The Financial Services Commission held a "sector-specific risk review meeting" on the 19th, presided over by Financial Industry Bureau Director Kim Jin-hong, with industry associations and financial and insurance research institutes. The meeting was to assess how a complex crisis—wider exchange-rate volatility from the recent Middle East crisis and simultaneous rises in international oil prices and bond yields—affects Korea's financial industry and to discuss measures in case it drags on.
Participants said the soundness of Korea's financial industry and its foreign-currency liquidity are relatively solid, and exposure to the Middle East is minimal, making the likelihood of a spillover into systemic risk low. They agreed, however, that a prolonged crisis could significantly affect the real economy and the financial industry overall, and they committed to maintaining a thorough readiness posture.
Risk management will be strengthened with tailored measures by sector. Banks have activated emergency response systems and are conducting daily checks on profitability and credit-rating changes in oil price–sensitive sectors such as refining, petrochemicals, and airlines. Insurers, which are sensitive to interest-rate fluctuations, have drawn up scenario-based crisis response plans and moved to reduce capital volatility through duration gap management.
Nonbank credit card and finance companies without deposit-taking functions are securing alternative funding sources such as bank borrowings and ABS in preparation for bond market volatility, while savings banks and mutual finance institutions are also strengthening monitoring of loans to low-income households and small merchants.
Securing the safety of locally operating financial firms is also proceeding urgently. After the Ministry of Foreign Affairs issued a special travel advisory, five banks and three non-life insurers with operations in the Middle East shifted local employees to remote work or moved them to alternative business sites, and accompanying family members were brought back to Korea. They also established 24-hour emergency communication lines with headquarters to ensure business continuity.
Following checks on marine insurance amid concerns about a blockade of the Strait of Hormuz, 32 of the 33 policies whose existing war risk endorsements were canceled have completed re-enrollment under new contracts. Insurers plan to strengthen support by swiftly paying claims if corporations located in the Middle East suffer damage and by providing information on expected ranges of premium increases if premiums rise.
The Financial Services Commission, noting that high interest rates and high oil prices place a heavy burden on low-income households and small merchants, asked for a meticulous review of difficulties in meeting funding demand. The Financial Services Commission plans to maintain its emergency response system to avoid missing the golden time for policy responses if market anxiety intensifies.