FSC Vice Chairman Kim So-young held the 2nd financial risk taskforce meeting on June 23 jointly with the other relevant institutions. The meeting discussed the following three issues—(a) expanded operation of the emergency response review system, (b) preparing ten major financial risk response tasks and focusing review on these issues and (c) working on preemptive support measures to prevent default risk of financial companies.
In his opening remarks, Vice Chairman Kim stated that volatility has been expanding in global financial markets and there are growing concerns about economic slowdown amid a prolonging war in Ukraine and an acceleration of monetary tightening in the U.S. and other major economies. As such, Vice Chairman Kim emphasized that it is necessary to more closely and comprehensively check market risks with a strong sense of urgency as if a complex crisis situation may surface anytime. In addition, Vice Chairman Kim said that while maintaining a daily financial market monitoring system, the authorities have strengthened the emergency response review system through an expanded operation of the financial risk response taskforce and that the authorities will carry out monitoring focused on ten major response tasks.
Vice Chairman Kim said that the government will promptly implement the financial support programs to help with people’s living conditions that have been included in this year’s second supplementary budget. Along this line, in order to identify and alleviate the hardship experienced by vulnerable groups, Vice Chairman Kim said that the authorities will set up and operate a taskforce to help relieve financial difficulties of vulnerable groups and prepare specific support measures in advance.
While reviewing the risk factors and the liquidity and soundness conditions across the financial system, Vice Chairman Kim talked about the need for a plan to manage excessive leverage of specialized credit finance companies as their high dependence on the issuance of corporation bonds to raise funds leads to liquidity risk time and again. In this regard, Vice Chairman Kim emphasized the need to revamp the nonbanking sector’s liquidity rules in a more systematic way alongside a regulatory overhaul for the financial industry. Moreover, Vice Chairman Kim urged the authorities to closely look into the recently arising problem of bypassing rules on household loans with a business loan from a savings bank.
Along this line, today’s meeting discussed ways to improve rules to enable preemptive provision of funding support to financial companies in order to prevent the risk of default amid expanding financial market volatility. To prepare for a condition of liquidity crunch amid a slowdown in the corporate bond market, the authorities reviewed the operating status of the existing corporate financing support programs and agreed to consider a way to expand the support.
The next meeting will be held around July 21, and in the meantime, the authorities will reassess the effectiveness of the market stabilization measure and prepare supplementary measures while working on detailed plans for improving the system to preemptively provide funding support for financial companies.