Supervision of Saemaeul Geumgo Should Remain Unchanged to Avoid Confusion
Implement PF Soft Landing Policy... "Agree on Improvement Direction"
Household Loans Increase but Bank Total Volume Regulation Difficult
Express Will to Abolish Financial Investment Tax... Cautious on Virtual Assets
Kim Byung-hwan, the nominee for Financial Services Commission (FSC) chairman, showed caution regarding the transfer of management and supervisory authority of Saemaeul Geumgo, which experienced a bank run (massive withdrawal of deposits) last year, to the financial authorities. He stated that while swiftly resolving the troubled real estate project financing (PF) sites, fundamental solutions such as increasing the self-capital ratio of the developers should also be considered.
Kim Byung-hwan, nominee for the Financial Services Commission chairman, is responding to questions from lawmakers at the confirmation hearing held by the National Assembly's Political Affairs Committee on the 22nd. Photo by Kim Hyun-min kimhyun81@
On the afternoon of the 22nd, during the confirmation hearing for the FSC chairman nominee held at the National Assembly’s Financial Services Committee in Yeouido, Seoul, Kim responded to Lee Jung-moon, a member of the Democratic Party of Korea, who criticized the delayed response during the Saemaeul Geumgo bank run incident. Kim said, “There was a blind spot due to confusion in the supervisory system at the time of the bank run,” and added, “A pan-governmental response team was formed, including the FSC, Financial Supervisory Service, Ministry of Strategy and Finance, and Deposit Insurance Corporation.” He further stated, “Saemaeul Geumgo is still in an unstable situation, and if the management and supervisory authority of the Ministry of the Interior and Safety is interfered with, it could cause more confusion. Stabilizing through a collaborative system is the priority.”
Additionally, when opposition parties including the Democratic Party criticized the Yoon Seok-yeol administration’s delayed measures, Kim said, “I will take it as a lesson.” When Lee Kang-il, a Democratic Party member, described the response to the 2022 Gangwon-do Legoland incident as “a remedy after the fact,” Kim pledged, “I will do my best to prevent such issues in advance.” The Yoon administration had introduced a liquidity supply program about a month after the incident surfaced. Furthermore, when Lee In-young, a Democratic Party member, pointed out the need for proactive responses to market signals not only in the Saemaeul Geumgo and Legoland incidents but also in inflation issues, Kim responded, “I will keep that in mind.”
"Urgent Restructuring of Real Estate PF... Fundamental Solutions Also Needed"
Regarding suspicions that the voluntary agreement among creditors conducted by the FSC in April last year to manage real estate PF was a ‘cover-up of insolvency,’ Kim expressed that it was a measure considering market conditions. Under the agreement, creditors took actions such as maturity extensions and interest deferrals for projects facing difficulties. When Kim Yong-man, a Democratic Party member, asked, “In May this year, you reversed the decision and said you would strengthen the conditions for maturity extensions,” Kim replied, “It seems it was based on the real estate market situation. Last year, there was hope that high interest rates might not last long, so efforts were focused on mitigating shocks through maturity extensions, but this year, it seems that approach is not suitable, so the conditions were tightened.”
Kim also stated, “We will limit the number of maturity extensions and require partial interest payments before deferral, and for insolvent projects, we plan to pursue auctions and restructuring.”
Kim said he would sequentially handle both the situation management and fundamental solutions to resolve the real estate PF insolvency crisis. He said, “Since the FSC’s evaluation of the feasibility of real estate PF projects is in its final stage, actions based on the results should be taken quickly. If a project is not feasible, it should be wound down, but for projects deemed feasible, it is necessary to ensure smooth funding centered on creditors so that real estate construction can proceed.” He also said, “I fully agree with the direction that Korean developers’ self-capital injection ratio is lower than that of foreign countries and needs improvement,” but added, “The timing and method will be considered after completing the real estate PF feasibility evaluation.”
Voices on Banks and Securities... "Financial Investment Income Tax Is Not a Tax Cut for the Rich"
Regarding the recent rise in household loans, Kim described the situation as “one that requires vigilance.” When Han Chang-min, a member of the Social Democratic Party, asked, “It has been confirmed that loans increased as the real estate market fluctuated; is there a stable management plan?” Kim replied, “Basically, it is important to lend or structure loans according to the borrower’s repayment ability.” He added, “Each bank has its own annual plan for total loan volume, and the supervisory authorities will inspect that part,” but also expressed, “While regulating total loan volume has some effect in controlling debt, it is very difficult for the public.”
He also shared opinions on excessive prepayment fees and the approval of the fourth internet-only bank. When Kim Jae-seop, a member of the People Power Party, asked, “If banks charge high prepayment fees during refinancing, the reduced interest rate loses significance. Shouldn’t the FSC provide guidelines?” Kim said, “I think banks should reflect only the minimum actual costs,” and added, “I will ensure that changes happen quickly.”
Kim Byung-hwan, nominee for the Financial Services Commission chairman, is responding to questions from lawmakers at the confirmation hearing held by the National Assembly's Political Affairs Committee on the 22nd. Photo by Kim Hyun-min kimhyun81@
Kim reiterated a negative stance on the financial investment income tax. When Kwon Seong-dong, a People Power Party member, mentioned that an era has come where asset formation is done through stock investment and asked for his thoughts, Kim said, “The financial investment income tax clearly has a negative impact on the capital market,” emphasizing, “I hope it will be deeply considered during the National Assembly discussions.” When Kim Sang-hoon, also from the People Power Party, asked about the claim that the tax is a ‘tax cut for the rich,’ Kim responded, “It is not only an issue for the rich; even investors who do not pay taxes on the amount after selling stocks are affected,” and said, “If anything, it should be defined as a tax cut for investors.”
He expressed the opinion that corporate and institutional virtual asset accounts should be carefully reviewed. In response to Kim Byung-gi, a Democratic Party member, who said, “Korea also needs to guarantee the participation of corporations and institutions in the virtual asset market,” Kim replied, “Considering the confusion we experienced in the virtual asset market in the past, current policies should prioritize investor protection over market development, and we need to think carefully about whether allowing corporations and institutions aligns with this.”
Regarding the approval of Bitcoin spot exchange-traded funds (ETFs), Kim Jae-seop of the People Power Party asked, and Kim responded, “We need to examine the impact on financial market stability and financial institutions.” About token securities (STO), which failed to pass legislation in the previous National Assembly, he added, “We will draft legislation and negotiate.”
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
