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| Financial Supervisory Service (FSS) Governor Lee Bok-hyun, right, speaks at a parliamentary meeting at the National Assembly in Seoul, Sunday. Newsis |
'Recent short-term funding market's difficulties have not spilled into overall financial sector'
By Anna J. Park
Financial Supervisory Service (FSS) Governor Lee Bok-hyun assuaged market anxieties and concerns over an increased possibility of Korea's corporate credit crunch, stressing that the temporary shortage of liquidity experienced in some sectors of the economy is not threatening the entire financial system's liquidity.
The financial watchdog head added that he has been very closely cooperating with other economic chiefs, including the finance ministry, the Financial Services Commission (FSC) and the Bank of Korea (BOK), to bring out effective policy measures to stabilize the local market.
"The economic and financial volatility facing the Korean economy has recently increased due to risks stemming from major countries' intense monetary tightening policies and energy price hikes. Despite temporary difficulties in the recent local short-term funding market, the problem hasn't spilled into other financial sectors as the government responded with a set of liquidity provision measures last month," FSS Governor Lee said during a press conference held at the headquarters of the institution in Seoul, Monday.
Aiming to further stabilize recent crunch crises, particularly witnessed in local corporations' commercial papers (CP) and securities firms' real estate project financing (PF), prior to the upcoming year-end book closing season, Lee said the financial authorities are currently consulting with financial companies to adjust and spread out bonds' maturities to lower risks of the corporate note market.
More than anything, he stressed that Korean companies and financial firms mostly maintain solid fundamentals and capital soundness that can stand firm against challenging times.
"For a country like Korea, which has a high import dependency rate in raw materials and energy, soaring global interest rates, as well as trade balance, are also significant matters. However, the Korean economy's fundamentals across sectors overall still seem to be solid, and it is expected that the local industries' competitiveness will be strengthened through weathering the current phase," FSS Governor Lee said.
"Compared to the 1997 Asian Financial Crisis and the global financial crisis in the late 2000s, the current situation of the local economy is assessed to be manageable and under control," the FSS governor stressed, adding the financial authorities will proactively respond to any issues that could heighten market anxieties in order to guarantee the smooth operation of the market.
Regarding possible risks from volatile foreign exchange rates, the FSS chief said local banks are actively managing their risks through FX hedge strategies. Also, given that their dollar-denominated assets are greater than their debts, they're expected to have a limited impact from such external factors.
Meanwhile, he also vowed to ask for greater responsibility for financial companies that solely focus on short-term gains, without taking the required measures to maintain their capital soundness.
"The FSS will hold financial companies that fail to take preventive risk management accountable, as the agency aims to prevent moral hazards and side effects of some companies' excessive quest for short-term gains," he added.
