Mounting Pressure on Financial Institutions

The financial world is abuzz with discontent as the government ramps up pressure on banks and financial institutions with new policies aimed at achieving a “win-win” scenario for all stakeholders. The introduction of a bad bank, a policy fund for strategic industries, and increased education taxes are central to this effort.

The Strain on the Insurance Industry

The insurance sector, facing the brunt of these measures, is particularly concerned. With the education tax rate set to be doubled for large financial and insurance companies, industry giants are scrambling to gather their stances on potential tax adjustments. Non-life and life insurance companies alike are staring at an additional burden amounting to a whopping 350 billion won.

Unrest in Savings and Loan Industries

Savings banks, mutual finance, and credit finance industries are similarly uneasy, citing their recent poor performance and the challenges tied to managing long-term overdue bonds. The second financial sector is bogged down by bad loans that are more than seven years overdue, and they feel they are being unfairly tasked with additional financial responsibilities in raising funding.

Bad Bank Bond Pricing Controversies

A heated debate continues over the bond purchase prices for these bad loans. Currently, Bad Bank is eyeing the acquisition of debts, which have been in arrears for over seven years, at merely 5% of their value—a proposition the loan industry finds utterly preposterous. According to industry sources, long-standing debts often hold a value exceeding 25% of their face value, but the current purchase proposal greatly undervalues them. As stated in 매일경제, this tension is a major point of contention.

Possible Implications and Future Outlook

The government’s objectives of fostering advanced industries and increasing financial accountability are clear, yet they inevitably lead to increasing friction within the financial ecosystem. All eyes are now on how effectively the industry negotiates this transition while maintaining financial stability and community trust. The industry awaits clarification and adjustments from policymakers that could ease these growing pains.