Uncertainty Grows Over 'Impeachment Bill Rejection'... Financial Authorities Consider 'Expansion' Review Meeting

Concerns over the financial market are growing amid the emergency martial law situation triggered by President Yoon Suk-yeol and the ensuing impeachment political turmoil. In particular, uncertainty has intensified following the dismissal of the impeachment motion against President Yoon on the 7th due to the ruling party's voting 'boycott.' In response, financial authorities are considering expanding the ongoing financial market inspection meetings, which have been held since the early stages of the emergency martial law situation, to include financial holding companies and holding them regularly.

Yonhap News

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According to financial authorities on the 8th, the Financial Supervisory Service plans to strengthen communication with the market, including the financial sector, real estate, and construction industries, as well as the industrial sector and field, to mitigate the economic and financial market shocks caused by the emergency martial law situation. Management will also be reinforced, focusing on issues such as financial stability, household debt, and real estate project financing (PF).

On the 6th, the Financial Supervisory Service held a meeting with chief risk officers (CROs) of insurance companies, and on the 9th, it will hold a meeting with deputy heads of banks in charge of loans and funds. Additionally, on the 10th, a meeting with CEOs of savings banks will be held, and in mid-month, meetings with real estate experts and the construction industry will be conducted to assess the funding situation in the real estate market.

Furthermore, financial authorities are reportedly considering holding an expanded emergency financial market inspection meeting attended by financial holding company chairpersons to prepare for the possibility that political instability could spread throughout the financial market. A financial authority official stated, "Although the schedule has not been finalized, there may be opportunities to communicate with major financial holding company chairpersons to discuss the overall situation of each sector as well as the financial market."

This move by financial authorities is interpreted as a response to the spread of anxiety following the full-scale impeachment political turmoil and the dismissal of the impeachment motion on the 7th. The opposition party, which has defined the emergency martial law situation as 'rebellion,' plans to repeatedly push for the approval of the impeachment motion after the first motion was dismissed due to the ruling party lawmakers' collective 'boycott.'

Speaker Woo Won-shik is announcing the rejection of the Kim Geon-hee special prosecutor bill at the National Assembly plenary session on the 7th. Photo by Kim Hyun-min

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Financial authorities also plan to actively manage financial-related bills that need urgent handling. Representative examples include the amendments to the Loan Business Act and the Depositor Protection Act, which had passed the National Assembly's Political Affairs Committee just before the emergency martial law situation.

The amendment to the Loan Business Act raises the self-capital requirements for loan business registration from 10 million KRW to 100 million KRW for individuals and from 50 million KRW to 300 million KRW for corporations. The self-capital requirement for loan brokerage businesses, which previously did not exist, has been newly established at 30 million KRW for offline and 100 million KRW for online operations.

Money lending contracts with illegal private lenders maintain the principal agreement but invalidate interest agreements, and penalties for crimes directly related to illegal private lending have been strengthened to imprisonment of up to 10 years and fines of up to 500 million KRW. Anti-social illegal loan contracts, such as those involving sexual exploitation collection, human trafficking during the loan contract process, or loan interest rates exceeding three times the maximum interest rate (20%), are null and void for both principal and interest.

The amendment to the Depositor Protection Act, which passed the full committee of the government, includes raising the depositor protection limit from the current 50 million KRW to 100 million KRW. Initially, it was expected to be implemented around December next year after a one-year grace period following approval by the National Assembly plenary session this month, but the implementation date has become uncertain. It is also unclear whether the procedures for reforming indemnity insurance, scheduled to be announced at the end of this month, will proceed as planned. The Financial Services Commission and the Ministry of Health and Welfare have been preparing measures to strengthen non-reimbursable management and prevent excessive medical practices such as manual therapy.

Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance (left), Lee Chang-yong, Governor of the Bank of Korea (right), and Kim Byung-hwan, Chairman of the Financial Services Commission (center), are leaving the meeting room with serious expressions after a closed-door emergency macroeconomic and financial issues meeting held on the 4th at the Korea Federation of Banks in Jung-gu, Seoul. Photo by Jo Yong-jun

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Meanwhile, the burden on the 'Value-Up Program' actively promoted by financial authorities this year has also increased. In response, financial authorities have requested financial companies to strengthen communication with overseas investors. Previously, financial authorities committed to continuously explaining the solid fundamentals of the Korean economy and policy response capacity to international financial organizations, international credit rating agencies, allied countries' economic lines, overseas investors, domestic economic organizations, and financial market stakeholders to prevent any impact on external credibility.

Choi Sang-mok, Deputy Prime Minister and Minister of Strategy and Finance, stated, "Since domestic and international uncertainties still persist, we will maintain a high level of vigilance and ensure a 24-hour response system." He added, "We will operate the 'Economic and Financial Situation Inspection Task Force (TF)' to continuously monitor real-time data on consumption, investment, exports, employment, inflation, and overall economic and livelihood conditions." Financial authorities have prepared market stabilization measures, including a stock market stabilization fund worth 10 trillion KRW and a bond market stabilization fund worth 40 trillion KRW, to be immediately activated, but the specific timing of deployment will be decided after assessing market conditions.

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