The National Assembly Audit Kicks Off... Financial Authorities on Edge Amid 'Fund Battle' Outlook (Comprehensive)

All Pressing Issues Are Serious
Private Equity and New Deal Funds Expected to Face Opposition Fire

[Asia Economy Reporter Kim Hyo-jin] As the National Assembly's Political Affairs Committee's audit begins on the 12th, the tension level among financial authorities and financial institutions is rising. They have to defend not only against major ongoing issues such as the private equity fund scandal that caused massive losses, the recent surge in credit loan management, and financial support related to the novel coronavirus infection (COVID-19), but also the controversy surrounding the New Deal Fund, which the government and the Blue House are vigorously promoting. Inside and outside the financial authorities, there are even predictions that this audit will be an unusually tough, "historic-level" audit compared to previous years.

Yoon Seok-heon (left), Governor of the Financial Supervisory Service, and Eun Sung-soo, Chairman of the Financial Services Commission

According to financial authorities on the 6th, Financial Services Commission Chairman Eun Sung-soo and Financial Supervisory Service Chairman Yoon Seok-heon have given up their internal and external schedules this week to focus on reviewing current issues in preparation for the audit. The Financial Services Commission and the Financial Supervisory Service have also minimized the distribution of materials for policy promotion and guidance. A financial authority official said, "Overall, you can say we are in 'study mode,'" adding, "There are many issues to respond to, and each one carries significant weight and seriousness, so the burden is quite heavy."

The opposition is expected to focus on the New Deal Fund, which is aimed at raising resources for the Moon Jae-in administration's Korean New Deal, during this audit. An opposition lawmaker belonging to the Political Affairs Committee said, "The basic stance is that the New Deal Fund has limitations similar to the old government-controlled funds," and added, "We intend to scrutinize it thoroughly at the audit."

The People Power Party launched a "Special Committee for Government Policy Oversight" the day before and targeted the Korean New Deal, which is expected to involve 160 trillion won (114 trillion won in national funds). The opposition's view of the New Deal Fund can be summarized as "the government is creating a government-controlled fund and forcibly dragging financial companies by twisting their arms."

The financial authorities hold the position that, amid rapidly increasing liquidity and low interest rates during the COVID-19 phase, the New Deal sector could be a viable investment avenue. They see the announcement of investment plans amounting to several trillion to tens of trillions of won by major financial holding companies following the government's Korean New Deal plan as part of their own management strategies considering this point.

In an explanatory document released last month, the financial authorities rebutted the criticism that "fund losses are being covered by taxpayers' money," stating, "A certain level of fiscal input is necessary as a safety measure to smoothly attract private capital."

Alongside the New Deal Fund, private equity funds are expected to be a hot topic during the audit. The People Power Party plans to launch a major offensive centered on its "Special Committee for Prevention of Private Equity Fund Corruption and Victim Relief," which has been active since July. The party is expected to focus its firepower particularly on ruling party figures who have been consistently mentioned in connection with private equity fund scandals such as Lime and Optimus. The opposition is also focusing on the authorities' supervisory and management failures.

People Power Party Prepares for 'Fund Audit' Centered on Special Committee

Questions regarding management measures for household loans, including the recent surge in credit loans, are also expected to pour in. Regarding this, a financial authority official said, "In the case of household loans, it is very difficult to draw a clear line as it is intertwined with COVID-19 financial support," adding, "We are continuously monitoring issues such as high-income or high-credit individuals using credit loans as a means to circumvent real estate speculation."

Regarding the 'debt investment' problem spreading like a trend mainly among young people, it was explained that the effects of the banking sector's interest rate hikes and other restraint measures implemented around the last Chuseok holiday need to be observed.

KDB Industrial Bank Chairman Lee Dong-gul is also expected to face opposition attacks. This is due to the controversy over his "20 more years" toast at the book launch event of former Democratic Party leader Lee Hae-chan. The opposition argues that it is a serious problem for the head of a national policy bank, who is required to maintain political neutrality, to openly wish for the extension of the current administration.

The Financial Services Commission audit will be held on the 12th, followed by the Financial Supervisory Service audit on the 13th. On the 16th, audits for the Credit Guarantee Fund, KDB Industrial Bank, IBK Industrial Bank, and the Korea Inclusive Finance Agency are scheduled. After the audit of the Deposit Insurance Corporation on the 20th, the comprehensive audit of the Financial Services Commission and the Financial Supervisory Service will conclude on the 23rd.

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