Kim Yongjae, Standing Member of the Financial Services Commission, Attends FSB General Meeting... Discusses Bank Crises Including SVB and CS

Financial Stability Outlook, Non-bank Financial Institution Resilience, Virtual Asset Regulation, and Nature-related Risks Discussed

Kim Yong-jae, Standing Commissioner of the Financial Services Commission, is delivering a congratulatory speech at the '2022 Asia Smart Finance Awards Ceremony' held on the 25th at the Press Center in Jung-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

Kim Yong-jae, Standing Member of the Financial Services Commission, announced on the 17th that he attended the Financial Stability Board (FSB) plenary meeting held in Toronto, USA, on the 14th (local time).

At this meeting, the following topics were discussed: ▲ Financial stability outlook ▲ Lessons from the 2023 banking crisis ▲ Strengthening the resilience of non-bank financial institutions (NBFI) ▲ Regulation of virtual assets and global stablecoins ▲ Nature-related risks.

Regarding the agenda on the financial stability outlook, member countries emphasized that although the macroeconomic outlook has somewhat improved, the financial system shows high valuations, and there is a need for close monitoring due to risk factors such as ▲ the possibility of a sharp correction in some asset prices ▲ decline in commercial real estate prices ▲ private financial vulnerabilities such as NBFI leverage ▲ risks related to household, corporate, and public debt caused by high interest rates and geopolitical uncertainties.

Concerning the crisis stemming from last year’s Silicon Valley Bank (SVB) and Credit Suisse (CS), member countries reaffirmed the importance of effective resolution regimes for financial institutions recommended by the FSB since the G20 financial crisis. They also discussed public sector backstops in preparation for banking crises, interest rate and liquidity risks in the financial system, and the impact of technological advances and social media proliferation on depositor behaviour.

Subsequently, member countries discussed the progress and future plans of the FSB’s ongoing work to strengthen the resilience of NBFIs, conducted in cooperation with international organizations. They also emphasized the importance of data quality and availability regarding NBFIs for addressing NBFI risks and discussed ways to close data gaps.

Regarding the regulation of virtual assets and global stablecoins, member countries welcomed the progress in implementing the FSB’s recommendations on virtual assets and global stablecoin regulation announced last year and stressed the importance of international cooperation considering regulatory arbitrage risks in virtual assets. Accordingly, the FSB stated that it will continue to monitor the implementation status not only of member countries but also non-member countries and will conduct additional work on risks posed by global stablecoins.

Furthermore, member countries reviewed the draft report on ‘Regulatory and Supervisory Practices of Member Countries on Nature-related Financial Risks,’ which the FSB is preparing at the request of the G20 Finance Ministers’ meeting. Member countries discussed whether and to what extent environmental destruction and biodiversity loss manifest as financial risks and expressed expectations that the report will be thoroughly prepared and delivered to the G20 in July.

Standing Member Kim Yong-jae stated, “The ongoing FSB work to share experiences and lessons on specific policy measures used by member countries to address NBFI risks is very meaningful,” adding, “Korea has experience in swiftly resolving liquidity crunches caused by margin calls on equity-linked securities (ELS) during the financial market crisis triggered by the COVID-19 outbreak in 2020 through liquidity provision, and we will actively share this with member countries.”

He continued, “One of the main reasons for the sharp rise in virtual asset prices since the second half of last year is the approval of virtual asset spot ETFs in some countries,” pointing out, “The approval of virtual asset spot ETFs signals the beginning of the integration of virtual assets with traditional finance. The FSB should review at the organizational level which specific financial vulnerabilities are intensifying and how each country is responding.”

Meanwhile, prior to attending the FSB plenary meeting, on the 12th, Standing Member Kim held an on-site meeting with startups and venture capitalists (VCs) operating locally in San Francisco, USA. He stated that through IBK Bank’s (IBK Changgong) Silicon Valley desk and KDB Industrial Bank’s Silicon Valley branch, financial support for Korean startups entering the local market and collaboration with VCs will be further activated.

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