Jeong Eun-bo "Korean Economy Faces Growing Uncertainties... Proactive Management of Potential Risks Needed"

Financial Supervisory Service - Meeting with Heads of Major Research Institutions Held

Jeong Eun-bo, Governor of the Financial Supervisory Service, is delivering opening remarks at the 'Life Insurance CEO Meeting' held on the 25th at the Millennium Hilton Seoul Hotel in Jung-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Jin-ho Kim] Jeong Eun-bo, Governor of the Financial Supervisory Service, emphasized on the 5th, "There are considerable risk factors for the Korean economy this year," and added, "While continuing efforts to overcome COVID-19, we must proactively manage latent risks that were obscured during the crisis recovery process."

Governor Jeong made these remarks at the 'Meeting of Heads of Major Research Institutions' held at the Bankers' Hall in Jung-gu, Seoul. Attendees included Governor Jeong, Park Jong-gyu, President of the Korea Institute of Finance, Shin Jin-young, President of the Korea Capital Market Institute, Ahn Cheol-kyung, President of the Korea Insurance Research Institute, Kim Nam-soo, Vice President of Samsung Global Research, Heo Yong-seok, President of Hyundai Research Institute, and Kim Young-min, President of LG Economic Research Institute.

Governor Jeong first commented on the economic and financial environment for this year, stating, "The global economy is expected to continue its recovery this year, but growth will likely slow compared to last year, which was influenced by base effects." He continued, "The domestic economy is expected to maintain a growth rate of 3%, but recent factors such as the spread of the Omicron variant, normalization of U.S. monetary policy, and accelerating inflation are causing economic uncertainties."

In response, Governor Jeong stressed the need for proactive management of latent risks that were hidden during the crisis recovery process. He said, "Financial institutions should strengthen soundness management, while the government and financial authorities need to continue tailored support measures for vulnerable small business owners."

Specifically, he mentioned plans to support the activation of pre-workout and debt restructuring systems and to expand management consulting support for small business owners in cooperation with administrative and related agencies to aid recovery.

Regarding household debt, the biggest risk factor for the Korean economy, he emphasized, "We will establish lending practices based on repayment capacity, such as expanding the Debt Service Ratio (DSR) at the borrower level."

Considering the real estate market adjustment due to interest rate hikes, he stated, "Financial institutions will sufficiently reserve provisions for real estate-related assets they hold and promptly assess losses to enhance loss absorption capacity." Additionally, he noted, "If market interest rates rise faster than expected, volatility in the short-term financial market may increase," and added, "We will broadly examine the liquidity impact on financial institutions and the possibility of contagion among sectors in preparation for shocks to the short-term financial market."

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