The Korea Asset Management Corporation (KAMCO) posted an average annual net profit of approximately 72 billion won over the past five years from 2021 to 2025. Excluding last year's exceptional surplus of 121.1 billion won, the state-run agency has typically generated several tens of billions of won in net profit through its ordinary operations. Since its establishment in 1962, KAMCO had accumulated total retained earnings of 1.3006 trillion won.
However, KAMCO recorded a deficit of 1.0502 trillion won in other comprehensive income last year, eroding a substantial portion of the retained earnings built up over 63 years. The New Start Fund alone generated valuation losses of 1.4 trillion won. The losses from the New Start Fund exceed the total retained earnings accumulated over the corporation's entire history.
"At this rate, KAMCO is heading toward capital impairment," a senior financial industry official said on the 11th. KAMCO's total equity at the end of 2024 exceeded its paid-in capital by approximately 1.3 trillion won, but by the end of last year, that gap had narrowed to 420 billion won. If other comprehensive losses or net losses grow large enough to push total equity below paid-in capital, the corporation would fall into capital impairment.
Within and outside the financial industry, the view that KAMCO's losses would be unavoidable had prevailed since the New Start Fund was launched in 2022. The structure called for KAMCO to make a 100% direct capital contribution to the New Start Fund, rather than drawing on government fiscal resources, to finance principal reductions for small business owners and the self-employed.
At the time, some in the financial sector argued that the government should inject capital directly into the New Start Fund through fiscal spending. However, this approach would have required amending related laws such as the National Finance Act, which would have delayed relief for small business owners and the self-employed. As a result, it was decided that KAMCO would fund the New Start Fund on the premise that the government would later provide capital increases.
The losses from the New Start Fund capital contribution had not been clearly reflected in KAMCO's financial statements. Expected losses were not separately calculated based on the repayment likelihood and delinquency rates of the claims purchased by the New Start Fund. The rationale was that even though KAMCO held a 100% stake, major decisions regarding the New Start Fund were made by policy authorities rather than by KAMCO itself, meaning the corporation merely served as an intermediary channel for government funding.
After the Board of Audit and Inspection raised concerns about this accounting treatment, KAMCO began internally reviewing last year how to reflect New Start Fund losses in its financial statements. As a result, KAMCO conducted a valuation of its equity stake in the New Start Fund contributed between 2022 and 2025, recognizing 1.4065 trillion won in other comprehensive losses.
Financial industry observers point out that KAMCO is bearing the full financial cost of inclusive finance policies. While the government provides some capital to KAMCO, the corporation also funds the New Start Fund through its own bonds (KAMCO bonds). KAMCO's corporate bond balance grew 24.4% from 7.815 trillion won at the end of 2024 to 9.725 trillion won at the end of 2025. Last year, KAMCO's debt-to-equity ratio rose to 234.3%, up 20.6 percentage points from 213.7% the previous year.
"Although the application period for the New Start Fund ends this year, procedures such as claims purchases and agreement signings will continue afterward," a financial industry official said. "The New Start Fund could adversely affect KAMCO's financial position not only this year but also next year." As of March this year, KAMCO had signed purchase-type debt restructuring agreements covering a total of 5.9349 trillion won in principal, with some observers projecting this figure could grow by several trillion won.
A similar problem is likely to emerge with the New Leap Fund. The New Leap Fund, newly established as a key policy initiative of the Lee Jae-myung administration, purchases unsecured claims of 50 million won or less that have been delinquent for more than seven years and either writes them off or restructures them. KAMCO has contributed 400 billion won to the New Leap Fund.
As a result, calls have continued within and outside the financial authorities for additional capital increases at KAMCO. However, such increases may not proceed smoothly due to opposition from the National Assembly and fiscal authorities. "I understand there have been many attempts to secure even in-kind capital contributions for KAMCO since the New Start Fund was launched," another financial industry official said. "But the reality is that there is considerable pushback against in-kind contributions in the National Assembly as well."
Some analysts suggest that separating the New Start Fund and the New Leap Fund from KAMCO's accounting would be a fundamental solution. However, this approach would also require legislation in the National Assembly, making it difficult in practical terms. "KAMCO's financial functions have grown considerably stronger, so it might be more appropriate to evaluate its financial position using the Bank for International Settlements (BIS) ratio, like the Korea Development Bank, rather than the debt-to-equity ratio," a financial industry official said.
