Chairman Lee Eog-weon of the Financial Services Commission presided over the fifth meeting on propelling a transition to productive finance with officials from the Financial Supervisory Service, the banking and insurance sectors, and related industry groups on April 16. At today’s meeting, officials discussed ways to improve upon the capital regulations and requirements for banks and insurers to help strengthen their capital capacity aimed at productive finance. With the participation of private sector experts, officials also discussed the impact of the Middle East situation on domestic industries and went over the progress of financial assistance measures made available from the financial industry.
A Summary of Opening Remarks by FSC Chairman
The situation in the Middle East is raising concerns about an expanded level of volatility in financial markets. With many businesses undergoing the challenges of rising costs and financing difficulties, it is very much appreciated that the financial sector has made available KRW53 trillion-plus in financial assistance programs. As the situation in the Middle East may continue to go on for a while, it is important to provide support more proactively.
In this regard, the FSC will work to maintain financial market stability and make certain that the risks originating from the Middle East do not translate into a financial market contraction or a drag in the real economy. Moreover, in order to be adequately prepared for a potential shift in global supply chains and a restructuring of industries in a post-war period, the FSC will continue to push forward with our productive finance initiatives to promote energy transitions and the growth of strategic industries.
The measures to improve upon the capital regulations and requirements for banks and insurers, which are being announced today, will free up their productive finance capacity by up to KRW98.7 trillion (KRW74.5 trillion for banks and KRW24.2 trillion for insurers). As such, these measures will certainly help to overcome this crisis situation and propel a reinvigoration of the economy.
For their productive finance efforts, banks are asked to make a transition away from their traditional operating model centered on collaterals and guarantees and boost the supply of finance toward more productive, future growth- and export-oriented, and strategic industry sectors. In a similar vein, with their freed-up capital capacity, insurers are urged to boost investment in long-term national infrastructure development or energy transition projects.
Additionally, based on the freed up capacity, financial companies are asked to more quickly and effectively respond to the financial needs of microenterprises and small- and medium-sized enterprises (SMEs) that may be experiencing extra challenges amid the conflict in the Middle East.
The push for productive finance is not a choice but a path that we should pursue together to make sure to put our economy on a course for sustainable growth. In this regard, the improvements sought for the capital regulations and requirements for banks and insurers should help them make such transitions.
Provision of KRW13 Trillion-plus in Financial Assistance Measures
Since the onset of the conflict in the Middle East, the financial industry has made available a wide range of assistance programs. From the banking sector, new loans have been made available for the companies doing business in the conflict-hit regions and the exporting and importing companies and their suppliers and partners.
As of April 7, there have been about KRW5.8 trillion (17,969 cases) in new loans and about KRW7.2 trillion (18,419 cases) in maturity extensions and payment deferments provided.
Insurance companies and specialized credit finance businesses have also introduced a variety of assistance programs tailored to the specific needs of consumers amid the continuation of higher oil and consumer prices. Insurance companies have introduced premium reductions on children’s health insurance and delivery drivers’ insurance coverages, and the specialized credit finance sector has begun to provide more cashback rewards to consumers at gas stations and payment deferments on installment payments for truck drivers. In close coordination with relevant industries, the government will seek to introduce additional relief measures (e.g. lowering of auto insurance premiums).
Further Plan
The FSC and the FSS will closely check on financial companies to make sure that their freed up capital capacity is being properly channeled into productive sectors. In the meantime, the FSC and the FSS plan to continue to seek areas for further improvement in regulations to help facilitate a transition to productive finance.
* Please refer to the attached PDF for details.