Presiding Over Chief Secretary Meeting... Economic Deputy Prime Minister Leads Bankruptcy Factor Review
Government and Monetary Authorities Strengthen Joint Monitoring... Choo Kyung-ho "Swift Response"
President Yoon Suk-yeol has instructed a thorough examination of the impact on the domestic financial market and real economy in relation to the bankruptcy of the US Silicon Valley Bank (SVB). Currently, the government and monetary authorities are strengthening real-time monitoring in a joint format.
At the senior secretaries' meeting he presided over on the morning of the 13th, President Yoon said, "Uncertainty in the financial market is spreading due to the bankruptcy of the US SVB," and ordered such measures. In particular, President Yoon said, "Thoroughly examine the causes of the SVB bankruptcy, the progress of the situation, the response of US authorities, and the impact on the domestic financial market and real economy, centered on the Deputy Prime Minister for Economy."
On the 10th, the California Department of Financial Protection and Innovation closed SVB, which had served as a funding source for startups in the western US, citing insufficient liquidity and insolvency. Amid the fallout from the SVB collapse, Signature Bank, headquartered in New York, was also closed. SVB, headquartered in Santa Clara, California, played the role of a funding source by dealing with startups in Silicon Valley, the fountainhead of US information technology (IT). The Associated Press reported that the US financial authorities' action against SVB was the largest since the closure of Washington Mutual Bank during the 2008 financial crisis triggered by the subprime mortgage crisis.
However, the government’s assessment is that the impact on South Korea will not be significant. On the same day, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho said at the Export and Investment Responsibility Officers meeting held at the Government Complex Sejong, "Many believe that this incident has not yet spread as a risk to the global financial and economic system and that its impact will be limited." He added, "This morning, related authorities including the US Treasury Department announced measures to fully protect deposits at Silicon Valley Bank and are responding swiftly."
Regarding the uncertainty mentioned by President Yoon, concerns were expressed. Minister Choo also emphasized, "Since the uncertainty about the future impact remains high, we will strengthen real-time joint monitoring by related agencies to minimize negative effects on our financial market and real economy," and added, "We will closely watch changes in market conditions and respond promptly if necessary."
Related agencies are focusing on monitoring the domestic financial and economic impact following the closure of SVB. Since SVB has not directly entered the Korean market and its structure mainly serves startups as customers, the direct impact on the domestic financial and economic sectors is limited. However, considering various variables, it is judged that comprehensive monitoring is necessary.
Lee Seung-heon, Deputy Governor of the Bank of Korea, said, "Depending on the impact of this incident on investment sentiment and the US Consumer Price Index (CPI) results, there is a possibility of increased volatility in the global financial market," and added, "We will closely monitor the impact of this incident on domestic price variables such as interest rates, stock prices, and exchange rates, as well as capital inflows and outflows, and take appropriate market stabilization measures if necessary."
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