Lee Bok-hyun "Strengthening Monitoring of 'Increased Volatility' Following US Employment Data and CPI"

Lee Bok-hyun, Governor of the Financial Supervisory Service, is holding a press conference on the 4th at the Financial Supervisory Service in Yeouido, Seoul. Photo by Kang Jin-hyung aymsdream@

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Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), urged enhanced monitoring and the management of current issues with a mid- to long-term perspective, as market volatility may increase following the consecutive releases of U.S. employment data and the Consumer Price Index (CPI). He emphasized the need to thoroughly manage potential risks arising from excessive expectations of interest rate cuts and the prolonged high-interest-rate environment, and to establish a robust and close response system.

On the morning of the 4th, Governor Lee held a financial situation review meeting at the FSS to examine risk factors by sector and response plans. He stated, "The U.S. Personal Consumption Expenditures (PCE) for January, announced just before the holiday, met market expectations, which stabilized the market." However, he added, "Since the U.S. Federal Reserve (Fed) will carefully determine the path of interest rate cuts based on upcoming data, market volatility may increase depending on the trends of the February U.S. employment data and CPI to be released starting this week."

He urged close monitoring of even minor changes in important events and balanced management of issues with a mid- to long-term perspective, emphasizing the necessity of a close response system for excessive interest rate cut expectations and potential risk factors.

In particular, Governor Lee reiterated the importance of close monitoring of the real estate project financing (PF) market and encouraging financial institutions to strengthen their loss absorption capacity related to overseas real estate investments.

He said, "While closely monitoring the risk of business sites becoming insolvent due to rising financial costs, it is necessary to promptly proceed with the liquidation and restructuring of insolvent business sites to enable a virtuous cycle of funds into productive sectors." He added, "Since overseas real estate investments by financial institutions are significantly affected by the prolonged high-interest-rate environment, please encourage risk management enhancements such as appropriate loss recognition and strengthening of loss absorption capacity."

He also added requests for support for households and individual business owners affected by the prolonged high-interest-rate environment and for strengthening insurance companies' risk management capabilities.

Governor Lee stated, "Please ensure the smooth implementation of debt adjustment support for households and individual business owners who are facing increasing difficulties due to the prolonged high-interest-rate environment and delayed economic recovery." He also said, "Considering the sensitivity of insurance companies to interest rate fluctuations, actively encourage the strengthening of their risk management capabilities and proactive capital expansion."

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