Chairman Eun Sung-soo of the Financial Services Commission (FSC) holds a meeting with chiefs of financial organizations, including Chairman Kim Yong-duk of the General Insurance Association of Korea, Chairman Kim Tae-young of the Korea Federation of Banks, Chairman Kim Joo-hyun of the Credit Financial Association of Korea, Chairman Shin Yoing-kil of the Korea Life Insurance Association, and Chairman Park Jae-shik of Korea Federation of Savings Banks at the KFB building on Aug. 12. (Photo: FSC)

The Financial Services Commission (FSC) prepared and is implementing a 175 trillion won-plus program to boost people's livelihoods and financial stability to overcome the COVID-19 crisis.

Small and medium-sized enterprises were given funding to help ease their financial difficulties, and the financial market stabilization program has been in place amid faster-than-expected market stabilization.

The FSC will proactively review whether temporary support measures introduced to respond to COVID-19 will be extended.

“A successful economic turnaround achieved from earlier this year was made possible through effective K-quarantine measures,” said a high ranking official at the FSC.

The FSC believes that financial institutions should closely follow the enhanced K-quarantine guidelines within their workplace in order to maintain the recovery momentum.

The longest recorded monsoon of this year has incurred heavy damages to households and businesses. The victims of torrential rain face extra hardship amid pandemic-related economic disruptions.

In order to help businesses and households hit by heavy rains, the FSC will operate one-stop financial support centers throughout the affected regions and make prompt and targeted assistance available.

As there are concerns about a protracted pandemic situation, the FSC will work to finalize its decisions on whether to extend temporary relief measures, such as loan maturity extensions, the deferral of interest payments and some of the temporary deregulatory measures within August. In an economic downturn, individual financial institutions may become passive in lending.

However, each institution’s “own actions can collectively influence the overall risk in the system,” as there is a danger of a fallacy of composition suggested by a BIS report in April. Thus, it is necessary to continue to encourage all financial institutions to support lending in order to maintain the recovery momentum.

Compared to earlier months of the COVID-19 outbreak, the emergency financial support programs for small merchants, SMEs and key industries now make up a close-knit support system for a variety of groups.

Businesses have also bolstered their liquid asset holdings in preparation for a prolonged pandemic situation.

 
Alongside the existing support measures, the FSC will work to ensure that the newly operating programs, including the low-rated corporate bond and CP purchase program, financial support for auto parts suppliers and subcontractors and the working capital support program for key industries are promptly implemented.

As there are possibilities that the reinstated level-2 social distancing measures may have negative impact on SMEs and small merchants, the FSC will work to strengthen the provision of financial support made available to them. In order to maintain the recovery momentum, it will bolster the provision of support through strong coordination and cooperation with the financial sector.

Between February 7 and August 14, a total of 178.0 trillion won (1.89 million cases) in loans and guarantees as well as loan and guarantee extensions were provided to the SMEs, small merchants and middle market enterprises that have been hit by the COVID-19 pandemic.

Financing by type, 80.2 trill-ion won was provided in new loans and guarantees in (1.4 million cases) while 97.8 trillion won in maturity extensions and deferred payments in 490,000 cases. Financing by industry, the machinery & metal manufacturing industry received 28.9 trillion won (107,000 cases). 23.1 trillion won (223,000 cases) was provided to wholesale businesses while 13.1 trillion won (313,000 cases) to retail businesses and 11.6 trillion won (363,000 cases) to restaurant businesses.

By providers, 91.3 trillion won (1.1 million cases) was supplied by policy banks and 85.7 trillion won (777,000 cases) won by financial institutions in the private sector.

In the meantime, vice chairman Sohn Byung-doo presided over a kick-off meeting of the Green Finance Task Force on August 13.

The task force will work to establish a monitoring system for financial risks emanating from climate change, boost investment in green industries and consider the possibility of joining international networks on green finance.

“Climate change can threaten the stability of the financial system in many different ways,” Sohn said in the kick-off meeting. “Financial institutions should consider taking into account environmental, social and governance factors alongside the traditional risk factors such as credit or liquidity risks for their asset management.

In this regard, the government will work to lay the foundation for encouraging investors to consider environmental risks when making investment decisions.”