Finance chiefs state agendas for new year
Household debt management will be a main challenge for 2022 as interest rates rise.
Bank of Korea (BOK) Governor Lee Ju-yeol warned Tuesday that many households and self-employed people borrowed a lot -- and could be in for a rough ride.
Lee shared that message Tuesday with six financial associations, including the Korea Federation of Banks and the Korea Financial Investment Association.
Last month, Lee reaffirmed that another interest rate will come in the first quarter, saying, “There is no change in policy direction.” Last year, the central bank raised rates in August and November by 25 basis points to bring the base rate to 1 percent.
In Tuesday's message, Lee highlighted the importance of managing risks as the economy faces uncertainties, including “increased pressure towards global inflation, normalization of monetary policies in key countries and a potential slowdown of the Chinese economy.” Lee said Covid-19 variants were “the biggest threat” to economic recovery.
“In the post pandemic era, [the financial sector should encourage investments into] advanced technology industries that could transform [the country's economy to be] eco-friendly and digitally driven,” Lee added.
On the same day, Finance Minister Hong Nam-ki asked the finance sector to “strictly manage risks, like household debt and liquidity.”
In a new year message, Hong urged financial circles to “take autonomy in supervising the impact of abundant liquidity in order to maintain market stability.
“Temporary response measures to the crisis during the Covid-19 greatly contributed to helping the livelihoods of the socially vulnerable and achieving market stability. But the measures that fulfilled their purposes will have to be gradually normalized,” Hong added.
Financial Services Commission (FSC) Chairman Koh Seung-beom similarly highlighted the importance of managing household debt in his new year address.
Koh said the FSC will “coherently strengthen management of household debt and take protective action towards the vulnerable social group.”
Koh added that the FSC will reform regulations to foster innovation and competition and support the digitization of finance. Innovation in the capital market system, including for the Korea New Exchange market (Konex), will be encouraged by the FSC.
Konex is a securities exchange exclusively for small and medium-sized companies and startups.
Financial Supervisory Service Governor Jeong Eun-bo highlighted “preemptive supervision of potential risks” in a new year message.
“The soundness of domestic finance companies and the market’s strength are in good condition, but if potential risks are actualized, their impacts could be extensive,” said Jeong.
BY JIN MIN-JI [email@example.com]