South Korea's four major financial holding companies have launched emergency reviews of market indicators including exchange rates, interest rates, and oil prices as fallout from U.S. airstrikes on Iran spreads. The groups are responding in real-time to market changes as the won-dollar exchange rate briefly surged to 1,500 won, heightening market anxiety.
Woori Financial Group held an emergency meeting chaired by Chairman Lim Jong-yong on the fourth to assess market impacts from geopolitical risks related to the Middle East situation. All holding company executives and representatives from major subsidiaries including banking, insurance, card, capital, securities, and asset management attended the meeting.
"As the exchange rate has returned to a sharp upward trend, we must closely monitor foreign exchange market volatility," Lim said. "The banking division will thoroughly re-examine foreign currency liquidity conditions and shift to a daily management system for the time being."
Hana Financial Group also strengthened monitoring as the won-dollar rate temporarily breached 1,500 won and market conditions changed rapidly. The group established a response channel involving Chief Financial Officers, Chief Risk Officers, and treasury executives from the holding company and major subsidiaries to share market conditions in real-time.
KB Financial Group activated its emergency response system and began managing group-level foreign exchange position exposure. The group plans to actively implement currency hedging to minimize foreign currency translation gains and losses excluding investment profits. Shinhan Financial Group is reviewing its Middle East regional business and transaction status while maintaining its crisis management level at "caution."
Domestic financial market conditions emerged as a key topic in meetings between the four financial holding company chairmen and overseas investors including global investment bank JP Morgan. JP Morgan met sequentially with Shinhan Financial Chairman Jin Ok-dong, KB Financial Chairman Yang Jong-hee, Hana Financial Chairman Ham Young-joo, and Chairman Lim alongside overseas investors to discuss implementation of corporate value enhancement programs and domestic financial and economic conditions.
Overseas investors particularly focused on confirming whether the stock price rally of the Big Four financial holdings could continue given increased market volatility from the Iran situation. The financial holding chairmen reportedly responded that they would not only continue capital and asset soundness efforts despite the Middle East situation but remain committed to expanding shareholder returns.
The four financial groups have been preemptively responding to expanded won-dollar exchange rate volatility by reducing currency-related derivatives balances and decreasing foreign currency liabilities relative to foreign currency assets. According to Korea Federation of Banks disclosures, the combined balance of currency-related derivatives including forwards, futures, and swaps at the four major banks (KB Kookmin, Shinhan, Hana, and Woori) decreased 5.9% from 915.54 trillion won at the end of 2024 to 861.86 trillion won at the end of the third quarter last year.
This decision followed recommendations to manage exchange rate risk with board-level oversight. Lee Jun-seo, a professor of business administration at Dongguk University who serves as an outside director at Hana Financial, noted at a board meeting in late October last year: "Given the unusual exchange rate levels, preemptive portfolio adjustment for risk capital among overseas assets appears necessary."
Director Yoon In-seop, who chairs Woori Financial's board, also emphasized during a meeting last year: "We must forecast exchange rates from a conservative perspective. We should ensure that business activities for managing common equity capital ratios are not constrained by discrepancies between projected and actual exchange rates in financial planning."
Market analysts warn that continued international oil price increases and financial market instability could lead to worst-case scenarios of sharp declines in domestic corporate profits and rising government bond yields. A senior executive at a major financial group said: "By reducing currency derivatives exposure, we have halved the impact of won-dollar exchange rates on capital ratios. While this may diminish the role of overseas branches, we have no choice but to respond quickly given the extreme exchange rate volatility."