BOK is closely monitoring the impact of the SVB collapse on financial markets and the economy
SEOUL, March 13 (Yonhap) – The Bank of Korea (BOK) said Monday it will closely monitor any impact of last week’s collapse of a US tech startup-focused lender on the domestic financial market and economic conditions, although she dismissed concerns the issue could become a systemic risk.
On Friday, US banking regulators shut down Silicon Valley Bank (SVB) and took control of its customer deposits in the biggest US bank failure since the 2008 financial crisis. It was followed by the collapse of another US bank, Signature Bank.
Regulators have announced depositor protection measures to mitigate the possibility that these events could become a systemic risk for the broader banking system and financial institutions.
“Currently, the likelihood that the closure of SVB and Signature Bank will result in systemic risk at banks and other financial institutions is not considered significant,” the BOK said in a press release after holding a market review meeting chaired by Deputy Governor Lee Seung -heon.
“However, depending on the impact of the incident on investor sentiment and the outcome of the US CPI release (on March 14), volatility in global financial markets is likely to increase,” she added. “The BOK will closely monitor the impact…on price variables such as domestic interest rates, stock prices and exchange rates, and capital inflows and outflows.”
The BOK announced that it would take “if necessary, suitable measures to stabilize the market”.
Concerns remain that South Korean financial markets could be hit hard by the aftermath of US bank failures, as they were after the Lehman Brothers debacle in 2008.
The South Korean economy has also faced increasing uncertainty, such as B. falling exports and the lagged impact on future growth of the BOK’s aggressive rate hikes to fight inflation.
Last month, the BOK froze interest rates for the first time in about a year amid concerns about an economic slowdown.
South Korean stock markets started Monday on a weak note, with benchmark KOSPI down about 0.5 percent from the close of the previous session at 09:41.
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