Chairman Kim Juhyun: "Real Estate DSR Easing Must Be Approached with Caution"

Financial Services Commission Chairman Kim Ju-hyun is speaking at the meeting of the five major financial holding company chairmen held at the Bankers' Hall in Jung-gu, Seoul, on the 1st. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Song Hwajeong] Kim Joo-hyun, Chairman of the Financial Services Commission, stated that while a soft landing of the real estate market is crucial, easing the Debt Service Ratio (DSR) should be approached with caution.

On the 1st, after a meeting with the heads of the five major financial holding companies held at the Bankers' Hall, Chairman Kim told reporters this.

Regarding the recent relaxation of the Loan-to-Value (LTV) ratio regulation and questions about plans to ease DSR regulations in the future, Kim said, "I believe a soft landing of the real estate market is very important," adding, "A soft landing in real estate is achieved not only through financial sector issues but also through coordination with overall real estate policies, so it is difficult to discuss it based on DSR alone." He explained, "Currently, the soft landing is closely linked not only to the real estate market but also to financial market stability, so we have been discussing this plan with the Ministry of Land, Infrastructure and Transport for the past couple of months. Since DSR essentially advises against excessive borrowing, I have a fundamental view that easing DSR regulations in the current situation should be done cautiously."

Regarding the timing of market stabilization, Chairman Kim said, "Previously, we looked at it from a macro perspective, but recently, we check daily cash flow trends in areas that could pose micro-level problems," adding, "However, since there are many unstable factors worldwide, it is cautious to assert that stabilization will come quickly." He continued, "With government measures and support from the financial sector, we believe we can respond while maintaining considerable control within the given conditions."

On the increase in corporate loans, he said, "If liquidity is reduced abruptly, companies will inevitably face great difficulties," and added, "We will continue to consult with the financial sector to prevent a sudden contraction of corporate liquidity."

Regarding concerns that support for construction companies and credit finance companies could lead to joint insolvency risks for financial institutions, Chairman Kim said, "We have made significant efforts to manage soundness in preparation for such possibilities," but explained, "The basic idea is to prevent liquidity problems from turning into credit risks by ensuring that financial institutions do not become so constrained that even normal companies cannot secure funding."

On the recent issue of securities companies forming a second Cha-an fund, he said, "I believe it is appropriate for the private sector to resolve what it can," emphasizing, "Securities companies should solve what they can on their own, and the government should fill the shortfall; it is not right for the government to solve everything."

Regarding the Korea Electric Power Corporation (KEPCO) bond issue, Chairman Kim said, "The government recognizes the problem and will soon make a related statement," adding, "KEPCO also needs to raise funds, so discussions are underway on how to resolve this, and some adjustments will be made." He further explained, "Since we asked KEPCO to refrain from issuing bonds, alternative funding methods need to be provided, and the five major financial holding companies will play that role. Specific methods will require further discussion with KEPCO."

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