The National Assembly Budget Office has stated that the 'debt relief' policy being pursued by Lee Jae-myung's government is unfair and called for the enhancement of the long-term arrears debt adjustment program. It also noted that to minimize 'blind spots,' measures should be reexamined to ensure broad support for many vulnerable borrowers.
The content was included in the '2025 Second Supplementary Budget Analysis' published by the National Assembly Budget Office on the 24th. Previously, the Financial Services Commission announced a debt adjustment program that would relieve the debts of 1.13 million long-term small-scale arrears borrowers amounting to 16 trillion won on the 19th. It involves establishing a 'bad bank' under the Korea Asset Management Corporation (KAMCO) that will purchase unsecured debts of individuals that have been in arrears for more than seven years, up to 50 million won.
The National Assembly Budget Office acknowledged, "There is a valid aspect to the intention of supporting economic recovery for vulnerable groups by alleviating their financial burden," but added, "It is also necessary to consider the equity issues for diligent repayors and the potential for moral hazard."
It pointed out that there are concerns about the emergence of blind spots. The government has limited the debt adjustment support targets to individuals who are 'in arrears for over seven years,' which means borrowers who began to be in arrears after June 2018 are excluded. The National Assembly Budget Office indicated that "it is necessary to review measures to minimize the occurrence of blind spots due to the incineration of bonds that meet specific conditions and to provide broad support for vulnerable groups with limited resources."
The National Assembly Budget Office also noted funding methods. The Financial Services Commission said it would secure 4 billion won of the necessary 80 billion won through the second supplementary budget and receive the remainder from financial institutions. The National Assembly Budget Office mentioned, "It may be difficult to receive active cooperation from financial companies," and suggested that "it is necessary to consider lowering the purchase rate of the (arrears) bonds from 5% to 2.5%."
Financial companies sell overdue non-performing loans at a fraction of their value to maintain soundness, typically pricing them at 1% to 5% of the bond value, selling them to specialized investment firms in non-performing loans. For example, if the bond value is 1 million won, it is sold for 10,000 to 50,000 won. The Financial Services Commission estimated that 80 billion won (16 trillion won × 5%) would be needed at a purchase rate of 5%, but if lowered to 2.5%, a budget of 40 billion won would be sufficient. The National Assembly Budget Office stressed that "there is a need to review the restructuring of the project to allow bond purchases solely through government investment."
A Financial Services Commission official stated, "To maximize purchases, there needs to be minimal resistance from those selling, which is why the average purchase rate was set at 5%," adding that "the purchase rate will be determined through negotiations between the buying and selling parties."