The International Monetary Fund (IMF) has sent a team to South Korea in six years to check the country’s macroeconomic soundness and systems for financial stability. The team stayed in South Korea from Feb. 12 to 14, looking into the country’s household debts exceeding 1,500 trillion won as well as its risks such as a high dependence on large corporations and exports.
“The team visited the Ministry of Strategy and Finance, the Bank of Korea, the Financial Supervisory Service and the Financial Services Commission to determine the scope of their assessment and the IMF is likely to request various data and ask various questions regarding the Korean economy,” said a government source, adding, “The team focused on financial stability at the Bank of Korea and stress tests at the Financial Supervisory Service.”
The Financial Supervisory Service has worked on stress test models assuming a financial crisis since last year in order to assess the stability of economic participants by estimating financial companies’ current net profits, their capital adequacy ratios, and other aspects. The government is estimating the total household debts at 2,200 trillion won, which means an interest rate hike or a drop in housing prices can lead to serious problems.
The IMF is likely to make an inquiry and a request for data next month. The South Korean government is planning to respond by organizing a team led by the Financial Services Commission.