Head of the Financial Supervisory Service (FSS) Lee Bok-hyun delivers congratulatory remarks at the start of a seminar in Yeongdeungpo district, Seoul, June 12. Yonhap

The chief of the financial regulator stressed the need to objectively evaluate real estate project financing (PF) loans Thursday amid government-led efforts to liquidate projects that are failing due to increased costs.

Lee Bok-hyun, the head of the Financial Supervisory Service (FSS), made the remark in an emergency meeting to check the country's financial market conditions following the latest U.S. Federal Open Market Committee (FOMC) meeting, where the U.S. Fed kept its key rate frozen for the seventh consecutive time while suggesting one potential rate reduction down the road instead of the three cuts earlier expected.

"We need to make sure that evaluations of real estate PF loans are not made generously due to growing hopes for a rise in property prices," Lee told the meeting.

"We must support the stable restructuring of PF loans by swiftly injecting additional funds necessary to promote the circulation of funds," he added.

Lee also highlighted the need to rein in the recent rise in the delinquency rate of small and medium-sized financial firms, saying, "We must double-check the liquidity and fiscal soundness of small financial firms and induce them to expand their capital if necessary so that the recent increase in their delinquency rate will not lead to a systematic risk."

The delinquency ratio of local savings banks stood at 8.8 percent in the January-March period, up 2.25 percentage points from three months earlier, according to earlier data.

With regard to the outcome of the FOMC meeting, the FSS chief called for all-out efforts to prepare for any future changes in the market.

"We must thoroughly monitor all major issues in preparation for risks that may move either way since there currently exists a possibility of continued high interest rates, as well as hopes for a rate reduction," Lee said. (Yonhap)