Lee Bok-hyun "Conducting No-Cut Scenario and Oil Price Surge Stress Test"

US Federal Reserve Holds First Financial Stability Review Meeting After Six Rate Hikes
Early May PF Feasibility Reassessment Criteria Announced... "Preparing for Market Volatility"

Lee Bok-hyun, Governor of the Financial Supervisory Service, is announcing the dispute mediation guidelines related to the large-scale losses of Hong Kong H Index-linked ELS at the Financial Supervisory Service in Yeouido, Seoul on the 11th. Photo by Kang Jin-hyung aymsdream@

On the 2nd, Lee Bok-hyun, Governor of the Financial Supervisory Service, held a financial situation review meeting following the Federal Reserve's (Fed) decision to keep interest rates unchanged, assessing the potential impact on our economy and financial markets. The Fed has maintained the benchmark interest rate at 5.25~5.50% for six consecutive times.

At the meeting, Governor Lee stated, "The domestic financial market has been managed stably compared to the beginning of the year," but also urged, "Please thoroughly manage the key ongoing issues in preparation for domestic and international uncertainties." He particularly emphasized conducting stress tests based on crisis scenarios reflecting recent domestic and international uncertainties, such as the no-cut scenario or sharp oil price hikes, to identify weak links within the financial system and strengthen soundness before a crisis materializes.

Regarding Japan's continued accommodative monetary policy stance and the interest rate differential between the U.S. and Japan, he said, "Although the recent yen depreciation has been prominent, its impact on our economy remains limited so far, but it is necessary to assess the potential effects of the intensified concurrent weakening of the yen and major Asian currencies due to global financial market instability factors on our economy and financial markets and prepare countermeasures." He added, "It is necessary to assess the potential effects of the intensified concurrent weakening of the yen and major Asian currencies due to global financial market instability factors on our economy and financial markets and prepare countermeasures."

Furthermore, given the prolonged high interest rates, which may lead to a rise in delinquency rates especially among vulnerable borrowers, he requested prompt resolution of delinquent loans through various sales methods to induce simultaneous improvement in profitability (easing asset fixation) and soundness (delinquency resolution). He also urged thorough preparation for market stabilization policies that may arise along with the announcement of project financing (PF) feasibility reassessment criteria in early May.

Governor Lee stated, "Considering the growing concerns over prolonged high interest rates, delaying PF restructuring could increase burdens, so it is necessary to promote a swift and orderly soft landing." He emphasized, "In the process of promoting a soft landing for PF, including the announcement of PF feasibility reassessment criteria in early May, if any market instability arises due to changes in domestic and international economic and financial conditions, please strengthen the cooperation system with related agencies to ensure that the already prepared market stabilization policies can be implemented immediately."