The Korean government plans to announce a set of comprehensive measures to curb mounting household debt, the main drag on the South Korean economy, next week

February 25, 2014 Leave a comment

Gov’t to announce measures to curb mounting household debt

Chun Beom-joo, Lee Hyun-jung

2014.02.18 17:46:24

The government plans to announce a set of comprehensive measures to curb mounting household debt, the main drag on the South Korean economy, next week. The measures, to be drawn up by the Finance Ministry and Financial Services Commission, are expected to include limiting loans to those who are seeking to live in high-priced rental homes with debt and reducing the size of housing mortgage loans. The government is also likely to encourage banks to increase the ratio of fixed-rate lending, limit lending by secondary financial institutions and expand support for the financially disadvantaged brackets. 

However, experts point out the problem of household debt cannot be solved by recognizing it as only a financial problem. They say in addition to Cheong Wa Dae, Prime Minister’s Office, Finance Ministry and Financial Services Commission, Health and Welfare Ministry, Employment and Labor Ministry and Bank of Korea should joint the effort to roll out more comprehensive and long-term measures.
This is because household debt is closely linked to real estate market climate while BOK’s rate decision and credit policy are used as important means to manage household debt. Experts say social assistance and pension programs which fall under the jurisdiction of the Welfare Ministry should also be used as a leverage to reduce risks associated with household debt.
There is especially a strong view that BOK, which has note issuing authority, should play a role beyond stabilizing consumer prices and the financial state by appropriately using fixed rate and credit policy.
Experts point out efforts to reduce the size of household debt should be matched by efforts to increase household income. To increase household income requires job creation and an atmosphere in which companies can perform well enough to raise wage, they say.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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