Financial Authorities Urge 'Flexible Response' to Secondary Financial Loans... Formation of Real Estate PF Consultative Group

Financial Authorities Hold 'Financial Market Status Review Meeting'

[Asia Economy Reporter Yoo Je-hoon] Financial authorities recently urged flexible responses regarding the suspension of loans by secondary financial institutions such as savings banks and capital companies. Additionally, to manage risks in next year's real estate project financing (PF) market, a consultative body involving related agencies will be formed and operated.

On the morning of the 29th, the Financial Services Commission held a financial market status review meeting at the Government Seoul Office in Jongno-gu, Seoul, with the Financial Supervisory Service, Bank of Korea, Korea Federation of Banks, Korea Financial Investment Association, and others, where these matters were discussed.

At the meeting, authorities requested flexible responses to the recent difficulties faced by ordinary citizens in securing emergency funds due to the suspension of loan services by some savings banks, capital companies, and lending businesses. For example, rather than suspending loan services, they suggested strengthening screening criteria according to credit policies or encouraging banks to cooperate to facilitate borrowing by excellent lenders in the microfinance sector.

Authorities emphasized that next year, risk management in the real estate PF market will be as important as in the corporate bond and short-term financial markets. Therefore, a consultative body comprising related ministries, policy financial institutions, financial sectors, construction industry, credit rating agencies, and research institutes will be formed and operated to promote the smooth landing and normalization of the market. Furthermore, a real estate PF consultation and communication system by financial sector will be established and operated centered on financial associations.

Meanwhile, participants at the meeting assessed that the financial market is gradually stabilizing, citing the continued decline in corporate bond and commercial paper (CP) interest rates. They also diagnosed that the year-end funding market is currently operating smoothly without major issues. However, since uncertainties due to economic slowdown and monetary tightening are expected to persist next year, they agreed on the need to continue efforts to firmly stabilize the financial market.

Since October, authorities have implemented various market stabilization measures, including market stabilization plans, additional support for PF-ABCP, additional capital calls for the bond market stabilization fund, and financial regulation flexibilization. Given that there are sufficient available funds in the currently operating market stabilization programs, authorities plan to continue operating them flexibly and continuously according to market conditions.

The banking sector has also continued market stabilization measures worth approximately 95 trillion won, including purchases of CP and ABCP, and plans to establish and operate a flexible issuance plan by dispersing and adjusting the timing and scale of bank bond issuance to avoid burdening the corporate bond and short-term funding markets. The Financial Services Commission stated, "Going forward, financial authorities will hold regular financial market status review meetings, continuously communicate with related agencies and financial sectors, closely monitor market conditions, and proactively respond as necessary."

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