Kim Taehyun, President of the Forecasting Agency, "Early Detection of Signs of Poor Performance and Strengthening Pre-Field Inspections Are Necessary"

[Asia Economy Reporter Song Seung-seop] On the 2nd, Kim Tae-hyun, President of the Korea Deposit Insurance Corporation, stated, "The preemptive on-site inspection function must be further strengthened to effectively detect signs of insolvency at an early stage."

On this day, in his 26th anniversary speech of KDIC, President Kim said, "Until now, the focus has been on handling insolvency after it occurs," adding, "Now, we must take a step further to support management normalization before insolvency expands, minimizing economic losses by concentrating on preemptive insolvency prevention and crisis response."

He also asserted, "To this end, when a financial company faces temporary difficulties due to the financial system not functioning normally, we need to actively discuss the introduction of a system that provides proactive funding support to prevent crisis contagion."

President Kim continued, "As interconnectivity among financial sectors increases, risks in a specific sector can spread throughout the financial market," emphasizing, "Strengthening preemptive insolvency prevention functions is essential to minimize losses of the funds held by KDIC."

He expressed concerns that domestic and international uncertainties are also growing. President Kim warned, "Due to the rise in energy and food prices caused by the Russia-Ukraine war, major countries are experiencing the highest inflation levels in over 40 years," adding, "Global instability factors could pose significant risks to our financial industry."

He further stated, "Due to rising interest rates, banks must prepare for the risk of deteriorating profitability as insolvency of marginal companies and small business loans, which increased during the COVID-19 recovery process, materializes," and added, "Savings banks, which have a high proportion of loans in construction and real estate sectors sensitive to economic fluctuations and vulnerable borrowers, must minimize the negative impacts caused by interest rate hikes."

From a risk management perspective, he explained, "We have prepared insolvency resolution plans reflecting the characteristics of each of the 10 major financial companies," noting, "These plans are currently under discussion at the Financial Services Commission's deliberation committee." According to President Kim, preparing insolvency resolution plans raises awareness of crises and establishes a constant insolvency response system, thereby enhancing the stability of the financial system.

He added, "It is necessary to actively encourage financial companies to reduce risks themselves by refining and solidly operating the differentiated insurance premium system, such as further subdividing the differentiated evaluation grades."

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