Hwang Geon-il, KFTC Member, "Proactive Management Needed for Financial Soundness in Vulnerable Sectors Including Self-Employed"

Financial Stability Report

As uncertainty in the domestic economy grows, there are calls to proactively strengthen soundness management to prevent an increase in loan defaults in vulnerable sectors such as self-employed individuals and small and medium-sized enterprises.

Hwang Geon-il, Member of the Monetary Policy Committee at the Bank of Korea. Provided by the Bank of Korea.

On the 27th, Hwang Geon-il, a member of the Financial Monetary Policy Committee at the Bank of Korea, explained in the Financial Stability Report, "Under high uncertainty and continued low growth, our country's financial system may experience increased volatility in financial and foreign exchange market price variables when domestic and external shocks occur."

Hwang particularly pointed out that the soundness of some financial institutions could deteriorate due to the easing of household loan management measures, including interest rate cuts by banks. He said, "With the easing of financial conditions, borrowers' principal and interest repayment burdens will gradually decrease," adding, "However, vulnerable sectors such as the self-employed and small and medium-sized enterprises may see an increase in defaults, raising concerns about the deterioration of soundness in some regional and non-bank financial institutions."

He emphasized, "Attention should be paid to the recent trend of rapid housing price increases in some areas of Seoul spreading to other regions," and stated, "Close policy coordination for macroprudential management is important to ensure that the real estate market and household debt situation do not constrain monetary policy operations aimed at alleviating downward pressure on the economy."

Hwang said, "To effectively respond to risks under conditions of high uncertainty, it is necessary to proactively strengthen soundness management in vulnerable sectors," and added, "Efforts for structural reforms to raise potential growth rates must also continue."

He also stressed, "Care must be taken to ensure that the easing of financial conditions under the interest rate cut trend does not act as a factor delaying or restricting structural reforms in vulnerable sectors."