FSS launches emergency response task force over Middle East risks...“Will sternly crack down on unfair trading”

[The Financial News] The Financial Supervisory Service (FSS) has launched a 24-hour monitoring system by forming a “Middle East Situation Emergency Response Task Force (TF)” headed by its Senior Deputy Governor, in response to rising volatility in domestic and global financial markets caused by the prolonged conflict in the Middle East. The FSS plans to assess how higher international oil prices and a sharp rise in the exchange rate could affect Korea’s economic fundamentals, while also taking a hard line against unfair trading practices such as spreading false information that exploits market anxiety.
According to the FSS on the 3rd, Lee Chan-jin, Governor of the Financial Supervisory Service (Photo) convened an executives’ meeting that day to review financial market conditions in light of developments in the Middle East. As concerns grow over a possible blockade of the Strait of Hormuz, international oil prices have surged. The Brent crude oil futures price jumped from 72.5 dollars per barrel on the 27th of last month to 79.5 dollars as of 1 p.m. today, approaching the 80-dollar mark.
Domestic financial markets are also experiencing turbulence. As of 1 p.m., the Korea Composite Stock Price Index (KOSPI) had fallen 4.3% from the previous trading day to 5,978.6, breaking below the 6,000 level, according to the FSS. In the foreign exchange market, the US Dollar–South Korean Won exchange rate rose from 1,425.8 won on the 26th of last month to 1,463.9 won today, widening its volatility. The yield on the 3-year Korean Treasury bond also climbed to 3.13%, adding to pressures in the bond market.
To prepare for a prolonged crisis, the FSS decided to implement phased measures under its emergency response plan. Through the TF chaired by the Senior Deputy Governor, it will monitor in real time the stock, bond, and short-term money markets, as well as trends in foreign currency inflows and outflows. It will also operate hotlines between its overseas offices and local financial institutions to track local conditions around the clock, and plans to raise the emergency response level if the situation deteriorates.
In particular, the FSS will tighten surveillance to uphold order in the capital markets. Lee instructed, “Closely scrutinize and respond sternly to all forms of unfair practices, including spreading false information and manipulating prices that exploit investors’ anxiety.”
Foreign exchange soundness management will also be strengthened. The FSS will re-examine each financial institution’s foreign-currency asset and liability positions, and review the effectiveness of their secured credit lines and emergency funding plans. To support vulnerable small and medium-sized enterprises and low-income households hit by rising oil prices, it will make use of the Consultation Center for Financial Difficulties of Small and Medium-sized Enterprises and, if necessary, work with relevant ministries to devise additional support measures.
Lee stated, “The fundamentals of our economy remain solid, but if the situation in the Middle East is prolonged, there are concerns that volatility could increase across the financial markets,” adding, “We will respond systematically to this crisis situation in close cooperation with the government, the Bank of Korea (BOK), and other relevant institutions.”

elikim@fnnews.com Kim Mi-hee Reporter