From the Korean New Deal to the Financial New Deal... Financial Companies' Sighs Grow Louder

Financial Services Commission Announces Formation of Joint Green Finance Task Force with Financial Sector
Financial Firms Already Providing Trillions in Support for Korean New Deal... Increasing Burden
Concerns Over Repetition of Green Finance Policies from MB Administration

[Asia Economy Reporter Kangwook Cho] As financial authorities announced plans to promote green finance involving private financial companies as part of the government's 'Green New Deal,' concerns are growing within the financial sector. There is apprehension that the 'green finance' initiative, which the Lee Myung-bak administration ambitiously attempted over a decade ago but ultimately ended in failure, might be repeated. In particular, there is added pressure and burden as financial institutions have already pledged trillions of won in funding for the 'Korean New Deal,' and now face further demands for support.

According to the financial sector on the 12th, Sohn Byung-doo, Vice Chairman of the Financial Services Commission, announced at the Financial Risk Response Team meeting held the previous day that a 'Green Finance Promotion Task Force (TF)' will be formed jointly with the financial sector. Vice Chairman Sohn stated, "To support the Green New Deal, a key pillar of the Korean New Deal, we will establish an institutional foundation for green finance and create favorable investment conditions."

Major financial companies have already declared their intention to release trillions of won in funds to support the government's 'Korean New Deal.' Hana Financial Group announced it would provide 10 trillion won in financial support for the 'Korean New Deal Financial Project.' Woori Financial Group also revealed plans for 10 trillion won in loans and investment support for the Korean New Deal, and KB Financial Group and Shinhan Financial Group have similarly promised support at comparable levels. This large-scale financial support plan was announced immediately after Financial Services Commission Chairman Eun Sung-soo met with the heads of the five major financial holding companies at the end of last month.

In this context, the financial authorities' renewed push for green finance is not welcomed. There are concerns not only about the burden of support but also about the possibility of repeating the failures of the green finance initiative from the Lee Myung-bak administration, which has now become a liability. In April 2009, domestic financial institutions including the Korea Federation of Banks, Korea Financial Investment Association, General Insurance Association, Life Insurance Association, and Credit Finance Association, together with the Green Growth Committee, Financial Services Commission, and Financial Supervisory Service, established the 'Green Finance Council.' The Korea Federation of Banks served as the council's chair and secretariat, and the financial sector launched various related products such as the Green World Savings, Eco-friendly Green Savings, Passenger Car Day-of-the-Week Card, Eco Mileage, and Eco Frontier carbon emission rights-backed convertible bonds, covering savings, cards, and funds.

However, after the Park Geun-hye administration took office, the activities of the Green Finance Council diminished. The council has been effectively inactive since its 7th meeting in April 2012. According to the Green Finance Comprehensive Portal, the 19 types of green savings and deposit products introduced by commercial banks ceased to be offered after March 2014. Most banks have discontinued or consolidated related products, and green finance has become a neglected item in the market. The Green Finance Comprehensive Portal explains, "Currently, green savings are not being sold by financial companies, but product development and sales will be pursued in consideration of the implementation progress of the green certification system."

The 'Unification Finance' initiative, which showed brief success during the Park Geun-hye administration, has suffered a similar fate. Financial products related to unification, introduced by the financial sector to align with government policy, once approached sales of 1 trillion won but are now mostly discontinued.

A financial sector official said, "For products launched in line with government policies, banks often bear more financial burdens than with existing products, so there is genuine concern about repeating past mistakes," adding, "The proposal to promote this jointly between the public and private sectors essentially means imposing that burden on commercial banks, so handling the aftermath is a concern."

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