Clear Divide in Financial Policy... Lee Jae-myung Advocates "Basic Finance" vs Yoon Seok-yeol Supports "Deregulation"

Lee "Realizing Inclusive and Fair Finance through Guaranteed Basic Loans"
Yoon "Excessive Total Loan Regulations Cause Difficulties for Citizens"
Common Concerns on Practicality, Specificity, and Side Effects
Experts "Caution Against Government-Controlled Finance to Fulfill Campaign Promises"

[Asia Economy Reporter Song Seung-seop] The presidential candidates from both the ruling and opposition parties are showing clear differences in their views on financial policies and directions. Since the regulated financial industry is heavily influenced by the government and financial authorities, there is an expectation that whoever wins will bring a distinctly different approach from the current one. However, concerns remain that both candidates’ proposals may end up as empty promises due to criticisms regarding their practicality and specificity.

According to political and financial circles on the 9th, Lee Jae-myung, the Democratic Party candidate, has proposed ‘Basic Finance’ as one of his financial pledges. One component, Basic Loans, is a policy to lend up to 10 million KRW at an interest rate slightly higher than preferential rates (around 3%) for a long term (up to 20 years). The loan type will allow flexible deposits and withdrawals, similar to a negative balance account.

Basic Finance is Lee’s third basic series policy following Basic Income and Basic Housing. Along with Basic Loans, he also pledged Basic Savings, which allows any citizen to deposit a certain amount (5 to 10 million KRW) within a set limit. The interest rate will be set lower than that of Basic Loans but higher than regular savings rates. The funds accumulated through Basic Savings will be used as resources for Basic Loans.

Yoon Seok-youl, the People Power Party candidate, has consistently voiced opposition to the financial policies and directions of the Moon Jae-in administration, advocating for deregulation. A notable example is his opposition to the current government and financial authorities’ loan volume regulations. Recently, through social media, Yoon criticized, "Sudden and excessive regulations by government authorities like these only cause side effects," adding, "While the rapid increase in household debt must be curbed, it should not be done in this manner."

Experts: "Regardless of the administration, state-controlled finance must be guarded against"

Yoon also announced a real estate policy that would ease the loan-to-value ratio (LTV) for newlyweds and young homebuyers without housing from the current 40% to 80%. Additionally, he proposed financial support measures using the Housing and Urban Fund to provide long-term, low-interest loans covering 80% of the funds for over 30 years. The repayment method would be based on 25% of income for principal and interest.

Both candidates face criticism regarding the feasibility of their pledges after election. Lee’s proposals are often criticized for funding issues and populism. The Basic Loan requires enormous resources and carries risks such as a surge in household debt and increased default risks. Yoon’s ‘LTV 80%’ pledge could stimulate housing price increases and a surge in loans, especially among genuine buyers. If the total household loan volume regulation is significantly relaxed after election, there is a high possibility that household debt, which the government and financial authorities have barely managed to control despite side effects, will soar again.

Experts express concerns that the flood of financial pledges could lead to state-controlled finance after the presidential election. Oh Jung-geun, president of the Korea Financial ICT Convergence Society, said, "The financial pledges of both candidates are still declarative, and more detailed plans on how to mobilize fiscal and financial resources after election need to be presented," advising, "Regardless of which administration takes office, policies should not drastically overturn fundamental financial principles or pressure private financial companies in pursuit of policy implementation."

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