Korea suspends 140% margin rule for three months to curb forced selling

South Korea will relax Korea margin-loan rules for three months from Nov. 9, suspending the requirement that securities firms maintain a 140% collateral ratio. Authorities announced the measure Nov. 6 after a sharp stock-market decline raised concern that compulsory sales of leveraged positions could deepen the fall.

The policy is an attempt to interrupt a market feedback loop. Falling prices reduce collateral values; forced selling to restore required coverage can push prices lower again. Easing the regulatory requirement may give firms room to manage that pressure, but it does not restore lost portfolio value.

The official start date is clear

The Finance and Economy Ministry: Nov. 6 market review states that the waiver starts Nov. 9 and lasts three months. Participants included the Financial Services Commission chairman, Financial Supervisory Service governor and a Bank of Korea deputy governor.

SBS: exemption begins Nov. 9 reported the same start date and the aim of limiting an increase in forced liquidations. Earlier Yonhap: emergency meeting and intraday context described the measure more generally as beginning later in the month. This article uses the precise date in the official release rather than treating those formulations as different policy decisions.

The reviewed material does not provide a complete implementation notice for every brokerage or an account-specific guarantee against liquidation. Investors should not assume the national exemption cancels the terms of their own borrowing agreement.

A regulatory pause is not debt forgiveness

A collateral ratio compares the value backing a loan with the outstanding borrowing. The 140% figure is a regulatory threshold in this announcement; it is not an interest rate, a minimum guaranteed investment return or the proportion of a loss the government will reimburse.

For illustration only, collateral worth 140 units against a loan of 100 units gives a ratio of 140%. If that collateral loses value, suspending a regulatory threshold does not make the decline disappear or extinguish the 100-unit obligation. This is a mechanical example, not data from an actual investor account.

A rules table is preferable to a fabricated chart of expected liquidations. The authorities did not publish a comparable before-and-after series showing how many forced sales this decision would prevent. Its eventual effect cannot be calculated from the threshold alone.

Officials defend fundamentals, with an important caveat

Meeting participants said South Korea’s economic fundamentals were strong and described the domestic market’s response to external developments as excessive. That is the authorities’ assessment, not a finding that every share was undervalued or that prices must recover.

The ministry cited projections of growth in the mid-3% range, exports reaching $1 trillion and corporate operating profit exceeding 900 trillion won. Those figures were presented as projections, not completed full-year outcomes. The policy case should not convert forecasts into realized data.

The market debate follows a record reported September current-account surplus. Strong external earnings and volatile financial prices can coexist, particularly when investors reassess the durability of an industry’s profits.

The next test is implementation

Officials promised real-time monitoring of capital flows and markets and said further measures were being prepared if instability intensified. They also emphasized longer-term efforts to improve corporate value and market confidence.

Those objectives intersect with the country’s dependence on chip and AI investment in its growth strategy. The immediate exemption is narrower: it changes a financing rule during a stressed period. Whether it reduces disorderly selling without encouraging additional leverage will depend on how brokerages and borrowers respond, not simply on the announcement’s reassuring language.

Sources

• Finance and Economy Ministry: Nov. 6 market review
• SBS: exemption begins Nov. 9
• Yonhap: emergency meeting and intraday context