Financial Audit Starts Tomorrow... Tension Rises Amid 'Fund Battle' Forecast

Yoon Seok-heon (left), Governor of the Financial Supervisory Service, and Eun Sung-soo, Chairman of the Financial Services Commission / Photo by Jin-hyung Kang aymsdream@

[Asia Economy Reporter Kim Hyo-jin] As the National Assembly's Political Affairs Committee's audit approaches, financial authorities are becoming increasingly tense. They must defend against controversies surrounding the New Deal Fund, which the government and the Blue House are vigorously promoting, amid already significant 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 disease (COVID-19).

According to financial authorities on the 11th, Financial Services Commission Chairman Eun Sung-soo and Financial Supervisory Service Governor Yoon Seok-heon minimized internal and external schedules last week and focused on reviewing current issues in preparation for the audit. The Financial Services Commission audit is scheduled for the 12th, followed by the Financial Supervisory Service audit on the 13th. On the 16th, audits for the Korea Credit Guarantee Fund, KDB Industrial Bank, IBK Industrial Bank, and the Korea Inclusive Finance Agency are planned. After audits of the Deposit Insurance Corporation and others on the 20th, the comprehensive audit of the Financial Services Commission and Financial Supervisory Service will conclude on the 23rd.

The opposition is expected to focus on the New Deal Fund, which was established to secure resources for the Moon Jae-in administration's Korean New Deal, during this audit. The People Power Party launched a 'Special Committee for Government Policy Oversight' and targeted the Korean New Deal, which is expected to involve an injection of 160 trillion won (114 trillion won in national funds). The opposition's view on the New Deal Fund can be summarized as "the government is creating a state-controlled fund and forcibly pushing financial companies to participate."

The financial authorities maintain that, amid rapidly increasing liquidity and low interest rates during the COVID-19 phase, the New Deal sector could serve as a viable investment avenue. They see the major financial holding companies' announcements of investment plans ranging from several trillion to tens of trillions of won following the government's Korean New Deal plan as part of their own management strategies considering these factors.

In explanatory materials released last month, the financial authorities rebutted criticisms that "fund losses would be covered by taxpayers' money," stating, "To smoothly attract private capital, safety measures are necessary, so a certain level of public funds must be invested."

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 efforts on the involvement of ruling party figures in private equity fund scandals such as Lime and Optimus. The opposition is also focusing on the authorities' inadequate supervision and management.

Questions regarding management measures for household loans, including the recent surge in credit loans, are also expected to pour in. A financial authority official said, "It is very difficult to draw a clear line on household loans as they are 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' trend spreading like a fad among young people, it is 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 state-run bank, who is required to maintain political neutrality, to openly wish for the continuation of the current administration.

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