Ministry of Economy and Finance-Financial Services Commission, Differences in Support for Large Corporations Affected by COVID-19

Eun Sung-soo, Chairman of the Financial Services Commission / Photo by Moon Ho-nam munonam@

[Asia Economy Reporters Kim Hyo-jin and Kim Min-young] As the novel coronavirus disease (COVID-19) crisis begins to unleash a fierce wave of high-intensity restructuring across industries, the Ministry of Economy and Finance and financial authorities are showing differing stances on support for large corporations.

While the Financial Services Commission has taken a step back from supporting large companies, emphasizing that "self-help efforts come first," the Ministry of Economy and Finance, which oversees the government-wide support program, has announced plans to provide policy support to key industries. In this urgent crisis situation, where large corporations are reaching their payment capacity limits, experts point out the need for close coordination and swift response among government ministries.

On the 3rd, Kim Yong-beom, the 1st Vice Minister of the Ministry of Economy and Finance, stated at the Macroeconomic and Financial Meeting held at the Bankers’ Hall in Myeong-dong, Seoul, "We are closely monitoring the maturity schedules, issuance status, and interest rate spread trends in the short-term money market and corporate bond market," adding, "We are reviewing various policy support measures needed for key industries that are economically important to the nation."

This contrasts with the position expressed the previous day by Sohn Byung-doo, Vice Chairman of the Financial Services Commission, at the Financial Situation Review Meeting, who said, "Large corporations must first implement self-help efforts by maximizing the use of internal reserves and available assets to procure funds primarily from the market."

Financial Services Commission Chairman Eun Sung-soo also stated on the 31st after signing a business agreement to establish a Securities Market Stabilization Fund with the financial sector, "Any company seeking help from policy banks must make self-help efforts." In other words, while financial authorities say they cannot prioritize support for large corporations, the Ministry of Economy and Finance is actively reflecting the industry's sense of crisis in policy and plans to expand financial support.

The government allocated 58.3 trillion won for corporate support funds out of more than 100 trillion won in COVID-19-related livelihood and financial stability funding measures announced on the 24th of last month. While prioritizing support for small and medium-sized enterprises and small business owners, large corporations are also included as beneficiaries. However, given the repeated statements from the Financial Services Commission’s control tower, the market is concerned that actual support for large corporations is unlikely.

The sense of crisis in the industry is reaching its peak. The aviation industry, along with refining and automobile sectors, has been hit hard by COVID-19 and has begun large-scale restructuring and shutdowns. An industry insider pointed out, "Large corporations that have reached their payment capacity limits are already appearing," adding, "There could be cases where otherwise sound companies go bankrupt despite being profitable due to temporary liquidity shortages."

With the fiscal year-end closing season over and the credit rating season for major companies starting this month, if a chain of rating downgrades becomes a reality, there is a possibility that many companies will face liquidity crises due to the spread of 'credit risk.'

Corporate business outlooks are also near their worst. According to the Business Survey Index (BSI) conducted by the Korea Economic Research Institute targeting the top 600 companies by sales, this month’s BSI recorded 59.3, the lowest in 135 months since January 2009 (52.0) during the global financial crisis. It fell 25.1 points from the previous month (84.4), marking the largest drop since the International Monetary Fund (IMF) bailout crisis.

This content was produced with the assistance of AI translation services.