By Choonsik Yoo
SEOUL (Reuters) -South Korean President Yoon Suk-yeol called on Friday for pre-emptive action against financial risks, saying they spread fast as stress keeps building in financial markets around the world.
He made the comment in response to a question about government measures announced on Thursday to help cut the debt-service burden on low income-earners and young people and as local stock and currency markets fell on fears of more troubles ahead.
South Korea’s household debt is among the highest in the world. There are few signs yet that it poses a systemic risk to Asia’s fourth-largest economy, but the country has had to offer various relief programmes to borrowers since the COVID-19 pandemic hit the world two years ago.
“Financial risks spread at a far faster pace when compared to those in the non-financial, real economic sectors,” Yoon said, adding that the government had to take pre-emptive action before the risks fully materialise and spread to other sectors.
A senior official at the presidential office said Yoon was referring to the nature of financial risks, while analysts said his comments reflected a desire to focus more on the economy amid falling popularity.
The Financial Services Commission has said it would expand a programme to help low-income borrowers switch adjustable-rate mortgage loans to fixed-rate loans at affordable rates.
“Preventing (vulnerable borrowers) from becoming delinquents and jobless and helping them continue normal economic activity can ultimately minimise social costs and boost overall benefit,” the regulator said in a statement.
Standard Chartered Bank Korea economist Park Chong-hoon said Yoon’s comments signalled an attempt to tell the public that he was focusing on the economy.
Yoon is suffering from a plunge in popularity, with the latest weekly poll by Gallup Korea showing on Friday that his disapproval rating soared to 53% from 49% a week before, compared with an approval rating of 32%.
South Korean policymakers have been calling for vigilance against financial risks, largely linked to external shocks, with the head of a financial supervisory agency making a similar call at his meeting with executives from foreign financial firms.
Lee Bok-hyun, governor of the Financial Supervisory Service, asked executives from 12 foreign financial firms operating in the country to ensure sound management of risks on a pre-emptive manner.
(Reporting by Choonsik Yoo; Editing by Christian Schmollinger and Tom Hogue)
