Financial Services Commission Proposes 'Strengthening Supervision of Corporate Bond Market' to Financial Stability Committee
[Asia Economy Reporter Kim Hyo-jin] The Financial Services Commission (FSC) has proposed to the Financial Stability Board (FSB) that supervision of the corporate bond market and corporate bond-linked derivatives market should be strengthened.
According to the FSC on the 22nd, Vice Chairman Son Byung-doo made this statement during the FSB Steering Committee conference call held the previous evening (Korean time). The FSB is an international organization that establishes international standards for financial regulation and supervision and enhances cooperation among financial authorities, based on agreements by the Group of Twenty (G20). This Steering Committee meeting was the third extraordinary meeting this year, reviewing the impact of the novel coronavirus disease (COVID-19) on financial markets and the effectiveness of policy responses.
Vice Chairman Son assessed, "Although financial market volatility due to COVID-19 has shown signs of easing since April, market uncertainty remains, and since there has been no recovery in the real sector, we cannot let our guard down."
He added, "The FSB should strengthen monitoring of the corporate bond market and derivatives market to prepare for the possibility of negative growth."
Vice Chairman Son also stated, "Banks need to ease their lending attitudes in response to government deregulation. Since deregulation could encourage regulatory arbitrage behaviors that may harm financial stability, the FSB and international standard-setting bodies should provide guidelines on appropriate levels of deregulation."
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The FSB pointed out, "Although proactive policy responses by each country have alleviated signs of financial market instability seen in the early stages of the COVID-19 outbreak, credit risk may increase. If the credit ratings of major companies decline, a renewed preference for safe assets in the market could spread again, potentially causing liquidity shortages to reoccur."
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