Kim Byunghwan, Chairman of the Financial Services Commission, to Manage Household Debt Growth Rate Within 3.8% This Year
Considering Strengthening DSR to Establish Practice of Borrowing According to Repayment Ability
Separate Fund to be Created in Korea Development Bank to Support Advanced Industries such as Semiconductors
Financial Services Commission Chairman Kim Byung-hwan is speaking at a press briefing on recent issues held at the Government Seoul Office in Jongno-gu, Seoul, on the 22nd. Photo by Jo Yong-jun
Financial Services Commission Chairman Kim Byung-hwan announced that the household debt management policy will continue this year following last year. He also revealed plans to create a separate fund within the Korea Development Bank to directly support investments for the development of Korea's advanced key industries such as semiconductors.
On the 22nd, Chairman Kim held a press briefing at the Government Seoul Office in Sejong-ro and stated, "This year, the increase rate of household debt will be managed within the government's projected potential growth rate of 3.8%," adding, "If this is achieved, the ratio of household debt to GDP, which exceeds 90%, is expected to continue its downward trend this year."
He said, "Discussions are ongoing on how banks will set household loan policies this year," emphasizing, "While household loan policies are basically autonomous for each bank, from the perspective of supervising macroprudential stability, it is desirable for debt to increase within the range of the potential growth rate." However, he added, "For regional banks, considering the difficult real estate situation, the household debt growth rate may be slightly higher than 3.8%."
Regarding household debt policy, Chairman Kim stated that they will establish a practice of borrowing money according to repayment ability. To this end, they are considering strengthening the Debt Service Ratio (DSR) system. He explained, "The third phase stress DSR is scheduled to be implemented from July as planned, and details such as the stress interest rate level and applicable targets will be finalized and announced around April or May."
In response to questions about Woori Financial Group's acquisition applications for Dongyang Life Insurance and ABL Life Insurance, he said that since the review has just begun, the schedule will proceed according to procedures. Chairman Kim stated, "The results of Woori Financial Group's regular inspection and rating are important points," adding, "We will not pre-determine the results before conducting the review."
Discussion on Supporting Competitiveness Enhancement of Advanced Industries such as Semiconductors
Additional support measures to strengthen the competitiveness of advanced industries such as semiconductors were also disclosed on the same day. Chairman Kim announced, "We are consulting with relevant ministries on establishing a separate fund within the Korea Development Bank to provide financial support for enhancing the competitiveness of advanced industries."
The Korea Development Bank currently operates a support program that offers loans at low interest rates to semiconductor companies. The reason the Financial Services Commission is considering establishing a fund is based on the judgment that domestic companies find it difficult to compete overseas during the Trump era with loans alone. Chairman Kim said, "While low-interest loans reduce interest expenses, interest costs also affect companies' cost competitiveness," adding, "We are considering ways to alleviate the constraints of the loan program."
He continued, "It is possible to invest directly in corporate equity, but when establishing or expanding factories, a separate Special Purpose Company (SPC) can be created to allow joint investment by companies and policy finance," emphasizing, "This method has advantages over loans in terms of cost, and large-scale investment is possible even when subsidies cannot be provided."
Chairman Kim stated, "Once consultations with relevant ministries on establishing the Korea Development Bank fund are completed, we will announce the finalized plan at the Industrial Competitiveness Ministers' Meeting and submit a bill to the National Assembly to enable support as quickly as possible."
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