Yoon Seok-heon “Some financial companies, including holdings, risk when the L-shaped economy recovers”

Financial Supervisory Commissioner Yoon Seok-heon warned that if the economic recovery in the future is’L-shaped’ due to the prolonged Corona 19, the financial status of financial companies could reach a risky level.

The Financial Supervisory Service broadcasted the year-end press conference live on YouTube on the 23rd, and Seok-Heon Yoon, Director of the Financial Supervisory Service, was concerned about the risks of the national financial system due to a surge in household debt and deteriorating financial soundness of financial companies.

First of all, FSS Commissioner Yoon Seok-heon pointed out an increase in household debt as a risk factor.

He said, “Household loans are increasing rapidly, so I think we will have to maintain total volume management for a while.” .

“As companies and self-employed people need money, we need to switch to the DSR regulation, which provides loans based on repayment capabilities.” “Most developed countries are doing so, so we need to go in that direction. It can be done, so I plan to consider various things.”

He also mentioned concerns about the soundness of financial companies due to the prolonged Corona 19.

Director Yoon said, “As of the end of the third quarter, the bank’s BIS ratio is 16%, and it has the ability to absorb losses.” Other industries, such as securities and insurance, also show good indicators. You have to prepare for it.”

This means that it is necessary to prepare in advance in case the so-called insolvent bomb explodes.

Director Yoon said, “I applied’U-shaped (quick recovery)’ and’L-shaped (long-term recession)’ scenarios through stress tests like other advanced countries. Most financial companies passed the U-shaped scenario, but Some financial companies, including those, have failed to pass the L-shaped scenario.” It means that financial companies may be shaken due to a lack of capital, and it is necessary to be alert and prepare necessary preparations.

It is explained that the recommendations for financial holding companies to refrain from dividends are in the same context.

Director Yoon said, “From a shareholder’s point of view, the stock value and dividend income are combined, but if you receive a lot of dividends at the end of the year, the stock value may fall next year.” “The corona crisis may worsen next year. “Is it okay to pay a lot of dividends?”

Allowance for bad debt is to prepare for the expected loss, and if it exceeds that, it must be filled with capital. Therefore, he explained that it meant refraining from dividends and having the ability to absorb losses.

He said, “I am coordinating with financial companies to pay dividend payout ratio within 15-25% of net profit, like Europe (15%) and UK (25%),” and “I know it is going well.”

It also made a position regarding the FSS’s independence and reorganization of the supervisory system.

The FSS’s independence can be divided into the budget and the supervisory system’s independence, but the budget is part of the supervisory system’s independence, so it is difficult to think separately.

When the government promotes the financial industry, financial accidents occur, which are a burden on consumers. This is the case with the past savings bank crisis, the Eastern crisis, and the recent private equity crisis. It is pointed out that a reorganization of the financial supervision system is necessary for this. In particular, he emphasized that the responsibility is unclear because it is a dual system.

Director Yoon raised his voice, saying, “Because there is a need for a balance between financial industry policy and supervision, the Financial Supervisory Service must have a minimum of independence.” “An organic coordination between policy and supervision is necessary.” The IMF also cited the case that the supervisory part should be given more authority.

He also mentioned the controversy over the authority and responsibilities of the holding company president.

He said, “Some point out that the authority of the holding company’s chairman is greater than responsibility,” he said. He added, “We will look for alternatives through in-depth research and monitoring in the future.”

For the reappointment of the holding company’s chairman, he said that transparency and fairness in the CEO appointment procedure are necessary, and he hopes this will be institutionalized.

On the other hand, regarding the reorganization, he said that it is necessary to change the system for each region such as banking, capital market, insurance, non-banking, and consumer protection into a system for each function.