The financial authorities are considering including the policy 서민금융 project, which was canceled following the 12.3 emergency martial law, as a priority in the supplementary budget. This is due to the urgent need for 'livelihood support' for vulnerable groups affected by high interest rates and economic recession.
According to the financial sector on the 1st, the Financial Services Commission is in the process of reviewing projects that require supplementary budget allocation. A senior official from the Financial Services Commission noted, “We are prioritizing the acquisition of additional budget to expand the supply of policy 서민금융 products, such as 햇살론.” The Ministry of Economy and Finance plans to request that each ministry submits their supplementary budget project plans as soon as an agreement is reached on the supplementary budget, gather opinions, and prepare the supplementary budget proposal by the end of this month.
The Financial Services Commission believes that securing additional budget for the ‘햇살론15′ and the ‘최저신용자 특례보증’, which failed to secure funding last year, is necessary. The Financial Services Commission reached an agreement with the Policy Committee, the relevant National Assembly committee, to increase the budget for 햇살론15 from 9 billion won to 55 billion won, but the Democratic Party of Korea only reflected the cuts in the budget proposal and pushed it through the plenary session, leading to the cancellation of the increase. The lowest credit special guarantee, which is also unavailable to vulnerable groups, was set to have its budget increased from 56 billion won to 37 billion won, but this too fell through.
The Financial Services Commission plans to request the Ministry of Economy and Finance to also allocate additional budget for the ‘불법사금융예방대출’ (formerly 소액생계비대출), which is focused on expanding supply alongside the lowest credit special guarantee. This recently renamed product loans up to 1 million won to those in urgent need of cash to prevent them from being pushed into illegal private finance. The Financial Services Commission previously requested a budget allocation of 150 billion won for this illegal private finance prevention loan this year, but the Ministry of Economy and Finance did not accommodate this request. This product is currently operated using donations from banks.
The Financial Services Commission is of the stance that the supply of illegal private finance prevention loans needs to be expanded due to the increasing number of individuals who are being pushed into illegal private finance for lack of just a few tens of thousands of won. However, the Ministry of Economy and Finance is raising concerns about the direct lending model employed by the 서민금융진흥원, a public institution under the Financial Services Commission. Other policy financial products have the Financial Deposit Insurance Corporation (FDIC) providing guarantees for borrowers, while banks implement the loans. The FDIC only covers losses incurred when borrowers fail to repay the money. The Ministry of Economy and Finance argues that an indirect support model would be more suitable for efficient use of resources.
The Financial Services Commission is also reviewing the possibility of including a capital increase plan for the Industrial Bank in the supplementary budget project plan, but it is forecasted that it will be difficult to include it in the final supplementary budget as the total size of the supplementary budget is only 10 trillion won. The Industrial Bank claims that a capital increase is necessary due to a sharp deterioration in its soundness indicators. As of the end of last year, the International Bank for Settlements (BIS) standard capital adequacy ratio of the Industrial Bank was 13.75%, down 0.61 percentage points from the end of the previous quarter. A decline in the BIS ratio leads to diminished domestic and international creditworthiness and a sharp rise in funding costs. This directly impacts lending capacity, hitting corporations that rely on low-interest policy financing hard.