Chairperson Lee Eog-weon of the Financial Services Commission (FSC) said on the 21st that he is reviewing regulatory measures on jeonse loans for nonresident single-home owners taken out for speculative purposes.
On this day at Government Complex Seoul, Chairperson Lee held a press briefing and said, "We are continuing to review regulatory measures on loans for nonresident single-home owners for speculative purposes," adding, "We will identify the current situation and thoroughly prepare related measures so they can operate in the actual market."
Chairperson Lee said, "We are continuing discussions on how to define and screen for speculative purposes," noting, "We are considering whether to use a positive approach of 'in these cases, it is not for speculative purposes,' or a negative approach of 'except for these cases, all are for speculative purposes.'" Earlier, President Lee Jae-myung called for extending regulations from multiple-home owners to nonresident single-home owners with speculative intent.
Chairperson Lee emphasized, "We will steadfastly pursue efforts to decouple real estate and finance to support a major shift toward productive finance," adding, "We will make additional refinements as needed, considering market conditions and policy goals."
The following is a Q&A with Chairperson Lee.
─How are loan regulations for nonresident single-home owners progressing? How can speculative loans be filtered out?
"We are continuing to review regulatory measures on loans related to nonresident single-home owners for speculative purposes, and there are several points to examine, so nothing has been finalized yet. In the Seoul metropolitan area, banks' jeonse loans for single homes in regulated area apartments total about 920 billion won across roughly 59,000 cases.
We need to keep assessing this situation. We are also discussing how exactly to define and filter speculative purposes. If we regulate, we are considering whether to use a positive approach of 'in these cases, it is not for speculative purposes,' or a negative approach of 'except for these cases, all are for speculative purposes.'"
─The Financial Services Commission recently took the unusual step of sending back to the Financial Supervisory Service the proposal for a penalty surcharge over the misselling of equity-linked securities (ELS) tied to the Hang Seng China Enterprises Index (H-shares). What was the main focus when making this decision?
"In the case of ELS, this is the first large-scale sanction involving multiple financial institutions since the enforcement of the Financial Consumer Protection Act, and it could become a touchstone for other similar cases, so rather than presuming an outcome, fact-finding and the application of the law must be more precise and rigorous. The Financial Supervisory Service is no exception.
We have looked at it from the standpoint of properly applying the law to the case to enhance acceptability, legitimacy, and completeness. We asked for another review of parts that require supplementation."
─Regarding Hana Bank's 1 trillion won equity investment in Dunamu, some interpret this as the lifting of "separation of finance and virtual assets."
"Separation of finance and virtual assets was a measure at the end of 2017, given the circumstances at the time, to restrict financial companies' participation in virtual assets as part of an emergency response to speculation. Now, with changes in the global market and legislative moves to institutionalize virtual assets, we need to look at the changed situation comprehensively.
From the standpoint of the financial authorities, we must comprehensively consider how the global trend is moving and, when financial institutions participate in the virtual asset market, how to address user protection and financial stability. In addition, we are pursuing the second stage of virtual asset legislation, including the introduction of stablecoins and overhauling the regulatory framework for virtual asset exchanges, and we will examine matters comprehensively in connection with this."
─What is your view on the need to codify the limitation of three consecutive terms for financial holding group chairs in connection with improving the governance of financial holding companies?
"We agree on the need to improve governance, as well as the direction of ensuring fairness and transparency in CEO reappointment procedures and the independence of boards. The specific methodology is the most difficult part.
Despite institutional improvements over time, trench-building and inner-circle issues keep recurring in the field, so we are considering how to design a system that can function properly on the ground."
─Have you spoken with Blue House Policy Chief Kim Yong-beom regarding inclusive finance?
"Inclusive finance is always the biggest assignment and concern from the perspective of financial practitioners. Inside the Financial Services Commission (FSC), we continue to debate this intensely. I believe our finance should have three layers. The first layer is the role played by the formal financial sector; the second layer is policy-based finance for low-income individuals; and the third layer is restart finance.
The first layer should fundamentally shoulder much of the role, but because it does not, everyone moves up to the second layer. Banks accept only prime borrowers, and those pushed out—mid-rate borrowers—leap across a crevasse and end up in secondary financial institutions at very high interest rates. This is the so-called "interest rate fault line." The third layer becomes a blind spot altogether. Someone has to take in those who are pushed out. Ultimately, it is the role of financial institutions to judge, manage, and measure how that person will fare in the future, but they go for the easy, convenient, and safe path. In the second layer, the question is how to divide roles to be more selective, manage cases, and operate systematically, which is a constant concern not only for me and Chief Kim Yong-beom but also for those working in finance."
─Single-stock leveraged exchange-traded funds (ETFs) will soon be launched, and market volatility is increasing.
"These are permitted overseas but blocked only domestically, so the intent was to adjust in line with global compatibility. Rather than whether to expand further, we plan to closely examine the effects and risks after actual market introduction. We are already providing investor protection mechanisms, and investors must take additional advanced training beyond standard education and also post margin. The capital market should not be viewed in the short term but with a long horizon. Fundamentally, it is the result of a comprehensive blend of many factors, including corporate earnings bases, market structure, and macroeconomic variables."