SEOUL :South Korea’s financial firms are facing little contagion risk from troubles at U.S. and Swiss banks, but some non-bank firms may have to contend with increased stress from the sluggish property market, the country’s central bank said in a report.
South Korean banks have been strictly supervised and their exposure to bonds and stocks stands at 18 per cent of total assets, compared with 57 per cent at recently collapsed Silicon Valley Bank, it said.
The sluggish real estate market, however, poses increased risk for some non-bank financial firms as their exposure to property financing has risen sharply in recent years, the Bank of Korea’s report said.
At credit financing firms such as credit card issuers, project financing loans and payment guarantees have climbed 433 per cent over the past five years. For savings banks, which in Korea are classified as non-banks, that gain was 250 per cent while at insurance companies it was 205 per cent.
Housing prices across South Korea have fallen in each of the past nine months in the wake of aggressive monetary policy tightening both locally and globally to fight inflation.
The government has taken several steps to avert a hard landing for the property market. Its latest step announced on Wednesday is designed to help sharply reduce the tax burden on home owners.
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