[Asia Economy Reporter Lee Jung-yoon] Amid increasing issues related to corporate restructuring, such as the rise of zombie companies, Lee Bok-hyun, Governor of the Financial Supervisory Service, emphasized that private equity funds should play a leading role and mentioned that they are paying attention to and monitoring certain industries.
Lee Bok-hyun, Governor of the Financial Supervisory Service [Photo by Financial Supervisory Service]
On the 13th, after concluding a meeting with representatives of institution-only private equity fund management companies at the Kensington Hotel in Yeongdeungpo-gu, Seoul, Governor Lee told reporters in response to a question about whether he had specific industries or sectors in mind for restructuring, "I cannot say that there are no industries we are paying attention to."
He also said, "If you look specifically by industry, the circumstances of medium-sized and large companies differ," adding, "Giving a uniform direction to institution-only private equity funds would not be practically meaningful."
He continued, "Since there are opinions regarding employment issues and structural soft-landing problems, we have discussed areas where there is a shared direction." Earlier, in his opening remarks at the meeting, Governor Lee stated, "The expansion of demand for financial structure improvement of sound companies or restructuring of zombie companies can be both a risk factor and an opportunity for the institution-only private equity fund industry," and added, "I hope they will play a strong supporting role for domestic companies based on the accumulated capital strength and know-how in business normalization." He also requested, "Please take a leading role in corporate restructuring centered on the capital market."
He went on to say, "In the mid-to-long term, there was an opinion that the scope of institutions could be expanded in light of the purpose of institution-only private equity funds, and I agree with that part." The Capital Markets Act, enacted in October 2021, distinguishes private equity funds into general private equity funds, which general investors can invest in, and institution-only private equity funds, which only institutional investors such as pension funds and financial companies can invest in.
Regarding whether there were any peculiarities found in the inspection of real estate project financing (PF), he said, "There are systematic inspections conducted monthly or quarterly, and since recent concerns arose, we have enhanced the inspection system." He added, "We are conducting detailed inspections and closely sharing information with the Ministry of Economy and Finance and the Financial Services Commission, as well as communicating with the Ministry of Land, Infrastructure and Transport."
Additionally, regarding the recent meeting with accounting firm representatives and the request to supplement internal controls of banks and other financial companies with external audits, he explained, "It is a process of considering methodologies to preemptively block or check issues that arise systemically or in advance in internal controls." He said, "Since accounting firms have expertise, if companies can use them as a tool to reduce the responsibility of inspection teams, it could be a win-win situation for supervisory bodies, accounting firms, and financial companies. We are currently discussing this with accounting firms and others."
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