On Nov. 7, the ruling People Power Party (PPP) demanded the government monitor the financial market and take steps to stabilize it on top of easing excessive regulations in the real estate market.
PPP also requested it refrain from raising interest rates on loans targeting those in the vulnerable bracket and timely implement the 50 trillion won plus alpha program to stabilize the liquidity market.
PPP’s Special Committee for Economic Stabilization, headed by Rep. Yoo Sung-kull, had its inaugural meeting at the National Assembly Parliamentarians’ Hall and made the demands to the government.
Among those on hand at the meeting, designed to stabilize the financial market, were First Vice Minister Bang Ki-sun of the Ministry of Economy and Finance (MOEF), Vice Chairman Kim So-young of the Financial Services Commission (FSC), Vice Gov. Lee Seung-heon of the Bank of Korea, Vice Chairman Kim Byung-chil of the Korea Supervisory Commission, and Dir.-Gen. Lee Hyung-joo in charge of financial policies at FSC.
The committee demanded MOEF closely monitor the financial market and focus on maintaining its stability timely if necessary.
Chairman Yoo of the committee, said, “Amid widening variables in the financial market, caused by the recent global retrenchment and continued market jitters coupled with the short-term money market, the government’s steps to stabilize the financial market had led to the easing of corporate bond interest rates and CP spread hikes as swell as the calming down of the stiff mood to some extent but it was not yet in a stable situation.”
The committee asked for swiftly relaxing irregular and excessive regulations since the sagging real estate market, caused by recent real estate price decline and continuous unsold units could influence the jitters of the financial market and the real economy.
The committee insisted on close communication between the central and local governments.
The request may be construed as a precaution on the spreading of the jitters of the financial market in the wake of Gangwon-do Gov. Kim Jin-tae’s declaring of the default of a project to build Lego Land in the province.
Chairman Yoo said, “The committee has been told words on the need for communicating between the central and local governments over matters and projects that could exacerbate risks of the financial market.”
The committee called for FSC to have institutional investors, such as pension and funds to aggressively buy bonds to stabilize the bond market.
It also asked for refraining banks from raising loan interest rates to protect those in the vulnerable bracket and taking steps to maintain a virtuous cycle of the money market by avoiding excessive competition, which causes an excessive money rush.
The committee demanded that FSC effectively implement the 50 trillion won-plus alpha to stabilize the money market.
It also called for closely managing the maturity of corporate bonds and CPs and the supply situation to examine factors that could deal a blow to the market and take policy steps corresponding to the situations.
The committee insisted the Bank of Korea make effective and continuous efforts to stabilize the money market.
The committee, a revamped and expanded version of the ruling party’s former Price and Public Livelihood Committee, has been established to stabilize the national economy through discussions of overall economic affairs.
As for expectations over contested bills being handled at the National Assembly Standing Committee, Chairman Yoo said if issues discussed by the special committee are required to revise related acts or create laws, we’ll submit related bills.”
Gov’t Works to Stay Vigilant to Brace for Uncertainty in Financial Markets
Deputy Prime Minister Choo Kyung-ho presided over the Emergency Meeting on Macroeconomic and Financial Stability with BOK, FSC and FSS on Nov. 3.
At this meeting, DPM Choo and the three heads of the financial institutes comprehensively reviewed the current macroeconomic and financial issues including the major decision of the FOMC’s November Meeting, the international financial market situation, the corporate bond and short-term money market trends, as well as the impact of North Korea’s missile test on Nov. 2 on the financial and FX markets at home and abroad.
The U.S. Federal Reserve raised its key interest rates by 75bp (3.0-3.25% → 3.75-4.0%). In the wake of the FOMC Meeting, the U.S. stocks fell, the interest rates went up and the U.S. dollar strengthened overnight.
The participants of the Nov.3 emergency meeting agreed to stay more vigilant than ever for bracing for any possibilities as they acknowledged that the Fed’s rate hikes would result in high uncertainties, affecting both Korean and international financial markets.
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