Hong Nam-ki and Lee Ju-yeol Simultaneously Mention 'Risk Management'... "Be Cautious of Asset Concentration and Rapid Debt Increase" (Comprehensive)

2021 Financial Sector New Year's Meeting Opening Address

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance [Image source=Yonhap News]

[Asia Economy Reporter Kim Eunbyeol] Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki, Bank of Korea Governor Lee Ju-yeol, and Financial Services Commission Chairman Eun Sung-soo simultaneously urged the financial sector to 'manage risks.' This comes from the judgment that the financial system could be shaken by even small shocks in a situation where unprecedented liquidity has been released due to the spread of the novel coronavirus disease (COVID-19) and debts have also accumulated.

In his New Year's address at the '2021 Comprehensive Financial Sector New Year's Meeting' announced on the 5th, Deputy Prime Minister Hong said, "Despite the COVID-19 crisis, the financial market has shown a stable appearance without shaking, but concerns about the gap between the real economy and finance are growing." He added, "The government will also pay special attention to the possibility that the rapidly increased liquidity during the crisis response process may cause concentration in asset markets or a rapid increase in debt, and will carefully manage market liquidity."

He also added, "Considering that the COVID-19 crisis is still ongoing, we will consider 'orderly normalization' so that future financial support can normalize without undermining financial stability and achieve a soft landing."

Deputy Prime Minister Hong also requested cooperation and roles from the financial sector. He said, "I ask you to promote innovation and stability in finance itself," and diagnosed, "Financial support to back the real market this year is very important to overcome the COVID-19 crisis and move toward a recovery path." He continued, "Please actively support tailored financial support programs such as special support programs for tenants in restricted business sectors, so that they can be a timely relief for small business owners."

Lee Ju-yeol, Governor of the Bank of Korea [Photo by Yonhap News]

Bank of Korea Governor Lee Ju-yeol also ordered the financial sector, saying, "Due to liquidity supply and interest repayment deferral measures by policy authorities and the financial sector, latent risks are expected to fully emerge this year," and "a high level of vigilance is required."

He stated that since domestic and international economic uncertainties remain high, support for households and businesses should continue, but the efficiency of resource allocation should be gradually improved. Last year, at the early stage of the COVID-19 spread, policy authorities supplied unprecedented levels of liquidity and extended loan maturities, causing debt accumulation, but this year, risks arising from this may surface, requiring efficient resource allocation.

Governor Lee said, "Especially in a situation where debt levels are high and the gap between finance and the real economy has widened, even a small shock can greatly shake the market," and "we need to examine the vulnerable parts of the financial system more carefully." He pointed out that there are many issues to be resolved, including not only the debt problem left as a sequela of the COVID-19 crisis but also the concentration of funds in asset markets such as real estate and stocks. Furthermore, he said, "2021 is a year when the financial sector's crisis management ability will be truly tested and a historic turning point entering the post-COVID era," and "it is time to have the determination of the 'Great Reset' to reset everything to create a better future."

Financial Services Commission Chairman Eun Sung-soo urged, "The financial sector must continue to respond to the COVID-19 crisis and thoroughly manage risk factors in the new year." Financial Supervisory Service Governor Yoon Seok-heon said, "Amid the uncertainty of the economic conditions in the new year, the financial sector must support vulnerable groups and make every effort to enhance the resilience of the financial system," and "2021 should be established as the 'Year of Financial Consumer Protection' to focus on restoring trust."

Six financial sector associations, including the Korea Federation of Banks, have held the comprehensive financial sector New Year's meeting every year inviting heads of major institutions, but this year, the event was canceled to comply with government quarantine guidelines.

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