[COVID-19 Great Transformation] Unprecedented Real Economy Shock... Overcome It with Untact

'Post-Corona Era Changes and Roles of Financial and Capital Markets' Expert Panel Discussion
Global Spread of Unemployment and Self-Employed Business Difficulties
Growing Concerns Over Insolvency of Marginal Companies
Digital and Non-Face-to-Face Factors Dominate Financial and Capital Markets
Urgent Need to Strengthen Open Banking and Asset Management Capabilities
Volatility Expansion Inevitable... Risk Management Is Key
Rational Regulatory Reform Difficult Amid Technological Advances

[Asia Economy Reporter Jo Gang-wook] The economic crisis caused by the COVID-19 pandemic is impacting both financial markets and the real economy. Some point out that as uncertainty about the future economy intensifies, industries with high economic sensitivity, such as banking and financial investment, are facing new challenges. This is why Asia Economy organized a roundtable discussion with financial and economic experts under the theme "Changes and Roles of Finance and Capital Markets in the Post-COVID Era." In this paper-based discussion held due to the spread of COVID-19, experts unanimously agreed that digital and contactless (untact) related industries will become key factors governing the entire financial and capital markets in the future.

[Participants (in alphabetical order)] ▲ Sung Tae-yoon, Professor of Economics, Yonsei University ▲ Jung Joong-ho, Head of Hana Financial Management Research Institute ▲ Choi Kwang-hae, Head of Woori Financial Management Research Institute

- There are growing forecasts that the full-scale adverse effects of COVID-19, such as unemployment and real economy recession, will worsen further. How is the economic crisis caused by COVID-19 different from past crises like the International Monetary Fund (IMF) foreign exchange crisis or the global financial crisis? What is the most concerning aspect?

▲ Sung Tae-yoon = The 1997 foreign exchange crisis and the 2008 global financial crisis were problems limited to South Korea or the Asian region and financial markets, respectively. However, the current issues caused by COVID-19 represent a crisis spreading globally from the real economy to other sectors including finance, and if the lethality of the pandemic does not decrease, recovery may not proceed smoothly.

▲ Jung Joong-ho = Unlike the IMF foreign exchange crisis or the global financial crisis, the trigger of the COVID-19 economic crisis is a natural disaster-type real economy shock caused by an infectious disease. Moreover, since it simultaneously affects both demand and supply, concerns about the depth and duration of the shock are significant.

▲ Choi Kwang-hae = Due to ongoing uncertainty in economic activities caused by concerns about COVID-19 infection, unemployment and management difficulties for self-employed individuals are the biggest worries.

Sung Tae-yoon, Professor of Economics at Yonsei University

- Many predict that financial and capital markets will be divided into pre- and post-COVID eras. What is expected to be the biggest change in financial and capital markets after COVID-19?

▲ Choi Kwang-hae = It will change from recognizing the importance of contactless (untact) channels to an era where everything is decided by them.

▲ Sung Tae-yoon = Industries relying on face-to-face services are expected to continue facing difficulties. Especially, with the spread of technological changes, polarization may deepen among industries, companies, and countries depending on whether they can adapt.

▲ Jung Joong-ho = Due to immediate concerns about liquidity shortages, volatility in the money market will be high, and after the situation settles, there is a possibility that risk-taking behavior in long-term illiquid asset investments will surge again.

- Structural adjustments are underway in some industries, raising concerns about insolvency in domestic marginal companies. On the other hand, some industries may see increased business opportunities. How do you view future industrial changes?

▲ Jung Joong-ho = This crisis will accelerate the visible growth of data and digital-related industries, penetrating even consumers' daily lives.

▲ Choi Kwang-hae = Contactless-related industries will expand their territory in the industrial sector. 5G and cloud will grow, while offline industries such as aviation and department stores will inevitably shrink.

▲ Sung Tae-yoon = The industrial structure may become one where the gap between companies that can flexibly and elastically change their production systems and those that cannot becomes even wider.

Jung Jung-ho, Head of Hana Financial Management Research Institute

- What are the challenges for banking, securities, and asset management industries in the post-COVID era?

▲ Jung Joong-ho = Along with financial innovation represented by open banking, strengthening asset management capabilities due to aging is urgent. Especially, various asset management services connected to mobile platforms may emerge as important areas.

▲ Choi Kwang-hae = Digital will be an important task in banking and asset management industries, and strategies to respond to this must be established.

▲ Sung Tae-yoon = Strengthening internal capabilities to discover diverse revenue sources and generating profits and managing risks through global investments will inevitably be the most important tasks.

- There are concerns about asset soundness burdens and expectations for money movement as volatility in financial markets increases due to the COVID-19 crisis. What are the positive and negative aspects from the financial industry perspective?

▲ Sung Tae-yoon = Expansion of financial market volatility is inevitable. While it is positive in that it raises awareness of the importance of debt and risk management, it is difficult to say that profits increase due to overall economic performance weakening compared to the volatility expansion.

▲ Jung Joong-ho = Due to large-scale liquidity supply and expansionary fiscal policy, corporate soundness issues are expected to be delayed or deferred for a considerable period. If soundness issues do not spread, asset price increases supported by liquidity conditions may reappear.

▲ Choi Kwang-hae = Since the near-zero interest rate trend is likely to continue, the financial sector may pursue high returns by expanding global financial market entry or restructuring the insurance industry.

Kwanghae Choi, Director of Woori Financial Research Institute

- The large-scale suspension of private equity fund redemptions is expected to significantly affect the profitability of banks, securities firms, and asset management companies. What measures can be proposed to minimize adverse effects?

▲ Jung Joong-ho = Strengthening financial supervision of private equity funds is necessary. In particular, liquidity-related regulations implemented by international financial organizations and countries like the United States need to be introduced.

▲ Choi Kwang-hae = Financial companies should be encouraged to take responsibility by strengthening internal controls and considering customers' risk profiles when selecting and selling products to enhance direct consumer protection.

▲ Sung Tae-yoon = The major problem is that some private equity funds can create negative perceptions. Therefore, it is important to separate investors who can recognize actual risks and make investment decisions from those who cannot.

- There are still strong calls for regulatory innovation to promote financial industry growth. Amid growing concerns about the era of extreme uncertainty, which regulations need the most urgent improvement?

▲ Sung Tae-yoon = While soundness and consumer protection regulations are necessary, a process of regulatory rationalization is needed to reform the regulatory system so that various products can be developed and technological changes and advancements can be accommodated.

▲ Choi Kwang-hae = Financial digitalization must be further promoted. In particular, the financial sector should be able to utilize external clouds. Financial authorities need to directly manage and supervise clouds so that the financial sector can actively use external clouds.

▲ Jung Joong-ho = Direct regulation on prices of financial products and services such as credit cards should be eased. Also, regarding aging and retirement preparation, urgent introduction of underdeveloped systems such as fund-type pension systems and enactment of trust business laws in areas like trusts and pensions is needed.

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