The supplementary budget of 400 billion won, which will serve as the foundation for the establishment of the bad bank promoted by the Lee Jae-myung government, has been finally approved. The Financial Services Commission emphasized that it will thoroughly review the assets and income of debtors, considering public sentiment concerned about moral hazard.
The Financial Services Commission announced that the second supplementary budget proposal for this year passed the National Assembly's plenary session on the 4th, and the supplementary budget of 1.1 trillion won for three projects under its jurisdiction has been confirmed. Looking at each project, a new budget of 400 billion won for the long-term overdue debt disposal program, namely the establishment of a bad bank, has been created. The budget for the new start fund, a debt adjustment program for small business owners and self-employed individuals, has been increased by 700 billion won. Additionally, the budget for supporting the appointment of representatives for debtors has been increased by 35 million won.
The Financial Services Commission stated that it will evaluate the repayment ability of debtors to prevent moral hazard, the biggest controversy surrounding the bad bank. The Financial Services Commission plans to receive information from relevant ministries and financial companies to assess the assets and income of debtors. It has indicated that it will only select debtors who have no repayment ability to the extent of being akin to bankruptcy after this assessment.
In addition, debts arising from stock investments and those of small business owners in the entertainment industry will be excluded from the acquisition targets of the bad bank. This is also a measure taken in consideration of the previously raised moral hazard controversy.
The Financial Services Commission has also responded to public sentiment regarding the feeling of deprivation that 'those who diligently repay their debts are at a loss.' A Financial Services Commission official noted, "The government understands and empathizes with the public's dissatisfaction," while adding, "We intend to promote debt adjustment as part of a system to support social rehabilitation." It was also revealed that programs for interest reduction and maturity extension aimed at diligent repayers are already in place.