Financial Supervisory Service Chief: "Must Prevent Banks' High-Interest Fundraising, Inspect Short-Term Money Market"

Significant Volatility in Financial Markets After Chuseok Holiday

Lee Bok-hyun, Governor of the Financial Supervisory Service, is attending the meeting between the Financial Services Commission Chairman and the Financial Association Presidents held at the Press Center in Jung-gu, Seoul on the 22nd, delivering opening remarks. Photo by Yoon Dong-joo doso7@

Lee Bok-hyun, Governor of the Financial Supervisory Service, on the 4th, regarding the sharp rise in corporate bond yields (21bp increase) and the decline in stock prices (KOSPI down 2.4%), which showed significant volatility in the domestic financial market, urged to "strengthen the daily monitoring system for short-term money market trends, secure banks' capital capacity, and supervise to prevent high-interest financing."

At the executive meeting held on the 5th, Governor Lee said, "please strengthen the daily monitoring system for supply and demand trends in the domestic money market, interest rates, spreads, maturing amounts and refinancing rates, issuance conditions by credit rating for real estate PF-ABCP (Asset-Backed Commercial Paper), and short-term money market trends such as CDs (Negotiable Certificates of Deposit) and RPs (Repurchase Agreements)."

He continued, "if necessary, policy responses through market stabilization measures such as corporate bond and CP purchase programs and the bond stabilization fund should be promptly implemented by enhancing information sharing and cooperation with related agencies."

As of the end of June, the total capital ratio of domestic banks based on BIS standards was 15.62%, and they have expanded loss absorption capacity by sufficiently provisioning for asset quality deterioration. However, he stated that capital capacity must be sufficiently secured in preparation for the possibility of further expansion and prolongation of volatility in the international financial market.

Governor Lee further said, "Regarding the possibility of money moves due to the concentration of year-end time deposit maturities, liquidity risk has been considerably improved through prior liquidity securing and maturity staggering. However, please re-examine funding plans through stress tests assuming severe crisis scenarios and supervise to prevent high-interest financing arising from asset competition."

He also said, "Please re-examine the operability of foreign currency funding credit lines and continuously monitor foreign currency funding conditions to strengthen proactive response efforts." The Financial Supervisory Service has ensured that foreign currency liquidity is secured at a level capable of withstanding crisis situations. As of August, the foreign currency liquidity coverage ratio (LCR) of domestic banks stands at 144.3%.

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