[Q&A] Eun Seong-su, Financial Services Commission Chairman, "Swift Relaxation of Financial Regulations Including LCR"

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

[Asia Economy Reporter Kim Hyo-jin] Eun Sung-soo, Chairman of the Financial Services Commission, stated on the 6th regarding concerns about the soundness of financial companies due to financial support related to the novel coronavirus infection (COVID-19), "We will also promptly ease regulatory burdens on the financial sector, such as the foreign currency Liquidity Coverage Ratio (LCR) and the loan-to-deposit ratio."

On the same day, Chairman Eun sent an 'open letter' to the media addressing concerns raised by various sectors surrounding recent financial market instability caused by COVID-19.

Below is a Q&A explanation related to recent issues attached by the Financial Services Commission.

▲ Are financial companies less likely to fail compared to general companies? Why are corporate commercial papers (CP) and corporate bonds of financial companies not supported?

= The primary purpose of the 100 trillion won+ financial support program is to facilitate corporate financing. Financial companies are fundamentally expected to secure their own funding. Securities companies can receive liquidity through securities finance and can also procure necessary funds through the Bank of Korea. Nevertheless, if funding is difficult, partial purchases are possible through the Corporate Bond Stabilization Fund, but in this case, it is difficult to offer better conditions than the market in terms of interest rates and other aspects.

▲ Isn't it contradictory to promote financial market stability while damaging the soundness of financial companies?

= Financial support has aspects that negatively affect the soundness of financial companies. However, we believe that the current soundness of financial companies is good and at a manageable level. The BIS ratio and non-performing loan ratio of banks have significantly improved compared to past crises. We will strive to minimize the burden on financial companies during the financial support process. The Corporate Bond Stabilization Fund will operate in a way that lowers risk by purchasing mainly high-quality corporate bonds, consistent with its original purpose of supplementing market supply and demand, and regulatory burdens such as LCR and loan-to-deposit ratio will also be promptly eased. We will continue to implement policies with the soundness of financial companies in mind.

▲ The authorities seem only eager to boast about immediate support achievements and show little interest in resolving regulatory difficulties related to the soundness of financial companies that actually provide financial support. Is there a plan?

= We will promptly ease regulatory burdens on the financial sector. We have already announced plans for temporary easing of foreign currency LCR regulations. Along with this, we are currently gathering opinions from the financial sector and preparing flexible measures for overall soundness regulations. We will swiftly implement relief for various regulatory burdens raised in the market, such as integrated LCR regulations, loan-to-deposit ratio, and capital soundness regulations related to the Corporate Bond Stabilization Fund's equity contributions.

▲ Regarding recent mentions of indemnity, financial companies uniformly distrust it, calling it a 'glossy but hollow promise.' How will you alleviate market skepticism about indemnity?

= To minimize concerns on the ground, we have been making efforts such as sending indemnity official letters related to COVID-19 support to financial companies (February 18, March 13). To guarantee indemnity more systematically, we will revise supervisory regulations and completely overhaul the indemnity system.

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