[금융안정보고서]③ “When financial insecurity comes, the impact of corporate loans is greater than that of households”

[서울=뉴스핌] Reporter Baek Ji-hyun = If the economic recovery is delayed due to the prolonged Corona 19 and the asset price falls, it has been investigated that companies will suffer more damage than households.

According to the Financial Stability Report for the second half of 2020 released by the Bank of Korea on the 24th, looking at the recent credit risk assessment situation, the financial market price variables did not sufficiently reflect credit risk compared to the real economy.

[자료=한국은행]

Despite the impact of Corona 19, interest rates on loans are not only below the level of the global financial crisis, but also remain at the long-term (10-year) average. The stock price is also at a very low level to reflect the company’s expected default probability.

The BOK analyzed that the credit risk undervaluation was largely due to the positive expectations of economic actors for vaccine development and continued policy support. Given that the recent economic uncertainty is very high, the credit risk assessment could change significantly if internal and external conditions worsen again.

For this reason, if a financial imbalance appears, it is expected that the impact on stores and companies will be great. In particular, as a result of the BOK’s stress test, the insolvency of corporate loans was found to be far greater than that of households. It is explained that the capital ratio of financial institutions can fall significantly due to falling asset prices and widening credit spreads. The test was conducted under the assumption that the economic growth rate continued to fall below the forecast, while the sense of credit boundary expanded and asset prices fell.

In the case of households, the default rate of loans rose 0.36%p and credit losses increased by KRW5.2 trillion due to the economic slowdown and financial imbalance adjustment. On the other hand, it is estimated that the default rate for companies will rise 0.93%p and credit losses will increase by 26.8 trillion won.

In the case of financial institutions, the capital ratio is falling, but it is expected to remain in good condition, generally exceeding the regulatory level. In the case of banks, the BIS equity capital ratio fell from 14.6% to 12%, while savings banks fell only 13% from 14.9%. However, securities companies and insurance companies have a high proportion of securities among their assets, so the capital ratio is likely to suffer a relatively large impact among financial institutions. Securities companies’ NCR weighting is estimated to drop significantly from 666% to 231.1%, and insurance companies’ RBC rates from 277.1% to 137.6%.

The BOK said, “It is necessary to strengthen risk management in preparation for stressful situations such as delayed economic recovery and reconciling financial imbalances while continuing efforts to expand capital.”

[email protected]