Extension of Financial Regulation Easing Measures Until the End of June

SVB Shock Somewhat Eased... Responding to Domestic and External Uncertainties

On the 9th, officials were busy moving in the corridor of the Financial Services Commission at the Government Seoul Office in Jongno-gu, Seoul, where financial authorities decided to include mortgage loans (Judaemae) in the 'debt refinancing' infrastructure set to launch in May by the end of the year. Financial authorities explained that the purpose is to reduce the interest burden on mortgage loans by establishing a debt refinancing platform that allows users to compare financial sector loan interest rates at a glance and switch loans easily. Photo by Dongju Yoon doso7@

The government has decided to extend the financial regulatory relaxation measures, including the loan-to-deposit ratio regulations for banks, until the end of June. This decision comes amid increasing uncertainties in domestic and international financial markets, such as the bankruptcy of Silicon Valley Bank (SVB) and the liquidity crisis at Credit Suisse (CS).

On the morning of the 27th, the Financial Services Commission held a 'Financial Market Status Review Meeting' at the Government Seoul Office in Jongno-gu, Seoul, chaired by Standing Commissioner Kwon Dae-young, where this decision was announced. Representatives from the Financial Services Commission, Financial Supervisory Service, and various financial associations from different sectors attended the meeting.

At the meeting, participants assessed that the global financial market uncertainties caused by the SVB incident have somewhat eased due to the swift responses by U.S. policymakers, including depositor protection measures and liquidity support, as well as similar rapid actions by other countries. They also judged that the direct impact on the domestic financial market and financial companies is limited.

Regarding the largest domestic real estate project financing (PF) in the domestic financial market, although difficulties have been raised mainly in some projects and sectors, it was shared that compared to past crises, the unsold inventory and delinquency rates are low, making it difficult to view this as a systemic risk at this time.

A Financial Services Commission official stated, “For areas where business viability is recently a concern, efforts for private autonomous business restructuring are underway, and communication with stakeholders is being strengthened.” He added, “The PF creditor group agreement will also be revised in April to support smooth private autonomous rights and stakeholder adjustments.”

However, since domestic and international uncertainties have not been completely resolved, financial authorities have decided to extend the financial regulatory relaxation measures implemented since October last year for banks, insurance companies, savings banks, specialized credit finance companies, and financial investment companies. Accordingly, some financial regulatory relaxation measures, such as the bank loan-to-deposit ratio regulations, which were set to expire at the end of March or April, will be extended until the end of June.

Since last October, financial authorities have relaxed regulations such as liquidity coverage ratio (LCR) and loan-to-deposit ratio for banks; credit extension limits between subsidiaries for financial holding companies; borrowing limits for retirement pensions for insurance companies; limits on Korean won liquidity and real estate PF handling for specialized credit finance companies; limits on inclusion of credit card receivables for financial investment companies; and risk values for net capital ratio (NCR) of self-guaranteed asset-backed commercial paper (ABCP).

The Financial Services Commission stated, “Considering the financial market situation in June, we will decide on the extension of the current measures and whether to further extend the measures expiring at the end of June.”