FSC launches new nonbanking task force

Korea’s financial regulator said Monday that it launched a task force to issue new checks on the financial soundness of nonbanking financial firms.

Kim Yong-beom, vice chairman of the Financial Services Commission (FSC), told a meeting of the task force that regulations are focused on improving the risk management of banks since the 2008-09 global financial crisis, but few efforts have been made to tackle weaknesses in nonbanking financial institutions.

“We need to pay attention to systemic risks stemming from the nonbanking financial industry,” Kim said.

Loans extended by nonbanking financial firms have grown at an annual average rate of 10.6 percent since 2014, compared with an annual average growth rate of 6.4 percent at banks during the same period, according to the FSC.

The size of local “shadow banking,” or unregulated lending activities, is believed to have stood at 45 trillion won ($40 billion) in 2016, compared with 28 trillion won in 2010, the FSC said.

In the short term, the task force will check potential risk in money market funds, which invest in short-term debt securities, such as Treasury bills and commercial papers.

Yonhap