[The Editors' Verdict] Stacked Financial Policy Bills... Undermining Value-Up Growth

The Government Calls for "Productive Finance," but Undermines "Value-Up" in Paradox
Innovation as Rationale, Mobilization as Reality: Profitability Under Pressure from Conflicting Policies
A Shift in Perspective Needed: Recognizing Finance as a

In his book "Globalization and Its Discontents," Joseph Stiglitz pointed out that when governments or international organizations intervene in markets without allowing autonomy but shift responsibility onto the private sector, it undermines market trust and can harm long-term growth. The reality currently facing the Korean financial sector is not much different.

The government has recently emphasized the importance of "productive finance." President Lee Jaemyung has strongly urged financial institutions not to rely solely on interest margins but to provide funding to innovative industries, while financial authorities have set out concrete directions such as expanding venture investment and risk capital. In response, financial institutions have pledged to cooperate by creating a 100 trillion won advanced and venture fund, supporting small business owners, and expanding risk capital. The problem is that this trend is, in effect, a government-led "policy mobilization."

Productive finance refers to supplying funds not simply to real estate or consumer loans, but to areas that can enhance the productivity of the economy, especially venture businesses and innovative startups. However, these companies typically lack collateral and have unpredictable returns, making them high-risk assets with low recoverability and high default risk from the perspective of financial institutions. The risks are significant, and the returns are uncertain. In this structure, it is not easy for financial institutions to act voluntarily.

Moreover, the "policy bill" handed to financial institutions is becoming increasingly burdensome. Of the 800 billion won needed to establish a "bad bank" to write off the debts of 1.13 million long-term delinquent borrowers?up to 50 million won per person?half will be borne by financial institutions. Another bad bank plan is being pursued to take over homes affected by rental fraud, and the burden on the financial sector could reach up to 1 trillion won. While the policy rationale is clear, it is problematic that private finance is repeatedly mobilized as a budget supplement for government welfare and relief policies. This is why there is growing discontent in the financial sector over the repeated imposition of "policy bills" that force unilateral sacrifice.

This is not all. The government has also decided to double the education tax levied on financial institutions. More than 60 financial institutions, including commercial banks, will be required to pay an additional 1.3 trillion won in education taxes starting next year. Imposing an education tax on industries unrelated to education violates not only tax fairness but also the principle that beneficiaries should bear the costs. Given the tax revenue shortfall for three consecutive years, it is not unreasonable to criticize this as a measure to fill the gap by targeting large financial institutions.

This burden structure puts pressure on both the profitability and soundness of financial institutions. A situation where profits decrease and risks increase ultimately weakens the financial ecosystem and makes it difficult to provide sustainable innovative capital. The greater contradiction is that the government is simultaneously pursuing a "value-up" policy. Since its inception, the Lee Jaemyung administration has emphasized protecting shareholder interests and enhancing corporate value. However, the reality for financial institutions is that their profitability is under pressure, and their stock prices and dividend capacity are actually shrinking. Thus, the policy of protecting the interests of financial institution shareholders is in conflict with the reality of government intervention in finance.

"Value-up" is not simply about boosting stock prices. It can only be realized when a predictable profit structure, an autonomous management environment, and conditions for shareholder returns are in harmony. The financial sector is now at risk of losing all three. If the profit base collapses, not only will "value-up" be impossible, but even fulfilling social responsibilities will become difficult.

The same applies to productive finance. If financial institutions are to bear risks themselves, appropriate incentives and institutional environments must be established. For example, the strengthened prudential regulations following the introduction of Basel III have increased risk aversion among financial institutions and made it more difficult to supply risk capital. Demanding that institutions "take risks" while leaving regulations unchanged is like asking someone to "speed up" while keeping the steering wheel fixed. Recognizing this problem, financial authorities have announced plans to improve prudential regulations so that finance can play a more active role in corporate and venture investment. The intention to remove unnecessary regulations is positive. However, this should not be the end.

It is now time to fundamentally change perspectives. Finance must be recognized not as a target of control and mobilization, but as a strategic partner in the economic ecosystem. Without autonomy and profitability, neither value-up nor inclusive finance can be sustained. Forcing only sacrifice in an environment lacking autonomy and flexibility makes sustainable financial innovation impossible. Expanding the range of choices so that private capital can act voluntarily and restoring market-based order?this is the true path for finance to fulfill its role and for value-up and inclusive finance to move forward together.

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