Republic of Korea: Financial Sector Assessment Program-Technical Note-Systemic Risk Analysis, Financial Sector Stress Testing, and an Assessment of Demographic Shift in Korea

International Monetary Fund

No 2020/279, IMF Staff Country Reports from International Monetary Fund

Abstract: This note presents the systemic risk analysis conducted for the Republic of Korea in the course of the 2019 Korea FSAP. It comprises a forward-looking solvency analysis for banks, insurers, and pension funds, a liquidity stress test for banks, and an assessment of network and interconnectedness for a wide range of financial sector entities and their ties to the real economy. Various structural characteristics of Korea’s economy and its financial system informed the features and focus for its forward-looking risk analysis. They include Korea’s strong export orientation, limited diversification, and its key role as a node in regional and international supply chains. Korea’s financial system has grown by 40 percentage points of GDP since 2013, enhancing the importance of a deep financial sector analysis as conducted through the FSAP. Mortgage insurance schemes are widely used—which was reflected in the way the risk assessment for banks was conducted. Korea’s life and non-life insurance sector is large, highly concentrated and saturated. Fintech developments keep accelerating, in terms of its Open Banking system and e-money providers. Demographic developments in Korea are among the most adverse world-wide, implying a continuous drag on demand, downward pressure on interest rates, financial firms’ income, and hence their capitalization unless they will be altering their business models.

Keywords: ISCR; CR; financial system; sensitivity analysis; balance sheet; banking system; central bank; credit risk; housing market; return on assets; sovereign bond; bond yield; real GDP; market structure; solvency analysis; Insurance; Loans; Stress testing; Commercial banks; Insurance companies; Global (search for similar items in EconPapers)
Pages: 100
Date: 2020-09-18
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=49755 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfscr:2020/279

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Staff Country Reports from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().