Lee Bokhyun Voices Serious Concerns Over Lotte Insurance's Call Option
Warns of Strict Measures for Unilateral Early Repayment Amid Solvency Issues
On the morning of the 8th, Lee Bokhyun, Governor of the Financial Supervisory Service, held a financial situation review meeting at the headquarters in Yeouido, Seoul, and stated, "We have serious concerns about Lotte Insurance unilaterally proceeding with early repayment despite not meeting the early repayment requirements due to a decline in the solvency ratio." Photo by the Financial Supervisory Service.
Lee Bokhyun, Governor of the Financial Supervisory Service, has expressed serious concerns regarding Lotte Insurance's exercise of the call option for its subordinated bonds.
On the morning of May 8, during a financial situation review meeting at the headquarters in Yeouido, Seoul, Governor Lee stated, "We have serious concerns about Lotte Insurance unilaterally proceeding with early repayment despite not meeting the early repayment requirements due to a decline in the solvency ratio."
He emphasized, "We will strictly enforce necessary measures in accordance with regulations and will make every effort to ensure stability in the financial market in order to prevent the spread of vague anxiety."
In order to exercise the call option, supervisory regulations require that the solvency ratio (K-ICS) remain at 150% or higher after the repayment. However, it is known that if Lotte Insurance exercises the call option, the K-ICS ratio will fall below 150%.
Previously, there were reports that the schedule for Lotte Insurance's call option had been postponed to May 12, but Lotte Insurance refuted this on the same day, stating in an official position that this was not true. Lotte Insurance announced, "Having secured sufficient funds for repayment, we definitively exercised the call option on May 8 and have officially initiated the repayment procedure."
The Financial Supervisory Service may impose sanctions on Lotte Insurance for violating legal requirements.
Meanwhile, regarding the U.S. Federal Open Market Committee (FOMC) decision to keep the benchmark interest rate unchanged, Governor Lee analyzed, "Although the U.S. economy recently experienced unexpected negative growth, employment indicators remain strong, which has further increased uncertainty about the future interest rate path." However, he added, "Currently, the domestic financial market is experiencing ample liquidity in the bond market under a rate-cutting trend, and corporate financing is proceeding smoothly, so the impact of localized credit events on the market is expected to be limited."
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