Head of FSS pledges to continue efforts to monitor short-term money market and take timely action against volatility
Lee Bok-hyun, head of the Financial Supervisory Service, speaks during a meeting with senior officials from major think tanks in Seoul on Wednesday. (Yonhap)
South Korea’s financial regulator will maintain its watch on short-term money and stand ready to take action should market volatility spike amid lingering concerns about a liquidity crunch, its chief said on Wednesday.
“The bond market has more or less stabilized due to taking market stabilization measures in cooperation with relevant agencies, such as the Ministry of Finance, Financial Services Commission and Bank of Korea,” Lee said. Bok-hyun, director of the Financial Supervision Service, said during a meeting with heads of major economic think tanks in Seoul.
“However, as anxiety may re-emerge in the future, we will be watching closely with a sense of tension and reacting in a timely manner to market jitters,” he added.
The corporate bond market was rocked by a series of unexpected events in the money market, including a rare default on municipal government-guaranteed debt and a local insurer’s decision not to exercise an option to purchase for hybrid bonds.
Although these market-damaging decisions were picked up later, anxiety grew, sending borrowing costs skyrocketing and making it more difficult for companies to secure funds for their operations in an interest rate environment. already high in place to fight inflation.
The government unveiled a series of measures to pump liquidity and urged banks and state-owned enterprises to reduce or evenly distribute bond sales in a bid to stabilize the debt market.
Lee said the FSS will work to encourage local financial companies to continue playing the role of providing funds to businesses in need, while encouraging them to strengthen overall risk management and raise capital to avoid a crisis.
He also pledged to make efforts to protect ordinary citizens and other at-risk populations from rapidly rising borrowing costs and the economic crisis.
During the meeting, think tank leaders expressed concern that global monetary tightening and high interest rates are likely to stick around for longer, urging financial authorities to step up surveillance of the possibility of money goes to safer benefits such as bank deposits.
There were also concerns about rising household debt burdens and increased credit risks for fringe or zombie businesses due to rapidly rising borrowing costs that have risen alongside increases in central bank rate to fight inflation. (Yonhap)
