Kim Yong-beom, chief of the presidential policy office, has emphasized his determination to reform Korea's financial system, which he says disadvantages vulnerable groups. Analysts say he is set to accelerate improvements to the "cruel financial" system flagged by President Lee Jae-myung, presenting concrete alternatives centered on credit rating reform and a redesign of the role of financial institutions serving low-income households.
Kim posted three consecutive essays under the theme "Financial Structure Series" on Facebook from the 1st to the 3rd. In his first post on the 1st, he raised the question: "Why do the most comfortable enjoy the lowest interest rates while the most desperate must pay the most expensive money?"
He went on to point out the incompleteness of credit ratings, saying, "The claim that credit ratings measure repayment capacity is only half true." Kim said, "No matter how diligently one lives, without a financial transaction record, one becomes a potential dropout," defining credit ratings as "invisible class badges designed by finance." He also described himself, having served as first vice minister of economy and finance and vice chairman of the Financial Services Commission (FSC), as an "accomplice" of the system.
The next day, Kim likened the current financial market to "a large doughnut with only the middle hollowed out." While top credit grades secure funds at low interest rates and high-risk markets operate at high interest, the broad middle ground is neglected, he said. "They [the financial industry] cut people's lives apart with the binary blades of 'prime' and 'subprime,' 'approved' and 'rejected,'" he said.
"Finance is not a completely free market," he continued. "Those pushed outside the boundary wander outside the market while bearing higher costs. This is not a coincidence but a meticulously neglected structural contradiction."
In his final post, Kim proposed solutions for restructuring the financial market: strengthening the accountability of banks, improving credit evaluation, and redefining the role of financial institutions for low-income households. Kim explained that "changing the structure in which banks believe 'avoidance' is a rational choice" is the first alternative. Here, "avoidance" is interpreted as referring to banks turning away mid- and low-credit borrowers who have the capacity to repay loans, based on the existing credit rating framework.
"How long will we just look at past delinquency records or card histories?" he said. "We must boldly broaden the old framework of credit evaluation." Finally, he proposed, "The role of financial services for low-income households must be reorganized from scratch," adding, "What is needed is not simply an expansion of support but an adjustment of the model."
Kim's lengthy essays pointing out the fundamental contradictions of the current financial system are read as groundwork to begin implementing the president's directives in earnest. Last September, President Lee, referring to the fact that borrowers with the lowest credit scores face an annual interest rate of 15.9%, said, "It makes no sense to lend at high rates and call it a financial policy for ordinary people. I hope there will be fundamental reconsideration."
