Get Ready for Worsening World Financial Markets

FSC Chairman Kim warns banks to be prepared for the worst by tightening scrutiny on FX liquidity

Chairman Kim Seok-dong of the Financial Services Commission (FSC) warned that banks should take necessary measures to cope with the uncertainty in the global financial market that could remain for a long time.
He issued the warning at an informal meeting with heads of commercial banks at the Federation of Banks building in Myeong-dong, downtown Seoul, on Sept. 29.
He said the financial crisis set off by Greece occurred in the first half, but has lingered and fears have been coming true. He cautioned that the debts of overseas branches should not be a burden to foreign exchange holdings pressuring the liquidity of the foreign exchange. He said banks should closely manage assets and debt situations and the foreign exchange held by their overseas branches to ward off any impact from the growing global financial uncertainty.
The FSC chairman said it is unclear how long the uncertainty in the global financial markets would linger and, therefore, the banks should use the large profits they made in the first half of the year to supplement their capital and loss provisions or to cope with any crisis that might develop. He also called on the heads of the banks at the informal gathering to develop financial products suitable to customers' demands for such products as fixed interest rate loans and non-deposit installment repayment loans.
In the meantime, the FSC has been at work preparing a contingency plan for the domestic financial market in stages to be ready for any possible impact from a global financial crisis. The financial authority has upgraded the five warning alert stages to the second highest. The alert stages include serious, warning, careful, concern, and normal.
With the European financial crisis growing ever larger, the FSC escalated the alert stage to warning from concern.
The FSC was established for the purpose of protecting the integration of Korea's financial markets by promoting a sound credit system and fair business practices. To this end, the FSC serves as a consolidated policy-making body for all matters pertaining to the supervision of the financial industry as a whole. To raise the efficiency, the posts of the FSC Chairman and the FSS Governor were separated in March 2008 for a clear distinction between policymaking and the execution of financial market supervision.

History
The 17th Presidential Transition Committee unveiled the "Government Reorganization Plan," which included a scheme to revamp the financial administration system by integrating the supervisory policy function of the FSC and financial policy function of the Ministry of Finance and Economy, including the Public Fund Oversight Committee and the Korea Financial Intelligence Unit; and separating policy setting and execution functions through the division of the posts of the FSC chairman and the FSS governor.
Under the Regulations for establishing the FSC and its support organizations (Presidential Decree No. 20684, promulgated and enforced on Feb. 29, 2008), the FSC and the Securities and Futures Commission were set up. The Korea Financial Intelligence Unit was put under the control of the FSC, and the Secretariat was established to support the activities of the FSC.
The FSC comprises nine commissioners including the chairman, the vice chairman, the vice minister of the Strategy and Finance Ministry, the deputy governor of the Bank of Korea, the president of the Korea Deposit Insurance Corporation, the governor of the Financial Supervisory Service, two members recommended by the chairman of the FSC, and one recommended by the chairman of the Korea Chamber of Commerce and Industry. The chairman, appointed by the president of the Republic of Korea, presides over the FSC meetings and exercises control over general affairs. The resolutions of the FSC meetings are adopted upon the concurrence of a majority of those present. nw

The purpose of protecting the integration of Korea's financial markets by promoting a sound credit system and fair business practices.

Chairman Kim Seok-dong of Financial Services Commission.

Photo on courtesy of the FSC