Logo of Phnom Penh Post newspaper Phnom Penh Post - Korea’s financial chiefs eye growth momentum in face of challenges

Korea’s financial chiefs eye growth momentum in face of challenges

Content image - Phnom Penh Post
Bank of Korea governor Lee Ju-yeol speaks during a press conference on its key interest rate in Seoul on October 16. AFP

Korea’s financial chiefs eye growth momentum in face of challenges

Gearing up for the new year, South Korea’s top financial officials steeled themselves to face persistent external challenges and to spark new momentum for growth.

As the trend toward low interest rates is expected to continue for a while, regulators vowed further efforts to curb the real estate bubble and promote market liquidity for innovative businesses.

“We need to maintain an easing monetary policy as the domestic economy faces a slow growth pace and weak inflationary pressure on the demand side,” said Bank of Korea Gov. Lee Ju-yeol in an address to employees. “Our midterm goal is to support the recovery of the economy and help market prices settle within the target range.”

The BOK forecast that the economy will expand 2.3 per cent in 2020, short of the theoretical growth potential of 2.5-2.6 per cent. The nation’s inflation rate for 2019 stood at a record low of 0.4 per cent, much lower than the BOK’s target 2 per cent.

The central bank leader also promised to pay further attention to communication so that the public can understand the delicate policy decisions needed to harmonize price stabilization and financial stabilisation.

Meanwhile, the financial authorities called on the financial sector to make strides forward and nudge the economy into a rebound.

“I am well aware that negative perspectives toward finance continue to exist (despite the policy achievements in 2019),” said Eun Sung-soo, chairman of the market regulator Financial Services Commission, in his New Year’s address. “It is therefore our key task to further develop our progress so that the people may actually feel the financial changes.”

The FSC chief called on the financial industry to play a more active role in the nation’s economy.

“The role of finance is not to sit behind and watch. It should move in step with the real economy, and each should seek to make up for the other’s blind spots,” he said.

Pointing out that market liquidity has focused excessively on real estate, instead of real industries, the chairman vowed to follow up the latest policy actions by adding momentum to regulations. On Dec. 16, the government unveiled a comprehensive set of rules to steady the housing market, including unprecedented bans on mortgage loans for expensive houses.

“This year, we shall see to it that liquidity flows from households to corporations, especially small and medium-sized ones with innovative technology and growth potential,” Eun said.

The market watchdog Financial Supervisory Service focused on consumer protection and potential risks arising from the overheated housing market and consequent household debts.

“As the nation’s risk manager, we should make all efforts to maintain the stability of the financial system in the face of various potential risks,” Yoon Suk-heun, governor of the Financial Supervisory Service, said in an address to employees.

While marginal companies and owner-operators have been weighed down by an increasing number of nonperforming loans, the real estate sector is absorbing most of the market liquidity, consequently expanding household debt risk, according to Yoon.

The FSS chief also vowed to reinforce the monitoring system for high-risk, high-income financial products for the sake of protecting consumers.

He was referring to the massive losses incurred last year due to the misselling of derivative-linked funds and securities. The FSS came up with an arbitration plan, advising sellers including Woori Bank and KEB Hana Bank to provide individual compensation of up to 80 per cent of the damages.

“The advancement of fintech and (customers’) drive for high incomes amid a low interest rate trend have increased the imbalance of information between financial companies and consumers,” Yoon said, citing the upcoming enactment of a new bill on financial consumer protection.

The Korean Federation of Banks suggested specific midterm targets.

“(Financial companies) need to enhance their global competitiveness by expanding their overseas business,” said KFB Chairman Kim Tae-young.

Overseas business currently accounts for 5 per cent of Korean banks’ total assets and 7 per cent of their net profit, according to KFB data.

Citing the so-called 10-20-30 strategy, Kim urged local banks to improve those figures to 20 per cent or more within the next 10 years and recommended that top-tier financial groups aim for 30 trillion won ($25.9 billion) in market capitalisation.

The Korea Herald/Asia News Network

MOST VIEWED

  • Man Covid-19 positive after Thailand trip

    The Ministry of Health on Saturday reported the third Covid-19 case in less than two weeks, bringing the total to 125. The man, a 26-year-old from Tbong Khmum province's Tbong Khmum district, arrived at the O'Beichoan border checkpoint in Banteay Meanchey province on Thursday. He is

  • Kingdom's GDP growth to narrow -1% to -2.9%, World Bank says

    The World Bank expects further recoil on Cambodia’s gross domestic product (GDP) growth to between minus one per cent and minus 2.9 per cent for 2020 as its main growth drivers – tourism, manufacturing exports and construction – take a beating due to Covid-19, its latest economic update

  • Vietnam: Tougher sentences for child abusers

    Several National Assembly (NA) deputies in Vietnam are calling for tougher penalties to be handed down to child abusers. They hope stricter punishments will act as a strong deterrent to prevent offenders committing further offences in the future. Extreme measures such as chemical castration were

  • Central bank to shun small US banknotes

    The National Bank of Cambodia (NBC) is considering not accepting smaller denominated US dollar banknotes – $1, $2 and $5 – from banks and microfinance institutions (MFIs) which it said are flooding its stockpile as the demand for those notes is low. While some banking insiders welcomed the move as

  • PM lauded in Covid-19 fight

    World Health Organisation (WHO) director-general Tedros Adhanom Ghebreyesus sent a letter to Prime Minister Hun Sen thanking him for following the WHO’s guidance and commending Cambodia’s efforts in the fight against Covid-19. In his letter made public by the Ministry of Foreign Affairs

  • Workers return, hope for salaries

    More than 600 factory workers in the capital’s Chaom Chao commune in Por Sen Chey district returned to work after the factory’s owner promised to pay their salaries in instalments until the middle of next month. On Tuesday and Wednesday, more than 600 workers gathered