IMF "Elderly Homeowners Vulnerable if House Prices Fall to Financial Crisis Levels"

Reference image (Yonhap News)

[Asia Economy Reporter Kim Hyo-jin] The International Monetary Fund (IMF) expressed concerns that if housing prices fall to levels comparable to the 2008 global financial crisis, the vulnerability of elderly borrowers would be significant.

It also predicted that the development of fintech (financial technology) would have medium- to long-term effects on the profitability and soundness of the banking sector.

The IMF further pointed out the need to assess the risks associated with the use of jeonse deposits for stock investments.

On the 20th, the Financial Services Commission released the IMF's Financial Sector Assessment Program (FSAP) report on Korea, which included these findings.

Assuming a stress scenario equivalent to the 2008 global financial crisis, the IMF evaluated that Korea's financial system is generally resilient.

However, considering factors such as low interest rates, low growth, population aging, and intensified competition in financial markets due to fintech development, the IMF diagnosed that close monitoring of certain areas is necessary.

While risks arising from household debt are manageable, the IMF judged that if a shock occurs where housing prices fall to levels comparable to the global financial crisis, the vulnerability of elderly borrowers would particularly increase.

The IMF forecasted that the development of fintech could have medium- to long-term impacts on the profitability and soundness of the banking sector, and that the life insurance industry’s operating profits would be affected in the medium to long term amid prolonged low interest rates.

Regarding the National Pension Service, the IMF recommended the need to prepare measures as the fund is expected to be depleted around 2057.

Simultaneously, the IMF called for establishing legal grounds for supervising non-holding financial groups, strengthening supervision, and enhancing oversight of capital markets and mis-selling.

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