Debt Relief Moral Hazard Controversy... Kim Ju-hyun, Financial Services Commission Chairman, "Debt Adjustment According to Borrower's Ability"

28th Political Affairs Committee Full Meeting
If Lonestar Has Responsibilities, Discussion Will Resume

Financial Services Commission Chairman Kim Ju-hyun attends the full meeting of the Political Affairs Committee held at the National Assembly on the 28th, responding to questions from lawmakers. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Sim Nayoung] Financial Services Commission Chairman Kim Joo-hyun addressed concerns that the policy to reduce the principal for borrowers who are over 90 days delinquent, aimed at small business owners affected by COVID-19, could lead to moral hazard. He stated, "In financial transactions, situations where it is difficult to fulfill debt obligations always arise," adding, "In preparation for such cases, financial institutions themselves adjust debts according to the borrower's capacity when default situations approach. There are also systems provided by the Credit Counseling and Recovery Service or the courts. This policy aligns with the spirit of those systems."

Chairman Kim made these remarks on the morning of the 28th during a plenary session of the Political Affairs Committee at the National Assembly, responding to People Power Party lawmaker Kim Hee-gon's criticism that "there is a moral hazard controversy regarding the reform to reduce the principal for those delinquent over 90 days to stabilize livelihoods."

Regarding lawmaker Kim's point that since the New Start Fund does not guarantee 100%, it could lead to losses for creditor financial companies, Kim said, "Supporting vulnerable groups is natural and desirable, but we are well aware of concerns that the financial sector may bear some burden," adding, "I think some degree of loss is inevitable, but we will try to ensure that excessive losses do not occur by transferring them to the fund."

Meanwhile, Chairman Kim stated that he would discuss responsibility related to the ongoing international arbitration (ISDS) case involving Lone Star at a later time. He said, "I understand that some are raising issues of responsibility regarding Lone Star," and added, "Once the ruling is made, we will disclose everything to the public as much as possible. If there is any responsibility to be taken, we will discuss it again at that time."

Foreign private equity fund Lone Star filed an 'Investor-State Dispute Settlement' (ISDS) lawsuit worth approximately 6 trillion won, claiming that the Korean government deliberately delayed the sale of Korea Exchange Bank. The International Centre for Settlement of Investment Disputes (ICSID) arbitration tribunal has declared the procedure closed, and the lawsuit outcome is expected before October.

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