Financial Authorities: "Excessive Deposit Competition Will Not Recur... Monitoring Fund Movement Situation"

Kim So-young, Vice Chairman of the Financial Services Commission, stated on the 18th, "Considering that the amount of funds maturing in the fourth quarter of this year is somewhat larger than in previous years, we will remain vigilant and closely monitor the movement of funds."

At the 'Financial Market Issues Review and Communication Meeting' held at the Government Complex Seoul in Jongno-gu, Seoul, attended by the Financial Supervisory Service and various financial associations, Vice Chairman Kim said, "Unlike last year, the financial market stability trend is being maintained this year, so excessive competition for securing funds is unlikely to recur."

At the meeting, Vice Chairman Kim assessed that despite several recent negative external factors, the domestic financial market remains relatively stable, and the likelihood of financial market instability similar to last year is low.

Last year was a period when central banks worldwide, including the U.S. Federal Reserve (Fed), sharply raised benchmark interest rates, whereas this year, the level and possibility of additional rate hikes are limited. In particular, although there were incidents such as the so-called 'Legoland incident' and 'Heungkuk Life incident' last year, the risk of recurrence this year is low, and the real estate project financing (PF) issues are also progressing toward a soft landing, which are cited as reasons.

However, Vice Chairman Kim warned, "As seen in the recent Israel-Hamas conflict, sudden external shocks can occur at any time," adding, "If the Israel situation prolongs or the conflict spreads to neighboring countries, it could have a significant impact on domestic and international financial markets. Therefore, the financial sector should maintain a high level of vigilance and establish a thorough preparedness system, including securing sufficient foreign currency liquidity in advance."

Regarding concerns that the maturity of high-interest financial sector deposit products attracted in the fourth quarter of last year could lead to renewed competition for deposits, Vice Chairman Kim analyzed that the possibility is low.

Previously, the authorities decided to abolish the bank bond issuance limit starting this month to prevent excessive deposit competition, and to normalize the Liquidity Coverage Ratio (LCR) regulation in the second quarter of next year, considering market conditions. Additionally, to alleviate the year-end concentration of defined benefit (DB) pension contributions, efforts will be actively made to encourage installment payments of contributions and diversification of maturities among financial institutions, public institutions, and large corporations.

Vice Chairman Kim stated, "A reasonable level of interest rate competition is necessary, and efforts to secure funds may be rational decisions at the individual financial company level. However, if such behavior spreads excessively across the market, negative ripple effects such as worsening liquidity problems due to fund imbalances may occur," adding, "We will strictly respond to selfish acts that disrupt the fund market."

This content was produced with the assistance of AI translation services.