Lee Bok-hyun "Economic Uncertainty Grows, Proactive Response to Real Estate and Household Debt Issues"

Growing Macroeconomic Uncertainty: Proactive Management of Household Debt, Real Estate PF, and Financial Institution Soundness
Strict Zero-Tolerance Measures Against Incomplete Sales and Major Financial Accidents Causing Consumer Harm

An open discussion for the advancement of the capital market, jointly hosted by the Financial Supervisory Service, the National Pension Service, and the Korea Exchange, was held at the Korea Economic Daily Association Hall in Seoul. Lee Bok-hyun, Governor of the Financial Supervisory Service, is delivering the opening remarks. Photo by Younghan Heo younghan@

Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), emphasized that due to the expected high level of macroeconomic uncertainty in South Korea this year, proactive measures will be taken to address market risk factors such as household debt, real estate project financing (PF), and the soundness of financial companies.

Growing Macroeconomic Uncertainty, Proactive Management of Household Debt, Real Estate PF, and Financial Institution Soundness

On the morning of the 10th, Governor Lee unveiled the "2025 FSS Work Plan" at the FSS auditorium in Yeouido, Seoul, stating, "This year will be marked by significant macroeconomic uncertainty due to the slowdown in economic growth and policy changes by the new U.S. administration. We will respond more swiftly than ever to financial market risk factors."

The FSS announced this year's work plan, which includes 14 key tasks under five strategic goals: stability, trust, coexistence, future, and innovation. Among these, Governor Lee placed the highest priority on the stability of the financial system.

He said, "To strengthen consistent and stable management of household debt, we will establish a sophisticated management system for household loans and continuously encourage a gradual reduction in household debt ratios through preparations for the phased implementation of the three-stage Debt Service Ratio (DSR) stress test."

Regarding real estate PF defaults, he explained, "In cases where PF defaults could become a trigger for our economy, we will induce a virtuous cycle of funds and enhance the soundness of financial institutions through the establishment of a continuous evaluation system for projects and close guidance on project liquidation and restructuring." In this regard, the FSS plans to conduct a comprehensive review of PF, real estate-related household debt, corporate loans, and individual business loans with high interconnectivity to strengthen management of vulnerable areas and improve regulations.

Governor Lee announced, "To prevent real economy defaults from spreading throughout the financial sector, we will strengthen proactive management of vulnerable areas such as corporate debt and promote the enhancement and refinement of soundness systems, including improving financial institutions' loss absorption capacity."

The FSS plans to advance supervisory and regulatory systems to enhance financial institutions' loss absorption capacity and global consistency. For banks, it will pursue the introduction of holding company liquidity and leverage ratio regulations to manage group-wide capital and liquidity comprehensively. For insurance companies, a 'supervisory process' will be established for key actuarial assumptions that significantly affect insurance liability valuation. Securities firms are expected to improve the calculation method of the net capital ratio, a key capital adequacy indicator.

Strict Non-Tolerance Measures Against Incomplete Sales and Major Financial Accidents Causing Consumer Harm

The FSS will also actively protect financial consumers this year. Governor Lee stated, "The newly established Financial Consumer Protection Investigation Bureau will promptly investigate complaints expected to cause harm to many consumers. We will swiftly respond to concerns about financial consumer harm identified through market information, such as product sales concentration, by utilizing undercover mobile inspections."

He added, "We will uphold a 'zero-tolerance principle' with strict measures against incomplete sales of financial products caused by large-scale consumer harm and inadequate internal controls, as well as major financial accidents. We will promote the restoration of trust and order in the financial industry through smooth introduction and support for the establishment of accountability structures." Furthermore, he mentioned, "We will maintain a strict stance against illegal and unsound practices in the capital market by strengthening investigations into habitual offenders of unfair trading, including those suspected of unjust profit-taking, expert groups, and by enhancing accounting reviews for initial public offerings (IPOs) and companies on the brink of failure."

Support for vulnerable groups and eradication of financial crimes affecting livelihoods will also be pursued for coexistence between the public and financial markets. Governor Lee emphasized, "We will expand non-face-to-face channels to improve access to financial products for low-income groups and continue to encourage internet-only banks to supply funds to middle- and low-credit borrowers. To eradicate livelihood financial crimes such as voice phishing and illegal private loans, we will implement effective damage prevention measures, including establishing safe blocking services for non-face-to-face account openings and blocking illegal fund transfers related to voice phishing."

The FSS will actively support the development of artificial intelligence (AI) by financial companies. Governor Lee announced, "We plan to support the establishment of infrastructure and regulatory frameworks to enhance financial companies' AI utilization and advance management systems for the virtual asset industry. We will establish an integrated AI guideline for the financial sector to promote systematic AI development and use by financial companies." He also stated, "We will promote the use of various data, including pseudonymized information, to enable financial companies to utilize high-quality training data for AI development and support the construction of a joint AI platform for small and medium-sized firms."

Governor Lee pledged not to neglect efforts to innovate FSS supervisory tasks. He said, "We plan to strengthen the speed and efficiency of financial company inspections by enhancing management of total inspection volumes and progress by region, department, and individual. We will continue to innovate through digital transformation of supervisory tasks and make comprehensive efforts to enhance supervisory capabilities across various areas."