FSS Chief Lee Chanjin: "Stock Corrections, High Exchange Rates Due to Non-Structural Factors, Not Fundamentals"

Financial Supervisory Service Holds Financial Situation Review Meeting

Yonhap News Agency

Lee Chanjin, Governor of the Financial Supervisory Service, emphasized in November that recent market instability-such as stock price corrections, rising interest rates, and continued high exchange rates-stems from non-structural factors rather than fundamental issues. He also called for liquidity management to prevent abrupt money movement triggered by year-end competition among financial institutions to attract retirement pension funds.

Governor Lee made these remarks at a financial situation review meeting held on the 27th, immediately after the Bank of Korea decided to keep its base rate unchanged.

At the meeting, the Financial Supervisory Service assessed that the somewhat unstable financial market conditions observed in November were mainly due to non-structural factors, such as short-term profit-taking, year-end supply-demand imbalances, and fluctuations in overseas markets.

While the agency expects market stability and recovery to continue into next year, it also identified significant risk factors-including uncertainty over Korea-U.S. interest rate differentials, concerns about excessive investment in artificial intelligence (AI), and instability in the real estate market-indicating the need for thorough preparation.

Governor Lee stated, "We must ensure robust consumer protection by curbing marketing activities that encourage investment in high-risk overseas derivatives and leveraged products. We should also strengthen risk management by monitoring each securities firm's credit extension limits and transaction trends on a daily basis, and respond proactively if any warning signs emerge."

He continued, "Although conditions for foreign currency funding and foreign currency liquidity are currently favorable, it is crucial to secure sufficient foreign currency liquidity to cope with temporary supply-demand imbalances. In the event of abrupt market fluctuations, we must thoroughly manage potential risks by closely examining investment exposures and transmission channels that could lead to forced selling or margin calls."

He added, "To prevent sudden money movement caused by year-end competition among financial institutions to attract retirement pension funds, we must closely monitor the liquidity situation of both the money market and financial firms. We will also ensure that capital is invested in the innovative growth of domestic industries by steadily implementing the settlement of the investment management account (IMA) system for investment companies and improving capital ratio incentive structures at financial institutions."

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