FSS Governor Lee Calls for Vigilance in Financial Risk Management

On January 16, Lee Bok-hyun, the Governor of the Financial Supervisory Service (FSS), emphasized the importance of thorough preparation for potential financial risks during a financial situation review meeting. This meeting followed the Bank of Korea's decision to maintain the base rate, highlighting the critical state of the South Korean economy amidst external uncertainties.

Addressing Economic Challenges and Policy Responses

Governor Lee pointed out the delayed interest rate cuts due to increased external uncertainties, including U.S. tariff hikes and fiscal deficits. He stressed the need for detailed countermeasures to support vulnerable sectors affected by high interest rates and the importance of recovering consumer sentiment and boosting domestic demand.

Ensuring Financial Stability and Support for SMEs

Lee called for a close review of the transmission path of loan interest rates and the trend of additional interest rates to ensure that households and businesses benefit from previous rate cuts. He also emphasized the importance of supporting productive sectors such as small and medium-sized enterprises (SMEs) through comprehensive reviews of financial institutions' loan operation plans.

Managing Household Loans and Foreign Currency Liquidity

The Governor highlighted the need to manage household loans at a stable level while ensuring the smooth supply of funds for productive sectors and local economies. Additionally, he underscored the importance of securing sufficient foreign currency liquidity to withstand rapid exchange rate fluctuations and managing capital ratios to maintain financial companies' funding functions.

Resolution of Non-Performing Loans

Lee urged financial companies to conduct additional provisioning and on-site inspections for non-performing real estate project financing (PF) to ensure funds flow into productive sectors. He called for measures to resolve non-performing loans by eliminating information asymmetry between sellers and buyers, facilitating smoother sales and auctions.