South Korean authorities Wednesday urged banking circles to sustain their financial situation amid the prolonged epidemic crisis.

“We should learn from the 2008 global financial crisis that individual actions by financial companies may affect the entire economic system,” Sohn Byung-doo, vice chairman of the regulator Financial Services Commission, said in a financial risk management meeting held at the Korea Federation of Banks in central Seoul.

During an economic downturn, the decisions of financial companies to stop or reduce their support could trigger a “fallacy of composition” that fuels the downtrend, according to the senior official.

The government is currently considering extending the redemption period of loans that were approved earlier this year to owner-operators and small businesses that suffered from the fallout of the COVID-19 pandemic.

As of Aug. 13, the balance of maturity-extended loans from the top five banks here -- KB Kookmin, Shinhan, KEB Hana, Woori, NH NongHyup -- stood at 35.79 trillion won ($30.25 billion). The extension on interest payments also came to 30.8 billion won.

Such a level of unpaid loans has increased concerns about the lenders’ risk management capacities.

“(The government) will review the possibility of prolonging the temporary actions, such as the extension of loans and interest payments,” said Sohn, vowing to make related announcements as early as within this month.

Referring to the latest mass infections, the FSC vice chief also urged thorough quarantine measures, especially for financial companies’ call centers.

(tellme@heraldcorp.com)