Discussion on 1.5 Trillion Capital Increase of KDB for Supporting Advanced Industries

Realistic Challenges in Financial Injection... Possibility of Utilizing Policy Financial Institutions
Support Systems for Korean Advanced Industries Lagging Behind Developed Countries
Up to 14 Trillion Won Financial Support Possible with Additional Capital Increase

The government is conducting behind-the-scenes discussions on an additional capital increase for KDB Industrial Bank. Due to the lack of support systems to enhance semiconductor competitiveness compared to the United States and Japan, the government aims to expand financial support through the Industrial Bank as a detour. However, financial authorities and the Industrial Bank have stated that no decisions have been made yet, so it is unclear how long it will take until actual implementation.

According to the financial sector on the 7th, related ministries are reportedly exploring measures to provide low-interest loans or equity investments through a capital increase in the Industrial Bank as a support plan for advanced industries such as semiconductors. Since direct support through national finances is difficult, they appear to be considering expanding financial support by securing a detour.

In Korea, aside from the policy to extend the 'K-Chips Act,' which provides tax credit benefits for investments in fostering and attracting advanced industries for three years, there are no other support measures. In contrast, the United States and Japan provide not only tax benefits but also subsidies, enabling relatively smooth support for advanced industries.

If the government decides to invest 1.5 trillion won in the Industrial Bank after discussions among related ministries, financial support of up to 14 trillion won is expected to be possible. The Industrial Bank's BIS (Bank for International Settlements) capital adequacy ratio stood at 13.70% at the end of last year. In March, a 2 trillion won in-kind capital contribution from Korea Land & Housing Corporation (LH) was made, and with an additional capital increase, the capital adequacy ratio will exceed 14%.

Kang Seok-hoon, chairman of the Industrial Bank, recently visited the United States for the 'KDB Next Round in Silicon Valley' event and stated, "The era of new industrial policies supporting domestic manufacturing companies worldwide has arrived," adding, "If the Industrial Bank increases its capital by 10 trillion won, it can secure 100 trillion won in lending capacity to support AI, semiconductor, and secondary battery companies." This is interpreted as emphasizing the necessity of a capital increase for the Industrial Bank.

Kang Seok-hoon, Chairman of the Korea Development Bank, is speaking at an emergency press conference regarding current issues at Daewoo Shipbuilding, held on the 26th at the Korea Development Bank headquarters in Yeouido, Seoul. Photo by Kim Hyun-min kimhyun81@

Related ministries are also reported to share a consensus that supporting advanced companies through policy financial institutions is the fastest and most realistic alternative. A financial sector official analyzed, "Since it is difficult to do so through the budget, providing financial support through in-kind capital contributions to policy financial institutions is the most likely alternative."

Attention is focused on the National Fiscal Strategy Meeting, which may be held as early as next week. Since it is a top-level meeting to discuss next year's budget and medium-term fiscal management directions, there is a possibility that support measures for advanced industries through a capital increase in the Industrial Bank will be mentioned. However, a financial authority official explained, "The need to support companies through low-interest loans and equity investments using the Industrial Bank and others is raised every year," adding, "No specific details have been decided regarding this capital increase issue."