Financial Services Commission Chairman Lee Eok-yeon emphasized that as market volatility grows due to rising market interest rates, "we must comprehensively review risk factors, including extreme risks and contagion pathways with extremely low probabilities of occurrence."

Presiding over a financial market situation inspection meeting at the Government Complex-Seoul on the morning of October 1, Chairman Lee stated, "If market 불안 (instability) spreads, we must implement necessary market stabilization measures for each sector in a timely manner."

The meeting was attended by officials from related ministries and agencies, including the Ministry of Finance and Economy and the Financial Supervisory Service, as well as researchers from the Korea Institute of Finance and securities firms.

Chairman Lee instructed, "As the upward trend in market interest rates continues, maintain an active implementation stance for market stabilization programs to stabilize the bond and fund markets, and thoroughly prepare in advance to swiftly expand support scales if bond market volatility expands excessively."

He also requested advance inspections of the issuance scale and maturity structure of bank bonds and specialized credit financial bonds for the fourth quarter (October to December) to prevent supply-demand burdens on the bond market caused by concentrated issuances during specific periods.

In particular, he noted that "the rise in market interest rates has a lagged negative impact starting from vulnerable borrowers with declining repayment capacity," ordering the prompt implementation of support measures for vulnerable borrowers announced late last month, alongside supplementary measures if necessary.

Diagnosing the current market situation, Chairman Lee said, "The global monetary policy stance is shifting toward tightening, and uncertainties such as changes in the AI and semiconductor industry conditions and the situation in the Middle East are overlapping," adding that "this is a transition period where the currents of the financial environment are changing."

He further stressed, "The more prepared we are, the less we will shake," urging preemptive and multi-faceted response tools to be prepared in advance.

Experts attending the meeting assessed that although domestic government bond yields have risen compared to the beginning of the year due to major countries' benchmark interest rate hikes, corporate bond spreads have not widened significantly.

According to the Financial Services Commission, the 3-year treasury bond yield stood at 4.011 percent per annum as of the previous day, rising 105.8 bps (1 bp = 0.01 percentage point) since the beginning of this year and 17.3 bps during last month alone.

In contrast, the increases in corporate bond spreads as of the previous day were limited to 16.9 bps for the year and 1.4 bps for last month.

Experts attributed this to the 100 trillion won-plus-alpha market stabilization program purchasing 12.1 trillion won worth of corporate bonds and commercial paper since the Middle East conflict in March.

However, participants also acknowledged that financing cost burdens are accumulating amid rising interest rates and market sensitivity to interest rate fluctuations is increasing.

Consequently, they cited risk factors such as ▲ liquidity risks due to maturity mismatches, ▲ capital concentration in specific sectors, ▲ concentration of bond issuance and maturities in specific periods, ▲ increased repayment burdens for vulnerable borrowers, and ▲ uncertainties in the outlook for AI and semiconductor industry conditions.

Chairman Lee decided to hold regular financial market situation inspection meetings moving forward to listen to diverse on-site voices from the market and industry and check for risks.
(Photo: Yonhap News)