The financial authorities announced that they would improve the assessment system to impose lending disadvantages, such as loan rates, limits, and extensions, on corporations that experience major disasters. In contrast, they will provide incentives, such as expanding loan supply and lowering interest rates, to corporations that focus on preventing major disasters.
On the 19th, the Financial Services Commission held a meeting chaired by Vice Chairman Kwon Dae-young to discuss this matter.
The Financial Services Commission determined that since credit and investment risks for corporations increase when major disasters occur, the financial sector needs to proactively respond to maintain soundness and protect investors.
Vice Chairman Kwon stated, "We will timely and appropriately reflect the major disaster risk in the financial sector's credit assessment," and "we will improve the financial sector's assessment system so that the occurrence of major disasters becomes a disadvantage in terms of loan amounts, interest rates, and maturity extensions." He added, "At the same time, we need to support the funding necessary for preventing major disasters and provide incentives, such as expanding loans and lowering interest rates, to well-performing corporations."
The Financial Services Commission announced that it would ensure corporations disclose information immediately following a major disaster, as the occurrence could increase volatility in stock prices and bond yields, thus providing information necessary for investment decisions. Moreover, it mentioned the need to revise the work guidelines of environmental, social, and governance (ESG) evaluation agencies to sufficiently take major disaster facts into account and to reflect this in the stewardship code, enabling institutional investors, such as pension funds, to fulfill their fiduciary investment responsibilities for major disasters.
The financial sector is considering measures to impose disadvantages on existing loans by reflecting major disaster risks in terms of limit reductions and withdrawal restrictions during loan agreements, or by including major disaster details in project financing (PF) guarantee assessments.