Choo Kyung-ho "Difficult to Predict SVB Crisis Impact... Possibility of Increased Market Volatility"

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho and other economic and financial leaders are taking a commemorative photo at the Emergency Macroeconomic and Financial Meeting held on the morning of the 14th at the Bankers' Hall in Jung-gu, Seoul. From the left, Choi Sang-mok, Chief Economic Secretary to the President, Kim Ju-hyun, Chairman of the Financial Services Commission, Deputy Prime Minister Choo, Lee Bok-hyun, Governor of the Financial Supervisory Service, and Lee Seung-heon, Deputy Governor of the Bank of Korea. Photo by Bank of Korea

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho emphasized regarding the bankruptcy of the U.S. Silicon Valley Bank (SVB), "It is difficult to predict the repercussions of the situation at this point," and stated, "We will operate a joint inspection system among related agencies 24 hours a day to thoroughly monitor domestic and international market conditions."

On the same day, Deputy Prime Minister Choo held an emergency macroeconomic and financial meeting at the Seoul Banking Hall and said, "The government will remain highly vigilant and closely observe the situation." The meeting was attended by Financial Services Commission Chairman Kim Joo-hyun, Financial Supervisory Service Governor Lee Bok-hyun, Bank of Korea Deputy Governor Lee Seung-heon, and Chief Presidential Secretary for Economic Affairs Choi Sang-mok. Bank of Korea Governor Lee Chang-yong was unable to attend due to a business trip to Switzerland to attend the Bank for International Settlements (BIS) Governors' meeting.

Deputy Prime Minister Choo explained, "Since the closure of the U.S. Silicon Valley Bank last weekend, global financial market volatility has expanded again, prompting governments worldwide to swiftly implement market stabilization measures. In the U.S., with the closure of Signature Bank as well, market anxiety increased, leading the U.S. Treasury Department, Federal Reserve (Fed), and Federal Deposit Insurance Corporation to urgently announce depositor protection and liquidity support measures last weekend."

He added, "This incident arose as financial instability in vulnerable sectors surfaced amid ongoing high-level financial tightening to combat elevated inflation," and emphasized, "Given that it is difficult to predict the repercussions of the situation at the current point in time, the government will remain highly vigilant and closely observe the situation."

Although major countries including the U.S. have introduced market stabilization measures following the SVB bankruptcy, the international financial market is showing somewhat mixed signals. While the preference for safe assets continues, the market expects the pace of interest rate hikes at this month's Federal Open Market Committee (FOMC) meeting to ease, causing U.S. Treasury yields to fall sharply, and major stock indices closed with mixed results.

Deputy Prime Minister Choo explained that our financial market is generally maintaining stability. He said, "Following the U.S. and other countries' response measures, foreign capital inflows led to a slight rebound not only in the KOSPI but also in the KOSDAQ, which has many venture companies," and added, "In the government bond market, the preference for safe assets strengthened and global tightening expectations weakened, causing government bond yields to fall sharply."

He continued, "Domestic financial institutions have asset and liability structures different from Silicon Valley Bank, and liquidity is sound, so they are assessed to have sufficient fundamental strength to withstand temporary shocks," adding, "The exposure scale of related banks to major domestic banks, the four public pension funds, Korea Investment Corporation (KIC), and the Korea Post Office, among other investment institutions, is also relatively small, so the direct impact at this stage is expected to be limited."

However, Deputy Prime Minister Choo stressed that since financial system instability factors overlap, the possibility of increased market volatility in the future cannot be ruled out, and the government and related agencies will not let their guard down. He said, "We will operate a joint inspection system among related agencies 24 hours a day to closely monitor domestic and international market conditions in real time and continuously inspect and supplement vulnerabilities throughout the financial system," and added, "If necessary, we will promptly implement market stabilization measures in cooperation with related agencies."