Lee Ju-yeol and Ko Seung-beom's First Meeting... A Signal to the Market of 'Determination to Solve Household Debt' (Comprehensive)

Bank of Korea Raises Base Interest Rate by 0.25%P in August
Financial Services Commission Reviewing Supplementary Measures for Household Debt

[Asia Economy Reporters Eunbyeol Kim, Jinho Kim] Lee Ju-yeol, Governor of the Bank of Korea, and Ko Seung-beom, Chairman of the Financial Services Commission, held their first meeting on the 3rd. Since Governor Lee took office in April 2014, this is the first time he has had a public one-on-one meeting with the Financial Services Commission Chairman. This is interpreted as a signal to the market that they are determined to solve the 'household debt problem' and respond with policy measures.

Governor Lee and Chairman Ko met at 10 a.m. at the Bank of Korea's main conference room in Jung-gu, Seoul, and discussed the COVID-19 situation and financial imbalance risks for about 30 minutes. The Bank of Korea stated, "Along with congratulatory remarks to the new chairman, they shared their understanding of the current economic and financial conditions, including the COVID-19 developments and financial imbalance risks, and exchanged opinions on policy response directions." It added, "Both sides agreed to share information and exchange opinions more actively, coordinate closely, and cooperate tightly." Chairman Ko, who visited the Bank of Korea, told reporters, "Having been a Monetary Policy Committee member for five years and four months, today is a courtesy meeting," and added, "I will meet Governor Lee as often and as much as possible going forward." He said, "We will meet officially and unofficially to discuss various issues. Although today is a courtesy meeting, we will discuss the real economy situation, household debt management, and financial imbalance issues."

Ultimately, the main purpose is interpreted as showing a shared determination between the Bank of Korea and financial authorities regarding the household debt issue. The Bank of Korea has tools such as interest rate hikes through monetary policy, and the Financial Services Commission has tools like loan regulations; these need to be properly coordinated to manage household debt. The Bank of Korea raised the base interest rate by 0.25 percentage points last month, and Chairman Ko has stated that he is reviewing supplementary measures for household debt policies.

At the meeting, Governor Lee expressed concern, saying, "Recently, risks of financial imbalance have been accumulating due to capital concentration in asset markets and the increase in household debt." He added, "If this situation continues, it could affect not only financial stability but also macroeconomic stability, including growth and inflation." He continued, "Monetary policy and macroprudential policies can be appropriately operated to mitigate these risks."

Chairman Ko also emphasized, "Preemptive management to resolve financial imbalances such as the increase in household debt and overheating of asset markets is urgent." He stressed, "In the midst of uncertainty, it is necessary to closely examine quarantine, real economy, and financial conditions, diagnose risk factors, and induce recovery of the real and livelihood economy. Therefore, the Bank of Korea and the Financial Services Commission must respond delicately through closer policy coordination and cooperation than ever before." However, as COVID-19 uncertainties persist and difficulties remain for vulnerable groups such as small business owners, separate measures will be prepared to support economic and livelihood recovery. Governor Lee said, "Difficulties in vulnerable sectors continue, so support policies targeting them need to be sustained," and added, "The Bank of Korea will also strengthen efforts to support vulnerable sectors through loan systems and other means."

Meanwhile, Chairman Ko also held a first courtesy meeting with Jeong Eun-bo, Governor of the Financial Supervisory Service, the day before. During the meeting, both emphasized "communication and cooperation" as top priorities. They agreed on the need to end the conflict phase between the two institutions that arose during the tenures of former Financial Services Commission Chairman Eun Sung-soo and former Financial Supervisory Service Governor Yoon Seok-heon. Accordingly, Chairman Ko promised full support at the organizational and budgetary levels to enable the Financial Supervisory Service to effectively carry out its heavy workload.

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