Nominee Kim Byung-hwan for Financial Services Commission Chairman: "Support Smooth Landing for Real Estate PF and Debt Issues"

"Risks Accumulate Mainly in Vulnerable Parts of the Financial System"
Shows Willingness for Corporate Value-Up
"Stress DSR Postponement Does Not Mean Lack of Debt Management Willingness"
Opposes Windfall Tax and Financial Investment Tax
Regarding 'Uncomfortable' Relationship with Financial Supervisory Service
"Did Not Feel Any Internal Conflict and Must Cooperate"

Kim Byung-hwan, the First Vice Minister of the Ministry of Economy and Finance, who has been nominated as the new Financial Services Commission (FSC) Chairman, expressed his determination to resolve issues related to real estate project financing (PF) and household debt. He also stated his intention to change and improve the economy's debt-dependent structure.

At a press conference held on the 5th at the Korea Deposit Insurance Corporation in Jung-gu, Seoul, Kim said, "There are risks in four areas: real estate PF, small business debt, overall household debt, and the soundness of the secondary financial sector, as high interest rates and high inflation persist." He pointed out that the Korean financial system and economy rely excessively on debt, stating, "The debt ratio is higher compared to foreign countries, which is problematic in terms of sustainability." He added, "Debt issues constrain economic growth, and if external shocks occur, the system itself undergoes a transmission process, so it is necessary to improve this."

Regarding the government's ongoing corporate value-up program, Kim expressed his commitment, saying, "The purpose is to enable companies to raise capital through revitalizing the capital market, and I believe that funding other than debt can be supplied."

On household debt, he stated that it is manageable within the range of economic growth rates. However, he said, "Since there can definitely be risks, management measures and supervision will be flexibly implemented according to market conditions." He also cautioned against interpretations that the Financial Services Commission is stimulating the real estate market by postponing the implementation of the second phase of the stress test-based Debt Service Ratio (DSR) to September. Kim said, "Measures to resolve self-employed debt issues have been announced, and contents related to real estate PF inspections will be released in August or September, so the postponement is to observe the situation," adding that the implementation will proceed as planned.

Regarding the financial investment income tax (금투세) opposed by the government and ruling party, Kim expressed his stance in favor of its abolition, and opposed the windfall tax (excess profit tax) raised by some. He said, "I think the abolition is necessary because the introduction of the financial investment income tax would have a negative impact on the capital market," and added, "(Regarding the windfall tax) the government has repeatedly stated that it goes against market principles."

Kim Byung-hwan, the nominee for the Financial Services Commission chairman, is answering questions from the press as he arrives at the confirmation hearing office set up at the Korea Deposit Insurance Corporation in Jongno-gu, Seoul, on the 5th. Photo by Kang Jin-hyung aymsdream@

The challenges Kim faces include managing real estate PF and household debt, which could shock the entire financial market. Financial authorities have announced a soft-landing plan for restructuring real estate PF and have begun a thorough selection process. They must identify insolvent projects to proceed with light auctions or liquidation procedures, while ensuring smooth funding for sound projects, acting as a control tower. Additionally, attention must be paid to enhancing the stock market value-up program and making capital market policies more specific, including short-selling policies.

Regarding the perception that the relationship between the FSC and the Financial Supervisory Service (FSS) is "awkward," Kim said, "I did not feel any internal conflicts while serving as Vice Minister," and added, "Since I have come to know Director Lee Bok-hyun professionally, we have naturally coordinated our work, so I think we can work well together."

Kim is regarded as an economic policy expert well-versed in macroeconomics. If he passes the National Assembly confirmation hearing safely this month, he will become the second FSC Chairman under the Yoon Suk-yeol administration. He passed the 37th Administrative Examination and began his public service career in 1993 at the former Ministry of Finance and Economy. He has worked in the Financial Policy Office, Securities Affairs Division, and Securities System Division. At the Ministry of Economy and Finance, he served as Director of the Capital Market Division, Director of the Economic Analysis Division, and Director of the Economic Policy Bureau. In the Financial Policy Bureau, he was recognized for his capabilities by introducing systems such as mutual funds and primary collateralized bond obligations (P-CBOs). After the launch of the Yoon administration, he was appointed as the Economic and Financial Secretary to the President, and just 10 months after being appointed as the First Vice Minister of Economy and Finance in August last year, he is moving to the ministerial-level position of FSC Chairman.

Born in 1971, if Kim is appointed as planned, he will become the youngest FSC Chairman in history. He is highly regarded for his understanding of the Yoon administration's financial policy direction and is expected to effectively carry out financial market stabilization policy tasks. As the youngest chairman ever, internal harmony and leadership within the FSC will be necessary. There are only two executives at the director level or above younger than Kim, including Standing Commissioner Lee Hyung-joo (born 1972, 39th Administrative Examination). The next Deputy Chairman candidates, Kwon Dae-young, FSC Secretary-General, and Lee Se-hoon, FSS Senior Deputy Governor, were born in 1968 and 1970, respectively.

Establishing a relationship with the Financial Supervisory Service, a financial policy partner, is also a task Kim must address. FSS Director Lee Bok-hyun, born in 1972, is a senior and junior alumnus from Seoul National University's Department of Economics. Some speculate that with the youngest-ever FSC Chairman and FSS Director leading financial policy, many young officials could be appointed to key positions.