"Blatant Shadow in Bank Personnel Affairs"... Opposition Targets Yoon Government's State-Controlled Finance 'Squarely'

Controversy Over Government's 'Personnel Authority in Financial Firms'
Side Effects of Authoritarian Financial Regulation Centered on the Financial Supervisory Service
Concerns Raised Over Risks of Easing Licensing Restrictions

Criticism of "state-controlled finance" has been raised regarding the financial policies of the Yoon Suk-yeol administration. The opposition parties have voiced concerns that interventions in financial sector personnel, authoritarian financial regulations centered on Lee Bok-hyun, the Financial Supervisory Service (FSS) chief with a prosecutorial background, and moves to ease entry regulations for financial company licensing constitute a form of "new state-controlled finance."

On the 14th, a forum titled "What is the Problem with the Yoon Suk-yeol Government's State-Controlled Finance," hosted by Kim Han-gyu, a member of the Democratic Party of Korea, addressed the reasons and issues surrounding the controversy over new state-controlled finance.

Lee Sang-hoon, director of the Economic and Financial Research Institute, who presented at the forum, stated, "There has been a rough and blatant shadow of intervention in personnel authority and price control," and introduced that "financial holding company chairpersons who strongly intended to seek reappointment have suddenly given up on their reappointment." Lee added, "Following Jo Yong-byeong, the former chairman of Shinhan Financial Group, even Son Tae-seung, the former chairman of Woori Financial Group who was deliberating, gave up on reappointment," and said, "In the business community, there has been much analysis that this is not a voluntary resignation but another form of new state-controlled finance."

Regarding the government's response to bank interest rates, Lee introduced, "President Yoon Suk-yeol, Lee Bok-hyun, the FSS chief, and Kwon Seong-dong, the floor leader, pointed out that 'during periods of rising interest rates, the interest rate spread between deposits and loans tends to widen, leading to increased criticism of banks' excessive profit-seeking,' effectively ordering interest rate cuts. Subsequently, banks actually lowered interest rates or restrained rate hikes." He criticized, "While it may be possible to temporarily lower loan interest rates by intimidating financial companies, banks will respond by lending to borrowers with lower credit ratings to compensate for lost profits, which will deteriorate banks' management soundness or increase risk-seeking activities such as selling high-risk financial investment products. Ultimately, this could result in harm to the public."

Concerns were also raised about authoritarian financial regulations centered on the FSS chief. Lee said, "The current atmosphere is that Director Lee has instructed executives to consider changing the oligopoly system centered on the five major banks into a fully competitive system, or criticized banks' excessive profit-seeking while effectively ordering banks to reduce the interest rate margin through loan interest rate cuts. He is leading the overall financial industry policy, including tasks under the Financial Services Commission," and pointed out, "Behind this is Director Lee, a former special prosecutor close to President Yoon, who, backed by the president's trust, is fully utilizing supervisory powers such as financial inspections and investigations and has emerged at the forefront of overall financial policy issues." Lee added, "While authoritarian governance may be effective in reforming some entrenched practices, it has limitations in stabilizing and systematically transforming a financial system that is far more complex and organically connected than before."

Concerns were also expressed about President Yoon's criticism of the financial sector's oligopoly system and moves to ease entry regulations. Lee said, "Easing entry regulations could cause tremendous repercussions that shake the entire economic structure, so it must be approached cautiously," and noted, "Because preferential treatment controversies for new entrants are inevitable, there is also an expectation of a murky atmosphere of state-controlled finance where licensing decisions and their scope are swayed by private interests through behind-the-scenes negotiations." He also pointed out the recent trend of changing the regulatory framework by easing preemptive regulations while slowly strengthening post-regulations.

Jeon Ju-yong, a professor at Dongguk University who participated as a discussant, said, "The Yoon Suk-yeol government's state control is carried out through direct intervention in personnel and pricing rather than policies or regulations, and it shows a significant difference from previous governments in lacking consistent direction," citing issues such as controversies over financial holding company chairpersons' appointments, criticism of performance-based compensation in the banking sector, intervention in interest rates, and uncertainty about overall policy direction.

Kim, the lawmaker who hosted the discussion, criticized, "The government that emphasized 'free market economy' has vanished, and it seems that the Lee Myung-bak administration, which used the Fair Trade Commission as a tool to control inflation under an authoritarian regime's 'state-controlled finance,' has been resurrected," adding, "The rapid shift from 'laissez-faire to state control' is nothing but populism without principles."

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