South Korea's financial regulators are set to meet with the heads of major financial groups next week amid escalating political tension surrounding President Yoon Suk Yeol’s impeachment motion.

The Financial Services Commission is arranging a meeting with the heads of major financial groups, including KB, Shinhan, Hana, Woori and NongHyup, though the date remains unconfirmed.

An official from one of the groups indicated that the meeting, initially set for Thursday, was canceled on Saturday, likely due to intensifying political unrest. The meeting is now tentatively rescheduled for the weekend, pending confirmation from the FSC, the official added.

This will be the first such gathering since the political unrest triggered by President Yoon’s short-lived martial law declaration on Tuesday. A motion to impeach the president was submitted but failed to pass in the National Assembly on Saturday.

The meeting comes as financial regulators step up efforts to work with the industry to mitigate market instability amid escalating political tensions.

FSC Chairman Kim Byoung-hwan convened an emergency meeting with the agency's senior officials on Sunday, warning of a "high likelihood of increased market volatility." He called for close coordination among relevant organizations to swiftly implement stability measures if new developments arise.

Governor Lee Bok-hyun of Financial Supervisory Service, South Korea’s top financial watchdog, has already held meetings with local securities CEOs and risk officers from insurance companies. A meeting with the vice presidents of bank treasury and credit departments is reportedly scheduled for Monday, followed by a session with savings bank CEOs the next day.

The Financial Supervisory Service, South Korea’s top financial watchdog, has already held meetings with local securities CEOs and risk officers from insurance companies. A meeting with the vice presidents of bank treasury and credit departments is reportedly scheduled for Monday, followed by a session with savings bank CEOs the next day.

The primary concern for the market is the weakening of the Korean won, which fell to a two-year low of 1,440 won against the US dollar following the martial law announcement, before stabilizing near 1,400 won -- still significantly weaker than pre-crisis levels.

The rising exchange rate presents several risks, including potential liquidity pressures on banks from increased corporate foreign exchange purchases and withdrawals by large firms, as well as the erosion of capital ratios for financial groups due to higher credit risk-weighted assets.

Pressure on local capital markets is also mounting, with foreign investors pulling over 1 trillion won ($702.2 million) from the benchmark Kospi between Wednesday and Friday. Notably, 70 percent of the selling was in financial stocks, a sector with substantial foreign ownership.

In response, the government has pledged to support the sector with unlimited liquidity, including a 10 trillion won fund for stock market stabilization and a 40 trillion won fund for the bond market. Authorities believe the situation remains manageable but are prepared to inject additional funds if market conditions deteriorate.

Amid the leadership vacuum, Finance Minister Choi Sang-mok has taken the lead in managing South Korea's economic response, holding emergency meetings with key officials and overseeing a task force for real-time monitoring and action. Choi has also maintained communication with the international community, issuing emergency letters and statements to reassure stakeholders of the stability of the Korean economy.

On Sunday, Choi convened another emergency meeting with government economic officials and reaffirmed that "South Korea's economic system is solid, with the government’s contingency measures functioning effectively."

"The top priority is external creditworthiness," Choi stressed, adding that the government plans to engage directly with international credit rating agencies, dispatch financial cooperation delegations to key global organizations and countries and launch briefings for overseas investors.