[Financial Sector Bruised by Populism] Expert: "Proliferation of Populist Bills Hurts Consumers"

Financial Industry, a Regulated Sector but Concerns Over 'Government Failure'
Excessive Populism May Lead to Market Distortion
"Authorities Should Not Be Swayed by Politics," Criticism Also Raised

[Asia Economy Reporters Kiho Sung and Seungseop Song] Experts are also voicing criticism against the financial populism bills being pushed by the ruling party. While bold regulatory reforms are urgently needed to advance the already lagging domestic financial industry, there are concerns that the financial system could collapse due to unrealistic, populist bills. Considering that finance is a regulated industry, experts warn that the moment the government tries to directly control beyond supervisory scope, ‘government failure’ caused by intervention may occur.

According to the financial sector and academia on the 11th, Professor Seongin Jeon of the Department of Economics at Hongik University said, “Finance is a regulated industry that guarantees monopoly profits, so it is easier for the government to twist its arm. If excessive demands continue, loans may be executed where they should not be, causing side effects where those who should receive loans cannot get them.”

Experts unanimously agreed that consumers ultimately suffer from market distortions. As the presidential election approaches, financial populism is being overused, distorting the market and leading to unintended policy effects that inevitably shift the burden onto consumers. Since the money in banks, which politicians treat as petty cash, actually belongs to shareholders and depositors, damage to these groups is also unavoidable.

Professor Taeyoon Sung of Yonsei University’s Department of Economics criticized, “Moving finance against market principles is a significant factor that ruins the economy. Regulation is meant to manage healthy financial movements and reduce market distortions, but ironically, government regulation is distorting the market.” This means that inappropriate political intervention in the financial market is ultimately undermining market order. Professor Woochan Kim of Korea University’s Business School also pointed out, “It seems the government is distorting market policies too much out of election concerns.”

Concerns within Political Circles Over Government Market Intervention: "Finance Being Overly Instrumentalized"

Professor Soyoung Kim of Seoul National University’s Department of Economics warned, “The current government’s market intervention is excessive and significantly disregards the original functions of finance, causing a kind of political risk for banks and making management uncertain.” She added, “If regulations are imposed arbitrarily without clear principles, banks may suffer losses, and those damages could be passed on to consumers.”

There were also harsh criticisms directed at financial authorities. The authorities, who should establish fair rules and foster a sound financial industry, are criticized for being too preoccupied with political populism and pandering to political circles. Professor Taeyoon Sung emphasized, “Financial authorities must act according to economic principles.” Professor Seongin Jeon also rebuked, “Financial authorities themselves should reflect on moving according to political logic.”

Even within political circles, critical voices are emerging against excessive populist bills. At a policy symposium held last month by the Korean Finance Association, Representative Changhyun Yoon of the People Power Party expressed concern, saying, “I worry that finance is being overly instrumentalized, such as with interest and principal repayment deferrals and financial company contributions to low-income financial projects. We need to reduce regulation and politics and strive to increase autonomy and innovation.”

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