Lee Bok-hyun "Next Year’s Economic Downside Risk Is Large... Please Prepare Thorough Countermeasures"

Held 'Financial Situation Review Meeting' Immediately After KFTC Base Rate Cut
"Immediate Market Stabilization Measures to Be Activated Upon Detection of Abnormal Signs Due to Mugunghwa Trust Actions"
"Thorough Risk Management of Vulnerable Sectors Including Swift Resolution of Real Estate PF Insolvencies" Urged

Lee Bok-hyun, Governor of the Financial Supervisory Service, held a financial situation review meeting immediately after the Bank of Korea's Monetary Policy Committee announced a base interest rate cut, urging to be fully prepared to ensure that economic and financial risks are managed in an orderly manner. The Monetary Policy Committee decided to lower the base interest rate from 3.25% per annum to 3.00%, a 0.25% reduction.

On the 28th, Governor Lee stated, "This year, domestic demand stagnation and a slowdown in the construction industry have continued, and in the second half, concerns over the semiconductor industry and export slowdown have emerged alongside the interest rate cut," adding, "Following the inauguration of the new U.S. administration, with issues such as the U.S.-China trade conflict, South Korea's growth outlook for next year has been revised downward, increasing downside risks to the economy."

He further added, "Due to the cumulative effects of high interest rates, latent risks in some vulnerable companies and financial institutions have become visible, raising concerns among market participants about further risk contagion."

In particular, he requested meticulous management as recent issues such as timely corrective actions for certain financial institutions and special clauses on corporate bonds of specific companies could destabilize the market if combined with the current funding market situation.

Governor Lee said, "Although the funding market has generally remained stable following measures taken against Mugunghwa Trust, immediate market stabilization measures must be activated upon detecting any abnormal signs," and added, "We will provide financial support through rapid assistance programs such as loan maturity extensions and repayment deferrals to prevent damage to Mugunghwa Trust subscribers, construction companies, and partner firms."

He also announced a policy to facilitate smooth negotiations with creditors regarding the special clause issues on corporate bonds of specific companies and to strictly respond to the dissemination of false information or rumors that could provoke market instability. Furthermore, he emphasized close monitoring of fund flows and proactive liquidity management, as rapid fund movements between financial sectors or institutions may occur toward the end of the year.

Additionally, Governor Lee ordered thorough risk management for vulnerable sectors, reflecting changes in the domestic and international macro environment, including the inauguration of the new U.S. administration next year.

He said, "We must rigorously review the results of the second real estate project financing (PF) feasibility assessments to promptly resolve additional insolvencies and actively promote new PF funding through syndicated loans," adding, "Next year, we will firmly maintain the management stance to ensure the household debt ratio relative to GDP stabilizes downward, and guide financial institutions to fully consider risks arising from increases and concentration in household loans when establishing management plans."

He continued, "For small and medium-sized financial companies with high non-performing loan ratios, thorough management should be conducted to make improvements in soundness visible through requests for soundness management plans and on-site inspections."