through STP Standardization & Automation
Information Hub as a Market Infra
Achieve-ments
Yearly cost saving*
19.8
9.83.25
30
67 Mil USD
Personnel expense reductionOperational risk-related
cost reduction
Fund report mail expense saving
Deposit fee reduction
Other expense
* Analysis by KPMG Strategic Consulting Group(2013 Dec)
05
Building on the success of FundNet Leverage market players’ support and accumulated "Know-how"
Adopting single platform approach Maximize cost savings through economy of scale
Customer-oriented approach rather than regulation-based one Listen to all pension service providers to accommodate customers’ needs
Research-based approach Reference Australia’s SuperStream project and other cases
1
2
3
4
Main Strategies in Developing 「 PensionClear 」
Diversify service coverage into new frontiers in wealth manage-ment market such as individual pension, insurance and ISA
Globalize PensionClear & FundNet experience through
06
PensionClear & FundNet
World ClassFinancial Plat-
form
Domestic + InternationalGlobalization
Div
ers
ificati
on
Cap
ital +
Non
-Cap
ital
Service expansion
Global hub platform
1
2
PensionClear FundNet
Sharing FundNet know-how with fellow CSDs in the world Contributing to “Back-office Standardization” of fund processing in Asia : AFSF(Asia Fund Standardization Forum)
Future of PensionClear
4. Is PensionClear Innovation in CSD Business?
Seek CSV(Creating Shared Value)
07
Contribute to capital market efficiency while developing a new rev-enue base
Business in non-capital market segments
Expand CSD business from equities and bonds to savings and insurances
Power of platform business model
Exploit business potential leveraging existing diverse CSD platform
Customer-based approach without regulations
Elicit voluntary participation from market players instead of relying on
government regulations
1
2
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Jae-Hoon YOO(ceo@ksd.or.kr)
Thank You
“Progress comes from monopoly, not
competition"- Peter Thiel (PayPal co-founder) in his book ‘ZERO TO ONE’ -
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