[Reporter’s Notebook] Korean Politics Holding Back Korean Finance

[Asia Economy Reporter Song Seung-seop] Financial authorities will extend the maturity of loans for self-employed individuals affected by COVID-19 by 3 years and the repayment deferral measures by 1 year. This is the fifth extension decision since its implementation in April 2020. The Financial Services Commission, which had firmly set the end date as September when deciding on an additional extension last March, has reversed its position like turning over a hand. The justification is that the economy is difficult, but it is covering up immediate insolvency and shifting responsibility to the future.

Initially, there was a prevailing opinion within the financial authorities that financial support should end this time. The force behind the change of decision by elite financial bureaucrats is politics. On the 15th, President Yoon Seok-yeol called Financial Services Commission Chairman Kim Joo-hyun to the Yongsan Presidential Office and requested an extension of financial support measures. Three days later, the People Power Party publicly demanded the extension of financial support measures. The next day, the Democratic Party even visited the Financial Services Commission to urge an extension.

Political intervention in finance is going too far. The recent controversy over the 5 trillion won solar power loans was not uncovered through the Financial Supervisory Service performing its original duties. It was the result of pressure from the ruling party. In the National Assembly, Chairman Kim was openly instructed to supervise, saying "solar power loans are suspicious." Financial companies that created solar power products during the previous administration are now facing inspections.

At this point, the biggest obstacle holding back Korean finance is our politics. Deregulation remains insufficient, and national projects and innovation projects often fail. Decisions are made without logic, focusing only on votes. During election seasons, finance becomes a tool for attacks and vote-catching. The proposal to relocate the Korea Development Bank to Busan is a representative example. Although a weakening of competitiveness is obvious, no financial authority official has publicly explained the reason for relocating KDB to Busan. It is simply pushed forward by the government and ruling party because it is the president’s pledge.

Of course, it is important that banks, which earned huge profits during the COVID-19 period, cooperate with policies and social contribution projects. Also, if there are mistakes, they must face strict sanctions. However, if domestic politics continues to make decisions only concerned with votes, banks will inevitably respond to political voices with suspicion and distrust. When the political sphere requested special COVID-19 guarantees, why did banks set ‘exemption from liability’ as a condition? The political sphere needs to reflect on what policies are truly necessary for the country and the people.