Kim Juhyun, Financial Services Commission Chairman, "If the government doesn't help, Cheong·bankruptcy... greater costs will be incurred"

Measures to Reduce Financial Burden on Vulnerable Groups Spark Moral Hazard Debate, Clarified on the Same Day
"A Little Help Can Enable Recovery"
"No Principal Forgiveness for Youth... Only Interest Reduction and Repayment Deferral Applied"

Kim Ju-hyun, Chairman of the Financial Services Commission

[Asia Economy Reporter Sim Nayoung] Kim Joo-hyun, Chairman of the Financial Services Commission, addressed the controversy over "moral hazard" that arose after the announcement of measures to reduce the financial burden on vulnerable groups, including small business owners and young low-credit borrowers. He stated, "If the government does not provide support, liquidation and bankruptcy are the only options," adding, "With just a little help, they can recover, but forcing immediate liquidation and bankruptcy would cost our economy much more. Despite moral hazard issues arising during every economic crisis, support has been provided."

On the afternoon of the 18th, Chairman Kim held a press conference at the Financial Services Commission and responded to the moral hazard controversy regarding the 'KRW 125 trillion + α' scale financial burden reduction measures for vulnerable groups announced on the 14th, which some claim are support measures for those who failed in stock or virtual asset investments. He said, "Businesses may fail, there may be family difficulties, and investment failures can happen," emphasizing, "The important thing is whether they can repay their debts as scheduled or not."

He added, "Because we tried to express the reality more vividly, the announcement included mentions of investment losses," and acknowledged, "I think that expression may have triggered the moral hazard controversy."

Chairman Kim explained, "This support plan for vulnerable groups supplements the debt adjustment system currently operating within our financial system," and added, "Even now, support for recovery is provided to those in difficulty through debt adjustments for existing financial institution customers, joint debt adjustments by the Credit Recovery Committee for the financial sector, and court rehabilitation procedures."

Above all, he emphasized that principal reduction is provided only to borrowers who are over 90 days delinquent and practically unable to engage in new financial transactions, through the Small Business Owners' Fresh Start Fund. These borrowers receive principal reductions of 60?90%. For borrowers who are not yet delinquent or are less than 90 days delinquent, maturity extensions, repayment deferrals, and interest reductions are provided.

Regarding the rapid debt adjustment measures for the youth, there is no principal reduction. The support targets borrowers in the bottom 20% credit score range, who face significant restrictions on financial transactions such as card issuance and new loans. They are provided with interest reductions (30?50%) or repayment deferrals to help them repay at least part of their debt.

Chairman Kim also explained the funding for the support, stating, "The KRW 125 trillion support amount is not entirely from the (government) budget," adding, "Some parts are financed through bond issuance, and some parts are supported through refinancing without budget support."

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