From Martial Law to Impeachment Dismissal... Financial Authorities Mobilize All Efforts to Mitigate Risks < Video < Article

Financial Authorities and Bank Holding Companies on High Alert Amid Impeachment Crisis... "Mobilizing All Measures"

From Martial Law to Impeachment Dismissal... Financial Authorities Mobilize All Efforts to Mitigate Risks (Seul Gi Yoon, Yonhap Infomax Reporter) | Economy ON Investigation File 241210

※This content was broadcast on the 'Economy ON' program of Yonhap News TV at 4 PM on December 10 (Tuesday). (Featuring: Seul Gi Yoon, Yonhap Infomax Reporter, Hosted by: Min Jae Lee, Anchor)

[Anchor Min Jae Lee]
The political situation has rapidly unfolded from President Yoon Suk Yeol's declaration of martial law on the 3rd to the National Assembly's dismissal of the impeachment motion last weekend. The financial authorities also moved urgently in response to the sudden martial law, and it seems they have been working hard to prepare countermeasures from the 3rd until the vote dismissal in the National Assembly on the 7th. What specific measures have they taken?

[Reporter Seul Gi Yoon]
It was last week. Since the sudden martial law situation on the night of the 3rd until the dismissal of President Yoon Suk Yeol's impeachment motion in the National Assembly on the 7th, the heads of economic and financial authorities have been meeting daily to discuss countermeasures. So far, they have quickly moved to prepare measures, including announcing liquidity supply plans to minimize market shock and sending messages to calm financial market turmoil.

Looking at the progress so far, after the declaration of martial law on the night of the 3rd, an emergency macroeconomic and financial issues meeting, known as the F4 meeting, was held at 11:40 PM. At that time, they announced that they would mobilize all possible financial and foreign exchange market stabilization measures, including unlimited liquidity supply, to respond to market instability factors.

They are also emphasizing that they will operate a real-time monitoring system across the government to closely watch the financial market situation and promptly implement all measures for market stability if necessary. The Bank of Korea's Monetary Policy Board also held an emergency meeting and decided to increase short-term liquidity supply to the market through non-regular repurchase agreement (RP) purchases.

They have decided to actively implement market stabilization measures, keeping all possibilities open until the market stabilizes, by holding temporary meetings for the time being. Regarding the stock market in particular, they explained that 30 billion won of the Value-up Fund has already been injected, and 70 billion won this week and 30 billion won next week will be executed sequentially. They also announced that an additional 300 billion won second fund is scheduled to be created next week.

[Anchor]
On the 9th, Financial Services Commission Chairman Kim Byung-hwan and Financial Supervisory Service Governor Lee Bok-hyun attended the F4 meeting at 7 AM and then met with the chairmen of the five major financial holding companies at 8:30 AM to share the current situation. What was discussed?

[Reporter]
At yesterday's emergency meeting with financial holding company chairmen, FSC Chairman Kim Byung-hwan and FSS Governor Lee Bok-hyun were joined by representatives from Korea Development Bank, Industrial Bank of Korea, Korea Credit Guarantee Fund, Korea Exchange, Korea Federation of Banks, and Korea Financial Investment Association. The financial authorities have taken preemptive action to prepare for financial market uncertainties due to the martial law situation and impeachment crisis.

At this meeting, Chairman Kim stated that despite the recent political uncertainties, the economic team will do its utmost to manage the economy stably. He emphasized that they will fulfill their given responsibilities without wavering to maintain financial system stability and the credibility of the financial sector.

He stated that they will consistently implement financial policy issues such as timely implementation of market stabilization measures, measures for stock market value-up, building a system to eradicate illegal short selling, additional licensing of internet-only banks, easing the financial burden on small business owners and self-employed, and reforming indemnity insurance, according to the original schedule and plan.

Chairman Kim instructed financial companies to closely monitor liquidity and soundness and to ensure proper fund management so that corporate economic activities are not contracted. In particular, he emphasized that financial holding companies are at the forefront in terms of external credibility and asked them to actively communicate the stability of each holding company and the resilience of our financial system using their overseas networks with foreign financial institutions and investors.

Following yesterday, today the FSC held a market inspection meeting chaired by Secretary General Kwon Dae-young, together with CFOs of the five major financial holding companies, non-financial holding company-affiliated securities firms, card companies, and insurance companies. They shared perceptions of the current situation among financial companies and re-examined liquidity and soundness response plans.

[Anchor]
Is FSS Governor Lee Bok-hyun also monitoring the market situation daily by holding financial market inspection meetings?

[Reporter]
That's correct. FSS Governor Lee Bok-hyun is also holding daily financial situation inspection meetings with FSS executives to monitor the market situation. Today, Governor Lee met with Japanese Ambassador to Korea Koichi Mizushima and stated, "We will consistently pursue policies such as the value-up program even during the impeachment crisis," directly engaging in defending external credibility.

He is also sending messages urging total efforts for financial stability and trust recovery as financial market uncertainties are growing due to the domestic political situation. He is responding with full force by also holding industry-specific meetings. Following meetings with securities firm CEOs on the 5th and insurance company CROs on the 6th, he held a meeting with bank lending and funding deputy presidents yesterday. Today, he held consecutive meetings with CEOs of savings banks and specialized credit finance companies.

The FSS instructed savings banks and specialized credit finance companies to secure sufficient available liquidity and quickly dispose of non-performing assets. For savings banks, they were instructed to re-examine the triple liquidity response system to be thoroughly prepared to respond without problems in emergencies. They were also advised to closely examine and prepare for the impact on capital ratios due to exchange rate increases and risk-weighted asset increases, strengthen real-time monitoring of foreign currency fund trends, and secure sufficient foreign currency liquidity for financial companies.

