Financial sector, moving away from interest business to ‘invest in cutting-edge industries and support small business owners’
Financial authorities and the financial sector have agreed to shift their focus from real estate financing and secured and guaranteed loans to expanding investments into productive sectors, including future high-tech industries like artificial intelligence, and local small businesses.
Furthermore, the financial sector has decided to actively cooperate in establishing a 100 trillion won public-private fund for investment in high-tech, venture, and innovative companies, and to expand financial support for small businesses struggling due to the economic crisis.
The Financial Services Commission announced on the 28th that Vice Chairman Kwon Dae-young held a meeting with the heads of associations, including Cho Yong-byeong, Chairman of the Korea Federation of Banks; Seo Yu-seok, Chairman of the Korea Financial Investment Association; Kim Cheol-ju, Chairman of the Korea Life Insurance Association; Lee Byung-rae, Chairman of the Non-Life Insurance Association; and Oh Hwa-kyung, Chairman of the Korea Savings Banks Association.
The meeting was held to foster communication and cooperation between the government and the financial sector on the role and innovation of finance under the new administration.
Vice Chairman Kwon Dae-young stated, “There has been continued public criticism that the financial sector has been dependent on real estate finance and secured and guaranteed loans and has been obsessed with easy interest business,” and emphasized, “The financial sector should divert the flow of funds in the market to productive and new areas such as AI and other future cutting-edge industries, venture companies, capital markets, and local and small business owners to support sustainable economic growth.”
He continued, “The government will boldly change all aspects of laws, systems, regulations, accounting, and supervisory practices that hinder financial companies from actively and responsibly engaging in productive investment,” and emphasized, “It is necessary to quickly improve overall industry-specific regulations, including risk weighting and soundness regulations that do not fit the conditions of the times, so that the financial sector can expand its supply of funds to productive areas.”
The heads of financial associations shared the need for innovation so that financial funds can flow from unproductive areas such as real estate to productive finance, and expressed their will to restore the original role of finance, which supports the growth of companies and industries through efficient fund allocation and leads to increased national income.
In addition, they requested that the government carefully examine whether there is room for improvement in systems and supervisory practices so that the financial sector can expand productive finance.
First, they agreed to actively cooperate in creating a 100 trillion won public-private fund for investment in advanced, venture, and innovative companies, which will be created in the future, so that our economy can escape structural low growth and continue to grow by discovering new growth engines.
In addition, they agreed to expand financial support for small business owners who are suffering from the livelihood economic crisis, and to resolve financial difficulties by establishing and utilizing a small business credit rating system and strengthening guidance and promotion at frontline windows.
In particular, the capital market is a core platform for productive finance where companies receive investment and the public shares in the fruits of growth, so we decided to work towards transitioning to the capital market and investment.
The meeting also discussed the role of the financial sector that meets the public’s expectations.
Accordingly, the financial sector will strengthen its autonomous household debt management, such as blocking bypasses to the June 27 measures, to prevent the inflow of funds into real estate.
In addition, we decided to actively participate in the long-term delinquent debtor support program and the expansion of the new start fund, which will be implemented as a second supplementary budget project, and to support the recovery of vulnerable groups through autonomous and preemptive ongoing debt adjustments and improvement of excessive collection practices by financial companies so that it does not end with one-time support.
In addition, we decided to reform the internal control system of financial companies with consumer protection as the top priority so that large-scale financial accidents do not repeat, establish a system to eradicate livelihood financial crimes such as voice phishing and illegal financial lending, and strengthen cooperation between organizations.
In addition, it was decided to strengthen the role of the financial sector, such as expanding the supply of financial products for the common people.
The Financial Services Commission plans to form a task force centered on the field and demanders with the Financial Supervisory Service, financial sector, market participants, companies, and experts to put their heads together to consider what changes are necessary for the transition to productive finance, and select and promote financial innovation tasks.
[Editor Lee]
