Financial Services Commission Chairman and Bank Presidents Hold Emergency Meeting: "Actively Participate in Establishing the Chaean Fund"

Eun Sung-soo, Chairman of the Financial Services Commission, along with heads of major banks, are attending a meeting between the Financial Services Commission Chairman and bank presidents held on the 20th at the Bankers' Hall in Jung-gu, Seoul, exchanging opinions. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Jo Gang-wook] Financial authorities and heads of banks have agreed to actively participate in the creation of a 10 trillion won-scale Bond Market Stabilization Fund (Cha-an Fund). This fund will purchase corporate bonds and financial bonds to alleviate the financial difficulties faced by companies and the financial sector. They also agreed to cooperate in increasing the fund size if necessary. Additionally, they will collaborate in establishing a Securities Market Stabilization Fund (Jeung-an Fund), which will operate temporarily until the stock market recovers.

On the 20th, the Financial Services Commission (FSC) announced that Chairman Eun Sung-soo held a meeting with Kim Tae-young, Chairman of the Korea Federation of Banks, and heads of eight major banks to discuss follow-up measures to implement the government’s livelihood and financial stability package program announced the previous day.

At the meeting, participants agreed that resolving the financial difficulties of small and medium-sized enterprises (SMEs) and small business owners, who have been hit by the novel coronavirus disease (COVID-19), to prevent bankruptcy risk is the foundation for real economic recovery and, ultimately, financial stability.

Accordingly, through a public-private role-sharing approach, they decided to strive to supply ultra-low interest rate (1.5%) funds as efficiently as possible to small business owners in urgent need of funds. It was especially emphasized that providing guidance on suitable financial products to small business owners at bank consultation counters is important. The banking sector agreed to actively cooperate with the outsourcing of tasks to regional foundations, which have been experiencing delays due to a recent surge in demand. On the 18th, a task outsourcing agreement was signed between 16 regional foundations and 14 commercial banks. They also pledged to make every effort to ensure that the extension of loan maturities and interest payment deferrals across all financial sectors, which will be implemented from the 1st of next month, proceed without confusion or delay. Furthermore, for companies experiencing temporary financial difficulties due to COVID-19, policy financial institutions such as the Korea Development Bank will provide liquidity support, and other commercial banks will refrain from recalling loans to maintain the effectiveness of this support.

In particular, the banking sector will take the lead in establishing the 10 trillion won-scale Cha-an Fund. Chairman Eun emphasized, "The responsible role of banks is crucial to ensure that the Bond Market Stabilization Fund, jointly established by the financial sector in December 2008 to overcome the global financial crisis, can be reactivated without any setbacks." Accordingly, the bank heads agreed to contribute to the creation of the 10 trillion won fund as the core participants according to existing agreements, ensuring timely execution of the fund, and to actively cooperate in increasing the fund size if needed based on the pace of fund utilization.

They will also actively participate in the establishment of the Jeung-an Fund. Domestic banks hold the largest share in the Korean financial market and play a leading role in the financial market. Therefore, they are expected to take responsibility and actively engage in stabilizing the stock market.

The FSC stated, "To ensure that these measures do not adversely affect banks’ capital soundness, management evaluations, or internal performance evaluations of responsible personnel, financial authorities will actively support banks’ efforts to enhance capital soundness in parallel with proactive exemption measures."