Lee Bok-hyun, Financial Supervisory Service Chief, Holds Financial Situation Review Meeting... Attended by Financial Holding CROs
Authorities Implement Stepwise Stabilization Measures According to Emergency Response System
Experts Say "Volatility Is Increasing but Fundamentals Remain Strong"
"Given the escalation of the Iran-Israel conflict, it is expected that high exchange rates, high oil prices, and high interest rates will persist, so please maintain heightened vigilance and respond swiftly according to the financial market situation."
On the 18th, Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), held a financial situation review meeting in accordance with the FSS emergency response plan activated immediately after the escalation of the Iran-Israel conflict, urging this. The meeting was attended by foreign exchange and commodity experts at the forefront of the market, as well as chief risk officers (CROs) from financial holding companies.
He stated, "Our financial market is expected to respond well to the shock of the Middle East situation with the crisis management capabilities accumulated through various market instability situations," but also emphasized the need to maintain heightened vigilance and respond promptly according to the financial market situation.
The financial authorities are implementing phased stabilization measures according to the emergency response system activated immediately after Iran's supply disruption. They are strengthening monitoring of stock, bond, short-term money markets, and foreign currency fund inflows and outflows, while establishing a 24-hour response system including the operation of FSS overseas offices and hotlines. In addition, they plan to closely cooperate with related agencies such as the Ministry of Economy and Finance, the Financial Services Commission, and the Bank of Korea, and to raise the emergency response level and immediately implement necessary stabilization measures if the situation worsens.
They also urged strengthening position management of foreign currency asset liabilities in preparation for a sudden deterioration in the foreign currency fund market. Furthermore, considering that difficulties for ordinary citizens and small and medium-sized enterprises (SMEs) may increase due to high interest rates and high oil prices, they emphasized the need to actively provide preemptive financial adjustment support.
Governor Lee said, "Please check the securing of sufficient credit lines and the effectiveness of emergency funding plans in preparation for a sudden deterioration in the foreign currency fund market," and added, "Please actively conduct preemptive debt restructuring support for SMEs' funding demand difficulties and for households and individual business owners."
He also added a request regarding the real estate project financing (PF) market. He said, "Please continue to induce the prompt disposal of non-performing assets and proactive capital expansion in preparation for market shocks such as the smooth landing of real estate PF and the possibility of prolonged high interest rates," and stated, "The FSS plans to operate the emergency response system with vigilance until the current geopolitical risks are resolved."
The market experts attending the review meeting diagnosed that although volatility is increasing, the fundamental strength remains robust. Foreign exchange market experts also judged that although the won-dollar exchange rate rose sharply after the conflict, swap basis, credit default swap (CDS) premiums, and other foreign exchange market indicators are stable. Market experts analyzed, "Recent rises in the won-dollar exchange rate and stock price declines are due to increased risk aversion caused by the conflict, but the fundamentals of our economy remain very strong, with continued export growth and a sustained current account surplus."
Financial holding company CROs stated that the impact on the soundness of financial companies is limited but risk management is being strengthened overall. The CROs explained, "The Iran-Israel exposure of the domestic financial sector is very minimal, so the impact on the soundness of financial companies is limited; however, risk management is being strengthened, including exposure limits by country," and added, "Foreign currency funding is smooth, borrowing spreads have decreased compared to the previous year, so there is no significant impact, and foreign currency liquidity regulatory ratios are very favorable."
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