[Asia Economy Reporter Ryu Taemin] The Financial Supervisory Service (FSS) has urged restraint in the overheated competition for funds in the retirement pension market. As interest rates have recently risen, causing market funds to flow into bank deposits, financial companies are engaging in excessive competition to prevent the outflow of funds from retirement pensions.
According to the financial sector on the 4th, the FSS issued administrative guidance at the end of last month to a total of 90 financial companies, including 44 retirement pension providers such as commercial banks, securities firms, and insurance companies, and 46 non-providers (product sellers). The guidance requested active cooperation to ensure that the interest rates for December are determined reasonably by considering the costs of providing products and operating profits, thereby maintaining a fair competitive order in the retirement pension market.
The FSS stated, "This measure was taken in response to signs of excessive competition for year-end fund attraction in the retirement pension market due to recent successive base rate hikes and the fund market situation."
The FSS explained that the maturity of principal-guaranteed retirement pension products is concentrated every December, leading to frequent fund movements among product providers. It urged financial companies managing these products to prepare in advance for potential fund outflows. In particular, it warned that if principal-guaranteed retirement pension products are not reinvested upon maturity, liquidity issues and financial market disruptions could arise, and thus advised comprehensive risk management in operations.
The FSS plans to monitor the maturity of funds inflowed through the sale of principal-guaranteed retirement pension products, the concentration of investments in high-risk assets, and other operational statuses, and will conduct on-site inspections if any abnormal signs are detected. Additionally, the FSS called for restraint amid rampant baseless defamation in the retirement pension market.
The FSS issued administrative guidance asking retirement pension providers to be cautious not to damage fair trade order by defaming specific product providers or spreading unfounded rumors during the process of offering and explaining principal-guaranteed products to customers.
On the 25th of last month, Kim Joo-hyun, Chairman of the Financial Services Commission, expressed the view at a financial market status review meeting that excessive competition in the year-end retirement pension market and aggressive fund acquisition efforts by the financial sector could act as destabilizing factors in the financial market, thus calling for restraint in competition.
On the 28th of last month, Lee Bok-hyun, Governor of the Financial Supervisory Service, mentioned phenomena such as the 'retirement pension money move,' stating, "Given the characteristics of the financial market, when fund concentration occurs, financial authorities must play their role even if they face some criticism," and emphasized, "This does not mean a lack of respect for market functions."
Following the guidance from financial authorities, financial companies simultaneously announced the interest rates for December principal-guaranteed retirement pension products at the end of last month. This was in response to the FSS's ban on 'cunning disclosures,' which could cause fund concentration at year-end by companies quoting higher interest rates.
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