SEOUL, Nov. 6 (Yonhap) — The head of South Korea’s financial regulator on Monday defended the temporary suspension of stock short selling until June 2024, citing the need to create a level playing field for retail investors. Lee Bok-hyun, head of the Financial Supervisory Service (FSS), made the remark a day after the decision was made. “It was an unavoidable choice to introduce an advanced short selling system,” the FSS chief said. He likened the domestic stock market to “all glass being completely shattered,” noting the FSS has confirmed that some 100 listed stocks have been subject to illegal short selling.
The decision was reportedly prompted by the recent exposure of two Hong Kong-based investment banks (IBs) that are suspected of short selling some 56 billion won (US$43 million) while being fully aware that they would not be able to borrow the shares sold. The FSS has said it will check all global IBs in the country to see if they are engaged in such illegal practices known as naked short selling. The financial regulator has also said that a revised system will be established to prevent illegal short selling before the end of June 2024.
Lee also criticized banks for making what he described as “excessively large” income on high interest rates. He noted that the combined operating profits of banks in the third quarter were bigger than those of Samsung Electronics, LG Electronics and Hyundai Motor combined, and that the banks’ interest income is expected to reach 60 trillion won this year, “the largest in history.” “The semiconductor and automobile companies maintain their competitiveness in the global market through innovation. The operating profits of such companies remain at that level. Those in the banking industry, too, should decide if the banks were able to make 60 trillion won in interest income through such various innovation efforts as those of semiconductor and automobile firms,” Lee added. bdk@yna.co.kr (END)