Kwon Kwang-su, Bank Federation Chairman: "Risk Management is Top Priority... Fulfilling Role as Defense Network"

"Tail Risks at Crisis Frontline Also Become System-Wide Crises... Caution Needed to an Excessive Degree"

[Asia Economy Reporter Yoo Je-hoon] Kim Kwang-soo, Chairman of the Korea Federation of Banks, said on the 30th regarding the role of the banking sector in the new year, "Risk management must be prioritized and management soundness must be strengthened," adding, "We must faithfully perform the role of an economic safety net."

In his New Year's address, Chairman Kim stated, "The high interest rates and high inflation that have come with the end of the COVID-19 pandemic require our economy and financial industry to endure another period of hardship."

Regarding the economic outlook for next year, Chairman Kim noted, "The dominant prediction is that the global macroeconomy will enter a contraction phase this year," and added, "The financial industry is expected to face various risk factors such as increased credit loss costs due to the real economy downturn and potential liquidity tightening in the capital markets. At the same time, changes in the competitive landscape of the financial industry triggered by digital transformation will become the new normal."

He then identified the roles of the banking sector as ▲ risk management and strengthening management soundness ▲ serving as an economic safety net ▲ discovering new competitiveness. He emphasized, "The financial sector improved the provisioning standards last year and proactively increased the size of credit loss provisions, but it must re-examine credit lines and strengthen monitoring of industry-specific risk factors to prepare for the expansion of real sector insolvencies such as deteriorating repayment capacity of households and marginal companies. Support for households, small business owners, and small and medium-sized enterprises burdened by high interest rates and high inflation should be expanded to practice warm finance."

Chairman Kim said, "Our financial industry is expected to face various crises and difficulties this year as well, and especially with the volatility of domestic and international macroeconomics and changes in the financial system intertwined, the possibility of a black swan event cannot be ruled out. In crisis situations, even seemingly minor tail risks can escalate into systemic crises, so we must not loosen our vigilance and must exercise an excessive level of caution."

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