Financial Sector National Audit Starts Today... 'Household Debt and Hwacheon Daeyu' Expected to Be Key Issues

National Assembly Political Affairs Committee Audit from the 6th to the 21st

[Image source=Yonhap News]

[Asia Economy Reporter Jin-ho Kim] The '2021 National Assembly Audit' of the financial sector, including the Financial Services Commission and the Financial Supervisory Service, begins today. This year's audit is expected to focus on key issues such as household debt surpassing 1,800 trillion won and the responsibility of financial authorities regarding the wave of closures among cryptocurrency exchanges. Additionally, controversy surrounding preferential treatment in the Seongnam City Daejang-dong development by Hwacheon Daeyu Asset Management is also anticipated.

According to the financial sector on the 6th, the National Assembly's Political Affairs Committee will start the audit at 10 a.m. today, beginning with the Financial Services Commission. On the 7th, the Financial Supervisory Service will be audited; on the 15th, the Korea Credit Guarantee Fund, Korea Development Bank, and Industrial Bank of Korea; and on the 18th, the Korea Deposit Insurance Corporation. A comprehensive audit is scheduled for the 21st.

The undeniable focal point of this year's audit is household debt. Despite the government's successive regulatory measures, household debt has surpassed 1,800 trillion won, becoming the biggest risk factor for the Korean economy. In particular, the Bank of Korea's emphasis on the need to normalize monetary policy has heightened concerns about potential defaults more than ever.

Accordingly, lawmakers from both ruling and opposition parties are expected to intensively question the heads of the two financial authorities about solutions to household debt. Especially since the Financial Services Commission emphasized last year during the audit that "household debt is at a manageable level," strong criticism toward Financial Services Commission Chairman Ko Seung-beom is anticipated.

Explanations regarding various controversies related to loan regulations aimed at curbing household debt are also expected to be demanded. Recently, the financial authorities have been considering even regulations on jeonse (long-term lease) loans, raising concerns about damage to genuine borrowers. Through Chairman Ko Seung-beom's responses, additional regulatory measures on household loans may be revealed.

The controversy over inadequate management and supervision of cryptocurrency exchanges is also expected to be a major issue. Both ruling and opposition political circles have emphasized the responsibility of financial authorities for the significant market turmoil that began in the first half of this year. However, since last month, the failure of cryptocurrency exchanges to meet the reporting deadline under the Act on Reporting and Using Specified Financial Transaction Information has materialized into a wave of closures, strong criticism is expected to continue.

Intense confrontations between ruling and opposition parties are also forecasted over the so-called 'Hwacheon Daeyu preferential treatment controversy.' Although not a financial sector issue, the matter is so sensitive that there are concerns this year's Political Affairs Committee audit might become a 'ruling-opposition political battleground' rather than a forum for policy discussion. The ruling and opposition parties fiercely debated the proposal to summon 40 related individuals as witnesses regarding the Daejang-dong preferential treatment, ultimately leading to a breakdown in witness negotiations.

According to the DLF lawsuit results, the responsibility of financial authorities is also expected to be reemphasized. While last year's audit saw lawmakers targeting financial companies, this year the Financial Services Commission and the Financial Supervisory Service are expected to be the main targets. In particular, lawmakers are anticipated to focus their inquiries on the Financial Supervisory Service's disciplinary practices against financial companies.

Furthermore, big tech issues will also be major points of discussion. Controversies over big tech companies infringing on small business districts and preferential treatment regarding the separation of banking and commerce are expected to be raised. The Merge Point incident, which caused a large-scale refund chaos, is also expected to be a topic. Lawmakers criticize that lax management and supervision of unregistered prepaid service providers like Merge Point have increased damage to consumers and small business owners. Therefore, measures to address the blind spots in the financial authorities' oversight of prepaid electronic payment service providers are expected to be demanded.

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