Eun Sung-soo and Yoon Seok-heon "Apologize for Private Equity Fund Investor Damage... Heavy Sense of Responsibility"

"Accumulated Issues Erupt Amid Rapid Growth"
Emphasizing Balance Between 'Innovation + Security' in Digital Transformation
Request for Passage of Financial Group Supervision Act Draft

Eun Sung-soo, Chairman of the Financial Services Commission, is reviewing documents at the full meeting of the Political Affairs Committee held at the National Assembly in Yeouido, Seoul, on the morning of the 29th. (Photo by Yonhap News)

[Asia Economy Reporter Kim Hyo-jin] The two heads of the financial and supervisory authorities expressed a heavy sense of responsibility and apologized regarding the damages suffered by private equity fund investors.

On the 29th, Eun Sung-soo, Chairman of the Financial Services Commission, attended the plenary session of the National Assembly's Political Affairs Committee and said, "The private equity fund market has rapidly grown in scale, but accumulated problems have recently surfaced all at once," adding, "As the head of the financial authorities, I feel sorry for the damages caused to (private equity fund) investors."

Yoon Seok-heon, Governor of the Financial Supervisory Service, who attended with Chairman Eun, said, "I believe the recent series of private equity fund incidents mainly stem from illegal activities by some private fund managers and the failure of autonomous market surveillance functions. As the head of the Financial Supervisory Service responsible for related supervision and inspection, I feel a heavy sense of responsibility."

Chairman Eun and Governor Yoon promised ▲ strengthening regulations on the sales and management stages of high-risk financial products ▲ enhancing supervision and inspection and improving related systems. The financial authorities have launched a full inspection of 10,304 private equity funds (as of last May) through sales companies, fund managers, custodians, and administrative service companies, scheduled to be completed by September.

Additionally, centered on the Financial Supervisory Service, a dedicated inspection organization involving related agencies will conduct on-site inspections of all private fund managers (233 as of last May) over three years until 2023.

Meanwhile, Chairman Eun said regarding the accelerating "digital financial innovation" due to the full-scale entry of big tech (large information technology companies) into finance and the activation of financial data trading, "We will not neglect efforts to balance innovation and security so that customers' personal information and assets can be safely protected during the implementation process."

To this end, the financial authorities are promoting ▲ mandatory external institution deposit and trust of prepaid charges, strengthening financial companies' responsibility for unauthorized transactions ▲ mandatory external clearing of payment transactions by big tech ▲ establishing supervisory grounds for cloud service providers. The financial authorities plan to push for amendments to the Electronic Financial Transactions Act regarding these matters in the second half of this year.

Chairman Eun also requested the National Assembly's cooperation for the passage of the 'Financial Group Supervision Act.' The bill legalizes the financial authorities' supervision of six complex financial groups including Samsung, Hyundai Motor, Hanwha, Mirae Asset, Kyobo, and DB. It requires the representative company to establish group risk management policies and install and operate risk management organizations to manage the soundness of financial groups.

The bill also includes provisions to accumulate additional capital based on the evaluation of group-level risks such as the impact of internal transactions and risk concentration on the soundness of financial groups and the possibility of risk transfer from affiliates.

"Additional Extension of Loan Maturities to Be Decided Considering Overall Economic Conditions"
Previously Mentioned in Government Questioning as "Consensus Toward Extension"

Regarding financial support for small business owners and SMEs severely affected by COVID-19, an extension of the loan maturity measures, currently set to expire on September 30, is being pursued. The financial authorities plan to decide on the extension and its scope comprehensively considering the real economy situation and corporate funding conditions together with the financial sector.

Chairman Eun mentioned this on the 23rd during a government questioning session at the National Assembly, stating, "We are gathering opinions toward extending the loan maturity extension and interest repayment deferral."

Chairman Eun also said about the increase in household debt, "We will manage household debt flexibly from a long-term perspective so that it does not become a burden on our economy."

According to the financial authorities, household debt balance in the first quarter of this year was 1,611.3 trillion won, a 4.6% increase compared to the first quarter of last year. The household debt growth rate has steadily decreased from 11.6% at the end of 2016, 8.1% at the end of 2017, 5.9% at the end of 2018, to 4.1% at the end of last year, but signs of expansion have reappeared since last month.

Chairman Eun diagnosed, "There is an inevitable aspect of expansion in the process of supplying sufficient liquidity to the market to overcome COVID-19."

This content was produced with the assistance of AI translation services.