The state-run Industrial Bank of Korea has increased this year's issuance limit for industrial financing bonds (IFBs) by more than 9 trillion won. IFBs are special bonds issued by the bank to provide funding for national key industries and other purposes. The need for funding has grown due to the bank's decision to supply 100 trillion won to advanced strategic industries, such as semiconductors, over the next three years.
The bank confirmed on the 13th that its board of directors approved an issuance limit for this year's IFBs at 80 trillion won for Korean currency and $15 billion (approximately 21.9 trillion won). This is an increase of about 9.4 trillion won compared to last year's issuance limit of 75 trillion won for Korean currency and $12 billion.
The issuance limit for IFBs is on the rise. The Korean currency IFB issuance limit has increased from 70 trillion won in 2020 to 80 trillion won, while the issuance limit for foreign currency IFBs has grown from $9 billion to $15 billion, a 1.6-fold increase in five years. The demand for policy financing for investments in national new growth industries such as defense, nuclear power, semiconductors, artificial intelligence (AI), and biotech has increased domestically and internationally, leading to a rise in the funds that the bank needs to support. A bank official noted, "As the demand for policy financing increases and assets grow, the funding through IFBs has also increased."
Starting this year, the bank will provide a total of 100 trillion won in financial support to domestic advanced strategic industries through the "Korea Rebound Program" over the next three years. Out of the 100 trillion won, 90 trillion won will be in loans, with 17 trillion won allocated for loans for semiconductor facility investments. The goal is to ensure that large companies like Samsung Electronics and SK Hynix, as well as small and medium-sized enterprises, can secure investment funds in a timely manner at low-interest rates to increase production facilities in line with growing global semiconductor demand.
The government has decided to secure a loan capacity of 17 trillion won by increasing the bank's capital through an investment of 1.7 trillion won. The bank can typically lend approximately 10 times the amount of the investment. It primarily raises the funds needed for lending and other financial support through the issuance of IFBs. Unlike other commercial banks, the bank has a low proportion of deposits that allow for low-interest funding, making it difficult to raise cash without issuing IFBs. The largest shareholder, the government, has been investing as needed; however, most of the investments are in the form of physical assets such as transferring public enterprise equity, resulting in a relatively small influx of cash. The scale of investment is also limited.
Discussions on expanding the capital that the bank has requested were halted following the political turmoil related to President Yoon Suk-yeol's impeachment. The bank's capital has been frozen at 30 trillion won for the past decade, nearly reaching the support limit. Representative Yoon Han-hong of the People Power Party, who is the chairman of the National Assembly's Political Affairs Committee, proposed a revision to the Industrial Bank Act last December to expand the bank's legal capital to a maximum of 60 trillion won, but the proposal is currently pending in the National Assembly. If the bank's capital increases by 20 trillion won to 30 trillion won from the current level, it would enable lending and guarantees of 200 trillion won to 300 trillion won.