Lee Bok-hyun, Financial Supervisory Service Chief: "If Market Instability Continues, Short Selling Will Not Be Considered"

On the 3rd, Lee Bok-hyun, Governor of the Financial Supervisory Service, emphasized, "We will not consider implementing short selling while financial market instability continues."

Financial Supervisory Service Governor Lee Bok-hyun is asking questions after receiving an explanation about the Saessalron Bank program for small business owners and financially vulnerable groups at the Win-Win Finance Expansion Meeting held on the 3rd at the DGB Daegu Bank headquarters in Suseong-gu, Daegu.
[Photo by Yonhap News]

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On that day, Governor Lee made these remarks to reporters after concluding a 'Meeting for Expanding Win-Win Finance' held at the DBG Daegu Bank headquarters in Daegu. He stated, "The government's policy is to take advanced market stabilization measures, including a complete ban on short selling in the event of a market crash, without hesitation," and explained, "There have been mentions regarding short selling amid recent financial market instability, but the intention is that without alleviating financial market instability, a full resumption of short selling is hardly even up for consideration."

He continued, "As long as financial market instability triggered by high interest rates and high inflation persists, we intend to review the matter cautiously," emphasizing, "If the financial market stabilizes significantly and better times come, we plan to express opinions regarding short selling." He added, "It is desirable to first implement accessibility measures appropriately for several months, gather various opinions, and then seriously consider a full resumption of short selling," and further noted, "Even if the base interest rate is lowered, I believe pilot programs such as profit regulation, liquidation periods, and market accessibility improvements, along with feedback from market participants, are necessary."

This is interpreted as a step back from his earlier statement about lifting the short selling ban within the year. Previously, in a Bloomberg interview reported on the 29th of last month, Governor Lee said, "We will definitely take measures to make Korea an attractive market for foreign investors," and mentioned, "If financial market instability is resolved within a few months, we will consider lifting the short selling ban within the year if possible."

Following that statement, there were criticisms suggesting that Governor Lee may have overstepped his authority with the Financial Services Commission. Although Governor Lee is an ex officio member of the Financial Services Commission's regular meetings, the full resumption of short selling falls under the Commission's jurisdiction. In particular, Kim Ju-hyun, Chairman of the Financial Services Commission, has said regarding short selling, "There are many uncertainties about timing and methods, so we are continuing to review," showing a difference in tone.

However, regarding the accusation of overstepping authority, Governor Lee stated, "I believe it is neglect of duty if the Financial Supervisory Service does not provide appropriate opinions," emphasizing, "Various issues surrounding short selling are very important for national governance, and as the Financial Supervisory Service is responsible for analyzing the effects of short selling, we cannot refrain from providing appropriate opinions."

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