Lee Bok-hyun, Financial Supervisory Service Chief, Says "Will Prevent Excessive Repayment Burden Due to Interest Rate Hikes"

Meeting between Financial Supervisory Service Chief and Financial Research Institutions on the 23rd

Financial Supervisory Service Governor Lee Bok-hyun is drinking water at the 1st Real Estate Related Ministers' Meeting held at the Government Seoul Office on Sejong-daero, Jongno-gu, Seoul on the 21st. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Song Seung-seop] Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), announced on the 23rd that measures will be prepared to prevent low-income and vulnerable groups from experiencing excessive financial repayment burdens.

Governor Lee attended a meeting with heads of research institutions held at the Westin Chosun Hotel in Jung-gu, Seoul, and emphasized, “We will actively seek a soft landing plan to ensure that low-income and vulnerable groups do not suffer excessive repayment burdens due to interest rate hikes and asset market price adjustments.”

However, there was no statement requesting cooperation from the private sector for this purpose. At a meeting with domestic bank presidents on the 20th, he pointed out, “Criticism of banks’ excessive profit-seeking is growing,” and stressed, “It is necessary to calculate and operate interest rates based on rational and transparent standards and procedures.” Regarding the low-interest rate conversion loan program, he also requested cooperation, saying, “The government is promoting it, but there are limits to the scale of support.”

He also expressed his intention to actively use supervisory measures such as soundness ratio regulations to focus on managing vulnerable parts of financial companies. Governor Lee said, “We must prepare for the possibility of tightening in the short-term money market and corporate bond market caused by rapid increases in interest rates and exchange rates,” and added, “We will strengthen inspections of liquidity management by financial companies and guide those with a high possibility of liquidity shortages to proactively secure liquidity.”

He further stated, “We will thoroughly manage foreign currency liquidity, especially for vulnerable financial companies that may face risks such as ELS margin calls due to deteriorating foreign exchange supply and demand conditions,” and said, “Since credit losses of financial companies are expected to increase due to the shock of interest rate hikes, we will ensure that sufficient provisions are accumulated to enhance loss absorption capacity.”

Governor Lee continued, “There is also concern that liquidity crises and insolvencies in individual financial companies could spread to other sectors and expand throughout the entire financial system,” and said, “We will strengthen monitoring to detect early signs of abnormalities in the financial market and continue efforts to prevent and contain systemic risks.”

The heads of research institutions attending the meeting mainly expressed concerns that downside risks to the global economy could increase due to supply chain disruptions caused by the Russia-Ukraine war, rising prices and interest rates, and the US monetary tightening policy. In particular, since there is concern that uncertainty in the financial market may increase in the second half of this year, they proposed contents related to thorough inspections by supervisory authorities and preemptive response measures regarding domestic and external risk factors.

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