Kwon Dae-young, Vice Chairman of South Korea's Financial Services Commission, defended the government's long-term overdue debt restructuring policy on the 20th, rejecting accusations of populism and asserting the initiative fills a 20-year institutional gap to modernize the financial system. Speaking on the presidential office's program, Kwon emphasized the policy targets vulnerable groups who lost repayment capacity due to force majeure, not malicious defaulters, and aims to prevent debt-related suicides. Starting in August, a credit information law special provision will enable asset verification without debtor consent, with debt relief limited to those below 60% of median income and possessing no recoverable assets.
FSC Vice Chairman Defends Debt Restructuring as Support for Vulnerable Groups
Kwon stated on the 20th during his appearance on the presidential office's program that "some say the government's long-standing debt relief policies are populism and government-controlled finance, but I think differently. This is not preferential treatment. It's about creating a more advanced financial system." He clarified the New Leap Fund's purpose: "In short, the national agenda of the Lee Jae-myung administration is to create finance that saves lives so that no one takes their life because of debt. We thoroughly examine assets and repayment capacity to settle old debts created by force majeure."
Kwon emphasized the policy excludes intentional bad actors: "We are not helping intentional and malicious people. We only help those who are truly struggling, those who have no way to repay, and there are many aspects the community should consider rather than discussing this only as moral hazard."
Kwon Addresses Fairness Concerns with Systemic Balance Argument
Regarding fairness concerns with diligent repayers, Kwon explained: "Anyone can face such a situation, which is why we made it a system. Korea's financial system has operated centered on creditors since the IMF foreign exchange crisis, and now we will balance it with debtor protection."
Financial Institutions Face Strengthened Overdue Debt Management Responsibility
Kwon announced plans to strengthen financial companies' overdue debt management responsibility. "Loans are a debtor's repayment promise, but financial companies also assess risk at the time of lending and receive interest as compensation," he stated. "Sharing management responsibility when problems arise aligns with common sense. Lenders have a responsibility to manage, not just lend. Lending and then ignoring the situation is unacceptable."
Government Announces Stricter Asset Verification to Prevent Moral Hazard
The government outlined measures to prevent moral hazard. Kwon stated: "No one volunteers to live as a debtor for more than 7 years," while adding "we will meticulously verify income and assets using information from the National Tax Service, Ministry of Land, Infrastructure and Transport, Ministry of the Interior and Safety, and Korea Financial Telecommunications & Clearings Institute."
He detailed the August implementation: "From August, the credit information law special provision will allow us to verify asset information without debtor consent. We will only forgive debt for those below 60% of median income with no recoverable assets, and if hidden assets are discovered, we will nullify the debt adjustment itself."
FSC Plans Long-Term Reform of Financial Industry Debt Management Practices
Kwon outlined long-term plans to reform financial institutions' overdue debt management practices. "We will actively support debtors' recovery through adjustment, reduction, and exemption of unpayable debts that have been neglected for a long time," he said. "We will institutionalize improvements so financial companies stop repeating only collection, sale, and statute of limitations extension when overdue payments occur after lending."
He concluded: "Both demonizing debt too much and arguing all debt should be eliminated are unbalanced. A balanced financial system means lending amounts that can be repaid, ensuring diligent repayment when borrowed, and adjusting through reasonable examination when truly unable to repay."
FAQ
What is the purpose of South Korea's long-term overdue debt restructuring policy announced on the 20th?
According to FSC Vice Chairman Kwon Dae-young, the policy aims to fill a 20-year institutional gap and modernize the financial system by supporting vulnerable groups who lost repayment capacity due to force majeure, not malicious defaulters. Kwon stated the Lee Jae-myung administration's national agenda is "to create finance that saves lives so that no one takes their life because of debt."
How will the government verify debtor assets to prevent abuse of the debt relief program?
Starting in August, a credit information law special provision will allow authorities to verify asset information without debtor consent using data from the National Tax Service, Ministry of Land, Infrastructure and Transport, Ministry of the Interior and Safety, and Korea Financial Telecommunications & Clearings Institute. Debt relief applies only to those below 60% of median income with no recoverable assets, and discovery of hidden assets results in nullification of the debt adjustment.
What responsibility does the FSC require from financial institutions regarding overdue debt management?
Vice Chairman Kwon stated financial companies must share management responsibility when lending problems arise, as they assess risk at loan origination and receive interest as compensation. The FSC plans to institutionalize reforms ending the practice of only repeating collection, sale, and statute of limitations extension when overdue payments occur, requiring active support for debtor recovery through adjustment, reduction, and exemption of unpayable long-term debts.
