SEOUL: The head of Korea’s central bank said Thursday that local banks should keep their financial status healthy to weather any possible external impact. “It is important for banks to maintain a clean bill of health in terms of assets and a proper level of debt-to-equity ratio to cope with financial volatility,” Bank of Korea Governor Lee Ju-yeol said in a meeting with chiefs of major banks in Korea.
The chiefs of the major banks shared the view that they need to strengthen efforts to cut costs, citing growing uncertainty at home and abroad and fierce competition, according to the central bank.
Korean banks have suffered from declining margins due to record low interest rates and tough competition in the nearly saturated domestic market. Lee’s comments come amid increased uncertainty following Britain’s decision last month to leave the European Union. Global financial markets seem to remain volatile for the time being as it will take several years before Britain’s official exit from the world’s biggest economic bloc. Earlier this week, he cited the vulnerability of a “small open economy” to external impact.
Korea’s economy, the fourth largest in Asia, is categorized as a small open economy for its heavy dependence on exports and massive foreign investments in its equity market. Lee is set to leave for the southwestern Chinese city of Chengdu on Friday to attend a two-day meeting of Group of 20 finance ministers and central bank governors, the central bank said. Lee plans to exchange opinions with his counterparts and other participants on such issues as policy coordination to cope with the global economic slowdown, it said.
