Financial Services Commission: "US Presidential Election, External Risks Including Possible Won Strengthening"

"No Unusual Trends in Non-Housing Secured Loans"

[Asia Economy Reporter Kim Hyo-jin] The upcoming U.S. presidential election on the 3rd of next month, the rise in global asset prices, the rebound in interest rates, and the possibility of won appreciation were identified as major risk factors for our financial market.

On the 28th, the Financial Services Commission held a Financial Risk Response Team meeting chaired by Secretary-General Kim Tae-hyun to review these assessments by market experts.

Regarding the U.S. presidential election, the uncertainty of the election outcome itself is acting as a significant risk factor, and it is expected that the scale of stimulus measures, tax policies, and recovery speed will vary depending on the election results. Since the COVID-19 pandemic, the strength of asset price increases compared to the real economy has been extraordinarily high compared to past recessions, raising the possibility of increased asset price volatility in the future, which was also cited as a key risk factor.

Additionally, due to expectations of stimulus measures, interest rates in developed countries are rising, and downward pressure on exchange rates persists depending on the flows of the dollar and yuan, so policy implementation considering these factors was suggested at the meeting.

Meanwhile, the financial authorities announced that, in response to concerns about a balloon effect causing an increase in non-housing collateral loans due to strengthened household loan management, a primary inspection of banks showed a slowing growth rate in non-housing collateral loans in the banking sector, and the borrower composition has a high proportion of high-income and high-credit borrowers, indicating no unusual trends observed so far.

However, since the average Debt Service Ratio (DSR) is higher compared to mortgage loans and commercial vacancy rates have increased over the past three years, the financial authorities stated that they will consult with related agencies to take necessary measures if signs of instability are detected in the future.

The financial authorities also plan to closely monitor the loan growth trends in the secondary financial sector, including savings banks and mutual finance. As of the end of August this year, corporate loans in the secondary financial sector amounted to 178.4 trillion won, a 16.8% increase compared to 152.7 trillion won at the end of last year. In particular, mutual finance, which has a large proportion of loans to individual business owners, showed a relatively high growth rate. This is interpreted as an impact of increased business difficulties for small business owners due to COVID-19.

Accordingly, the financial authorities intend to actively absorb funding demand through emergency management fund support programs to alleviate the difficulties of small business owners, while considering the slight rise in delinquency rates in the secondary financial sector, they plan to encourage proactive loan loss provisions and the preparation of crisis response plans.

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