Financial Authorities Urge Restraint in Excessive Fundraising Amid Deepening Reverse Money Move

[Asia Economy Reporter Song Hwajeong] Financial authorities recently requested financial companies to refrain from excessive competition in securing funds amid concerns about fund concentration within the financial market.

On the 23rd, the Financial Services Commission and the Financial Supervisory Service held a meeting to inspect and communicate about financial sector fund flows (reverse money move) together with financial institutions and research organizations, checking the current status of fund flows in the market and discussing future response measures.

Recently, due to worsening financial conditions, a reverse money move phenomenon has appeared in the financial market, where funds are shifting from risky assets to stable assets. In the short term, banks have relatively abundant liquidity, while the secondary financial sector faces difficulties in raising funds, widening the differentiation in funding conditions between sectors. With the year-end closing approaching, there are concerns that the volatility of fund flows will increase further.

Participants in the meeting agreed that excessive competition in securing funds both between and within sectors could lead to future increases in loan interest rates and affect the widening of credit spreads in the bond market, potentially causing instability in the financial market.

The financial authorities emphasized, "Excessive competition in securing funds can lead to higher loan interest rates, which may burden the economy, so it is necessary to refrain from excessive competition both between and within sectors," adding, "Market-disrupting activities that create anxiety in the market will be strictly dealt with."

Additionally, the financial authorities decided to actively review necessary measures related to improving funding conditions and market stability and to immediately implement feasible measures as a priority.

A Financial Services Commission official stated, "Going forward, the FSC and FSS will jointly hold relay meetings by sector to closely monitor the status of fund flows and risk factors by sector and maintain close communication with the sectors," and added, "Financial research institutions will continue to study and investigate countermeasures for fund concentration through analysis of domestic and international cases to stabilize the market."

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