With "Top 5 Financial Holding Companies Should Increase Support for 'K-New Deal'"... Financial Sector Requests "Regulatory Easing" (Comprehensive)

Kim Jin-pyo "Lead the way to direct private funds to companies, not real estate"
Kim Kwang-soo "Lower risk-weighted asset standards and reduce tax rates"

On the morning of the 22nd, Kim Jin-pyo, Chairman of the National Economic Advisory Council, is speaking at the 'K-New Deal Support Measures' meeting held at the Bank Federation Building in Myeongdong, Seoul. At this meeting, the chairpersons of the five major financial groups and heads of financial associations discussed matters related to the Korean New Deal project promoted by ruling party figures and the government. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Kwangho Lee] The ruling party met with the chairpersons of the five major financial holding companies?KB, Shinhan, Woori, Hana, and NongHyup?to request expanded support for the 'K (Korean) New Deal' project. The financial holding chairpersons asked for regulatory easing to enable more active participation.

On the 22nd, a delegation led by Representative Jinpyo Kim, chairman of the Democratic Party's National Economic Advisory Council, discussed ways to support the K-New Deal with financial holding chairpersons and heads of financial sector associations at the Korea Federation of Banks in Jung-gu, Seoul.

Attendees included Chairman Kim, Yoon Kwan-seok, chairman of the National Assembly's Political Affairs Committee, Kim Byung-wook, ruling party secretary of the Political Affairs Committee, and Democratic Party members Yoo Dong-soo and Hong Sung-guk. From the financial sector, there were KB Financial Chairman Yoon Jong-kyu, Shinhan Financial Chairman Cho Yong-byeong, Woori Financial Chairman Son Tae-seung, Hana Financial Chairman Kim Jeong-tae, NH NongHyup Financial Chairman Son Byung-hwan, Korea Federation of Banks Chairman Kim Kwang-soo, Korea Financial Investment Association Chairman Na Jae-cheol, Korea Life Insurance Association Chairman Jung Hee-soo, and Korea Non-Life Insurance Association Chairman Jung Ji-won.

Chairman Kim urged the financial sector to actively engage in investments and loans related to the K-New Deal. He stated, "To lay the foundation for our economy to become a leading economy within the remaining 1 year and 4 months of the current administration, the key is how quickly private investment funds in the financial market enter K-New Deal leading companies and innovative program participants in the form of funds or individual investments." He added, "According to Bank of Korea statistics, as of the end of the third quarter last year, 55% of all domestic credit was tied up in real estate, which is an undesirable phenomenon," emphasizing, "Financial institutions must take the lead in directing private funds toward growth-oriented companies rather than real estate."

Chairman Kim also warned about the risks of investing in commercial real estate (office buildings). He said, "Due to COVID-19, vacancy rates nationwide have increased, but prices of large buildings in Gangnam and Yeouido have risen by about 25-35%. China has implemented strong real estate regulatory policies requiring large banks to limit real estate financing to below 40% of total assets," he noted.

In response, the financial sector agreed on the need for caution regarding loans for office buildings. They pledged to strengthen risk management of real estate financing through financial companies' risk management systems if necessary and to strive to channel market liquidity into productive sectors.

However, they requested regulatory easing to enable more active participation in the K-New Deal. After the meeting, Chairman Kim of the Korea Federation of Banks told reporters, "We focused on discussing the difficulties the financial sector faces in participating in the K-New Deal, and received a response from the ruling party that they will make significant efforts."

He also conveyed, "When investing in startups, if risk-weighted assets (RWA) increase, the Basel Committee on Banking Supervision (BIS) capital adequacy ratio decreases, so we proposed lowering the RWA standards to allow more investment with limited resources," adding, "There was also a tax-related proposal to reduce tax rates if companies hold equity for the long term."