President Moon gives a speech at a meeting with heads of financial institutions at the Korea Federation of Banks headquarters in Seoul on April 6 to explore ways of providing financial supports to small companies and self-employed businesses, shocked by the pandemic. (Photo on the courtesy of Cheong Wa Dae Website)

The government is leaving no stone unturned to minimize the economic fallout of the COVID-19 pandemic, which is feared to wreak havoc on Korean and global economies. Korea has joined most advanced countries, including the United States, in attempting to prevent a financial depression, caused by the virus pandemic, with quantitative easing.

The President Moon Jae-in government decided to double on the amount of emergency financial aid for businesses buffeted by the pandemic to 100 trillion. The step is part of countermeasures, taken by the 2nd Emergency Economic Council Meeting at Cheong Wa Dae on March 24, to prevent bankruptcies, caused by the spread of the novel coronavirus.

The emergency financial aid package was upgraded from a 50 trillion won financial support package, earlier announced by the first such meeting.

The Bank of Korea promised to inject an unlimited amount of liquidity into the financial market over the next three months, while expanding its repo operations. The Korean central bank had already slashed its benchmark interest rate to a record low of 0.75 percent on March 16.

Economists in Korea and abroad warned of a V-shaped recession in the global and Korean economies, influenced by the coronavirus outbreak.

The consensus estimate of the nation’s gross domestic growth for this year stood at negative 0.9 percent, a far cry from the previous forecast of around 2 percent. The outlooks were based on tallies from 11 global financial services companies, including Standard Charters, UBS, Morgan Stanley, and Nomula Holdings.

Experts shared the view that steps should be taken to cushion the economic shock caused by the pandemic. Small business and self-employeed business owners, hit the hardest by the pandemic, are more likely to be vulnerable to bankruptcies, caused by a financial crunch.

President Moon called for financial institutions to extend emergency loans to the businesses in a timely and swift fashion so that they protect jobs and people’s lives from the shock of the pandemic.

The president made the demand at a meeting with heads of financial institutions designed to explore ways of providing financial supports to small companies and self-employed businesses, shocked by the pandemic, at the Korea Federation of Banks headquarters in Seoul on April 6.

Financing should be “strong umbrellas for companies buffeted by fierce winds and rains in a crisis,” the president said.

Among the participants of the meeting were chairmen of KB, Shinhan, NongHyup, Hana, and Woori financial groups, presidents of three state-run commercial banks –KDB, Korea Eximbank and IBK – as well as heads of Korea Credit Guarantee Fund and Korea Technology Finance Corp.

A 100 trillion won emergency financial aid package had been worked out during the 1st and 2nd Emergency Economic Council Meetings, and it is more important to execute them in the right place and at the right time, he said.

He was apparently speaking about the bottleneck phenomenon in which financially strapped small businesses and mom-and-pop store owners are still experiencing hard times in borrowing money. President Moon stressed the swift extension of the emergency relief fund to anyone in danger of losing their livelihood.

A participant said his financial institution was seeking to use retired manpower and collaborate with credit institutions to extend emergency funds to small businesses in a swift fashion. President Moon promised exemption from responsibility over unintended mistakes in the course of the swift extension of emergency funds.

In a related development, financial authorities decided to release measures related to innovative financing such as fintech and financial support for companies affected by disasters such as COVID-19.

 
The Financial Services Commission (FSC) and the Financial Supervisory Serviced (FSS) announced steps to stipulate regulations related to an exemption from responsibility in the financial sector and introduce a responsibility immunity deliberation committee on April 7.

The steps followed financial regulators’ scheme to help executives and officials of financial institutions proactively carry out work on financial support to businesses buffeted by the coronavirus and innovative financing.

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The government decided to supply a disaster relief fund worth 1 million won for a four-member family to those in to the lower 70 percent of the income bracket to help them overcome the economic fallout caused by the virus.

The major opposition United Future Party floated a proposal to transfer 500,000 won per head to everyone. In return, the ruling Democratic Party of Korea proposed a 1 million won cash transfer per four-member family for all the people, reversing the government decision.