Ruling Party Claims By-Elections Held Because Banks Refused to Provide Loans

Democratic Party Criticizes Bank of Korea and Financial Sector at Forum on 21st
Claims Election Defeat Due to Refusal of Loans and Small Interest Rate Cuts
Experts Point Out "Finance Reduced to a Political Tool" and Raise Awareness of Issues

[Image source=Yonhap News]

[Asia Economy Reporter Kwangho Lee] The Democratic Party of Korea pointed to the financial sector as a factor in their crushing defeat in the April 7 by-elections. They openly criticized the financial sector, which is suffering from excessive political interference such as profit-sharing systems and recommendations to keep loan-deposit interest rate spreads low during COVID-19 financial support, for its lack of a proactive role.

Concerns are being raised that the distortion and loss of trust in the financial industry could worsen as the politically sensitive lawmakers manipulate financial policies to suit their interests.

According to political and financial sources on the 21st, Yoon Ho-jung, the Emergency Response Committee Chairman and Floor Leader of the Democratic Party of Korea, criticized the Bank of Korea’s insufficient role in leading and supporting finance during the 'Coexistence and Unification Forum' financial discussion held at the CCMM Building in Yeouido.

Yoon also stated, "I recently confirmed that the Bank of Korea, which had planned to invest about 8 trillion won last year, only fulfilled one-fifth of that commitment."

He emphasized, "The role of finance is just as important as the government’s role in overcoming crises," adding, "Like other countries’ central banks, not only quantitative easing but also qualitative easing and inclusive finance should be actively supported for finance to play a more significant role."

Fellow party member Representative Noh Woong-rae joined the criticism, pointing out the slow reduction of loan interest rates in the financial sector. Noh said, "The Bank of Korea’s base rate is 0.5%, but loan rates are around 3-4%," and argued, "Shouldn’t the rates be lowered by about 1 percentage point for small business owners and self-employed individuals?"

Noh added, "This is not government-controlled finance but necessary as a form of shared pain," and criticized, "The financial sector earns tens of trillions of won annually but does nothing."

Democratic Party Representative Yoon Hu-deok said, "At bank counters where loans were given based on collateral value, they say ‘we cannot lend due to government policy,’" and remarked, "I think that’s why the Democratic Party was judged in the by-elections."

Political Sphere Uses Finance as a Political Achievement Tool... Distortion of Financial Markets

As the Democratic Party blames the financial sector for their by-election defeat, experts are raising concerns that political finance has already become excessive.

At the Korean Finance Association’s Spring Policy Symposium held on the 14th at the Bankers Hall in Jung-gu, Ulsan, Professor Jeon Seong-in of Hongik University’s Department of Economics said, "The financial market is being distorted due to the political sphere’s use of finance as a tool for political achievements," and stressed, "The political sphere must abandon its desire to use finance as a means of politics."

Professor Kim Woo-chan of Korea University’s Business School said, "It seems the government is distorting capital market policies due to excessive election concerns," citing examples such as the extension of the short-selling ban, maintaining the capital gains tax major shareholder threshold at 1 billion won, and increasing the National Pension Service’s domestic stock investment ratio.

Yoon Chang-hyun, a member of the People Power Party, also expressed concerns about the 'instrumentalization of finance.' Yoon said, "I am worried that finance is becoming too much of a tool, such as interest and principal repayment deferrals and financial company contributions to low-income financial projects," and added, "We need to reduce regulation and politics and strive to increase autonomy and innovation."

The financial sector feels burdened by excessive political interference in management. A financial sector official said, "It is true that government and ruling party policies repeatedly mobilize the financial sector, transferring considerable risks," and confessed, "Approaching financial companies as if they only collect unearned income is problematic."

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