Less than half of the 'Corona Support Fund' Used... Financial Services Commission to Compensate KDB for 2 Trillion Won Loss

Financial Services Commission to Invest 1.8817 Trillion Won in KDB through Supplementary and Main Budgets
KDB's Execution Performance Only Half... Investment Calculated Based on 'Total Supply Scale'
Budget Office: "Investment Should Follow Execution Performance After Program Ends"
Financial Authorities: "Budgeting Unavoidable to Secure Stable Policy Capacity"

[Asia Economy Reporter Song Seung-seop] It has been confirmed that the Financial Services Commission allocated a budget approaching 2 trillion won to KDB Industrial Bank under the name of loss compensation. Despite the fact that KDB Industrial Bank did not even spend half of the budget established last year to support companies affected by COVID-19, there are criticisms that excessive taxpayer money is being injected. In particular, as COVID-19 cases rapidly spread and the situation worsens, voices are emerging that a review of the COVID-19-related budget allocated to KDB Industrial Bank by the Financial Services Commission is necessary.

According to the National Assembly Budget Office and financial circles on the 12th, the Financial Services Commission invested 1.8817 trillion won in KDB Industrial Bank through the third supplementary budget last year and the main budget this year. This was to prevent a decline in the Bank for International Settlements (BIS) ratio and to compensate for losses.

The Financial Services Commission has been operating the 'COVID-19 Livelihood and Financial Stability Package Program' since the emergency economic meeting in March last year. The scale is 175 trillion won plus alpha, used for supporting small business owners and SMEs, stabilizing financial markets, and the period industry stabilization fund. KDB Industrial Bank is participating by investing 19.9 trillion won.

The Budget Office has put a brake on the Financial Services Commission's investment scale. Despite the poor execution performance of KDB Industrial Bank's financial market stabilization program, the investment amount was calculated based on target figures. The Budget Office's view is that it would not be too late to invest after reviewing how much money was ultimately spent after the program ends.

Last year, the execution rate of the 'COVID-19 Livelihood and Financial Stability Package Program' carried out by KDB Industrial Bank was only about 45.9%. Although a total of 16.9 trillion won was planned to be spent, only 7.76 trillion won was supported. Among the nine related programs, more than half?five programs?had an execution rate of 30% or less. The Chaean Fund had 30%, and corporate bond refinancing support was 22.3%. The Jungan Fund was only 2%. This led to criticism that KDB Industrial Bank, which was allocated a budget by financial authorities to support companies affected by COVID-19, was neglecting support for these companies.

Despite Half Execution Performance, Investment Calculated Based on 'Total Supply Scale'

Among the livelihood programs, 548.76 billion won was invested to compensate for the decline in the Bank for International Settlements (BIS) ratio caused by the Securities Market Stabilization Fund (Jungan Fund) and the Bond Market Stabilization Fund (Chaean Fund). The investment amount was calculated based on targets, not execution rates. In the case of the Jungan Fund, although 20 billion won was executed, the investment calculation was based on the total supply scale of 2 trillion won. Similarly, for the Chaean Fund, the supply scale of KDB Industrial Bank used for investment calculation (4 trillion won) was much larger than the execution performance (600 billion won).

There were also concerns raised that investments should have been made based on execution performance after the program ended. Loans to small and medium-sized enterprises and mid-sized companies will end when the limit is exhausted, and the rapid corporate bond underwriting system will end next year. The Budget Office expressed the view that the business plan for responding to COVID-19 was insufficient and that a review is necessary.

The Financial Services Commission stated that the low execution rate was inevitable. The Jungan Fund's investment guideline aims to maintain the KOSPI at the 1500 level. Since the KOSPI rose continuously, it was difficult for the Jungan Fund to be executed. They explained that other programs also saw decreased or dispersed demand due to similar support policy implementations. Regarding the background of making investments before the program ended, they conveyed that budget allocation was unavoidable to secure stable policy capacity, and some investments could have rather caused market instability.

Yoon Chang-hyun, a member of the Political Affairs Committee from the People Power Party, emphasized, "It has been confirmed that policy financial institutions are only enthusiastic about receiving budgets and neglect evaluation and feedback on execution performance," adding, "Support programs scattered around should be systematically managed to establish a performance-oriented budget system."

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