[Anchor]
Despite the continuous messages from economic and financial leaders, the market still showed signs of instability. On the first trading day after the dismissal of President Yoon Suk Yeol's impeachment motion, the exchange rate exceeded 1,430 won intraday and the stock price broke below the 2,400 level, showing unstable investment sentiment. How are the economic and financial authorities currently assessing the impact of the recent situation on the financial and foreign exchange markets?

[Reporter]
There is an atmosphere of amplified uncertainty in the market following President Yoon's declaration of martial law on the 3rd and the impeachment motion being dismissed on the 7th due to lack of quorum. The opposition party has announced that they will propose an impeachment motion every week until it passes, with the next vote scheduled for the 14th this week.

In the financial sector, while predicting that the exchange rate may rise for the time being due to heightened political uncertainties, they also believe that caution about authorities' intervention will limit the extent of the increase. For now, the financial authorities view the impact of the recent situation on the financial and foreign exchange markets as limited so far.

They believe they have sufficient capacity to respond to market volatility and that market participants need to respond calmly and coolly rather than with excessive anxiety. Today, including Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok, the heads of economic and financial authorities assessed that "the recent expansion of volatility in the financial and foreign exchange markets is somewhat excessive compared to our economy's solid fundamentals and external soundness."

Regarding the foreign exchange market, Deputy Prime Minister Choi said, "Considering the foreign exchange reserves of $415.4 billion, ranking 9th in the world, and net external financial assets of $977.8 billion, the government and the Bank of Korea have sufficient capacity to respond to the market."

[Anchor]
It seems that financial holding companies are also preparing countermeasures for this. What are the details?

[Reporter]
As political turmoil continues, the financial sector is also operating emergency organizations and checking the impact in real-time amid tension. This is because if political instability persists, causing the dollar-won exchange rate to continue rising and external credibility to fall, it could impact foreign currency liquidity, capital adequacy ratios, and ultimately profits and business performance.

There are concerns that credit risk-weighted assets (RWA) among foreign currency-denominated assets or overseas investments may increase, potentially lowering the overall BIS capital ratio of financial groups. There is also a sense of crisis that the situation could become more serious if external credibility is damaged in the future.

For now, the financial holding company chairmen who met with FSC Chairman Kim Byung-hwan and FSS Governor Lee Bok-hyun yesterday stated that there are no problems with the liquidity strength of their affiliates even in the recent phase of increased uncertainty. Each financial holding company is taking steps to manage soundness and liquidity, assuming worst-case scenarios, seeing how they weather this crisis as potentially having a significant impact on next year's management strategy.

In addition, they are strengthening communication with major overseas shareholders who are viewing the uncertainties in our economy with anxious eyes. KB Financial Group has sent letters to major global investors explaining the current political situation and promising unwavering implementation of the value-up plan announced last October. Hana Financial Group is conducting face-to-face and non-face-to-face meetings with overseas investors, including Chairman Ham Young-joo and the group's CEOs and board of directors.

Shinhan Financial Group is also promising the steady implementation of its value-up plan and preparing measures to maintain external credibility and manage market volatility through conference calls with overseas investors. They are focusing all corporate capabilities on preparing for market shocks, such as establishing scenario-based plans considering the worst situations in preparation for management environment uncertainties and preparing response strategies.

Woori Financial Group is also promising to implement existing value-up programs while managing soundness through real-time communication with overseas subsidiaries.

[Anchor]
Are there any additional measures being prepared by the authorities? What is the future outlook?

[Reporter]
For now, as the Democratic Party is pushing for a re-vote on the impeachment motion this Saturday, whether the impeachment motion will be voted on in the National Assembly on Saturday will be key. While market participants are showing trust in the economic team's consistent messages, there are still views that confusion may be prolonged depending on the passage or rejection in the National Assembly.

For now, the financial authorities have said they will strengthen 24-hour monitoring of the overall financial and real economy situation by newly establishing and operating a government-wide economic and financial situation inspection task force until the market normalizes, and additional measures are being announced daily, so we need to continue monitoring the situation.

Nevertheless, the market is focusing on when the financial authorities will start the market stabilization measures they said they would mobilize. In particular, there is interest in when the Securities Market Stabilization Fund, also known as the stability fund, which is mentioned first as a stabilization measure related to the stock market, will be injected. Although it has not yet been decided to inject it, the authorities are prepared to immediately activate market stabilization measures such as the 10 trillion won stability fund at any time.

The Financial Services Commission is also expected to respond to risks such as margin calls due to exchange rate increases through foreign currency liquidity supply through Korea Securities Finance Corporation while closely monitoring the foreign exchange soundness of financial companies. Securities-related institutions such as the Korea Exchange are expected to focus their capabilities on blocking market order disruption activities such as stock price manipulation, disclosure violations, and price manipulation, along with efforts to stabilize investment sentiment.

The Financial Supervisory Service is expected to strengthen communication with the field by continuously promoting meetings and strengthen market situation monitoring by holding daily financial market inspection meetings until the current situation stabilizes. As the heads of financial authorities have stated that they will consistently pursue financial policy issues such as value-up and short selling system construction according to the original schedule and plan, we will have to see how the market views this.

(Yonhap Infomax Economic Department Reporter Seul Gi Yoon)
※This content is from the video news covered in the Yonhap News TV Investigation File corner.
sgyoon@yna.co.kr
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Seul Gi Yoon sgyoon@yna.co.kr