'170 Trillion+α' New Deal Financial Support... Financial Authorities "Backed by Eased Soundness Regulations"

Policy Financial Institutions 100 Trillion, Financial Groups 70 Trillion, etc.
Comprehensive Support for On-Lending Loans, Investments, and Guarantees

Financial Services Commission Chairman Eun Sung-soo (left) and Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki are announcing the 'Korean New Deal Financial Support Plan' on the 3rd at the briefing room of the Seoul Government Complex in Gwanghwamun, Seoul. / Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Kim Hyojin] On the 3rd, the government announced a support plan for the financial sector to provide financial supply worth 170 trillion won＋α (alpha) related to the 'Korean New Deal.' By 2025, policy financial institutions will invest about 100 trillion won, and private financial institutions will inject 70 trillion won in the form of investments and loans.

On the afternoon of the same day, Eun Sung-soo, Chairman of the Financial Services Commission, held a briefing at the Seoul Government Complex in Gwanghwamun with Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, to announce this plan to revitalize New Deal finance.

The government will simultaneously promote a significant expansion of financial support not only for New Deal projects and New Deal infrastructure but also for related upstream and downstream companies and industries. Accordingly, policy financial institutions such as KDB Industrial Bank plan to raise the proportion of funds supplied to the New Deal sector from about 8% last year to around 12% by the end of 2025. The intention is to lead the role of venture capital through active investment in New Deal infrastructure.

Diversified Support through On-Lending Loans, etc.
New Deal Theme Added to Innovation Company Selection

In line with this direction, the plan is to supply about 100 trillion won to New Deal companies through low-interest loans, investments, and guarantees. The loan program will also utilize a special on-lending program. On-lending refers to an indirect lending system where the government lends money to banks for the purpose of supporting companies, and the banks execute loans after going through their screening systems. It targets small and medium-sized enterprises and mid-sized companies that are not yet creditworthy but are judged to have high growth potential.

Specifically, this includes ▲ supplying 1 trillion won through special on-lending for fostering New Deal companies ▲ supplying 69 trillion won in loans to enhance the competitiveness of New Deal companies ▲ supplying 30 trillion won through a special guarantee program for New Deal companies.

The government also plans to newly add a New Deal theme to the 'Innovation 1000' selection project to focus support on related companies. Among the '168＋α' companies to be announced in the fourth quarter of this year, a certain portion will be selected as New Deal-related companies.

In the private sector, the five major financial groups?Shinhan Financial Group, KB Kookmin Financial Group, Hana Financial Group, Woori Financial Group, and NH Nonghyup Financial Group?will lead the supply. These financial groups have already established plans to supply about 70 trillion won by 2025 to New Deal projects and upstream and downstream companies through investments and loans.

Shinhan Financial Group plans to supply at least 28.5 trillion won based on the 'Shinhan N.E.O (New Economy Opportunity) Project,' and Hana Financial Group and Woori Financial Group also plan to supply 10 trillion won each based on internal projects and dedicated organizations such as the 'Korean New Deal Financial Project' and the 'New Deal Financial Support Committee.'

KB Financial Group plans to supply 9 trillion won over five years centered on the 'KB New Deal and Innovation Finance Council,' and NH Nonghyup Financial Group plans to supply 8 trillion won over five years in fields such as renewable energy and smart farms through the 'Green Finance Business Group,' among others.

The government intends to actively support these efforts by easing related regulations. For New Deal project financing (PF) investments where the public sector shares risks, the government plans to apply relatively low Basel Committee on Banking Supervision (BIS) risk weights, thereby relaxing financial companies' New Deal exposure soundness regulations and allowing the expansion of credit extensions in the New Deal sector by mega investment banks (IBs).

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