As tensions rose in the Middle East and volatility in international oil prices and exchange rates surged, the Financial Supervisory Service launched an emergency financial market review. It focused in particular on the potential for losses among individual investors from leveraged investing and the impact on the soundness of financial companies.
On the 9th in the morning, the Financial Supervisory Service (FSS), chaired by Senior Deputy Governor Lee Se-hoon, held an emergency financial situation review meeting to examine recent financial market trends and potential risk factors.
On this day, international oil prices topped $100 per barrel, and the won-dollar exchange rate neared 1,500 won, sharply increasing market volatility. Accordingly, the financial authorities analyzed the impact across the financial sector and industry overall and discussed response measures.
Lee, the senior deputy governor, was said to have emphasized that while the fundamentals of the domestic economy remain solid, preemptive action is needed given the possibility that the Middle East crisis could drag on.
In particular, as stock price volatility has recently increased, authorities decided to closely review the flow of so-called "bit-too" ("borrowing to invest") funds, including margin financing and overdraft loans. The assessment is that if losses among leveraged investors widen, it could weigh on the broader financial market.
They also decided to examine how rising oil prices and exchange rates affect financial companies' soundness and profitability indicators, and to look into the potential for misselling of financial products linked to stock prices, interest rates, and exchange rates.
Along with this, they examined the impact of the volatile market on corporations' funding conditions. The goal is to prepare for the possibility that the funding environment for corporations, through corporate bond and stock issuance, could deteriorate.
The Financial Supervisory Service (FSS) plans to share sector-specific risk factors in real time going forward and to broadly gather market opinions related to the Middle East situation through roundtables and other channels.