South Korea expands 'productive finance' target to W1,560tr

Target raised by 310 trillion won from earlier 1,250 trillion won

272.3 trillion won disbursed through July; white paper due in December

Financial Services Commission Vice Chairman Kwon Dae-young presides over the fifth meeting of the Financial Sector Productive Finance Council at Government Complex Seoul in Jongno-gu, Seoul, on Monday afternoon. The session brought together holding companies, insurers, securities firms and policy finance institutions to discuss ways to embed productive finance practices. [FSC]

South Korea's financial sector is set to significantly expand its "productive finance" funding, with the five-year supply target raised to 1,560 trillion won ($1.16 trillion) from the previous 1,250 trillion won. The increase comes as the Export-Import Bank of Korea and Suhyup Bank have brought their existing funding plans under the productive finance framework, and Samsung Securities has joined the initiative for the first time. Financial authorities said they plan to accelerate the spread of productive finance by broadening both the range of participants and the scale of funding.

The Financial Services Commission said it held the fifth meeting of the "Financial Sector Productive Finance Council" on Sunday at Government Complex Seoul, chaired by Vice Chairman Kwon Dae-young, to review progress and future plans for the initiative.

The updated five-year supply plan totals 1,560 trillion won — 628 trillion won from the private financial sector and 932 trillion won from policy finance institutions. That is 310 trillion won more than the 1,250 trillion won target announced in July, which comprised 624 trillion won in private finance and 626 trillion won in policy finance. Of the increase, 306 trillion won comes from the policy finance side and 4 trillion won from the private sector.

Much of the expansion reflects the incorporation of funding plans that institutions had previously been pursuing independently. The Export-Import Bank of Korea and Suhyup Bank had each drawn up their own supply plans from the start of the year and have now formally joined the government's productive finance initiative.

"The Export-Import Bank of Korea and Suhyup Bank each had their own funding supply plans," an FSC official said. "Rather than pursuing them separately, the intent was to bring them together under the common framework of productive finance."

The Export-Import Bank of Korea is providing 78.5 trillion won in credit this year under four core pillars: fostering AI and advanced industries, supporting overseas strategic project wins, managing external economic risk, and promoting balanced regional growth. Samsung Securities, which received a short-term finance business license on Wednesday, plans to join the productive finance initiative and expand its supply of venture capital.

The financial sector had disbursed 272.3 trillion won under the productive finance framework as of the end of July. The FSC also plans to accelerate the establishment of internal implementation systems at financial firms. To that end, it will begin compiling a "fact book" summarizing productive finance performance starting in the fourth quarter. Each financial firm is expected to publish a white paper in December covering the definition and scope of productive finance, its goals, organizational roles, progress and best practices, followed by an annual report on full-year performance in May next year.

The FSC will also broaden liability exemptions to encourage financial firms to invest and lend more actively under the productive finance framework. Following the introduction of exemptions for investment and lending by institutions participating in the National Growth Fund in March, the commission plans to develop additional exemption measures applicable across productive finance activities more broadly.

"It will not be easy to quickly change the longstanding financial sector practice of demanding collateral and guarantees while seeking rent," Vice Chairman Kwon said. "Continuous effort from the financial sector is needed to ensure that productive finance capabilities are genuinely internalized and systematized — not just productive finance in name only."

rim@heraldcorp.com