'Candidate Kim Byunghwan Verification' Household Debt Management and Real Estate PF Measures as Major Issues

Hearing for Financial Services Commission Chairman Nominee Held on 22nd
Sharp Rise in Household Debt... Debates Expected Over Government Debt Management 'Effectiveness'
Real Estate PF Soft Landing Measures and Appropriateness of Hong Kong H Index Compensation Standards Also Controversial
Personal Allegations Raised Including Red Cross Membership Fees and Military Service Evasion Suspicions

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@

As the confirmation hearing for Kim Byung-hwan, nominee for Financial Services Commission chairman, is scheduled for the 22nd, key issues such as household debt management, restructuring of the real estate project financing (PF) market, incomplete sales of Hong Kong H Index (Hang Seng China Enterprises Index·HSCEI) equity-linked securities (ELS), improvements to the short-selling system, and virtual asset exchange-traded funds (ETFs) are expected to become focal points for suitability verification. Attention is also expected to focus on Kim’s responses amid allegations of non-payment of Red Cross dues and draft evasion over the past five years.

First, the possibility of failure in household loan management policies, which have shown a clear upward trend since April, and controversies over discord between ministries are likely to be highlighted. According to the financial sector, household loans at the five major banks surged by 5.3415 trillion won in June, marking the largest increase in 2 years and 11 months since July 2021’s 6.2 trillion won rise, and increased by more than 16 trillion won in the first half of the year alone after the implementation of the first phase of the stress debt service ratio (DSR).

Kim stated that considering expectations of interest rate declines and recovery in housing transactions, there are concerns about the expansion of household loan growth, and he plans to promote measures to strengthen the DSR. He intends to smoothly implement the second phase of the stress DSR, postponed by two months from July to September, and gradually expand the scope of DSR application within the range that does not drastically reduce loan limits.

Regarding the direction of household loan management, he largely maintained the existing financial authorities’ stance. He outlined plans to manage this year’s household debt growth rate within the nominal gross domestic product (GDP) growth rate, encourage an increase in fixed-rate and installment loan proportions, and support the return to economic activity through active debt restructuring for vulnerable borrowers.

Effectiveness of 'Real Estate PF' Measures... Appropriateness of 'Hong Kong ELS' Compensation Standards Also a Key Issue

On the restructuring of the real estate PF market, another thorny issue for the Korean economy, Kim emphasized the need to increase developers’ equity ratios, citing repeated structural risks caused by excessive borrowing by developers.

He also mentioned that related ministries, including the Ministry of Economy and Finance and the Ministry of Land, Infrastructure and Transport, will review measures such as establishing a real estate PF information system and setting aside loan loss provisions according to capital ratios. However, it seems difficult to avoid criticism at the confirmation hearing that the real estate PF restructuring measures missed the 'golden time' due to their entanglement with real estate market policies.

In his written responses submitted to the National Assembly, Kim said, "We will improve systems to resolve structural problems such as the low-capital, high-leverage financing structure in the real estate development market," and added, "We will review the cleanup of non-performing PF projects with relevant ministries after observing the Financial Supervisory Service’s adequacy inspections and results."

Sharp questions and answers are also expected regarding the loss compensation process for Hong Kong H Index ELS and the possibility of preventing financial accidents through the introduction of a responsibility structure. Some ELS victims continue to oppose, claiming that the compensation levels set by banks favor the financial sector over victims. Although the financial authorities implemented the responsibility structure from the 3rd, the financial sector’s generally passive stance led to an incentive offer promising exemption from liability if the structure is introduced early.

Kim stated that the ongoing compensation procedures since April have been reasonably prepared considering on-site inspections, complaint investigations, and past precedents and dispute cases. However, regarding calls to restrict sales targets in the future, he expressed agreement with limiting bank sales of high-risk financial products to some extent while considering financial consumers’ choice rights.

Non-payment of Red Cross Dues for 5 Years... Draft Evasion Allegations Draw Attention

While the overall atmosphere suggests no major flaws in Kim’s personal allegations, direct explanations are expected for some issues raised by opposition lawmakers. Democratic Party lawmaker Lee In-young pointed out the problem of non-payment of Korean Red Cross dues over the past five years, and lawmaker Kim Hyun-jung raised concerns about Kim’s military service, completed as a grade 5 physical rating with wartime labor service due to congenital gastrointestinal malformation.

Lee argued, "It is problematic that a senior public official who served as vice minister of the Ministry of Economy and Finance did not pay dues." Kim stated, "If he evaded the sacred duty of national defense, he would be unqualified as a senior public official, so this needs to be clearly addressed."