Chief regulator vows preemptive steps to ease post-Brexit volatility

Korea's financial authorities said Wednesday they will act preemptively to minimize any market fallout in the wake of Britain's unprecedented vote to leave the European Union.

As Britain's upcoming exit from the EU may have a lingering and lasting impact on global markets in the long term, the government will take quick and bold steps to ease any post-Brexit market turmoil while thoroughly preparing to ride out the changes ahead, Financial Services Commission Chairman Yim Jong-yong said before lawmakers.

"Market volatility has eased this week. But uncertainties still remain high out there as Britain's exit from the EU is the first of such kind," Yim said.

Almost $4 trillion has been wiped out from global equity values since Friday when Britain's decision to leave the 28-nation economic bloc was officially announced.

To prevent further market volatility driven by Britain's exit from the EU, known as Brexit, central banks and governments said they are ready to take action if markets run wild. On Tuesday, Korea announced a 20 trillion won fiscal stimulus package to support Asia's fourth-largest economy.

In a press conference held earlier in the day, Finance Minister Yoo Il-ho said the government "will thoroughly analyze the mid- and long-term impact Brexit will have on trade, foreign exchange and financial markets, and take pre-emptive measures."

The chief financial regulator also said the authorities will apply stricter rules from next month on home loans as there are some signs of "overheating" in the property market.

Until recently, those who signed up to buy an apartment under construction have used the collective middle payment system to borrow a chunk of money from lenders under the guarantee of the Korea Housing & Urban Guarantee Corporation. The initial and final payments are usually made by the apartment buyers' own money.

From July, the KHUG will offer its debt payment guarantee for apartment buyers with a maximum of 600 million won per person.

There has been no upper limit for the guarantee so far, the FSC said.

Helped by record-low rates and the government's stimulus programs to boost the real estate markets, household loans have already exceeded 1,200 trillion won, raising worries that they could strike a major blow to Asia's fourth-largest economy if rates turn higher.

The country's policy rate stands at an all-time low of 1.25 percent.

On Tuesday, the government cut its growth outlook to 2.8 percent from its earlier 3.1 percent to reflect sluggish demand and market volatility. Korea's economy expanded 2.6 percent last year, slowing from the previous year's 3.3 percent growth. (Yonhap)