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Asia-PacificJuly 7 2022

South Korean regulators prepare for turmoil

As the clouds darken over the global economy, South Korea’s financial regulators are bracing for a storm. James King reports.
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South Korean regulators prepare for turmoil

On June 23, Kim So-young, the vice-chairman of South Korea’s top financial regulator, the Financial Services Commission (FSC), announced that the Korea Deposit Insurance Corporation (KDIC) will be given new powers to pre-emptively intervene to save struggling financial companies from default. The move marks a notable expansion of the KDIC’s mandate, which has traditionally had limited precautionary powers, and underscores the its concerns as global economic conditions deteriorate.

The country’s export-driven economy and its status as a bellwether for global trade leave it highly exposed to downside external risks. Today, these difficulties include probable US and eurozone recessions, rolling Covid-19-linked shutdowns in China, and conflict in Europe. Internal problems are also mounting, as the collapsing value of the won, low domestic investment levels and high household debt, among other issues, threaten the country’s medium-term economic prospects.

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