South Korea sees risks to financial firms from overseas property
SOME South Korean financial institutions may be at risk if bets on overseas property sour, the country’s regulator warned, emphasising that the likelihood of systemic stress is low.
“For companies with large overseas real estate exposures, prudential concerns may emerge individually,” the Financial Services Commission (FSC) said on Monday (Dec 11).
The message comes after the country’s pension funds, insurance companies and asset managers ploughed billions of dollars into properties and risky real estate loans across the globe in the run-up to the pandemic, leaving them under scrutiny as losses started to pile up.
Regulators at the industry watchdog have already urged brokerages to brace for a prolonged real estate slump and boost their capital buffers.
However, given that the companies’ 55.8 trillion won (S$56.8 billion) of exposure amounted to less than 1 per cent of the sector’s assets, the risk “is assessed as being sufficiently covered by the financial sector’s current loss-absorbing capacity, even if losses expand due to negative shocks such as global asset price declines”, the FSC said in the statement.
Trouble in the country’s financial sector began a year ago, when a default by the developer of Legoland Korea triggered a credit crunch.
“(Officials) will monitor the possibility of future losses and the response status of each financial company,” the FSC added. BLOOMBERG
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