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🇰🇷 South Korea /Economy & Trade

South Korea Eases Bank, Insurance Capital Rules to Free Up 99 Trillion Won

From Hankyoreh · (5h ago) Korean Positive tone

Translated from Korean, summarized and contextualized by DistantNews.

TLDR

  • South Korea's financial authorities plan to ease capital regulations for banks and insurance companies to secure approximately 99 trillion won in lending capacity.
  • This measure aims to redirect funds from non-productive sectors like real estate towards productive areas such as advanced industries.
  • The regulatory adjustments are expected to lower capital burdens, thereby expanding financial institutions' capacity for loans and investments.

The Hankyoreh reports on a significant move by South Korea's financial authorities to stimulate the economy by easing capital regulations for banks and insurance companies. The Financial Services Commission (FSC) announced a plan to unlock an estimated 99 trillion won (approximately $73 billion USD) in lending and investment capacity. This initiative is framed as a crucial step in promoting "productive finance" and redirecting capital flow away from sectors like real estate and towards more dynamic areas, including advanced industries.

This measure is a kind of supplementary budget.

— Lee Bok-hyunFinancial Services Commission Chairman Lee Bok-hyun described the capital regulation easing as a supplementary budget, highlighting its economic stimulus purpose.

The core of the plan involves adjusting how financial institutions calculate their risk-weighted assets. By making these calculations more flexible, particularly concerning losses from major financial incidents that are deemed unlikely to recur, the FSC aims to reduce the capital burden on these institutions. For banks, this means that even significant financial losses might be excluded from capital calculations if preventative measures are in place, a change from the previous system where such losses could impact capital for up to a decade. For insurance companies, risk weights for investments in policy funds, venture capital, and infrastructure will be lowered.

The secured lending capacity will serve as a catalyst for overcoming the crisis and achieving economic re-leap.

— Lee Bok-hyunChairman Lee Bok-hyun expressed optimism about the impact of the increased lending capacity on economic recovery.

FSC Chairman Lee Bok-hyun described the measure as akin to a "supplementary budget," emphasizing its role as a catalyst for economic recovery and renewed growth. The underlying goal is to ensure that financial institutions have ample liquidity to support businesses and industries critical for the nation's future economic development. This proactive approach by the financial authorities signals a commitment to fostering a more robust and forward-looking economic landscape in South Korea.

Financial institutions must hold capital above a certain level to respond to crises such as liquidity crunch or large-scale losses.

— Article textThis explains the general principle behind capital ratio regulations for financial institutions.
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Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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