Kim So-Young, Vice Chairman of the Financial Services Commission, Announces Introduction of 'Financial Stability Account' to Prevent Financial Company Insolvency

Kim So-Young, Vice Chairman of the Financial Services Commission, Holds 'Financial Risk Response TF' Meeting
Preparation of 'Financial Stability Account' Introduction Plan and Reassessment of Market Stabilization Measures

[Asia Economy Reporter Sim Nayoung] On the 26th, Kim Soyoung, Vice Chairman of the Financial Services Commission, held a 'Financial Risk Response Task Force' meeting to prepare measures for introducing a 'Financial Stability Account' to prevent insolvency of financial companies and reviewed market stabilization measures. On the same day, the FSC held the 3rd joint 'Financial Risk Response TF Meeting' together with the Financial Supervisory Service and the Korea Deposit Insurance Corporation.

Vice Chairman Kim stated, "Recently, major foreign countries are actively pursuing monetary tightening, and with continuous interest rate hikes in Korea, volatility in the financial market is increasing." She added, "Especially, the upcoming U.S. FOMC interest rate decision scheduled for this week, the Q2 GDP announcement, and the consumer price indices of Korea and the U.S. to be released in August are major factors for future volatility, so we will closely monitor related trends."

At the meeting, the introduction plan for the 'Financial Stability Account' to prevent insolvency of financial companies was discussed, and based on today's discussions, it was decided to promptly proceed with legislation after collecting opinions from related institutions and experts.

Meanwhile, the effectiveness of financial sector market stabilization measures used during past financial crises in the current situation, activation criteria, and the need for improvements were re-examined. It was agreed to pursue necessary institutional supplements and improvements to ensure immediate activation in case of future crises.

In particular, since there may be differences in opinions regarding support conditions and scope between the cost bearers and beneficiaries of market stabilization measures, the need for sufficient consultation and opinion gathering before implementing such measures was raised. Given the asymmetry where profits from risky investments accrue as private gains while financial instability caused by them is supported by market stabilization measures funded by public burdens, measures to alleviate this imbalance will also be explored.

Current status related to household and individual business loans risk (NICE Credit Rating) and foreign currency liquidity response capacity, as well as household debt and foreign exchange market issues, were reviewed and discussed. The next meeting is scheduled for late August, where topics such as the level of loan loss provisions in the banking sector, recent risks by financial industry, and emergency response plans for contingencies will be discussed.

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