S. Korean financial firms remain insulated from overseas risks: FSC

▲ Kim So-young (C), vice chairman of the Financial Services Commission (FSC), speaks during a meeting at the FSC headquarters in Seoul on Dec. 11, 2023, in this photo provided by the financial regulator. (PHOTO NOT FOR SALE) (Yonhap)

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S. Korean financial firms remain insulated from overseas risks: FSC

SEOUL, Dec. 11 (Yonhap) -- South Korean financial companies currently remain insulated from potential risks stemming from worsening conditions for their overseas investments, the country's financial regulator said Monday.

Such an assessment came in an emergency meeting hosted by the deputy chief of the Financial Services Commission (FSC), Kim So-young.

"Based on our review, the situation appears to be that the risk of a loss from overseas real estate investments can be dealt with by the financial industry even if its loss grows due to an additional drop in global real estate prices in the future," the FSC said in a press release, noting local financial firms currently have 55.8 trillion won (US$42.3 billion) invested in overseas property markets.

The amount represents 0.8 percent of the companies' combined total assets, according to the FSC.

"It has also been observed that the maximum loss of the entire financial firms will remain miniscule compared to their assets even under a more severe stress test where the value of their (overseas) properties fall additionally by a large margin," it added.

The FSC reported earlier that out of the total overseas investment, up to 1.3 trillion won may face an event of default (EOD), which refers to an event where a lender may demand full repayment of an outstanding balance before it is due.

Kim noted that the potential loss from overseas investment may not trigger a systematic risk here, but said the financial regulator will closely monitor the possibility of any future loss and the financial firms' preparations since "exposure to overseas risks may cause concerns over the financial soundness of individual firms."

Monday's meeting also reviewed local securities firms' foreign currency liquidity ratio and confirmed that they continue to maintain a stable level, according to the FSC.

"As a result of the review, the foreign currency liquidity currently maintained by securities firms has been determined to be adequate to safely deal with any contingency even under a scenario where all overseas (stock) indexes fall at the same time," it said.

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