Yoon Seokheon "Preparing for the End of COVID Support... Proactive Restructuring Needed"

[Asia Economy Reporter Park Jihwan] Yoon Seokheon, Governor of the Financial Supervisory Service, stated on the 7th, "With the COVID-19 pandemic coming to an end, proactive corporate restructuring is essential in preparation for the termination of financial support."

Governor Yoon made these remarks during a congratulatory speech at the 'Diagnosis and Challenges of Corporate Sector Vulnerability' symposium hosted by the Korea Capital Market Institute at the Bankers' Hall in Jung-gu, Seoul. He said, "As COVID-19 comes to an end and financial support ends, we must prepare for the cliff effect, where latent insolvencies suddenly materialize."

He pointed out, "The proportion of marginal companies in South Korea, whose operating profits have deteriorated so much that they cannot even cover interest expenses, reached an all-time high of 14.8% last year," adding, "These marginal companies have prolonged their survival due to the low-interest-rate environment, thereby becoming a burden on the domestic economy."

Governor Yoon assessed, "With the prolonged COVID-19 pandemic and the expansion of non-face-to-face interactions, the overall business structure has changed significantly, making business structure transformation and reorganization more urgent than ever for companies." He judged that the current period of increased domestic and international economic uncertainty is the optimal time to establish effective corporate restructuring strategies.

He emphasized, "Securing the golden time through early restructuring is most important," and added, "We must move away from the outdated paradigm of the past high-growth era, where companies survived by enduring until the end."

In particular, Governor Yoon noted, "The previous financial restructuring centered on creditor banks has reached its limits," and said, "As business risks have become more important than financial risks, creditor banks should focus on their role as 'health checkups' and allow market players, who are experts, to carry out restructuring."

He further urged, "Creditor banks should no longer be obsessed with short-term performance but strengthen their corporate selection functions to lay the foundation for proactive restructuring, manage credit risks to prevent corporate sector risks from spilling over into the financial sector, and maintain sufficient loss-absorbing capacity."

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