Lee Chanjin: "Preparing for the Impact of U.S. Rate Hike... Proactively Responding to Market Volatility"

FSS Holds Financial Situation Assessment Meeting Led by Commissioner Lee Chanjin

Uncertainty Heightens Amid Middle East Instability and U.S. Rate Hike

Enhanced Monitoring of Key Financial Market Indicators Such as Interest Rates and Exchange Rates

On September 17, the Financial Supervisory Service (FSS), led by Commissioner Lee Chanjin, convened a 'Financial Situation Assessment Meeting' to review the latest trends in financial markets and examine both internal and external risk factors resulting from the U.S. Federal Open Market Committee (FOMC)'s benchmark interest rate increase.

Yonhap News Agency

Commissioner Lee Chanjin emphasized, "Given the heightened uncertainty in external conditions such as continued instability in the Middle East leading to rising international oil prices and increases in key nations' government bond yields, interest rate hikes have a broad impact on global rates, capital flows, and exchange rates. As such, we must closely assess the effects on domestic financial markets and the financial industry, and thoroughly prepare for increased volatility."

Accordingly, the FSS will closely monitor key financial market indicators such as interest rates, stock prices, and exchange rates, and proactively respond to potential sectoral risks including the financial burden on corporates and households and the soundness of financial institutions.

The FSS is particularly keeping a close watch on the potential for increased stock market volatility due to internal and external factors. Commissioner Lee stated, "Concerns have been raised that the recent extension of trading hours may cause dispersion in trading volumes and, consequently, greater volatility in the domestic stock market. On top of that, outflows of foreign investor funds and a possible slowdown in AI-related investments due to the U.S. interest rate hike could further exacerbate market volatility. Therefore, we will continue to monitor individual investors' tendencies toward high-risk products and trends in margin trading."

Supervision of the exchange rate and foreign exchange markets will also be strengthened. In anticipation of renewed volatility in the KRW-USD exchange rate, which had recently stabilized, the FSS will take preemptive measures to manage the foreign currency liquidity of financial institutions. Furthermore, as the likelihood of Japan raising its benchmark interest rate increases, the FSS plans to prepare for a potential appreciation of the yen and subsequent changes in foreign investment flows.

Regarding the funding market, the FSS will review conditions in the domestic corporate bond and short-term funding markets and support the stable operation of banks' intermediary functions. In particular, the FSS will ensure that productive capital is smoothly supplied to mid- and low-credit corporates and non-metropolitan companies that are expected to face funding challenges. In addition, the FSS will analyze how rising interest rates affect borrowers and ensure that vulnerable borrowers continue to receive necessary funding without disruption.

The FSS also urged enhanced management of financial institutions' soundness. It will thoroughly monitor for refinancing risks at securities firms and specialized credit finance companies due to shrinking market liquidity, and has instructed insurance companies to strengthen asset-liability management (ALM) so as to preemptively address any increase in losses due to rising interest rates.

Finally, Commissioner Lee called for continued inspection and maintenance of response systems in order to prepare for rapidly changing financial market conditions amid ongoing uncertainty. He asked all involved to respond proactively by swiftly implementing measures to stabilize the market in close cooperation with relevant agencies should any abnormal signs arise.

This content was produced with the assistance of AI translation services.