Financial Services Commission to Hold 'Financial Market Issues Review and Communication Meeting' on 13th
Political and Geopolitical Uncertainty Increases After Trump's Election
Market Stabilization Program to Be Maintained Until End of Next Year
The government has decided to extend temporary financial regulatory relief measures, which exempt financial company executives and employees from liability for potential defaults arising during the restructuring of real estate PF (Project Financing), until June 2025. On the 13th, the Financial Services Commission (FSC) announced this at a financial market issue review and communication meeting chaired by Vice Chairman Kim So-young, attended by related agencies, academia, and market experts.
Originally scheduled to end this year, the temporary financial regulatory relief measures related to real estate PF will be extended by an additional six months until the end of June 2025, considering that restructuring and liquidation work at PF project sites is ongoing. The specific normalization timeline will be determined in the first half of 2025, taking into account various conditions.
The regulatory relief measures include a total of 11 actions such as ▲exemption of liability for executives and employees related to fund supply and restructuring ▲allowing separate classification of asset soundness when supplying new funds ▲relaxation of risk coefficients under the insurance company K-ICS ▲relaxation of credit extension limits within savings banks' business areas ▲and easing the PF exposure ratio relative to credit assets.
Additionally, a market stabilization program worth up to KRW 37.6 trillion to stabilize the bond and short-term money markets will be maintained at the current level until the end of next year. Specifically, this includes ▲KRW 20 trillion for the Bond Market Stabilization Fund ▲KRW 10 trillion for policy financial institutions’ corporate bond and CP purchase programs ▲KRW 2.8 trillion for the Credit Guarantee Fund P-CBO program ▲KRW 1.8 trillion for the financial investment industry’s joint PF-ABCP purchase program ▲and KRW 3 trillion for liquidity support to securities firms by Korea Securities Finance Corporation.
Furthermore, to ensure the smooth landing of real estate PF, the government, related agencies, and financial sectors will continue to operate support programs totaling up to KRW 53.7 trillion without disruption. This includes ▲KRW 35 trillion for PF operator guarantee programs ▲KRW 2.7 trillion for PF normalization support funds ▲KRW 5 trillion for pre-completion unsold loan guarantees ▲KRW 1 trillion for bank and insurance sector syndicated loans ▲and KRW 10 trillion for non-residential operator guarantees, among others.
The meeting also cautioned about increased market volatility following the election of President Trump in the U.S., known as the “Trump Trade.” Vice Chairman Kim So-young stated, “We are watching the recent market volatility with heightened awareness and seriousness, and will take timely necessary measures to stabilize the market if instability spreads. Although the possibility of severe financial distress such as credit crunch has decreased, given the high level of political and geopolitical uncertainties worldwide, preparation for increased financial market volatility is necessary.”
Experts attending the meeting forecast that favorable market conditions will continue in 2025, with market liquidity gradually expanding due to the trend of base interest rate cuts and the inclusion of Korean government bonds in the WGBI index. However, they noted the need to be cautious about impacts from U.S. policy changes and identified global economic downturns and inflation risks as potential threats.
The financial authorities plan to continuously monitor the reserve fund status of financial companies and encourage capital increases to prevent the expansion of soundness risks in the secondary financial sector during the PF restructuring and liquidation process. They will also strengthen monitoring of risk factors such as delayed recovery in the construction and real estate markets and polarization by region and usage.
Vice Chairman Kim said, “The smooth landing of real estate PF is steadily progressing through joint public-private efforts,” and urged, “The financial sector should do its utmost as a responsible party to promptly resolve defaults to ensure an orderly smooth landing of real estate PF.” She added, “If the role of the public sector is needed during the smooth landing process, we plan to promptly prepare additional support measures in consultation with related agencies and respond in a timely manner.”
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