South Korea will closely watch the impact from the collapse of Silicon Valley Bank and will take actions when needed to stabilize the market, the country’s Minister of Economy and Finance Choo Kyung-ho said during an ad-hoc government meeting on Tuesday.

The meeting was held to discuss macroeconomic and financial issues on concerns about the SVB bank run and the impact it would have on the Korean financial markets. Other attendees included Financial Services Commission Governor Kim Joo-hyun, Financial Supervisory Service Governor Lee Bok-hyun, and the Bank of Korea’s Deputy Governor Lee Seung-heon.

“The SVB collapse shows the financial stress that exists in vulnerable financial sectors following the tightening policy in response to high inflation,” Choo said. “Our financial market seems to be stable overall, but the government will take swift measures in cooperation with relevant agencies if necessary.”

The finance minister assessed that the impact seems to be limited in the domestic financial market. “The asset-liability structure among domestic financial institutions is not similar to that of SVB and Korean institutions tend to have fairly good liquidity, which means they have financial soundness to endure any temporary shock,” Choo said.

“Domestic banks and other major financial players, as well as pension funds, the Korea Investment Corp., Korea Post and other institutional players do not seem to have high exposure to those banks. We find that any direct impact, for now, is pretty limited.”

However, the minister was wary of market volatility. “There is, though, a possibility that market volatility might increase if financial systems are stressed, on top of high inflation globally,” he said. “The government will cautiously respond to all uncertainties to keep financial markets stable.”

The government plans to operate a government-wide system to monitor markets and any financial vulnerabilities and will take timely measures if necessary.

By Pulse

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