Ruling and Opposition Presidential Candidates' Financial Policies and Stances?… Lee's "Basic Finance" vs Yoon's "Deregulation" (Comprehensive)

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 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 are also growing that both candidates’ proposals may remain mere 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 part of this, the Basic Loan, is a policy to lend up to 10 million KRW at an interest rate slightly higher than preferential rates (about 3%) for a long term (up to 20 years). The loan will be structured like a negative balance account, allowing deposits and withdrawals at any time.

Basic Finance is Lee’s third basic series policy following Basic Income and Basic Housing. Along with the Basic Loan, 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 the Basic Loan but higher than regular savings rates. The funds accumulated through Basic Savings will be used as resources for the Basic Loan.

At a non-face-to-face press briefing held in August, Lee stated, “Financial institutions estimate the loss rate on Basic Loans at about 2% of the principal. Even if 50 million people use the Basic Loan, resulting in a total loan amount of 500 trillion KRW, the government’s loss would be 10 trillion KRW.” He added, “If this is spread over 10 to 20 years, the burden would be between 500 billion and 1 trillion KRW, which is not a large amount.” He also expressed plans to first provide Basic Loan benefits to vulnerable groups such as young people in their 20s and 30s, where institutional effectiveness is greatest, and gradually expand it to the entire population.

Additionally, he mentioned implementing safeguards against moral hazard such as registering and managing delinquency information, and guaranteeing minimum jobs necessary to resolve delinquencies to prevent people from falling into delinquency or bad credit status.

Yoon Seok-youl, the People Power Party candidate, has consistently voiced opposition to the Moon Jae-in administration’s financial policies and direction, advocating for deregulation. A representative 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,” and said, “While the rapid increase in household debt must be curbed, it should not be done in this manner.”

Experts: "Any administration should be cautious of government-controlled finance"

Yoon also pointed out, “In the midst of the ongoing COVID-19 crisis, trying to abruptly reduce the household debt growth rate from 8-10% to 6% is unreasonable,” and warned, “Those truly struggling citizens who fail to get bank loans and have no choice but to turn to high-interest private lenders will bear an even heavier burden.”

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

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 risk. Yoon’s “LTV 80%” pledge could stimulate house price increases and loan surges, especially among genuine buyers. If household loan volume regulations are 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 government-controlled finance after the election. They also point out the need to present a long-term vision for the financial industry. Professor Sung Tae-yoon of Yonsei University’s Department of Economics analyzed, “No clear policies have come from the candidates. It is difficult to say they have presented a long-term vision for finance.”

Oh Jung-geun, president of the Korea Financial ICT Convergence Society, advised, “The financial pledges of both candidates are still declarative, and more detailed plans on how to mobilize finances and funds after election are needed. Regardless of which administration comes in, the basic financial direction should not be completely overturned or private financial companies pressured in a way that disrupts policy implementation.”

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