SEOUL, A top financial regulator on Thursday warned of an “unprecedented economic perfect storm” amid growing uncertainties at home and abroad, vowing utmost efforts to maintain the stability of the financial system.
Lee Bok-hyun, chief of the Financial Supervisory Service (FSS), made the remark during a meeting with top officials of economic think tanks in Seoul to discuss policy responses amid surging inflation and worries over a possible recession.
“Some experts compare the current state to the oil shock (in the 1970s) when the world suffered inflation and an economic downturn at the same time. I think we could face an even more serious crisis due to the closely intertwined global value chain,” Lee said. “Simply put, an unprecedented perfect storm could come up.”
Perfect storm often refers to a serious economic crisis, as cascading unfavorable factors occur simultaneously to wreak havoc.
In a move to better respond to unexpected risks, Lee vowed to strengthen the oversight of financial institutions “by actively employing various means, including soundness ratio measurement,” he said.
Lee also called for enhanced monitoring of financial firms’ foreign liquidity management and beefing up of their loss-absorbing capabilities to prevent systematic risks, noting that a liquidity crisis by one institution could have far-reaching consequences.
“We will devise emergency support measures and implement them swiftly in case a crisis actually takes place,” the chief said. “We will abolish regulations that hamper innovation, and seek ways to help the people struggling with financial burdens over rising borrowing costs and falling asset prices.”
The country’s consumer prices jumped 5.4 percent on-year in May, the fastest rise in almost 14 years, and the Bank of Korea (BOK) warned of faster inflation growth.
Market watchers say the BOK could take more aggressive monetary tightening steps to fight inflation, particularly as the U.S. Federal Reserve hiked the key rate by 0.75 percentage point this month, the sharpest hike since 1994.
The South Korean stock and foreign exchange markets have plunged recently on growing concerns over a global economic recession.
On Thursday, the local currency fell to the lowest level since July 2009 against the U.S. dollar in intraday trading, and the key Korea Composite Stock Price Index (KOSPI) had skidded to a fresh yearly low of 2,335.66 as of 11:13 a.m.
Source: Yonhap News Agency